Multinational corporations should be required to disclose more about payments they make to countries for extracting natural resources, according to a new World Bank report
"Breaking the Conflict Trap," a report released May 14, concludes in part that "there is a strong link between dependence on natural resources and the risk of civil war and, more generally, of failed development, " according to remarks at a press conference by one author, Paul Collier. He was until recently the director of the Research Department at the World Bank and is now a professor at Oxford University and remains an adviser to the World Bank.
Collier said at a Paris press conference May 14 that revenues from natural resources help finance rebel groups or "have tended to be very badly used by governments," he said.
The report suggested that the Group of Eight countries "can address this link between natural resources, conflict risk, and development in reverse." It noted that suggestions for greater transparency in this area have been made by the United Kingdom, the nongovernmental organization Global Witness, and financier George Soros. Their original idea was to force the international oil companies to make payments transparent, Collier said.
"Our thinking now," Collier said, "is that the best approach is to have governments of resource-rich countries volunteer to sign up to a template of good governance. The sort of template they would be signing would be a mixture of requiring companies to report revenues in their country, and setting up domestic institutions for the scrutiny of how those revenues are used. This is building block one in our package: transparency and scrutiny."
Improve Tracking of Commodities
"Building block two," Collier said, "is to improve the tracking of the commodities themselves, and the revenues from them in order to try and keep those revenues out of the hands of rebel groups." The final building block in the proposed package " is to try and cushion the price shocks that have badly affected the countries dependent on natural resources," Collier explained. "We are therefore recommending that the donor community should create the aid instruments that provide a short-term cushion to soften these crashes.
The World Bank, the report suggested, could play a role by collating, reconciling and aggregating the data from the companies, while the International Monetary Fund could integrate the net revenue figure into its routine annual consultations with governments.
The report, which is not a reflection of the views of the Bank’s board of directors, does not suggest making disclosure of revenues a condition for Bank aid.
In September, the head of the World Bank’s private sector lending arm said that oil, gas, and mineral companies should fully disclose their payments to governments of developing nations.
Peter Woicke, executive vice president of the International Finance Corporation, stated, ‘We would come a long way if all-and I emphasize all-natural resource companies would make their transfers of royalties, fee payments, and other revenues to host countries fully transparent.’
Now that the report has been released, the hope is that an international consensus will develop around the idea of creating a template for more transparency in this area, according to Ian Bannon, Manager, Conflict Prevention and Reconstruction Unit at the World Bank. The report’s conclusions have been shared with ministers of the G-8 countries in advance of the June summit meeting, he said.
The text of the report and the press conference are available at: http://econ.worldbank.org/prr/CivilWarPRR/
By Toby McIntosh
Filed under: IFTI Watch