European Union reaches deal on historic oil and mining transparency law

Transparency ensures accountability

As transparency campaign in the extractive industry gets major boost.

The European Union has today agreed historic new rules which will require oil, gas, mining and logging companies to publish the payments they make for access to natural resources in all countries where they operate.

The provisional deal reached by European negotiators on Tuesday evening will ensure that citizens around the world are better able to hold their governments to account for the exploitation of their country’s natural resources.

“The oil, gas and mining sectors can bring great wealth to countries if they are managed well”, said Marinke van Riet, Publish What You Pay International Director. “Unfortunately, revenues from the sector have too often been squandered through corruption or mismanagement.”

The new legislation, which must now be formally agreed by member states and the European Parliament over the next few weeks, is contained within the revised European Accounting and Transparency Directives. All EU-listed or large privately owned oil, gas, mining and logging companies will be required to publish all payments over €100,000 to every country where they operate and for each extractive project.

The United States has already passed legislation through a provision in its 2010 Dodd-Frank Act which requires all oil, gas and mining companies listed on US stock exchanges to publish their payments to all countries and for every project without exception.

Crucially, the EU rules will not contain any exemptions. A number of oil companies had claimed that there were countries which forbid the disclosure of payments to governments in their criminal law. However, EU lawmakers were not persuaded by any of the examples put forward by the industry.

“Today’s EU agreement is the culmination of years of work by the Publish What You Pay coalition. It shows what collaboration can achieve and we’d like to thank our members worldwide for their commitment,” said Ms Van Riet. “We also salute the lawmakers in all EU institutions who held out for the strongest deal possible.”

The agreement comes at an important time. UK Prime Minister David Cameron has made globalising these laws beyond the US and Europe a key pillar of his G8 chairmanship this year.

“We now look to strong implementation of the legislation in the EU and for similar rules to be adopted in other jurisdictions around the world including Canada and Australia, as well as emerging markets in Brazil, Russia, India, China and South Africa”, said Ms Van Riet.

Source: Press Release [09-04-2013], Publish What You Pay International.

Swiss Miss: Switzerland Soft-Pedals on Transparency in Commodities Industry

Transparency in commodity trading is crucial

Source: Alexandra Gillies, Head of Governance, Revenue Watch Institute. Read more here www.revenuewatch.org

Swiss companies dominate global physical commodity trading. This places a unique responsibility on the Swiss government to require these companies operate in a transparent and responsible manner. Bloomberg reports Switzerland is "the world’s leading commodities trading hub, accounting for about 35 per cent of global physical oil trade and a 60 per cent of metals and minerals." This amounts to more than $3 trillion in world trade, according to Al-Jazeera.

The government of Switzerland recently ducked an important opportunity to protect against the potentially damaging effects of opaque deals between its companies and commodity-producing countries. On March 27, 2013, following months of debate within government, a cross-departmental body finally issued its report to the Federal Council on the country’s commodity sector. The report was meant to outline the associated risks and suggest appropriate policy responses. Instead (as explained further by Swiss NGOs), it offered vague suggestions and placed too much confidence in voluntary international mechanisms rather than binding national regulation.

Swiss trading companies—which include energy giants Trafigura, Glencore and Vitol—have attracted scrutiny of late, due to the sector's explosion in size over the last 10 years, the Iraq Oil-for-Food scandal, and, as the Financial Times reports, "increasing public resentment in Switzerland towards highly paid executives and bankers."

The poverty, corruption and weak governance prevalent in many resource producing countries has led transparency advocates like RWI to call for stricter reporting standards of commodity sales. For example, Glencore was just awarded the license to buy oil from the government of Chad. In late January, the company lifted its first cargo of 950,000 barrels. This single sale would net at least $80 million. This may be a small- or medium-sized deal for Glencore, but for a poor country like Chad, this is a massive transaction. The revenues from this single sale are enough to pay for half of the country’s yearly education budget.

Without the disclosure of basic information around commodity sales, corruption risks increase, and there is little chance for citizens, journalists and parliaments to know how much their country receives for its public resources.

In its announcement Wednesday, the Swiss government said it would rely on global standards such as the Extractive Industries Transparency Initiative (EITI) and various U.N. mechanisms to police its commodity companies. These standards are useful, but insufficient. The report heralds the EITI, and frames Swiss support for the initiative as the major plank of its efforts to promote transparency. But EITI is only a voluntary initiative and not implemented by many resource-producing countries with major corruption and governance problems, like Angola, Equatorial Guinea and Turkmenistan.

To promote consistent transparency, governments which host extractive companies should regulate reporting by the companies based within its borders. The U.S. and the EU are taking such steps through Section 1504 of the Dodd-Frank Act and forthcoming EU regulations respectively. The Swiss, rather than follow suit, said they would revisit this issue later. Should this occur, commodity trading (rather than just extraction) must be at the center of the discussions. Otherwise, such a law would be a largely symbolic gesture that avoids the biggest part of the Swiss sector. 

Requiring companies to operate in a transparent and responsible manner does not constitute unfair or uncompetitive treatment. Trading companies are huge global players that buy billions of dollars of oil and minerals from poor countries. Wherever they are headquartered in the world, they should be the subject of robust oversight and scrutiny. Ensuring this is the case is a basic responsibility of the home government, and one which the Swiss should not avoid.

**Stephen Yeboah participated in the Swissaid workshop in Geneva this year on Transparency in the Extractive Sector: the role of Commodity Superpower Switzerland.

The reality check: Minerals and Conflict in Central African Republic

Diamonds and other minerals fuel conflicts

Central African Republic is rich in minerals. In 2011, it was ranked 11th among the world’s leading producers of rough diamond by volume and 12th by value. Mining accounted for about 2.8% of the country’s gross domestic product. There are also the production of clay, gold, and sand and gravel. Mineral resources including copper, graphite, ilmenite, iron ore, kyanite, lignite, manganese, monazite, quartz, rutile, salt, tin, and uranium however remain largely underdeveloped. Despite these potential natural resources, the country is one of the poorest in the world. In the 2013 Human Development Index (HDI), Central African Republic ranks among the bottom six in 180th position and a low value of 0.352. 

Aside from its poor development performance, Central African Republic has been trapped in long-standing and deep-seated political and military crises. The country today faces severe humanitarian crisis. The United Nations High Commissioner for Refugees (UNHCR) estimates that as of mid-2012, approximately 65,500 people were internally displaced and more than 150,000 Central Africans had found refuge in neighbouring Chad and Cameroon.

Few weeks ago, the Seleka rebel alliance ousted the sitting the president Francois Bozize citing failure of the power-sharing deal signed in the Gabonese capital Libreville in January. The announcement by the rebel leader Michel Djotodia on Friday, March 30 that he will review resource deals raises critical issues. The reason for toppling Bozize government goes beyond the failure on his [Bozize] part to fulfill the deal. The crave to control mineral resources is the factor. It is obvious that natural resources have fueled the general insecurity and militancy in poor Central African Republic and Democratic Republic of Congo. This is however not new.

Conflict minerals have funded the rebels and it is no surprise that they have succeeded in toppling the Bozize government. The Kimberley Process, the international certification scheme established to stop the trade in blood diamonds, has done little. Trade in conflict diamonds is still commonplace and increasing. Global Witness, a vibrant non-governmental organization that investigates and campaigns to prevent natural resource related conflict and corruption, and associated environmental and human rights abuses, withdrew from the Kimberly Process on December 5, 2011. It indicated in a press release that “The Kimberley Process’s refusal to evolve and address the clear links between diamonds, violence and tyranny has rendered it increasingly outdated.” The Kimberly Process has not done enough.

Little has been done to combat trade in conflict diamonds. Trade in “blood diamonds” is still pervasive. It incentivizes activities of rebels in most of mineral-rich countries in Africa. The recent insurrection of rebel group M23 in Democratic Republic of Congo indicates that a global action against conflict minerals is needed to clamp down on trade in conflict minerals. The M23 as well survives on conflict minerals. The Kimberly Process has to do more to bolster improved governance and transparency in trade of these minerals. Trade in conflict minerals is putting the lives of the poor and the state of economies at great risk. Global discourse on the "resource curse" has for sometime now concentrated on the economics of natural resources leaving security perspective. It is about time adequate consideration was given to the apparent increase in trade of conflict minerals and the proportionate rise in rebel activities in mineral-rich countries in the African region.

Despite the increasing humanitarian and governance crises, self-imposed president Djotodia could only call for review of resource deals. This reveals one obvious factor. Minerals have been an important incentive to his capturing of power. According to the UNICEF, at least 4.1 million people, almost half of whom are children, are now directly affected by the crisis, which includes not being able to attend schools or getting enough to eat. This however means little. The focus is rather on getting mineral deals reviewed. There should be clear governance structure and accountability mechanisms in diamond trade. This is to clamp down on the rise of trading conflict minerals.

International non-governmental organizations, bilateral and multilateral donors need to increase their voice and support to stop the recent spur in trade of conflict minerals. The Dodd-Frank Wall Street Reform and Consumer Protection Act passed in July 2010 makes an important attempt at addressing issues of conflict minerals. Section 1502 of the Act requires the  American Securities and Exchange Commission (SEC) to make the sector more transparent by formulating rules that require companies to disclose the origin of their minerals through due diligence over the supply chain. However, the Dodd-Frank Act disclosure also does not ban or penalise the use of conflict minerals. According to the section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, “the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein […]” pp. 838. If companies discover they have been sourcing conflict minerals from DRC or adjoining countries, they can continue to do so; however, they must submit a “conflict minerals report” to the SEC and thus make public their imports (Source: International Crisis Group: “Conflict Minerals in DRC” accessed: April 1, 2013).

This is a useful step but it is not enough. The Dodd-Frank must make a provision to penalise the use of conflict minerals. Such a punitive measure will have real impact. The European Union must also pass a similar regulation since European market is one of the largest consumers of these minerals. José Manuel Barroso, President of the European Commission, in pursuance of transparency has committed to advancing similar legislation in Europe. The EU must consider and address conflict minerals. Trade in conflict minerals must end! We cannot promote riches and enslave the lives of the majority poor. At the end, it is the poor people in these mineral-rich countries who suffer from brutal militancy fueled by the desire to control and trade diamond and other minerals.

Read more articles written by the author on transparency in mining and oil and gas sectors in Ghana here

By: Stephen Yeboah, Researcher and Journalist based in Geneva, Switzerland. [profstephenyeboah@gmail.com]

Re-elected IFAD chief: 'Some fine-tuning to do'

Source: Jenny Lei Ravelo, Devex [February 14, 2013]

Kanayo Nwanze pledged to make the United Nations’ specialized agency for agricultural development “more effective, efficient and agile” in the next four years after being reelected to a second term as president on Wednesday.

Nwanze highlighted some of the International Fund for Agricultural Development’s “accomplishments” in the past four years in his Feb. 13 acceptance speech before member states at the 36th session of the Governing Council of IFAD in Rome, Italy. These include a new business model that has a stronger focus on women, an “expanded country presence” and an increased participation in policy dialogue.

But the IFAD chief acknowledged the agency still needs some “fine-tuning” in a number of areas, including:

• Direct supervision and implementation support.
• Improving the agency’s HR management system for instance by taking issues raised by staff members “seriously.”
• Improving IFAD’s business process and accountability framework.
• Boosting efficiency to increase impact.
• Data collection.
• Measuring results.
• Boosting partnerships with a wide range of stakeholders, such as other U.N. agencies, governments, donors and nongovernmental organizations.

Nwanze announced plans to explore “new and innovative financing” for IFAD’s core sectors: agriculture, food security and nutrition. IFAD must take the “next step” in helping smallholders have their own “sustainable, profitable businesses,” he added.

“As the only international financial institution that caters exclusively to the needs of smallholders, we will work to mobilize much-needed, additional sources of finance that will allow small and medium enterprises to thrive,” he said.

Nwanze hails from Nigeria, one of the countries he has over the years pushed to ”become self-sufficient in its rice production.” President Goodluck Jonathan wants to end rice imports before he leaves office in 2015.

“IFAD can make the difference by helping smallholders to become active participants in their own development, and that of their nations: from aid-dependent to business-minded farmers,” Italy’s Minister for Economy and Finance Vittorio Grilli said at the meeting’s opening session.

The theme of this year’s meeting is “the power of partnerships in developing countries” — the focus of many discussions at the event.

Link to original story: https://www.devex.com/en/news/reelected-ifad-chief-we-still-have-some-fine/80319?source=ArticleHomepage_Headline

Lift Conference 2013 kick-starts in earnest

The 8^th edition of the Lift Conference has started today February 6 at the Centre for International Conferences Geneva (CICG) in Geneva, Switzerland.  With over 1000 participants from 30 countries, Lift Conference brings together people to share, connect and create new opportunities in technological innovation.

In a session of the conference dubbed “Democracy in Distress – Re-engineering Participation”, Sami Kanaan, City of Geneva Counselor, in his welcoming address expressed his happiness for Geneva being the host of this all-important conference. He mentioned that Geneva has been host to important global debates on human rights and trade.

He indicated that Lift Conference, a hub for minds on technological innovation, is obviously crucial for supporting transparency and participation. Mr. Kanaan stated that technology has immense potentials in various aspects especially how to support democracy and participation adding that democracy needs a lot of things to work properly. “It [democracy] needs freedom of speech, informed citizens, participation in many aspects, balance of power and time”, Kanaan stated. 

Other speakers included Maximilian Stern, Political Scientist and Managing Director of foraus; Micah Daigle, Founder of Collective Agency; and Gudrun Pétursdóttir, Director, Institute for Sustainability and Interdisciplinary Studies, University of Iceland.

Lift Conference 2013 continues on Thursday, February 7 with groundbreaking and innovative sessions and workshops. 

Follow this blog for updates on Lift Conference 2013: http://liftconference.com/lift13