The lives of more than 1 billion people worldwide could be transformed if their governments managed their countries’ oil, gas, and mineral resources in a more open and accountable manner, a new Revenue Watch Institute analysis concluded.
RWI’s 2013 Resource Governance Index measured oil, gas, and mining accountability and transparency in 85 countries worldwide that produce 85% of the world’s oil, 90% of its diamonds, and 80% of its copper, generating trillions of dollars in revenue annually.
It found that 47 of the 58 countries have not embraced openness and accountability. Eleven, including emerging Latin American economies, received satisfactory overall scores.
“We hope to advance reforms in this sector with real data and analysis which enables more empirical research by scholars and scientists to be translated into evidence-based policymaking,” RWI Pres. Daniel Kauffmann said. “This is a diagnostic tool at the country level. There’s an enormous amount of data for each country.”
The Middle East and North Africa present the biggest challenges, he told a May 15 Brookings Institution seminar where the report was released. “It’s enormously important in the Middle East, where 80% of their export revenue goes to their national budgets,” Kauffmann said. “Latin America is doing better and getting closer—but not there yet—to [Organization for Economic Cooperation and Development] standards.”
Some countries did well in some areas and not as well in others, he continued. “In 20 countries, like Venezuela, the substantial resource revenue bypasses the treasury and overall budget,” Kauffmann said. “Others such as Guinea are making progress. A number of former Soviet republics have very poor records in the environment and government accountability.”
More resources available
The report is significant because it shows that several countries that have signed the Extractive Industries Transparency Initiative have not implemented reforms, noted Carlos Pasqual, special envoy and coordinator for international energy affairs at the US Department of State. It’s also timely since there’s much more resource availability worldwide, he added.
“We’re seeing the potential for new oil supplies in the Gulf of Guinea we haven’t seen before,” Pasqual said. “Traditional suppliers like Norway are bringing more oil and gas onto the market. Having a measure like this when countries like Nigeria, Tanzania, and even Myanmar are producing more of their resources is important.”
Many emerging oil and gas producers don’t fully understand the extent or value of their resources, particularly when it comes to gas which primarily used to be transported by pipeline but increasingly is being liquefied and shipped in tankers, he said.
“Finally, this all has to be translated into laws and institutions,” Pasqual said. “We have tried to work with countries that have emerging natural resource wealth and help them develop the capabilities to manage that wealth and develop the necessary institutions. What this report has put on the table will keep encouraging us to work through institutions like EITI, to keep asking questions, and to try to make a difference.”
George Ingram, a senior fellow in Brookings’s Global Economy and Development program, said he expects UK Prime Minister David Cameron to raise the resource transparency and accountability issue the G8 countries’ meeting in another week. “People in the development community recognize the financial community has an important role to play,” he said. “Expanding that will help encourage countries to initiate reforms.”
The next phase will be to demand accountability and transparency in how countries actually spend their resource revenue, the three experts suggested. “At a country-level, it involves following the money and determining, for instance, how much of the revenue is going to militias, for example,” Kauffmann said. “There are many government reformers who are engaging with us to advance analysis and implement policies.”
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