US holds reservations over UK anticorruption plan

Maureen Lorenzetti
Washington Editor

LONDON, June 18 -- The US is worried a UK-sponsored anticorruption initiative is too restrictive on multinational oil companies that do business in developing countries because it does not hold government officials accountable for their own misdeeds.

Multinational oil and gas companies are working with the US and the UK on a voluntary anticorruption program championed by UK Prime Minister Tony Blair aimed primarily at resource-rich developing countries.

The UK's Department for International Development held a high-level conference in London Tuesday on its Extractive Industries Transparency Initiative with 30 nations and 17 oil and mining companies in attendance.

US Department of State officials said the current EITI proposal, inspired by George Soros' "Publish What You Pay" scheme, "presents a much more restricted approach to transparency and accountability that is focused primarily on company disclosure of payments to governments. Such an approach will not shed light on government actions to increase transparency and allocate resources," according to an internal briefing statement. "Further, it will not hold government officials accountable for misuse or mismanagement of these resources," the background statement said. "We are also concerned that the state-owned enterprises will escape scrutiny."

US government officials told OGJ that the document confirms the US remains committed to greater transparency in the extractive industries sector, but that the EITI plan in and of itself may not be adequate. They added that any international consensus on anticorruption should reflect broader discussions made at the recent G-8 summit in France that called for greater government accountability.

London meeting
US public statements on the UK plan were more conciliatory.

In remarks to the group, Janice Bay, deputy assistant secretary for international finance and development, said, "We look forward to cooperating with the UK and other developed country governments, with the governments of interested developing countries, with international organizations, with companies, and with civil society to implement greater transparency in the extractive industries sector," she said.

Identifying countries willing to be part of a voluntary pilot program that ties future development deals with specific transparency goals "must be a high priority," she said.

None of the attending countries specifically committed to being part of a pilot, although Azerbaijan, Ghana, Trinidad and Tobago, Indonesia, Timor-Leste, and Nigeria are expected to be possible candidates within the coming year. Iraq may also be considered as a test case, but its participation ultimately hinges on pending US government decisions on the timetable in which a democratically elected government is allowed to form.

Bay noted that the recent G-8 summit called for improved host government public financial management, including greater transparency in host government procurement and the awarding of concessions.

Oil company reactions
Multinational oil companies that attended the meeting downplayed the US critcism of the UK plan, saying the EITI draft is a good first step on the anticorruption issue. They also stressed that they expect to see calls for greater transparency on several fronts.

The European Union Parliment, for example, last week also called on oil companies to publish payments made to governments.

And public interest groups such as Human Rights Watch, Global Witness, and the Soros-led Open Society Insitute have stepped up their efforts to lobby private banks and public lenders such as the World Bank to tie future loans and investment to mandatory transparency guidelines.

Companies including BP PLC, ExxonMobil Corp., ConocoPhillips, and ChevronTexaco Corp. told the EITI gathering in separate statements that they oppose corruption in any form. But they also said requiring oil companies to disclose deal terms without holding governments themselves accountable won't stop corruption.

It is also important to remember that eliminating corruption is a formidable task that no one program can easily solve, they said.

"There is today, as there has alweays been, the need for realism to accept that a framework for transparency of payments and receipts of extractive industry funds will not, in and of themselves, lead to an end to corruption," said Sam Laidlaw, executive vice-president, business development, ChevronTexaco. "Political will and the properly functioning tools and mechanisms of internal audit and public accountability are key. We should not lose sight that building the capacity of the appropriate government functions to fight corruption is paramount."

IMF, investors role
Although industry and public interest groups disagree on how transparency measures should be enforced, they do agree that the World Bank and the International Monetary Fund can play a critical role in moving the process forward.

Both institutions spoke at the EITI meeting and said they endorse the idea of greater transparency, as advocated for in the EITI and G-8 summit.

Peter Heller, deputy director of the IMF Fiscal Affairs Department, told the delegates that EITI will provide technical guidance to any country planning to participate in a anticorruption pilot program. Heller said the EITI "is fully in line with our own transparency efforts, and we have every expectation that these efforts will reinforce each other."

The World Bank said it is conducting its own extractive industries review with recommendations due in Semptember. But an emerging finding is that "governance is one of the key requirements for translating resource revenues into sustainable benefits," said Charles McPherson, senior advisor of the bank's oil and gas group.

He said the bank will cotninue to assign "high priority" to the development of in-country capacity to implement the objective of the EITI.

And in the private sector,consensus is also coalesing.
A group of insitutional investors representing $3 trillion in holdings lent its support to the UK's EITI plan. Some of the participants include large pension funds such as CalPERS and large mutual fund managers such as Boston-based Fidelity Investments.

Contact Maureen Lorenzetti at [email protected].