Call for full disclosure of revenues to all national governments by transnational natural resource companies and related national subsidiaries and business partners

by Global Witness

first published 23 May 2002


Publicly-traded resource companies, such as mining and oil companies, should be required to publish a breakdown of all the royalties, fees and other payments they make for the products of every country in which they operate. At present, they are undisclosed, and this lack of transparency surrounding revenues is encouraging embezzlement, fraud and corruption. Export Credit Agencies (ECAs) should make full transparency a condition of support for such companies, argues this presenation at an NGO Seminar on Export Credit Reform, House of Commons, London.



Most foreign investment in least developed countries takes place in extractive industries such as oil and mining. Revenues from such investments make their way to governments in the form of taxes, fees and other payments. If such revenues were effectively and transparently managed, they could provide a possible basis for successful growth and poverty reduction. However, all too often, the state and other institutions managing these resources are unaccountable to the ordinary citizens of their country and become a vehicle for embezzlement, fraud and corruption. In more extreme cases, access to such resources intensifies regional conflict and the resulting political, economic and social disorder may be exploited to facilitate large-scale misappropriation of state assets.

Mining and oil companies are not responsible for how the royalties and fees they pay are spent; but they have a clear responsibility to disclose what payments they are making so that the citizens of the countries concerned can hold their governments accountable. If they fail to provide adequate disclosure, the extractive companies become complicit in the disempowerment of the population of the countries to which the natural resources belong. This problem extends to all countries where natural resources provide a major proportion of state income, where corruption associated with state income is of concern, and where companies are not fully transparent about their payments to national governments, such as in Angola, Azerbaijan, Burma, Chad, Cambodia, Congo-Brazzaville, Democratic Republic of Congo (DRC), Equatorial Guinea, Gabon, Indonesia, Kazakhstan, Nigeria, Sudan and Venezuela.

Companies are not being called upon to provide commercially confidential information, but rather to publish the same basic data about aggregated tax payments and royalties to national governments that they must already provide in the North. Nevertheless, individual companies may be disadvantaged in their dealings with governments if they disclose information that other companies are willing to keep hidden. Therefore they cannot be expected to comply with the disclosure requirements on a voluntary basis. Yet they would benefit collectively if the disclosure requirements were imposed on them and so would the countries in which they operate.

Accordingly, we propose that publicly traded resource companies should be required by the regulators to publish a breakdown of all royalties, fees and other payments they make for the products of every country in which they operate.

Such payments could then be aggregated and compared with national budgets to ensure that they are in fact included in the national budgets. This would reduce corruption and make a significant difference for the countries concerned.

Global Witness' Recommended Steps towards Full Transparency

Oil Companies should:

1. Render summary figures of taxes and other payments made to national governments publicly available for all countries of operation. Data should be listed as total net payments to national authorities for each country of operation and should be provided in the parent company's consolidated annual reports and in annual returns to investment authorities, in addition to information already available in the reports of subsidiaries. This data should be provided locally in the national language of each country of operation as well as in the home language of the company. Parent companies should also publish the names and locations of registration of all subsidiary companies operating in each country.

Bilateral Export-Credit Agencies should:

2. Impose full transparency on all participants as a condition for future export-credit agreements.

National Governments should:

3. Ensure that their national oil companies adopt full transparency criteria on overseas operations. National governments should require them to adopt a forceful common position on this issue.

4. Insist that financial regulators of international stock exchanges should legally oblige companies filing reports with them to disclose payments to all national governments in consolidated and subsidiary accounts.

5. Insist that their export financing agencies practice full transparency as a condition for setting up credit agreements, and that full transparency of funding partners and recipients becomes a pre-requisite for funding.

The International Community should:

6. Insist that the oil industry and the financial world institute a policy of full transparency on all revenues and loans to corrupt, neo-authoritarian regimes.

7. Recognise that the definition of acceptable corporate behaviour is bound up with the operation of transparent and accountable business practices and the provision of information on payments to national governments to the citizens of that country. Future regulatory programmes or voluntary codes-of-conduct should recognise that the 'stakeholder' concept includes the general population of a country in whose name the resources of a territory are being exploited. Civil society is entitled to be provided with adequate information to be able to call their governments to account over the management of 'their' resources. It is time to move from debating corporate social responsibility to corporate accountability.

The G8, EU, OECD and the New Partnership for African Development (NEPAD) should:

8. Issue clear contracting guidelines defining and legislating 'good practice' for multinational enterprises in structuring transparent financial arrangements with host governments. Such an initiative requires the G8 and others to make it a priority for national regulatory authorities to legally require full transparency for all companies over payments to national governments.