The Future Global Norm: License and Contract Disclosure in Resource Extraction

Country: Africa
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This week, Cape Town, South Africa, is hosting Mining Indaba, a conference for thousands of government officials, investors, companies, advocates, academics and other professionals in the African mining industry.

On Sunday, RWI Deputy Director Antoine Heuty spoke at a pre-conference discussion organized by the World Bank about contract transparency, accountability and investment for development. Heuty’s message: contract transparency is critical to accountability in oil and mining countries, and is gradually becoming the “new normal” in the extractive industry.

Contract and license disclosure is necessary. Heuty emphasized the benefits disclosure of extractive contracts and licenses can have for citizens, governments and companies.

Through access to contracts and licenses, citizens benefit from transparency by knowing the decisions their government makes about how the country’s publicly owned resources are extracted. This enables citizens to monitor both government and company operations; in turn, both will be more accountable for the deals they make and execute. Additionally, this kind of contract transparency and accountability creates a more stable business environment, which in the long run can make the country more attractive to investors. (We’ve blogged previously about what makes for a risky investment environment as well.)

Companies benefit because in addition to a legal license to operate, transparency can help provide a “social license” by creating a better, more stable relationship with the communities in which they operate. Citizens can also help companies in their negotiations with government if the public stands to benefit from a project.

Contract disclosure is already happening. RWI blogged about the “emerging norm of contract transparency” in 2011 . Since then, the trend toward greater publication has accelerated. From Afghanistan to Ecuador to the Democratic Republic of Congo, 20 countries featured in the forthcoming 2013 Revenue Watch Index publish some or all of their oil, gas and mining contracts or licenses. Heuty emphasized the particular progress taken in several African countries to disclose large numbers of oil and mining contracts—also on the panel were officials from the governments of Liberia and Guinea who shared their governments’ rationale for disclosure.

International organizations including the International Monetary Fund, World Bank and International Finance Corporation have in recent years included calls for contract disclosure in recommendations or procedures. The Extractive Industry Transparency Initiative, which has 37 member countries, is considering adding a contract transparency requirement to its global standard.

But contract disclosure isn’t enough. It’s not enough for countries and companies to provide the information; they need to educate the public and media to read and understand the contracts and licenses. Revenue Watch has worked to help its civil society partners develop stronger capacity for contract analysis and monitoring, through the publication of Enforcing the Rules and training initiatives in Francophone Africa (co-organized with the World Bank Institute) and Latin America. WBI and RWI are also collaborating on the development of an online database that will aggregate publicly-available contracts from around the world and will enable users to search concise summaries of key terms that make the contracts more accessible to non-expert readers. These types of programs can aid the development of an educated and informed citizenry that will not only be able to hold companies and governments more accountable, but can also serve as a resource for the government to monitor these contracts when state capacity is limited.

Contract disclosure is becoming the global norm. Contract and license disclosure is the future for all stakeholders in the oil, gas and mining industries. As the evidence base for the benefits of disclosure continues to grow, countries that continue to shroud contracts in secrecy will find themselves left behind by those who have recognized that transparency and accountability is good sense and good business.

RWI Africa Regional Coordinator Emmanuel Kuyole will participate in a panel on revenue transparency and anti-corruption on Thursday, February 7. Follow us on Twitter @revenuewatch for updates, and take part in the conversation with the hashtag #miningindaba.

Suzanne Ito blogs for RWI.

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