RWI Newsletter - July 2010
15 July 2010
Victory in U.S. Congress! U.S. Financial Reform Sets New Standard for Energy and Mining Industry Transparency
Revenue Watch and our coalition partners achieved an historic victory this month with the passage of new energy industry disclosure rules as part of the U.S. government's Wall Street reforms. The law gives investors and citizens powerful new tools to hold companies and governments accountable for their actions.
By passing the financial reform measure, Congress voted to require companies registered with the Securities and Exchange Commission to publicly report how much they pay governments for access to oil, gas and minerals, country-by country and project-by project.
In praise of the measure, The Financial Times wrote, "The secrecy of company payments has at times shrouded corporate complicity with rulers who rob or betray their own peoples. … the U.S. has again shown leadership in fighting corruption." U.S. Senator Ben Cardin, who co-sponsored the provision with Senator Richard Lugar, said, "Given the catastrophic events in the Gulf of Mexico, oil companies, in particular, should well understand that secrecy fosters instability, corruption and greater risk."
"The provisions in the new law are the culmination of a long campaign by Revenue Watch and the Publish What You Pay coalition," said RWI Director Karin Lissakers. "This victory has far-reaching implications for energy security in the U.S. and across the globe, and especially for citizens in resource rich countries."
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RWI Experts Lead Contract Transparency Discussion in Ghana
It has been more than a year since Ghanaian President John Atta Mills committed his government to the disclosure of all existing and future contracts with oil, gas and mining companies, but to date, his promise remains unfulfilled.
Firm decisions on transparency are increasingly urgent in Ghana, as the development of offshore oil reserves moves closer to the production phase. The Jubilee Field discovered in 2007 could eventually yield as much as 150,000 barrels of oil per day.
With drafts of a new petroleum law released by lawmakers, and increasing national interest, RWI convened a panel discussion in Accra focused on transparency in oil and mining contracts.
"This is the time for Ghana to get oil right," said Emmanuel Kuyole, RWI Regional Coordinator and host of the contracts discussion. "President Atta Mills and the Ghanaian government cannot afford to let the excitement of the people for new wealth, or companies' eagerness for new profits, take precedence over practical decisions that can make the country's future more stable and more prosperous."
Following the discussion, Ghana's Civil Society Platform on Oil and Gas hosted a citizens' summit on sustainable resource management. Civil society groups agreed to ask the Ministries of Energy and Finance to promote openness concerning important documents, including contracts, to further the transparency agenda.
Read more ...
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Global Momentum for Accounting Reforms: Rule-Makers, Companies and Advocates Assess International Standards
 The movement for a reformed global accounting standard is gaining momentum around the world, evident in the new SEC listing requirements passed by the U.S. Congress, the new standard for disaggregated reported on the Hong Kong Stock Exchange, and the initiative taken by some industry leaders to support voluntary disclosure improvements.
In June in New York, representatives from the International Accounting Standards Board (IASB) met at RWI's New York office for a dialogue with members of the investment, civil society and corporate communities about rule changes that would add vital industry information to reporting requirements for petroleum and mining companies.
For several years, RWI, the Publish What You Pay coalition and other civil society partners have discussed with the IASB—the world's leading rule-setter for accounting— new measures the Board should consider during its current review process. First and foremost among these recommended changes is the requirement that companies report key financial information on a country-by-country basis, rather than the current practice of aggregating information by region or business activity.
At its Forum for Corporate Responsibility meeting in May, BHP Billiton committed to publishing its payments to government in each country of operation. Such voluntary disclosure demonstrates that companies recognize that the benefits of transparency outweigh any costs.
Read more…
CALL TO ACTION: Campaign for Country-by-Country Reporting
You can take action this month to help secure important reporting reforms. The International Accounting Standards Board needs to hear from as many stakeholders as possible by July 30 that country-by-country reporting is crucial to economic development and an aid to investors assessing risk in the extractive sectors.
Take action …
We have written a template letter that you can share with investors to make it easy for them to make submissions. Download the template letter ... (pdf)
Read more in the RWI Resource Center:
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RWI Comments on Uganda's Draft Petroleum Bill
In May, the government of Uganda circulated a draft petroleum bill for managing the country's emerging oil sector. In an analysis of the bill from RWI, oil expert Professor Robert. D. Langenkamp concludes that the bill leaves many questions unanswered and many problems unaddressed.
Since the 2006 discovery of oil reserves near Lake Albert, leaders and advocates in Uganda have been working to prepare for the challenges oil presents for good governance and wealth management. In its review of the draft legislation, RWI took into account the Oil and Gas Policy, the 1999 Model Production Sharing Agreement and the 1997 Income Tax Act. RWI is urging the Ugandan Government, Parliament, civil society groups and other stakeholders to consider these comments as the bill takes shape and moves toward ratification.
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Nigerian Oil Savings Fund Requires Strong Protections, RWI Advises Leaders
 To promote sustainable economic development, the government of Nigeria is considering the creation of a Sovereign Wealth Fund, a savings tool that could protect against the volatility of the country's main revenue source: oil. But according to a new analysis by RWI, Nigeria risks repeating patterns of weak economic governance and volatile spending unless its new fund features certain safeguards.
Sovereign Wealth Funds enable resource rich countries to save windfall profits when commodity prices are high, and soften the negative impact of price volatility. As RWI researcher and Nigeria expert Alexandra Gillies explains in the analysis, if Nigeria's leaders are to create a fund more effective than existing fiscal policies, the fund will need a solid legal standing, binding rules regarding the inflow and outflow of funds and strict transparency requirements.
"The politics of Nigeria call for a carefully safeguarded fund," said Gillies. "Without strong and transparent governance, a new fund will end up as depleted as the current Excess Crude Account."
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EITI Board Tests Its Own Resolve to Apply Rules
The global movement for accountable natural resource management gained ground in April as the Extractive Industries Transparency Initiative (EITI) resolved questions over the status of 18 countries that had missed a key deadline in the program. At a meeting in Berlin the EITI International Board decided on limited extensions for 16 countries to complete their reporting and validation processes, including Kazakhstan, Timor Leste and Ghana.
The board also announced that Equatorial Guinea and São Tomé and Príncipe have lost their EITI candidate status and will need to reapply if they want to rejoin the initiative. RWI urged all stakeholders in these countries to renew their commitment to improve transparency practices, take action to regain EITI candidate status and move quickly toward full EITI compliance.
"This was a road test for the EITI board to see whether it could apply its own rules," said RWI Governing Board Chair Anthony Richter, a member of the EITI International Board. "Countries are learning what it means to implement EITI standards, and the EITI itself is establishing what it takes to enforce them."
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Transparency Progress in Tanzania
 Over the past year, transparency work has blossomed in Tanzania. In March, RWI conducted a one-day training session on the EITI with members of the Tanzanian Parliamentary Standing Committee for Energy and Minerals. The training was organized at the request of the committee after the country joined the EITI in February 2009.
Tanzania opened a new phase in the development of its mining sector in April, as parliament passed a sweeping mining law. In the months leading up to the bill's passage, RWI and our local partner Policy Forum worked to build capacity for parliamentarians, civil society and the media.
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Updates and Commentary from Karin Lissakers in the Huffington Post
 In May RWI Director Karin Lissakers began blogging on the news and commentary website HuffingtonPost.com. Read her latest posts below or for all posts go to
http://www.huffingtonpost.com/karin-lissakers.
Mineral Prospects Should Spur Peace, Not Conflict, in Afghanistan
With the discovery of new mineral deposits worth an estimated one trillion dollars, the stakes for creating sound and accountable minerals management just got higher. Karin Lissakers describes steps that Afghan leaders can take to make the promised windfall a tool for national stability.
Read more … (Huffington Post)
Only Transparency Can Permanently Fix the Mess at the MMS
During 2009 and 2010, a stunning number of improprieties surfaced at the U.S. Minerals Management Service. But the planned reorganization of the troubled MMS is only a half-step towards true reform. Karin Lissakers writes that that transparency of key public data, which makes it far harder to hide regulatory or industry misdeeds, is critical to accountable governance of the U.S. extractive sector.
Read more … (Huffington Post)
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Featured Documents from the RWI Resource Center
In February RWI launched the Revenue Watch Resource Center: an online database of research, training and policy documents and videos on transparency and the management of natural resource wealth.
Our collection of resources continues to grow. July's featured resources include a mix of advocacy reports, official country-specific EITI documents and RWI's signature extractive industry "backgrounders." To explore all the materials in the Resource Center, go to http://resources.revenuewatch.org.
POGO's "Drilling the Taxpayer: Department of Interior's Royalty-In-Kind Program"
This 2008 report from the Project on Government Oversight (POGO) chronicles the corruption and industry influence that were once pervasive in the now defunct "Royalty-in-Kind"(RIK) program at the U.S. Department of Interior. POGO's findings and detailed reporting influenced the cancellation of the RIK program in 2009. The report continues to set an important precedent for regulatory reform, given the Interior department's current overhaul of the former Minerals Management Service.
Timor Leste 2010 EITI Validation Report
The 2010 Validation Report of the EITI in Timor Leste, published in March, marks the completion of the first EITI validation process undertaken in Southeast Asia. The report presents the findings of an independent reviewer on the progress of EITI in Timor Leste, and contains a rich summary of the state of extractive transparency in the country. Thanks to the EITI Board's approval of this Validation Report, Timor Leste was designated as EITI Compliant this June.
RWI Backgrounder: Oil, Gas and Mining Fiscal Terms
This RWI "backgrounder"provides an overview of fiscal terms for the extractive industries.
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AUDIO: Revenue Watch Leads Panel on Financial Crisis During IMF-World Bank Meetings
 In April, RWI presented a dynamic policy discussion at the World Bank on lessons learned from the global financial crisis and the steps that local and international actors can take to insulate resource rich economies from future shocks and ensure the long-term benefits of extractive activity.
Panelists from the Bank, the IMF Institute and the Brookings Institution joined RWI Director Karin Lissakers and audience participants in a conversation based on the RWI paper series "Boom, Bust and Better Policy."
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Australia's "Super Profits Tax": A High-Stakes Proposal for Australia and the Developing World
 Australia is a standard setter in the mining industry as the home of some of the world's largest and most sophisticated mining companies, as well as a major supplier of minerals to Asian markets. The mining power, however, now finds itself at the center of a debate over mining taxation. Mining companies and investors are mobilizing against Australia's recently proposed Resources Super Profits Tax (RSPT) on miners announced by the government on May 2. Fortescue, Australia's third largest iron ore exporter, and Xstrata, a large diversified miner, have each suspended two projects in response to the proposal, citing material impacts on project profitability, while the rest of the industry, led by Australia's largest miners, BHP Billiton and Rio Tinto, is waging a public battle against the law.
The first proposal would have replaced Australia's patchwork of state-level royalties and national taxes with a uniform resource rent tax levied by the national government. It would also have taxed miners' profits at 40 percent, in addition to applying a general corporate tax at 28 percent.
Since the publication of RWI's initial commentary, the Australian government announced revisions that would adjust the controversial proposals in response to mining industry demands. The newest draft is weaker than the original, covering only the iron ore and coal sectors and reducing the profit tax to 30 percent instead of the 40 percent initially proposed.
Read more …
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Indonesia Leads Asia Pacific Region with Plans to Implement Transparency Standards
RWI applauded the government of Indonesia's announcement that the country plans to implement the EITI. The presidential decree signed on April 23 initiates several of the required steps to reach formal EITI candidate status. RWI praised Indonesia's leaders in particular for an "unequivocal commitment to go beyond minimum EITI standards."
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HONG KONG: Stock Exchange to Require Greater Transparency
On June 3, the Hong Kong Stock Exchange put new disclosure rules into effect for mineral companies, marking a significant step forward in the global campaign for extractive industry transparency and accountability. The rule change is a sign of positive momentum as the International Accounting Standards Board considers actions that could have even greater reach, and also weakens the case against greater disclosure by extractive companies on the basis of the disadvantage borne by any "first mover."
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Video: "Your Voice, Your Opportunity" Indonesia Campaign Raises Budget Awareness
 This spring, RWI's Indonesian partner, PATTIRO, together with a Columbia University researcher and NGO LPAW, conducted an innovative grassroots campaign to raise awareness about government management of public finances at the local level. The "Your Voice, Your Opportunity" project, which reached 93 villages and nearly 2,000 people in Indonesia's Blora district, and helped participants lobby their district leaders, highlighted the lack of transparency and access to government budgeting information citizens in resource-rich developing countries often face.
Read more …
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ANÁLISIS QUINCENAL: Latin America Update, May 30, 2010
Carlos Monge, RWI Latin America Regional Coordinator, and colleagues deliver news and insight. In issue May 30, the debate about exporting natural gas continues in Peru; consequences of the oil spill in the Gulf of Mexico for Latin America; and the implications of rising international gold prices for Peru and Bolivia.
Read more … | Español …
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VIDEO: Cameroon: Pipeline to Prosperity?
On the tenth anniversary of the Chad-Cameroon pipeline project, filmmaker Christiane Badgley reports from the beach town of Kribi, a Cameroonian city that stood to benefit from the pipeline project. Seven years after oil began flowing, Badgley says the town seems "untouched by any new oil wealth."
Read more …
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OSI-Azerbaijan Honors Investigative Journalism on Public Finances
The Open Society Institute - Azerbaijan recently sponsored a competition for investigative journalism on issues of public finance, a critical area of concern for transparency activists. Four of the award-winning stories are now available in English, covering topics including regional access to water, the challenges to vocational training, and food safety.
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Big Four Firm Surveys Mining Company Tax Practices
A new report by Big Four auditing firm PricewaterhouseCoopers (PWC) surveys the contributions made by mining companies to public finances. In May, RWI co-hosted a seminar with PWC to discuss the findings of the report, "Total Tax Contribution," and its contribution to country-by-country financial analysis and reporting.
The international accounting and transparency communities are placing increasing emphasis on country-specific financial information. At the event, RWI's Vanessa Herringshaw highlighted the value of such data not only to companies but to investors, governments and citizens in producing countries.
Read more …
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Equatorial Guinea and U.S. Energy Security
The African nation of Equatorial Guinea is of critical strategic importance to the U.S. Nestled in the Gulf of Guinea, it exports the majority of its oil to the U.S., and it is the third largest African supplier of U.S. oil after Nigeria and Angola. U.S. companies dominate production, making Equatorial Guinea the fourth largest destination for U.S. investment in sub-Saharan Africa. The oil boom has produced a revenue windfall, with government oil revenues rocketing from to $4.8 billion in 2007 from $190 million.
This May, RWI partners including EG Justice and Global Witness presented a discussion in Washington, D.C. on Equatorial Guinea's oil sector and the gaps in existing transparency efforts. The distinguished international panel explored why U.S. government action is critical to addressing corruption and improving the lives of the citizens of Equatorial Guinea.
Read more …
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New Web Features at RevenueWatch.org
We have added new web site features to make it easier for you to find, receive and share information, including two RSS feeds, enabling you to get updates of news from around the web, or links to all the latest articles posted by RWI.
To subscribe to RWI's new RSS feeds, please use the following links:
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RWI in the News
Revenue Watch Noted for Victory in U.S. Financial Reforms
Sovereign Wealth Fund Recommendations Spark Dialogue in Nigeria
RWI Contracts Transparency Work Recognized by Oil & Gas Journal
In March, Oil & Gas Journal editor Bob Tippee praised the insights in RWI's 2009 report Contracts Confidential and Tippee exhorted industry members to open their contracts up for public oversight, and transform them from objects of secrecy into vehicles for building trust.
Read more …
Revenue Watch Latin America Coordinator Discusses Peru's Post-Resource Economy
RWI Latin America Regional Coordinator Carlos Monge was recently featured in an extended interview on PBS Newshour, discussing economic growth in Peru. Monge acknowledged the importance of the extractive industry to Peru's economy, and suggested that tax policy reforms could help the nation receive a larger share of industry income.
Read more …
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RWI Staff Updates
RWI is delighted to welcome several new staff members:
Administrative Associate: Loren Anderson
Economic Analyst: Andrew Bauer
Media Capacity Building Project Coordinator: Jackie Christie
Research Associate: Alexandra Gillies
Senior Regional Program Associate for Asia Pacific: Yasmin Hatta
Middle East and North Africa Regional Coordinator: Patricia Karam
Training and Capacity Building Program Officer: Katarina Kuai
Regional Program Associate for Central Asia and the Caucasus: Emil Omarov
Head of Communications: Robert Ruby
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