Lessons on Transparency in the Extractive Industry Sector - By Uche Igwe
Lessons on Transparency in the Extractive Industry Sector
I recently had the rare privilege of listening to and speaking with Senator Benjamin L. Cardin of the Unites States Senate. He was a guest lecturer at an investment conference organised by the Columbia University Law School in New York. It was very refreshing listening to him eloquently articulate the reasons why the US Senate passed the now famous Cardin Lugar provision on transparency - and the potential benefits of the legislation to resource rich but poor developing countries and the US enlightened self interest as a global promoter and defender of good governance. He charmed everyone in the audience as he simply but convincingly canvassed the need for increased transparency and corporate social responsibility in the global extractive industry dominated by US energy companies.
The now famous Cardin-Lugar Energy Security through Transparency (ESTT) provision was authored by Senator Benjamin Cardin, a democrat from Maryland and Senator Richard Lugar, a republican from Indiana. It requires both US and internationally based companies registered with the US Securities and Exchange Commission (SEC) to publish what they pay to governments for the commercial development of oil, gas and minerals. It was passed on the 15 July 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As he spoke, Cardin argued that confidentiality clauses in contracts should cease to exist in the extractive industry. He made a solid case for complete and mandatory disclosure of all so-called 'sensitive' information as this does not put any extractive industry company into a competitive disadvantage. Rather, he argued very lucidly that such disclosure would provide a level playing field for healthy competition to happen. He called for a comprehensive good governance approach to business and global affairs, hinging on the fact that 'secrecy fosters instability, corruption and greater risk for investors, regulators and citizens.'
As I sat listening, I began to think about Africa in general and Nigeria, the country of my birth. Experts say that Africa holds an estimated 10 per cent of global oil reserves, 40 per cent of gold, and 80 - 90 per cent of chromium and the platinum group of metals. The McKinsey report indicates that by 2015, 13 per cent of global oil production will take place in Africa and 19 countries, including Nigeria, will become more significant producers and players with new deep-water discoveries. And yet many African countries are submerged in poverty, under development and conflict. We have unfortunately become a poster for the so-called 'resource curse'.
As I listened to Cardin, he came across as someone who speaks from conviction, deep understanding of the issues, experience, foresight and patriotism. And I saw in him the reason why the US plays an increasingly conspicuous role in global affairs. Here, partisanship takes a backseat for cooperation in many matters of policy - especially foreign policy. Parliamentarians close rank across party lines and place long-term national interest beyond political party, individual, corporate or, for that matter, any interest.
It further signifies how a vigilant civil society can collaborate with willing and committed parliamentarians. Many revenue transparency activists within the US worked closely with Cardin and Lugar on this legislation which, according to Isabel Munilla, director of Publish What You Pay US, 'sheds light on billions of payments between oil and mineral companies and governments and provides a powerful tool to scrutinise the levels of public expenditure on economic development.
Can I say the same for our parliamentarians in Africa? As I look to Nigeria, I see clearly that one of the most virulent features of democracy is our prostrate parliament. Our national assembly is filled with clueless parliamentarians who were catapulted to Abuja due to dubious elections. They simply should have no business with the seriousness associated and expected in law-making. Worse still is their gross inability to discharge the two other aspects of their responsibility: representation and oversight. Because they were appointed and not elected, their accountability is first to their godfathers and so they have no business with their constituency. In conducting their oversight, there have been many cases of compromise and lack of patriotism.
As I perused the media on events around the passage of the Dodd Frank Act, I learned that many oil companies and the American Petroleum Institute lobbied against the bill, albeit ineffectively. But if it were in Africa and particularly in Nigeria, things would obviously be different. For instance, despite the lip service support by multi-national and indigenous oil companies to the Extractive Industries Transparency Initiative (EITI), section 14 (a) of the NEITI Act was watered down in between our parliamentary sessions.
Another relevant issue that came to my mind at the New York conference last week was the new Petroleum Industry Bill (PIB). Nigerian parliamentarians are currently considering this landmark reform legislation that will potentially improve the Nigerian petroleum sector. I wondered how many months has passed since our late former President Umaru Yar'Adua submitted the draft for consideration. We have been told that the bill has been in between committees since then. Many Nigerians are anxious due to the past performances of our national assembly and looking at how for instance the NEITI Bill undertook the same journey and came out a mutilated Act in 2007.
Many other reasons further increase our anxiety. Weak capacity is a preponderant quality of many of our legislators, a quality shared by their aides and consultants. These parliamentary support persons are mostly drawn from their friends and cronies for personal reasons rather than added value, professionalism or expertise. Worse still, as the 2011 elections approach, many parliamentarians are in dire need of a financial war chest for the election battle ahead. Rigorous scrutiny of any bill can never be and indeed has never been on our national parliamentary agenda.
So, as Nigerians await the passage of the PIB, the timing can lead us to hazard a guess of what will be a most likely outcome.
The Cardin-Lugar provision in the US is an example of a unique victory for good governance against the tide of vicious corporate interest. It offers an example for parliaments and parliamentarians worldwide in their role of shaping good laws for global prosperity. I hope and believe that one day, African and Nigerian parliamentarians will emulate, Cardin and Lugar.
Uche Igwe is an Africa public policy scholar at the Woodrow Wilson Centre and visiting scholar at the Africa Studies Program, Paul H. Nitze School of Advanced International Studies, John Hopkins University, USA.