WASHINGTON, D.C. — Oil, gas, and mining companies should fully disclose their payments to governments in the developing nations, according to the head of the International Finance Corporation.
"We would come a long way if all -- and I emphasize all -- natural resource companies would make their transfers of royalties, fee payments, and other revenues to host governments fully transparent," said Peter Woicke, executive vice president of the International Finance Corporation (IFC), the private-sector lending arm of the World Bank Group. Woicke is also managing director for all the private sector-related operations of the World Bank Group.
Disclosing such payments "would push governments to invest more wisely," Woicke said in a luncheon speech to IFC clients. "Hiding behind confidentiality agreements does not help anybody, and those with the most to gain financially from these projects -- the poor people -- are too often helped the least."
Woicke also pledged that IFC would redouble its efforts to help private sector companies in the emerging markets that lose access to the global capital markets during financial crises.
"Good companies in the emerging markets -- with solid credit histories and foreign currency earnings should not be punished every time the global capital markets close," Woicke said. "They need export credit. And we need to fill these financing gaps so that exporters, particularly small exporters, can weather these storms. This is one of the messages that has come out of the [World Bank Group-IMF] meetings this weekend."
Woicke said that the major macroenomic forces in the developed world, which he termed "push" factors, that had contributed to dramatic increase in capital flows to the emerging markets would be less powerful in the coming years.
"The '90s were all about the 'push' of capital flows, we're now into the decade of pull," Woicke said. "These factors include a country's investment climate, the depth and strength of its financial sector, and its public and corporate governance."
If the natural resource endowments of emerging market countries are developed in an environmentally and socially responsible way, they could be a major source of economic growth, Woicke said. "But as long as revenues from such projects are squandered away and are not productively channeled into health, education, and infrastructure for the benefit of the people, such projects will not reach a full level of sustainability."
The issue of disclosing payments from extractive industries to developing nation governments has been contentious in recent years. Critics of the industries have argued that royalties and other revenues, which often run to the billions of dollars, are not properly accounted for and subject to abuse by government officials. Developing country governments counter that the degree of disclosure should be determined by each nation.
The World Bank Group has incorporated a disclosure agreement into one of its extractive industries projects, the Chad-Cameroon pipeline, which is currently under construction. However, such disclosure agreements are not mandatory.
In 1998, following discussions with the World Bank Group, Chad's parliament approved a law that sets out the Government's poverty reduction objectives and details arrangements for the use of project revenues. Under the law, 10% of the royalties and revenues will be held in trust for future generations, 80% of the remaining funds will be devoted to education, health and social services, rural development, infrastructure, and environmental and water resource management, and 5% will be earmarked for regional development in the oil-producing area (over and above its share of national spending).
Annual published audits of Chad's petroleum accounts are published, public expenditures are reviewed by the Government and the Bank, and special arrangements have been made for channeling and accounting for the funds. In addition, the law created an oversight committee to monitor the use of oil revenues. This committee will include representatives of government, Parliament, the judiciary, and civil society.
A related capacity-building credit from the International Development Association supports the work of the oversight committee, as well as strengthens Chad's general accounting office and the dissemination of information on government expenditures.
