Memorandum submitted by Global Witness.
OVERVIEW
1. Global Witness is a non-governmental organisation,
founded in 1993, which campaigns against the misuse of natural
resources to fund corruption and conflict. Our work on logging,
oil and mining in more than a dozen countries, including Cambodia,
Angola, Liberia, the Democratic Republic of Congo, Kazakhstan
and East Timor, has made us an influential voice against corruption
and warlordism.
2. We were co-nominated for the 2003 Nobel Peace
Prize for our work on conflict diamonds which led to the creation
of the Kimberley Process, and we are a founder member of the Publish
What You Pay coalition and a key participant in the Extractive
Industries Transparency Initiative, launched by the British government
in 2003. In 2005 we received the annual Gleitsman Foundation International
Activist Award.
3. The World Bank and IMF's lending and assistance
give them great influence over the 50-odd developing countries
that produce natural resources like oil, gas minerals and timber.
In both institutions, awareness is growing that many such countries
will remain mired in poverty, instability and conflict, unless
they can manage their natural resources in a way that is sustainable,
transparent and accountable to the public.
4. Unfortunately, the Bank and the Fund have been
reluctant to tackle natural resource governance in a coherent
and holistic way, relying on ad-hoc measures in particular countries
or, in some cases, ignoring the question altogether. Britain could
do much more, as a leading shareholder in the Bank and Fund, to
promote the joined-up approach that is desperately needed.
5. Here, in summary, are the questions which best
express our concerns:
i) What steps will the British government take to
ensure that the World Bank requires borrower governments, in countries
which depend on natural resources and have a history of poor governance,
to be transparent about the revenues they earn from these resources?
ii) In countries like the Democratic Republic of
Congo and Liberia, where fighting between predators for control
of natural resources has been a major cause of recent wars, will
the British government ensure that the World Bank makes the transparent
and accountable management of natural resources a condition of
all its non-humanitarian aid?
iii) The IMF recently published a Guide to Resource
Revenue Transparency, which details the institutions and policies
that resource-rich-but-poor countries should put in place to promote
transparency and reduce the risk of corruption. What steps will
the British government take to ensure the IMF implements the Guide's
recommendations in all resource-rich countries that receive its
assistance?
iv) Will the British government use its influence
to stop the World Bank supporting destructive models of industrial
logging in countries like Cambodia, which hurt local people and
the environment and enrich rogue logging companies and corrupt
officials?
OIL AND MINING REVENUE TRANSPARENCY
6. Lack of transparency about the flow of revenues
from the oil and mining industries to the governments of resource-rich
countries in the developing world has made possible the misappropriation
of billions of dollars of these revenues by corrupt officials,
deepening the poverty of countries such as Nigeria, Angola, Indonesia,
Kazakhstan and Equatorial Guinea, and damaging their development
prospects
7. Recognising this problem, the British government
in September 2002 started the
Extractive Industries Transparency Initiative (EITI),
which brings together governments, oil and mining companies and
civil society groups to promote the public disclosure of revenue
flows from the oil and mining industries to governments in resource-rich
developing countries, in order to deter corruption. Roughly 20
countries and most leading global oil companies are now involved
in EITI.
8. Although the World Bank and IMF have both endorsed
the EITI, neither institution is using the full weight of its
influence to promote resource revenue transparency. Both continue
to treat revenue transparency as an optional extra on their policy
wish-lists, rather than as a basic condition of their interventions,
whose absence will undermine all their other work in countres
that are rich in natural resources, but vulnerable to corruption.
9. We believe that the British government can and
should spearhead a co-ordinated effort by other Bank and Fund
shareholders to ensure that revenue transparency is mainstreamed
across their operations in all resource-rich-but-poor countries.
THE WORLD BANK AND REVENUE TRANSPARENCY
10. The World Bank has taken a step in the right
direction by requiring that corporate investment projects in oil
or mining which receive its financial support must publicly disclose
their payments to governments, in line with the EITI principles.
However, the Bank does not require governments which borrow from
it to be similarly transparent, even where they are dependent
on natural resource revenues, and where there is a history of
weak governance. This creates the risk that Bank loans in such
countries may be merely filling the gaps created by corruption.
11. The need for transparency is particularly pressing
in countries emerging from conflict, such as the Democratic Republic
of Congo and Liberia. A struggle between armed factions for control
of natural resource wealth, aided by predatory private companies,
was a major cause of the devastating wars in both countries. If
the international community to instil transparent and publicly
accountable management of resource revenues, this struggle may
renew, tipping these countries back into war.
12. We would like to ask the Committee that the government,
both as a donor in its own right and as a shareholder in the World
Bank, should work to ensure that all non-humanitarian aid (including
debt relief) to resource-rich countries, particularly those with
a history of poor governance and those emerging from conflict,
should be made conditional on transparency of resource revenue
flows, on the creation of systems of public revenue management
that are truly accountable to citizens, and on increased public
spending on development priorities such as health, education and
basic infrastructure.
THE IMF AND REVENUE TRANSPARENCY
13. The IMF has also endorsed the EITI and recently
published a Guide to Resource Revenue Transparency, which neatly
and effectively describes the laws, measures and institutions
that a resource-dependent country should have in place, in order
to ensure that its management of resource revenues is transparent
and accountable to citizens.
14. However, the IMF does not require that countries
which receive its financial support actually implement the measures
recommended by the Guide, nor are IMF staff required to report
on these issues in their Article IV surveillance reports on member
countries. We would like to ask the Committee to question the
government as to how it intends to ensure that the IMF requires
these steps by borrower countries which are dependent on resource
revenues, as a condition of lending.
FORESTRY MANAGEMENT AND CORRUPTION
15. Many of the developing world's large remaining
forests are at risk of rapid destruction by unsustainable logging
by rogue companies in league with corrupt officials, to the detriment
of local people and the natural environment.
16. In Cambodia, the World Bank has spent the last
ten years supporting a logging concession system which has enriched
such companies and their allies in the government, despite abundant
evidence of corruption. Global Witness staff were banned from
Cambodia recently for daring to publish such evidence.
17. A Forest Sector Review in 2004, funded by DFID
and the World Bank, called for this concession system to be replaced
by new systems that meaningfully involve local communities. We
ask the Committee to call on the British government, to use its
vote to ensure that the Bank implements the recommendations of
this Review and stops supporting a concession system which has
penalised the Cambodian people and enriched a small and corrupt
elite.
18. More broadly, the British government should use
its influence as a shareholder to stop the Bank from promoting
destructive models of industrial logging in developing countries
which damage the livelihoods of local people, reward rogue companies
and fund official corruption.
Thank you for your attention.
October 2005
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