The 2010 Millennium Development Goals Review Summit

Written evidence submitted by Publish What You Pay

October 2010

Key outcomes from the summit

1. The MDG Summit outcome document adopted by the General Assembly by consensus on 22 September 2010 included the following ‘action agenda’ and commitments related to fighting corruption and promoting financial transparency:

2. The MDG Summit outcome document stressed that "fighting corruption at both the national and international levels is a priority and that corruption is a serious barrier to effective resource mobilization and allocation and diverts resources away from activities that are vital for poverty eradication, the fight against hunger and sustainable development." [1]

3. In 2008, exports of oil and minerals from Africa were worth roughly $393 billion -- nine times the value of international aid ($44 billion). Ironically, countries rich in natural resources are more likely to suffer conflict and poverty than their resource-poor neighbours, as the revenues are fought over, mismanaged and misappropriated under a veil of secrecy. Information about extractive industry revenues is critical for curbing corruption and fostering the better use of these domestic resources for development.

4. Notwithstanding the UK government’s laudable commitment to reaching 0.7% of GNI in aid by 2013 (reaffirmed at the MDG Summit), the fact is that the burden on the UK’s aid budget could be reduced at a time of severe fiscal austerity if developing countries were able to achieve sustainable growth by mobilising revenues from the sale of their natural resources.

5. Mobilising revenues from domestic natural resources through disclosure of payments made by oil, gas and mining companies to governments is crucial to ensuring sustainable growth in developing countries as citizens are empowered, through financial transparency, to hold governments to account for the use of these revenues.

6. At the MDG Summit the UK government placed an emphasis on improving maternal and child health as well as tackling preventable diseases such as malaria. Aid plays an important role but since natural resource revenues dwarf development aid flows, it is these domestic resources which will ultimately underpin a country’s economic development and ability to meet the MDGs including improving child and maternal health and tackling malaria.

7. Mobilising domestic resources for development would ensure that developing countries are able to secure and deliver the Summit outcomes for themselves. The MDG Summit outcome document reaffirms that national ownership and leadership are indispensable in the development process but that "development efforts at the national level need to be supported by an enabling national and international environment that complements national actions and strategies." A critical part of creating this enabling environment would be for the UK government to adopt legislation requiring UK-listed oil, gas and mining companies to disclose their payments the governments of resource-rich developing countries.

8. The MDG Summit outcome document specifically committed Heads of State and Government to accelerating progress on Developing a Global Partnership for Development (MDG 8) through:

· "Enhancing and strengthening domestic resource mobilization and fiscal space, including, where appropriate, through modernized tax systems, more efficient tax collection, broadening the tax base and effectively combating tax evasion and capital flight."

· "Implementing measures to curtail illicit financial flows at all levels, enhancing disclosure practices and promoting transparency in financial information." [2]

DFID’s role in delivering agreed strategies

9. The Publish What You Pay coalition urges the Secretary of State for International Development to champion extractive industry transparency regulations for UK-listed companies.

10. A new precedent in extractive industry transparency has recently been set by legislation in the United States. Provision 1504 (Disclosure of Payments by Resource Extraction Issuers) contained in the new Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, requires oil, gas and mining companies registered with the Securities and Exchange Commission (SEC) to publicly report how much they pay each government for access to their oil, gas and minerals. [1] The law requires the information to be presented annually on a country- and project-specific basis. It must be filed in an electronic format and the SEC must make this publicly available in a single on-line database.

11. President Obama raised this historic step in his speech to the UN MDG Summit on the 22nd September:

"...We are leading a global effort to combat corruption, which in many places is the single greatest barrier to prosperity, and which is a profound violation of human rights.   That’s why we now require oil, gas and mining companies that raise capital in the United States to disclose all payments they make to foreign governments .  And it’s why I urged the G20 to put corruption on its agenda and make it harder for corrupt officials to steal from their own people and sti fle their nation’s development." [2]

12. The UK government could help accelerate progress on achieving the MDGs by introducing similar reporting requirements for UK-listed companies. This would mean that companies that are currently not listed with the SEC would be covered by the same reporting requirements, creating a more level and transparent playing field for business. The information from company financial reports, if disaggregated to the level of each country, will be a vital tool in building such accountability, giving citizens essential data with which to hold their governments accountable for the revenues mobilised and how they are used.

13. A reporting requirement for UK-listed companies would cover important energy and mineral suppliers that are not listed on the SEC including Russian oil and gas companies like Gazprom, Rosneft and Lukoil, as well as large mining companies like Anglo American and Xstrata. These companies pay large sums of money to resource-rich countries for the sale of oil, gas and minerals which could serve as a basis for economic growth and poverty reduction.

14. With the UK’s important role in global financial markets, adoption of country-specific reporting requirements like the US law would greatly contribute to making payment disclosure an international norm. The UK should also promote similar standards in the European Union and other jurisdictions around the world. The inclusion of country by country reporting in the International Financial Reporting Standard for mineral extraction which is currently being developed by the International Accounting Standards Board would ensure the most universal coverage.

15. Introducing regulation to improve transparency and fight corruption fits well with the Coalition Government’s domestic and international agenda of transparency, accountability and good governance.