Firms ‘aid poor-country fraud’

International oil and mining companies are abetting the vast misappropriation of public funds in the developing world, a report has said.

International oil and mining companies are abetting the vast misappropriation of public funds in the developing world, a report has said.

Secrecy about payments to governments by foreign firms means revenues from natural resources are going astray, the campaign group Global Witness said.

The result, it said, was chronic poverty and instability.

Such high levels of corruption would not exist if companies were obliged to reveal their payments.

Confidentiality deals

At present, Western companies operating in developing economies are generally not obliged by their own governments to disclose how much they pay foreign leaders.

Even if foreign firms wanted to publicise this information, they might face termination of their contracts if they do so.

Contracts signed between oil companies and individual countries usually contain “confidentiality clauses” which prevent either side from divulging the nature of their agreements.

“Ordinary citizens in Angola, Equatorial Guinea or Kazakhstan have no information on what is happening to that money,” Gavin Hayman of Global Witness told the BBC’s Today programme.

The report focuses on five countries – Angola, Congo-Brazzaville, Equatorial Guinea, Kazakhstan and Nauru.

Key accusations include:

  • In Angola, where it says a quarter of oil revenue is unaccounted for each year, one in four children dies in infancy. 
  • While trying to undermine a rival, Kazakhstan’s President Nursultan Nazarbayev apparently led investigators to $1bn in state funds placed in secret accounts abroad. 
  • In Equatorial Guinea, controversy has arisen over payments by oil companies into an account in a private US bank. The same bank has handled the purchase of luxury homes for President Teodoro Obiang Nguema and his brother, an alleged torturer, which they insist were bought with their own money. 
  • Phosphate mining revenues on the Pacific island of Nauru have been squandered.UK initiative“The international community spends $200m each year trying to feed one million people in Angola who are critically dependent on international food aid,” said Mr Hayman.

    “Now given that $1.5bn is going missing from the treasury, there is a lot more they could be doing for their citizens.”

    British Prime Minister Tony Blair has backed a scheme known as the Extractive Industries Transparency Initiative, which encourages companies to volunteer information about their agreements overseas.

    Global Witness said the project had not borne results – an assertion the government denies.

    Nigeria, Ghana and Azerbaijan are about to sign up to transparency initiatives, said Masood Ahmed of the Department for International Development who overseas project.

    To change UK law to require British oil companies to divulge information would put them at a disadvantage, as they would be competing against US and European companies which are not held up to the same transparency obligations, he said.

    “Let the governments in the countries take charge of this problem. They need to be accountable to their own people.”

    But Global Witness said unless laws are changed, the situation was unlikely to improve.

    At the same time, the World Bank, International Monetary Fund and donors should require transparency of oil, gas and mining revenues before they hand over financial support, the group concluded.

BBC News, March 24, 2004

Categories: Corruption, Odious Debts

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