Publish What You Pay

OK, final article on the oil curse for today.

It is one of the great paradoxes that countries rich in natural resources tend to have lower growth rates, more debt, worse governance and greater political unrest than their energy-poor neighbors. Vast petroleum profits without oversight allow corruption to flourish. Nigeria, for instance, has earned more than $250 billion for its oil in the last 25 years, yet remains mired in poverty. In Turkmenistan, gas revenues are deposited into a foreign account controlled by the president for life, Saparmurat Niyazov, international financial officials say. These kinds of governments do not make for stable energy suppliers.

It's easy to see how the Caspian Basin could follow the path of so many oil-producing countries in the Middle East and Africa, where a corrupt elite, not the population, benefits from oil resources. But Azerbaijan and Kazakhstan, where the oil wealth is just beginning to flow, and Iraq, where an oil regime is not yet established, could still get it right.

Azerbaijan and Kazakhstan have taken a positive first step by establishing oil funds, in which a portion of oil revenues are set aside for national development projects. Oil funds, however, succeed only with a system of checks and balances, coupled with transparency of information about oil revenues. Oil funds in Venezuela and in the Middle East are controlled by presidents or monarchs and have dwindled because of corruption and mismanagement.

In Iraq, as elsewhere, it is now up to the people to ensure that such oil funds are run transparently. Citizens' advisory councils modeled on those in Alaska's Prince William Sound might be a good forum to address the economic and environmental impact of petroleum development. Freedom of information laws should be passed and people trained how to use them. Any contracts about producing oil and gas should be disclosed. To demonstrate their commitment to fiscal transparency, oil funds should report information as recommended by the Extractive Industries Transparency Initiative, a British proposal whose tenets were endorsed by the Group of 8 countries earlier this year. The initiative aims to increase the transparency of payments made by energy companies to host governments by standardizing the templates used to report such payments.

The private sector must also do its part. The Publish What You Pay Campaign, which is sponsored in part by the Open Society Institute, has called on oil, gas and mining companies to reveal the extent of their payments to resource-rich countries. If this initiative is adopted widely, civic groups can track the allocation of their national income.

I like this Publish What You Pay Campaign. I wish they had a ranking of the best and worse oil companies in terms of implementing transparency. Then customers could choose to buy from those that are the best and put pressure on those that are low to improve.

via Open Society Institute