Does transparency help reduce corruption in natural resource management?

10 April 2014

Liz David-Barrett, Director of the Centre for the Study of Corruption and Transparency, writes about her current work with the United Nations Conference on Trade and Development (UNCTAD) where she spoke to a number of delegates in Geneva on Tuesday 8th April 2014.

Many countries that are endowed with natural resources suffer from the ‘resource curse’, whereby the benefits of this wealth do not filter down to the population.  The UN Conference on Trade and Development convened a major forum earlier this week to discuss the potential for transparency to help alleviate the resource curse and promote commodity-based development.

The facts about the resource curse are shocking.  At the UNCTAD forum, Alexandra Gillies of the Revenue Watch Institute presented data showing that resource-rich countries grow slower than countries without resources, as well as being less likely to democratise.  There are many possible explanations for this, but part of the story might be corruption.  Many resource-rich countries are ranked among the most corrupt on the Transparency International Corruption Perceptions Index, while mining is ranked the 15th most corrupt sector out of 19 on the Bribe Payers Index, with oil and gas in 16th place.

Transparency can help by exposing the revenue flows between governments and companies, and making it possible for civil society organisations to ask questions about where the money goes.  For example, governments that sign up to the Extractive Industries Transparency Initiative promise to publish what they receive from extractives companies, and to require companies operating on their soil to publish what they pay.  The Initiative has proved surprisingly popular, attracting 26 full members and a further 18 candidates since 2002.

Why do governments in countries known for corruption sign up to transparency initiatives that shed light on the transactions they make with oil and gas companies? Cynics – myself and my co-author, Ken Okamura, included – suggest that at least part of the reason is that countries are explicitly rewarded for compliance with this norm.  In our 2013 paper, we find that countries that commit to implementing the EITI standard, for example, receive more aid than countries that are not prepared to make that commitment.

But we cannot prove that the promise of aid is what motivates governments to join, and we do not claim that this is the whole story.  It is also true that transparency has emerged as an international norm, and governments wishing to be part of the international club feel pressure to comply.  Individual ministers and officials gain personal satisfaction when their countries credibly commit to values associated with the pro-transparency movement, particularly if their peers – e.g., neighbouring countries – also join.

Perhaps we could capitalize on this desire to ‘keep up with the Joneses’ to extend the EITI model to other areas where global governance is needed to address thorny problems?  We suggest that the multi-stakeholder group that the EITI establishes has so much potential as a tool against corruption because it brings together three parties – governments, companies and civil society – who share an interest in bringing about change, even if their motivations are sometimes different.   It institutionalizes dialogue among these three groups, builds expertise about how to evaluate relevant data, and has numerous spillover effects that improve accountability in other areas.  The founder of EITI, Peter Eigen, is already adapting the methodology to tackle transparency in the garment industry.  But what other areas might benefit?