New Revenue Watch Index Promotes Transparency, Good Governance as Paths to Global Development

October 8th, 2010

On Wednesday, October 6th in Washington D.C., the Revenue Watch Index was co-launched by Revenue Watch Institute and Transparency International.

This is an important step in the Promoting Revenue Transparency project, an important project advocating, among other things, country-by-country reporting of all extractive corporations, and not only those active on Wall Street.

It is good to take a step back and know what this whole project is about. Why are we interested in the extractive industries? When there is money, there is a corruption risk, when there is big money, there is a big corruption risk, and oil and gas or mining deposits are equitable to large US dollar underground deposits for which a lot of entities or individuals are competing. Not only is this enormous wealth concentrated in deposits, but it is regulated for historic and environmental reasons, which allows civil servants and political leaders to participate in the competition.

We therefore have a game between companies on one side and governments, with powerful individuals, on the other side. Negotiations are being held between those two parties, and contracts are being signed between them. Those contracts are essentially about value sharing between companies and governments, but this value sharing can be detrimental to civil society in two ways. Firstly, the cake can be divided into three pieces: the piece for the company, the piece for the influential government officials who are being bribed, and the formal piece for the government (which is now drastically reduced due to the bribe). Secondly, the official flows to the governments can be misused, either diverted to individuals, or used essentially in military or police expenses in order to protect the power of those individuals.

There is an absent signatory to the contracts, which is the civil society. Only the inclusion of civil society can bring those dealings and contracts into light and help increase the governmental piece and its use towards education, health, infrastructure, and general development goals. All the rationale of the Promoting Revenue Transparency project is to bring civil society back as the third, but to some extent the most important, player in the dealings between companies and governments. Promoting revenue transparency means promoting transparency on the revenue derived by companies and governments from the extractive wealth, but it is really about knowing how the value is being shared, and advocating for better sharing it, more to the benefit of the general population.

The project currently includes one report on governments, the one just launched in D.C., and one report on companies which should be launched in March next year.

What are we asking from the companies? Information disclosure and good governance, which means country-by-country financial disclosure on value sharing, transparency on partners and subsidiaries, transparency on anti-corruption programmes, and transparency on what corporations do for transparency.

What is the Revenue Watch Index asking from governments in 41 resource-rich countries? Information disclosure and good governance, which also means information on value sharing, and checks and balances in the legislative and regulatory framework.

Reflecting on this work and the Task Force agenda, they both advocate for better value sharing between companies, governments and civil society. The fight against offshore centres, tax evasion or trade mispricing, and the advocacy for country-by-country reporting or knowledge of beneficial ownership contribute to better information disclosure and a more informed debate on how value can be shared for global economic development.

Editor’s Note: This article originally stated that the revenue from governmental contracts could be divided into two shares–or two ‘pieces’ of ‘cake’. This was due to an in-artful editorial change. ‘The cake can’ actually ‘be divided into three pieces’ (the company’s, the government’s, and the bribe itself). The fourth paragraph has been updated to reflect this correction.

Written by François Valérian

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