We were heartened by President Obama's strong praise for open government and extractive industry transparency during last week's UN meetings. Speaking to the General Assembly on September 23, Obama said:
The strongest foundation for human progress lies in open economies, open societies, and open governments. … Open society supports open government, but cannot substitute for it. There is no right more fundamental than the ability to choose your leaders and determine your destiny. Make no mistake: the ultimate success of democracy in the world won’t come because the United States dictates it; it will come because individual citizens demand a say in how they are governed.
And in remarks earlier last week at the Millennium Development Goals Summit, Obama specifically cited new disclosure requirements for oil, gas and mining companies:
We also know that countries are more likely to prosper when governments are accountable to their people. So 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 stifle their nation’s development.
The requirements Obama described are included in the new U.S. Wall Street reform law, passed by Congress in July 2010.
The law is big news: Section 1504 obliges all companies listed on the Securities and Exchange Commission (SEC) to annually report how much they pay to governments for oil, gas and mineral extraction activities. The law has now entered the formal rule-making process at the SEC, and a range of organizations are collaborating with the U.S. Publish What You Pay coalition to provide input and guidance as the SEC codifies the new reporting requirements.
In 2008 alone, $393 billion came to Africa through oil and mineral exports. As the developed world continues to feel the pinch of fiscal deficits, the burden on their aid budgets could be reduced if developing countries were better able to mobilize their extractive revenues to achieve sustainable growth.
Transparency is the key to this dilemma, empowering citizens to hold their governments to account using information about how revenues are used, and strengthening safeguards against corruption.
The new U.S. law will have far-reaching effects. It covers 29 of the 32 largest oil companies active internationally. Eight of the world’s ten largest mining companies are registered with the SEC and would also be covered. It is estimated that between half and two-thirds of international oil companies in Iraq, measured by both oil production and money, would be subject to the law, which covers both U.S. and non-U.S. companies. It will also make voluntary initiatives like the Extractive Industries Transparency Initiative stronger by pushing companies to make more detailed reports of their payments on a country by country basis.
This landmark step by the U.S. government is the culmination of a long campaign by activists around the world working under the banner of the Publish What You Pay coalition, together with high-profile supporters including George Soros.
However, it is not sufficient for the U.S. alone to act. Other countries must follow suit to unlock billions of dollars in natural resource revenues so that they can be used for sustainable growth.
It is encouraging that the U.S. government has committed to working with other countries to establish similar disclosure requirements in other financial markets. The Publish What You Pay coalition is acting swiftly to capitalize on this momentum and has called for the United Kingdom, with its many oil, gas and mining companies, to adopt similar rules in London and to promote similar requirements in the European Union and at the G20.
We commend Obama for his powerful reminder to world leaders that accountable government and extractive industry transparency are essential ingredients for economic development in rich and poor countries alike.