Publications
TRANSPARENCY-KEY TO HARMONY IN A
DISTRAUGHT WORLD
Editorial, Corporate Governance,
September 2003
Oil has long been regarded as the source
of all ills the modern economy is heir to. Juan Pablo Perez
Alfonso, a founder of OPEC, complained in 1975, “I call
petroleum the devil’s excrement. It brings trouble…Look
at this locura – waste, corruption, consumption, our public
services falling apart.”
It is now universally accepted that oil was the main reason
for the Anglo-American attack on Iraq. 70% of world’s
oil lies in Middle East. US needs control of oil to finance
its annual trade deficit of half a trillion dollars estimated
to rise to one trillion in the next 5 years. Sometime towards
the end of the 2000, Saddam Hussein had decided to invoice oil
exports in Euros instead of dollars. Such a step, if followed
by other oil exporters – 10 out of 11 OPEC members are
Islamic countries- could do incalculable damage to the US economy.
At the same time, estimates of Iraq’s oil reserves had
also been upgraded from around 112 billion barrels to 300 billion
barrels compared to the Saudi Arabia 260.
In this context any effort to bring openness
and transparency in oil payments needs to be commended specially
when it comes against the backdrop of corrupt countries stashing
away illicit oil payments in secret bank accounts and oil companies
remaining silent in their eagerness to avoid a possible competitive
advantage. At a recent forum in London on the Extractive Industries
Transparency Initiative (EITI), Tony Blair, the British prime
minister, re-emphasised theBritish government’s commitment
to bring transparency in payments for oil and mining. “We
aim to increase the commitment of the developed world to aid
and to industry on the basis of partnership. In return, developing
countries have to take measures towards governance. The transparency
initiative is one part of that.”
Baroness Amos, the UK’s international
development secretary, told the meeting that Azerbaijan, Ghana,
Trinidad and Tobago and Indonesia had said they would look at
adopting the EITI transparency principles. Nigeria, the Democratic
Republic of Congo, Kazakhstan, Mozambique, Sierra Leone, Equatorial
Guinea and East Timor had offered broad support. But the representative
of Angola, another large African oil producer, reacted coolly
to the idea.
Institutional investors with total holding
worth more than £1,760bn ($2,952bn, Euros2,496bn) have
backed the UK-led plan. Howard Carter, chief executive of Isis
Asset Management, which coordinated their involvement, is reported
in the Financial Times to have said: “if we want to prosper,
if we want companies in which we invest to prosper, then the
answer is pretty clear: we all win if the rule of law is respected
and enforced; if the corruption is brought under control; and
if local societies deliver improving economic conditions for
all segments of society.
The good news is that one of the 11 countries
that have agreed to support the British government move to make
oil payments transparent is the Democratic Republic of Congo
(DRC) where illicit oil payments are believed to be the root
cause for sustaining a civil war that has left 4.7 million dead
at the last count.
It will be wrong to assume that corporate translucence and opacity
is limited only to developing countries. As a recent survey
conducted by the Economist and reported in the corporate governance
alliance digest (3/3/3) reveals, the developed countries are
the worst culprits. In a point count of 0-3 (with 0 being information
not there; 1 information there but hidden; 2 information easily
found but hard to understand/incomplete; 3 information easily
found, understandable and complete) US score is only 0.5 and
the UK –1, Germany tops the score with 1.3 with France
immediately trailing behind at 1.2. Japan’s score is the
worst at 0.4. Worldwide compaign for transparency is the surest
way to bring harmony to this distraught world.
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