Earlier this year the Extractive Industries Transparency Initiative (EITI) held its fifth Global Conference in Paris. The event was dominated by often lively debate on three broad issues: the extent to which the voluntary EITI was complemented by the requirements of the US Dodd-Frank Act (esp. Sec. 1504, the Cardin-Lugar Amendment); what comes next for those countries deemed compliant with EITI; and what could be done beyond transparency to ensure that the greatest social and economic benefit is secured from natural resource wealth.
Shell CEO Peter Voser made news by suggesting that Dodd-Frank’s reporting requirements diminished the sovereignty of resource-rich countries, which were being treated as ‘a problem and not a solution’ in contrast to the approach of the voluntary EITI.
Dr. Mo Ibrahim, a member of the Oversight Board of the Natural Resource Charter, warned against seeing any contradiction between Dodd-Frank-style regimes and EITI. Ibrahim called on Europe to ‘show its moral character’ by swiftly following the US example. And it certainly seems that the EU and its members are gearing up to act.

Legally binding reporting requirements in international capital centers provide a global public good in the form of information which can be used by civil societies, governments and companies throughout the world. Participation in EITI by resource-rich countries reduces the risk that requirements in some investor jurisdictions will lead to a race to the bottom with companies registered elsewhere. Transparency can thus be built up from both ends.
Far from threatening the sovereignty of resource-rich countries, transparency empowers them to fulfil their sovereign responsibility for managing resource wealth, taking control of national endowments rather than being controlled by them. Precisely how transparency becomes accountability is left in the hands of the resource owners themselves.
Companies like Shell are concerned with what form the response to transparency will take. ‘Will transparency bring accountability to informed publics?’ is the implicit worry. ‘Will the response put investments at risk?’
Yet transparency is precisely concerned with informing resource-rich societies. They will learn by doing – and, with a bit of help, from the mistakes and successes of resource-rich countries in the past. There is a risk that the greater amount of information provided by transparency will have no effect on the quality of decisions – even lead to poor choices – but not as great a risk as that stemming from a lack of information.
There is opportunity in transparency for resource companies. A more transparent deal is a more credible deal; an open agreement made with accountable authorities is more legitimate and thus more robust to changing circumstances. The time-consistency problems of excessively one-sided, corrupt or un-transparent deals are much greater. There’s a higher risk of reneging when murky arrangements are made. Furthermore, a transparent investor gains in reputation, which comes in handy when pursuing extraction projects elsewhere.
Transparency alone is not enough to ensure responsible resource management, as EITI stakeholders concede. Even if EITI leads to accountability on payments –‘showing the money’- the responsible use of resource wealth requires that the ‘impact of the money’ also be addressed, including ‘contracts, budgets, and other impacts’. Such was the argument of Alfred Brownwell, founding senior campaigner of Liberia’s Green Advocates, speaking to TrustLaw. The demand from the ‘larger population’ for a comprehensive approach in which – to put it in the Charter’s terms, ‘every stage of the decision chain is understood and addressed’- was ‘insistent’, according to the Liberian. This demand cannot be ignored if the resource curse is to be escaped.