New Standards Sought in Payment Disclosure

Mar 24, 3:43 PM (ET)
By BRUCE STANLEY

LONDON (AP) - Anti-corruption activists called Wednesday for new accounting and
financial standards that would force the disclosure of payments that oil and
mining companies make to leaders of resource-rich developing countries.

The new rules would put greater pressure on governments to reveal their often
unpublicized revenues from exports of oil, natural gas and minerals, and would
enable ordinary citizens in these countries to hold their leaders to account,
the London-based human rights group Global Witness said.

Financial institutions, including export credit agencies and international
banks, should help by requiring governments to disclose such revenues as a
condition for their obtaining insurance and loans, the group said.

Global Witness argued that voluntary disclosure of corporate payments has had
only a limited impact so far in helping stop the spiral of corruption, poverty
and instability in many developing countries.

The group issued a 91-page report highlighting what it said were examples of
embezzlement and mismanagement of revenues in five countries - Kazakhstan,
Angola, Congo Brazzaville, Equatorial Guinea and the Pacific island nation of
Nauru.

The sums that have disappeared are a staggering $1.1 billion in Kazakhstan, as
much as $500 million in Equatorial Guinea and $250 million a year in Congo
Brazzaville, the report said.

In Angola, one of every four dollars in oil earnings disappears. At the same
time, one in every four Angolan children dies before the age of 5 from
preventable diseases, it said.

The Group of Eight leading industrial nations, or G-8, recognizes this
problem. Britain encourages oil and mining companies to disclose their payments
in developing nations under what it calls the Extractive Industries Transparency
Initiative.

"However, voluntary disclosure will not work everywhere that transparency is
most needed because many political and business elites have a vested interest in
avoiding transparency to protect their illicit profits," Global Witness said.

It cited the experience of the British company BP PLC in Angola. Angolan
officials treat any disclosure of financial information as a matter of national
sovereignty. When BP revealed it paid a bonus of $111.7 million for the right to
drill for oil there, the state-owned Angolan oil company Sonangol sent it a
threatening letter.

Major oil companies have expressed varying degrees of willingness to accept
rules for mandatory disclosure of payments. BP Chief Executive John Browne said
last June that a voluntary approach to transparency was the best way forward
until governments and institutions could devise disclosure rules that applied to
state-owned companies like Sonangol as well as to publicly traded corporations
such as BP.

Simon Buerk, a spokesman for Royal Dutch/Shell Group of Cos, said "the push for
greater transparency must be inclusive or else it won't work. Any reporting
requirements have to be applied to all oil and gas companies."

Global Witness campaigner Diarmid O'Sullivan acknowledged this concern. "But I
don't think it's a deal breaker," he said.

The group advocates "a cocktail" of mechanisms to ensure that financial
disclosures are as complete as possible, O'Sullivan said. Accounting standards
and stock exchange rules could be changed to force disclosure by publicly listed
companies, while the World Bank and other financial bodies could influence
governments that borrow from them to publish their figures.

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On the Web:

http://www.globalwitness.org

http://www.shell.com

http://www.bp.com