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Promoting revenue transparency
Kowalczyk-Hoyer, Barbara
Kowalczyk-Hoyer, Barbara
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Abstract
"to host governments – in the form of license fees, royalties,2 dividends, taxes and support for local communities. These large financial inflows should contribute substantially to social and economic development, yet many resource-rich countries have been unable to transform resource wealth into wellbeing.3 When revenues from the extractive sector are not managed with transparency and accountability, mineral and petroleum wealth can fuel large-scale corruption, as well as poverty, injustice and conflict. One of the explanations for this phenomenon is that large revenue inflows lead to excessive rent-seeking.4 The question is how to make oil and gas revenues work for societies and not against them. The relevance of this question is strengthened by the fact that resource dependency is mostly a problem in poorer regions.5 The combination of high revenues of the oil and gas industry, high poverty levels in many oil-producing countries and, finally, high corruption risk6 makes transparency critical. Oil and gas rents7 can constitute a powerful budgetary instrument whose proper use is strongly dependent on government transparency and accountability. This money can foster long-term socioeconomic development, but it can also be misused, for example, to extend the political and economic power of a ruling elite. In a positive scenario, governments could use oil and gas rents to support education, healthcare, clean water supply, transportation infrastructure, small-scale entrepreneurship or even economic diversification – which are all basic conditions to lift people out of extreme poverty and foster long-term development. Citizens of resource-rich countries should have the right to know how their resources are managed, what income they bring and how this income is allocated. Exploitation of natural resources and the related foreign direct investment also have an impact on local communities. There are both opportunities and risks related to such investments, which engage the labour market, the environment and local social structures. This is another important reason why information transparency should be a basic principle in the extractive sector. Our study evaluates companies on several important aspects of transparency. Why is each of these aspects important? First, anti-corruption programmes constitute the basic preventive anti-corruption measure applied by companies. Evaluating public reporting on programmes such as this is the only way for civil society to know if such programmes are in place. Such reporting demonstrates companies’ public commitment to fighting corruption. Second, we analyse organisational disclosure – reporting on relationships among companies, their subsidiaries and their partners, as well as the adequacy of their financial statements. This is necessary for transparent contracts and financial flows both inside and outside companies. Third, we analyse country-level disclosure concerning both transfers to governments and data that gives an insight into value sharing between host countries and companies. Such information is necessary for communities, civil society organisations and other stakeholders to monitor the management of natural resources in their countries and to hold their governments to account. Fourth, we examine certain NOC-specific issues that are necessary for transparency in the oil and gas sectors."(pg 5)
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Book
Date
2011
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9783935711661
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With permission of the license/copyright holder