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.
Madhav
Mehra
