As we prepare for significant cuts at home, it is more important than ever that this money goes to where it is needed the most, writes Anas Sarwar MP.
The coalition is to be commended for sticking to the previous government’s commitment to meet the UN target and give 0.7% of GDP in Official Development Assistance (ODA) by 2013. It’s a big ask in times of austerity, but essential for the continued support of developing nations with populations still largely in poverty.
With this in mind, the government must not miss the opportunity to improve tax transparency in the developed world – a process which could help revenues reach local populations and reduce the UK aid bill in the long term.
It is not very often that NGOs demand the UK take a leaf of the US book, but improvements in tax transparency for mining and extractive companies is one area where America is blazing a trail in international development Britain would do well to follow.
The important Dodd-Frank bill, which is reforming finance in the US, was passed in July 2010 and includes a provision obliging all US-listed companies engaged in oil, gas or mineral extraction to disclose how much they pay to governments in an annual report.
It is a long awaited regulatory change championed globally by a 600-strong group of NGOs and charities known as Publish What You Pay and could ultimately improve life for millions of people in developing countries which are consistently resource rich but cash poor.
The link between international development and financial reporting is not immediately clear, but organisations such as Global Witness paint the picture in black and white. Their report “The Secret Life of a Shopaholic” (pdf) details the multi-million dollar spending spree of Teodoro Obiang the son of the President of the Republic of Equatorial New Guinea. Despite an official salary of $4,000 a month, Teodoro spent almost $100 million in the US on fast cars and yachts in the space of a just few years.
Thanks to huge oil revenues, his home country had the 12th highest GDP in the world in 2008, at over $30,000 per capita. However, Equatorial New Guinea also ranks 121st out of 177 countries on the United Nations Human Development Index. Africa as a whole exported more than £400 billion in oil and minerals in 2008, yet millions in the continent struggle to survive.
Equatorial New Guinea is just one of many countries in Africa suffering from what is sometimes referred to as the ‘resource curse’, where huge revenues from natural resources and a lack of transparency make it easy for corrupt officials to siphon off public money for personal gain.
A reporting requirement for the London Stock Exchange similar to that introduced in the US would give us a better idea of where the vast sums of money in the extractives industries end up. By requiring the companies extracting the resources to publicly disclose all royalties, taxes and payments, project-by-project and country-by-country, we would arm opposition and press in the countries concerned with the evidence required for calling out corruption.
It would also arm UK investors and forecasters, informing not only ethical investment but improving transparency in reporting and identifying states with sound tax processes and anti-corruption measures, and those without.
The benefits could be huge. Transparent, effective tax systems and the reduction of corruption could allow this money to be spent on schools, doctors, clean water and infrastructure – exactly the kinds of projects that British aid money is spent on now.
Improving access to their own wealth could lead many developing countries out of poverty and aid dependence and into self sufficiency and sustainable growth – the ultimate development goal. An Extractives Transparency law in the UK would represent a big contribution to international development, for little or no cost, whilst at the same time promoting the kind of corporate social responsibility that we can be proud of.
George Osborne announced at the G20 in Paris last weekend that he would support such rules at European level, something which President Sarkozy has been promoting for some time. Whilst European Union cooperation on this issue is desirable, the length of time we may have to wait before it actually happens means the UK should take the lead and introduce national rules now.
These resources are finite, and the amount of money disappearing every day could translate into lifting millions of lives out of poverty.
International development is not just about cash and % GDP commitment, it’s about leading by example and setting global standards. The UK is already behind the US on this issue, and the developing world doesn’t have time to wait for Europe to catch up. A genuinely sustainable and cost effective approach to international development demands that the UK government acts now.
• Publish What You Pay is a global civil society organisation; visit the website at www.publishwhatyoupay.orgLike this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.