Coalition must match rhetoric with action on transparency

This is not a time for bowing to corporate lobbying - it is a time for strong leadership to match strong rhetoric, writes Rushanara Ali MP.

Rushanara Ali MP (Labour, Bethnal Green and Bow) is the shadow minister for international development

Despite having huge deposits of oil, gas, and mined resources, which generate billions of dollars in incoming revenues, the people who live in more than 50 ‘resource rich’ countries around the world live in abject poverty. There is now a crucial moment to make important headway in tackling poverty and corruption, and making sure people in the developing world get their fair share of their countries’ resources.

However, despite all the talk from the government about their development credentials, David Cameron and his Secretary of State for International Development, Andrew Mitchell, have fundamentally failed to live up their promise to be a ‘development superpower’, and are letting this great opportunity pass them by.

If the resource flows from extractive industries were managed transparently and more effectively by the governments of these countries, they could provide a stable foundation for economic growth and poverty reduction.

The European Union is currently reviewing the EU transparency and accounting directives, giving the coalition the perfect opportunity to match its rhetoric on transparency for the extractive industries with leadership and action.

Governments and institutions in many of these countries are weak, and unaccountable to their citizens. The proceeds of natural resources are often siphoned off by public officials, either through corruption or because the countries are deeply undemocratic.

The extractive industries themselves often engage in corrupt practices in order to secure contracts or gain influence over public officials.

Income from resource extraction is often not fully disclosed by either the government or companies involved. The lack of transparency and thus of accountability, can lead to corruption and misappropriation. In the worst cases the revenues are then used to fund conflict and war.

Forcing companies to ‘publish what they pay’ for resources and for governments to ‘publish what they earn’ in exchange, is vital to make the entire system of resource extraction more accountable. If citizens can see readily available information on what companies pay for resources and what governments earn, they have a better chance of holding their governments to account over the use of resources and the income generated from extractive industries.

This would in turn help to lower levels of poverty and increase living standards in all resource rich countries.

The excellent ‘Publish What You Pay’ campaign has made huge progress in getting the countries and companies involved in extractive industry, as well as the world powers, to take note of the need for transparency. Last year the US passed the ‘Dodd-Frank Act’ which requires oil, gas and mining companies to reveal their payments to governments on a project-by-project and country-by-country basis. They have truly been leading the world on this issue.

In the UK, both David Cameron and Andrew Mitchell have spoken of the importance of transparency in international development; just last month, at the Institute for Government, the prime minister said:

“Information is power because it allows people to hold the powerful to account, and it gives them choices and chances they never had before.”

Unfortunately, once again the government are failing to match their words with action.

The European Union is currently looking at its transparency directive, the EU’s own rules on transparency. The review gives us the opportunity to go even further than the US, forcing companies to make available not just their payments to governments, but also their profits, sales and employment in every country in which they operate.

This information would expose corruption, bring democratic accountability but would also allow us to identify companies who are dodging their corporate tax, a problem which costs poor countries hundreds of billions of dollars a year.

However, it is far from certain the new transparency directive will be as strong as it needs to. There is a strong corporate interest lobby within the European Union fighting hard to maintain the status quo – it is vital the UK government take the lead in the charge for more transparency.

USAid recently wrote (pdf) to the US Securities and Exchange Commission to express strong support for the US regulations; DFID should do the same to the London Stock Exchange. DFID have representation on both the G20 working group on development and the OECD taskforce on tax and development, both of which should be used as routes to exert pressure on other member states.

The department should also be exerting pressure on development departments in other member states to ensure the support for a strong new directive is as broad as possible.

If the coalition is to become a ‘development superpower’ in more than just words, David Cameron and Andrew Mitchell must personally take the lead on this issue. This is not a time for bowing to corporate lobbying – it is a time for strong leadership to match strong rhetoric.

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