G-8 Urges More MDB Transparency, Disclosure of Extractive Industry Revenues

1 June 2003

The Group of Eight countries, meeting in Evian, France, on June 2 restated their support for some additional transparency at the multilateral development banks and added a new endorsement, for greater disclosure by corporations and governments of the revenues from extractive industries.

Neither statement was seen as sufficient by transparency activists, but the extractive industries statement was new territory for the G-8 and may help set the stage for a follow-up meeting on the subject June 17 in London.

The call for "presumptive publication of Article IV staff reports" by the International Monetary Fund, although a regular feature of G-8 declarations for several years, precedes a late June IMF board meeting at which Article IV disclosure policy will be revisited. Currently disclosure is voluntary by member governments. (The G-8 Statement is available here.)

The multi-paragraph G-8 statement in general commits the members to fighting corruption and mismanagement of public resources. The more specific applicable paragraph says the G-8 members will "work with others to achieve full disclosure of multilateral development bank (MDB) performance allocation systems; require publication of all MDB Country Assistance Strategies; urge presumptive publication of Article IV staff reports; and require publication of staff reports for all exceptional access cases, including a report for each that lays out clearly the related justification."

The declaration continues in the next paragraph to say the eight countries will "encourage participation in and publication of fiscal policy transparency ROSCS by all IMF members, including making this standard practice for exceptional access cases."

An ROSC is a Report on Observation of Standards and Codes. The IMF has recognized 12 areas and associated standards as useful for the operational work of the Fund and the World Bank. These cover such areas as accounting, anti-money laundering, and securities regulation. Reports summarizing countries’ observance of these standards are prepared and published at the request of the member country. Short updates are produced regularly and new reports are produced every few years.

New Topic Covered in G-8 Language

While support for presumptive disclosure of the Article IV reports has been a staple of G-8 declarations, the other language is less familiar. The "exceptional access cases" language refers to a policy discussion concluded in early 2003 on dealing with the extension of credit in special capital account crisis cases. The Public Information Notice on that discussion includes mention of division within the executive board about whether to require the release of the Fund staff reports on whether to grant "exceptional access" to Fund resources. (See http://imf.org/external/np/sec/pn/2003/pn0337.htm)

A majority of the board supported "a presumption of public disclosure" for these reports, according to the PIN, because "there would a high premium on increasing public understanding of and credibility of the program strategy." The PIN continues, "Many other Directors, however, were concerned that moving to a presumption of publication of such staff reports might not be easily reconcilable with the need for frank assessments of the risks involved." The directors agreed to defer this debate until the larger June discussion on transparency.

A somewhat more expansive statement on disclosure was issued a month earlier by the G-8 finance ministers, meeting in advance of the Evian summit, issued a statement supporting more transparency. To help "promote local debate and ownership over the reform process," they pledged to "press to establish presumption of publication of all country strategy, program reviews, reports and strategies, including Article IV Poverty Reduction and Growth Facility/Staff Monitoring Programme staff papers, and all Multilateral Development Bank country strategies." The statement also urged "full disclosure of MDB performance allocation systems, and fiduciary and governance diagnostics." (See http://www.g7.utoronto.ca/finance/fm030517_communique.htm)

June IMF Meeting on Transparency Planned

Optimism that the MDBs will follow through on the G-8’s advice is not high among transparency activists. An article published recently by the Bretton Woods Project reflecting on the potential disclosure of more documents, observes: "It is unlikely that the IFIs and their borrower governments will readily acquiesce to the publication of such documents." (See link here.)

The same Bretton Woods report states: … "the apparent reluctance of borrowing countries to disclose more information on their relations with the IMF can be explained by a willingness to prevent closer scrutiny and potential `interference’ in sometimes difficult negotiations with the institutions." It further comments, "However, it would be sensible for borrowing governments to involve legislators and others before a loan agreement is signed rather than negotiate in secret and risk parliaments or mass protests rejecting the conditions of IMF assistance."

The date for the IMF board’s transparency policy review has not been set, but will likely come in very late June, according to a Fund official. The set-up policy options document by Fund staff, which is not disclosed to the public prior to the meeting, has not been completed yet, she said.

However, the broad outlines of the issues before the board are known, and will feature reconsideration of the Fund’s policy on releasing the Article IV staff reports, the key document covering conditions in member countries and laying out Fund-recommended policies. They are now disclosed in a majority of instances, as the Fund likes to point out, but the decision is voluntary on the part of member governments.

G-8 Issues First Extractive Industries Statement

The G-8 statement on extractive industry revenues (oil, gas and mining) begins with explanation that "we have agreed to pilot on a voluntary basis an intensified approach to transparency."

"To this end," the declaration continues, "we will encourage governments and companies, both private and state-owned, to disclose to the IMF and another agreed independent party such as the World Bank or Multilateral Development banks, in a consistent fashion and common format, revenue flows and payments from the extractive sector. This information should be published on an aggregated level, in accessible and understandable ways, while protecting proprietary information and maintaining contract sanctity."

The declaration continues with three other statements, generally aimed at facilitating compliance. The first says the G-8 countries will "work with participating governments to develop and implement agreed action plans for establishing high standards of transparency with respect to all budget flows (revenues and expenditures) and with respect to the awarding of government contracts and concessions." Further the G-8 commit to "assist those governments that wish to implement this initiative with capacity building assistance." Finally it says there will be an effort to "encourage the IMF and the World Bank to give technical support to governments participating in the initiative and to develop linkages with other elements in this Action Plan."

Extractive Industries Conference Upcoming

The Group of Eight statement on extractive industry revenues was praised as a start by Simon Taylor, of the London-based nongovernmental organization Global Witness, although he believes the voluntary approach may be found wanting.

The first-time mention by the G-8 is considered a boost to the "Publish What You Pay" campaign, and will set the stage for the meeting, to be held June 17 in London, at which it is hoped work will proceed on developing a set of principles for the disclosure of extractive industry revenues.

U.K. Prime Minister Tony Blair, for about a year, has been shepherding a loose, multi-party negotiation on the topic, known as the Extractive Industry Transparency Initiative (EITI). The United Kingdom in early May issued invitations to a ministerial-level meeting to be held at Lancaster House in London.

The United States pushed for a "more ambitious" statement than the United Kingdom, according to one U.S. official. The United States would like to see parallel emphasis given to a call for governments to make their budgets and procurement processes transparent. In addition, U.S. officials are urging a commitment on the part of the developing nations to do more to fight corruption, and to prevent corrupt leaders from sending money abroad and finding exile havens themselves.

Considerable disagreement exists about how the EITI should proceed. The United Kingdom initially was pushing for an international voluntary "compact" on the topic, but that idea met with "pretty strenuous" objection from quite a number of countries, according to a U.S. official. It now appears more likely that what might emerge from the June 17 meeting will be a set of principles.

One key difference revolves around whether disclosure standards should be voluntary or mandatory, and for whom. The United States opposes mandatory disclosure. Corporate disclosure is only part of the equation, said one U.S. official, who said such disclosures might not be useful for the weak civil society organizations in corrupt nations. The official argued that requiring corporate disclosures would not pressure governments to release more information. The United States supports not only voluntary corporate disclosure, but also voluntary government disclosure of the monies they receive and their expenditures.

Pursuing this wider disclosure agenda, along with anticorruption efforts, will do more to get at the root causes of corruption, the U.S. official said. More openness and lower levels of corruption will play an important role in attracting investment, according to the official. The United States anticipates a "demonstration effect" from the example of countries that make voluntary disclosures.

Taylor said he is "not fussed about the absolute specifics" but hopes the G-8 will at least deliver a commitment from its members to make the June 17 meeting a success. Taylor would like to see a commitment to a time frame for an agreement, and support for "a cocktail of mandatory mechanisms" when a government refuses to make disclosure. Angola’s refusal to disclose the revenues it receives from oil is the usual example cited by the Publish What You Pay coalition of NGOs. Without the potential for mandatory action, "We simply cannot see how you can address this problem in countries where you have elites that have been using state assets for themselves," he said.

He said the pro-transparency movement is gaining ground as developing nations and multinationals look for increased security of supply and governmental stability, not only in Africa, but also in countries of the former Soviet Union and in the Middle East.

By Toby McIntosh

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Filed under: IFTI Watch

ABOUT IFTI WATCH

In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
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