EITI Press Conference October 16, 2006 Oslo Minister Solheim: A hearty welcome to this Press Conference. I just want to apologize for being a little late, that is because we felt it would be completely unfair to start without the real person -- because we knew that you were here. And without your initiative we still had doubts that this conference would have taken place. So, it would have been unfair to have a press conference without you. If I could just start with one paradox, when I ask foreigners why Norway has performed quite well economically in the last few years, they all say, “Because you have oil.” The paradox is of course that all our neighbors are at the same level on society without any oil at all. So, I think you should look into it from the opposite way. I think it is more true to say that Norway is rich, affluent and a quite well-organized society despite of our oil resources and not because of the oil. If you look around the world the most successful economies in the last two years, I think Paul Wolfowitz mentioned one of them, are with no oil whatsoever. No natural resources whatsoever. Possibly the one most successful economy in the world for the last thirty years I think is South Korea. Being as poor as Africa thirty or forty years back and now be as rich as any country in Europe, and as democratic as any country in Europe, and with a fair distribution of wealth of any country in Europe. This development has taken place on the basis of zero raw material. And this is also the case with many other Asian countries -- Japan being possibly the most successful economy in the world. It took fifty years. It was, again, based on zero raw materials. And China of course has very few raw material compared to the size of the population. But it is also the case in Europe. I guess the two most successful economies in Europe in the last decades would be Finland and Ireland. Finland went into the transformation after the fall of the Soviet Union into another economy without Nokia at their core, Nokia of course being a company which in the past produced rubber boots, and Ireland possibly the poorest in Central, Eastern, Western and Northern Europe until recently; now is one of the richest countries within the European Union. I think it’s the third or fourth highest GNP per capita within the European Union, in one generation. And there are no Finnish or Irish raw materials to speak of. So how do you organize society? Wise political decisions simply use the brainpower of the society, that is the key and that is I think the basis for what we are going to speak about here today. I met Paul Wolfowitz in Stockholm; one year back we decided that maybe we should jointly take a look into what the World Bank and Norway could do in the sector of Oil performance. We will sign an agreement today, between Norway and the World Bank, which is called ‘Petroleum Governance Initiative’ and then tie the resources of the World Bank (that has a wide outreach to every continent in the world) with the particular experiences of Norway, being one of the most successful oil economies in the world - pooling their (World Bank) wide range of experiences with governance issues) with our particular experience in the oil and gas sector. We are a much stronger force combined. Let me also add that Norway wants to work with other forces in the same field: with the UNDP, with the Revenue Watch Institute, with the civil society at large. Very briefly, there are three pillars for this initiative; it includes sector governance and revenue management. I mean it is about governance, and about fiscal management, and not about general law as such. Secondly, it is about environment where Western African countries, which are now in the process of rapidly increasing their oil and gas production with the target of the programme and community development surrounding the oil production. Let me just at the end say because a lot of countries are coming to us speaking about a Norwegian model. There is nothing like a Norwegian model. The way we have organized the oil and gas sector in Norway is deeply rooted in Norwegian traditions and systems. I mean how our bureaucracy and how our industrial sector were organized before we found the oil. So, it is nothing we can export. What we are ready to provide is experience, historical experience from the different steps we have taken -- what made them successful and not so successful in Norway. And then, of course, on the basis of experiences, other countries may make sounder discussions on how they want to proceed to make their models, not copying any fixed model which simply does not exist. We listened to the remarks on these initiatives which are linked to the EITI, it is not the same. But I think there are different ways of proceeding along the same road with the general aim of being transparent in this sector and having the good governance. These were my opening remarks and again I would like to give the floor to you, Paul Wolfowitz. Paul Wolfowitz: Thank you. I think those were very thoughtful eloquent comments about what is to be learned from the development experience including from Finland and Ireland. It is very striking when we think about the experience of those countries, especially Ireland, which was one of the poorest countries in the world. Certainly it’s an amazing development success story. I am here in Oslo, it is the first of three stops in Europe. I’ll be going to Geneva, then going to Paris and as I think about it, there is something that brings all these countries together which is that -- from the point of view of the World Bank and the world development community -- the European countries individually and collectively are the strongest supporters of official development assistance, and the strongest supporters of the World Bank. Secondly and not insignificantly, I think the conference that you are hosting here today and tomorrow on EITI underscores the point that development assistance by itself without good governance can have some of the same negative impacts that oil revenues by itself without good governance can have, and the two really need to go together. I had a great opportunity yesterday to meet with I guess some sixty representatives from Civil Society organizations here in Norway. When I travel to developing country I make a point to meet with civil society groups and with women’s groups partly because I learn a lot from it and partly because it is a way of sending a message to the governments that may not be quite sure how to deal with civil society, that it is important to do so. Obviously, in this country you have been cultivating the dialogue with civil society in a very active way for a long time, and it is one of the things that makes Norway a special place. You have been successful long before you found oil; I was here a long time ago. I know it’s true. But, you said that Norway is not a model. May be that’s -- I take you point, I think it is correct. What you do here is really the Norwegian experience. But, I must say the experience that you’ve developed here in the oil sector is something that a lot of countries want to learn from. I was in Timor-Leste just back in May and they had the challenge of a potential oil curse, with hopefully can be turned into an oil blessing. And they very much looked at the Norwegian experience to develop their own model and how to manage this potential, this coming very large flow of revenue. It is a little bit scary when you think about the average experience of countries of this kind of—I guess it is called under-an-income—that it is more often a curse than a blessing. It is not just that the money is often not used for what it should be used for. When that happens is that it does enormous damage, it has a corrupting influence on the whole society, and I think as I said this morning I think in the case of countries like Liberia it even destabilizes the country and brings about conflict and civil war.
Wolfowitz: So, the prospect of large old revenues coming into Sub-Saharan Africa is – I think the Chinese character for crisis is the combination of the character for danger and character for opportunity -- and I think one could say it is crisis and in the same sense it’s an opportunity. Oil revenues can really make a difference in the lives of poor Africans but it has a danger -- enormous potential danger that will repeat the experience of the last 30 years and so you not just the resources are wasted but that they generate corruption and conflict.
I am hopeful that this time it will turn out differently and the major reason I am hopeful is because I see a much, much more active civil society. I’ve been around the world and most importantly in Africa. I had the privilege during the course of (inaudible) to meet two very brave civil society representatives to the Republic of Congo who literally at great personal riskhad called attention to problems of transparency in their country. I think - before I turn the floor over to Peter Eigen - I do want to say it one thing, this has been a remarkable initiative. As I study what has been accomplished and what is left to be accomplished, it’s easy to say there is still a great deal of more work and even if we can achieve full transparency in oil revenues that’s only the first step for making sure that the revenues have identified and used properly. But, it’s remarkable to me that you and the whole movement have been able to carry that for years as far as you have in just a few years time. It makes me think that this crisis, which confirms to Africa that there is a combination of danger and opportunity. It will be possible if we seize the opportunity and we can meet again in ten years and look back and say, this great stream of revenues from Extracting Industries was truly a the blessing that it should be. Peter Eigen: Thank you very much. Being here in Oslo, I think it’s great going about the fact that Muhammad Yunus got the Nobel prize last week for fighting poverty because fighting poverty is building peace, and that this is recognized -- is an encouragement for all of us in civil society including in particular those who are fighting against corruption because corruption is probably one of the greatest obstacles to fighting poverty and corruption is still everywhere. It is still in the western countries like, Norway. if -- You can see if you open your own newspapers today and so corruption is very much the responsibility of the rich countries as much as it is -- the responsibility of the poor countries because remember, until 1999 in our country in Germany, in Norway, foreign bribery was allowed. It was considered necessary to get contracts in order to do business in a globalized economy. Minister Solheim: You even got a tax reduction here. [Laughter] Peter Eigen: Right, here you also got it in Germany. So, the taxpayers in Germany paid half of every million dollars, which was paid, say, to a cleptocrat in Africa or Latin American or South Africa or Asia. So, this is a legacy which we are dealing with and the World Bank estimates that thousands of billions of dollars are paid every year for corruption. I think the real damage is much greater, the real damage is mismanagement in the economy, mismanagement in investment programs of the countries, the result is poverty and misery, conflicts, terrorism and therefore, the attempts to their fight corruption in the Extractive Industries is particularly important. But, I think we should be very much aware that this is a joint responsibility and not an attempt to teach some decision makers in the poor countries. This is very much my philosophy. The Extractive Industry Initiative, it is a historical first in the sense that from the very outset, it’s a multi-stakeholders approach where the powerful civil society and organizations get together with the private sector and the positional efforts of governance, with the states and the international organizations in order to address issues, which in a globalized economy have had been left unattended to and this is so exciting – and it is so exciting to listen to the Minister and to listen to the President of the World Bank. I left the World Bank 15 years ago in disgust because we didn’t want to touch corruption. Why? Because, its shareholders, its member countries didn’t allow it to touch corruption. We were the captives of a consensus in the rich countries and in the poor countries where corruption was something quite normal until it was suddenly recognized that it was destroying this world as we know it and was creating misery even in countries, which were blessed with natural resources. So, for me this is a very exciting moment. A moment in which 450 people from all sectors of society, from private sector, from the public sector, from civil society get together, and find this fine balance of common interest in starting with a modest approach. Starting with transparency about the revenues in Extractive Industries and then on the basis of that transparency allow others to take the information, which is needed by this process in order to create instruments, to fight corruption, instruments of improving governance. I am very proud and privileged but also awed and to some extent scared by the fact that I have been elected as the Chairman of the Board, which will be in this multi-stakeholders philosophy in implementing the report which that has been presented to all of you. I hope that we will continue to be as successful as we have been so far. We have now better tools in our hands, we have now validation processes, we have now ground rules which we can apply. We can become much more professional, much more rigorous in determining which countries are actually implementing, which countries are compliant with the various proposals, which are inherent in the systems and which countries are perhaps free riders and should be shown out. Also we will be a vigorous group of people who use our skills to protect civil societies whenever they are attacked for their openness and courage as an involvement and as mentioned (inaudible). Civil society is courageous but it’s also very vulnerable and in that sense we issue this as a mandate who will further empower the civil society. In the partnership with the other actors of Global Government so, this is an historic moment and I am very moved by it and I hope I can convey some of this excitement to you, from the media but also the others who are in this room. Thank you very much. Press officer Kaja Haldorsen (Min of Foreign Affairs Norway): And now here’s the time for some questions. Please keep it as short as possible and Odd will give you the microphone and please state your name and which organization you work for. Øyvind Brigg TV2: And What I would like to do is raise this question for Mr. Wolfowitz and my question is,: Isn’t there a risk that this initiative could be a club of good intentions instead of actions? Knowing that so much money is involved. Knowing that a country like Norway, recently the Statoil company paid some $20 million in bribes? Paul Wolfowitz: I think there’s -- It’s certainly a valid question. One can have the best intentions in the world. I think in this case there is no question, this is a real program of action and that the kind of action this initiative is undertaking would give people the kind of knowledge on the basis of which they can take other action. But it should be understood if that’s the step that takes you to, it doesn’t. Transparency about revenues (inaudible) -- it's critical to making sure that the revenues are spent the right way but by itself it doesn’t produce that result. It’s a step in the direction of producing that result and that’s why, I think, if we look at the example of Nigeria, which we’ve -- I think all of us have faced this morning, its -- and even there, they still have a long, long way to go, as if they were dug into a very deep hole over the course of 30 years and its going to take time to dig out of it. Transparency is part of it and aggressively pursuing corrupt individuals and economic crimes as part of it, including procurement practices as its quite clearly pointed out to make -- to see where the money is going, all those things have to come together. So, I’m very convinced that the EITI represents action and there will be more actions along these lines. I think the real question isn’t so much whether the intentions are good or not. Whether the intentions lead to action, where the issue’s going to be, whether the parallel actions that are needed take place. And there is no guarantee in that kind of thing, but I think that the strongest assurance is it will happen, is a strong civil society. The reason I feel that things are different in Africa, is they’re even -- I think than they were ten, fifteen years ago is because Africans themselves are demanding their governments to be accountable. The election in Liberia, in which economic reforms were chosen over a soccer star, demonstrates to me that the Liberian people, after 20-25 years of misrule and civil war - that they want something different. And because why I think the initiative is so clear, I have been emphasizing it to be successful, it has to be an active role of civil society. That hopefully will produce the kind of demand that will produce the action that is more… Robert DiNardo, Platts: Thank you. I have a question also for Mr. Wolfowitz? My name is Bob DiNardo and I am a reporter with Platts in New York, to cover the international energy industry. And I’d like to ask you about Chad and specifically about the stand off earlier this year over the escrow account, the abrogation of the agreement for the pipeline. And look, the single resolution after several weeks of that stand off was that, well Chad had gone back pretty much to the status quo angle. Yet, as I talked to people in the aftermath there is really a different view of that. That Chad in principle did not link it to the World Bank, and then they point out, several problems with the interim agreement and that is the Fund for Future Generations, and (inaudible) that hasn’t been (inaudible). The five very specific terms on how the fund that the money from the oil revenues could be used for. (inaudible) has been watered down, they should have pretty much generally anything that cannot direct the military purchases (inaudible). And Chad still is yet to – unless there is something I missed out – they’re still yet to have a heavy budget law that will -- have really instill, accountability and the non - misuse of these funds. So I am wondering if you could respond to those to prevent (inaudible) Is this a kind of model that could be used at least, in the coarser sense if these countries, these resource -rich countries go about flaunting agreements? Or (inaudible) in the face of the EITI for instance, the validation process. Are they being let off the hook in this kind of (inaudible)? Paul Wolfowitz: Well, I don’t think Chad is the model for any other country. It was a fairly unique circumstance, for a very specific agreement, which they tore up and as a result we had to take action in response. But I think the outcome is one in which it’s not correct to say that either side blinked. I think that there really is win-win here. And at the heart of it is something that you didn’t mention: in the list of things that are different, which is that the government has committed now to covering all of the income from the oil assets and not just the royalties under the new arrangement. So, the new arrangement is different from the old one, but I believe it accomplishes two basic purposes. One, it gives the Government of Chad some greater flexibility in the short term to allocate resources where they do need to in dealing with immediate security needs, but it provides much larger commitments of resources to poverty reduction programs over the long term. And we're going to have to see how that is actually implemented. You’re right to say that they still need to pass the budget law to…[inaudible] what's in the agreement. So, it’s a framework for resolving issues, I wouldn't say, it’s yet resolved. But I think it really does have the potential to do what we've been urging them, before they tore up the agreement, which was to find a way to make sure that the long term interest, weren’t sacrificed because of the short term financial stress. Robert DiNardo: So you’re satisfied… Wolfowitz: I believe that, “satisfied” would be too strong a word. I think that if the agreement is successfully implemented over time, we’ll in fact have a longer commitment of resources to poverty reduction programs and a stronger involvement of civil society monitoring it and … Robert DiNardo: Is there a time line for a final agreement ? Wolfowitz: There is, but I can’t be doing it off the top of my head right now, so I’d rather not state it (inaudible). Bjørn Åmland, Development Today: Angola is one of the main cooperation countries for Norwegian oil companies. Do you have any message with this initial feedback to improve the situation in Angola? And what's the World Bank’s perspective on how to fix the massive corruption in Angola? Wolfowitz: I am not sure where Angola stands with respect to the EITI;. I think that one of the countries you’re talking about participating Peter? (Eigen). I think that probably the starting point is that, am not sure that this is something the World Bank can -- in fact it’s not something the World Bank can dictate, it’s something that really does depend on, there’s so much in this initiative that does depend on voluntary action by governments, but clearly participation in EITI would be a very important step and Angola is one of those countries that is sort of on the edge of a transformational change in their fiscal situation because of oil revenues -- and I, still very much, in my mind the question as to whether they will make the right choices. It does effect to some extent, for example, India, the ratings that countries get, at determining the level of IDA assistance they receive. That would be a factor in those determinations, but I think the most important thing is going to be what the Government of Angola feels it has to do to satisfy its people and I think the demand for better accountability from people in African countries is going to be the most important (inaudible) factor. I can’t tell you how that will come out in Angola, but I think that’s what has to be encouraged. Press Officer, Ministry of Foreign Affairs: Let’s take a few quick questions and close the session. Speaker: My name is (inaudible) I am from Paris. I have some questions for Mr. Solheim. You’ve mentioned petroleum government initiative and in your speech, you talk about the role of the civil society and we think that in Africa the key issue is civil societies. And our civil societies organizing in Africa (inaudible) that we had some groups of (inaudible) has been down (inaudible). So, (inaudible) issue the action of which civil society will be given initiatives. Minister Solheim: I think civil society is absolutely key. It has been key to the development in our own country (Norway), I mean, we may not have had a lot of non-governmental groups when it comes to transparency in the oil sector, but when it comes to environmental pressure on business and politics there is a very strong environmentalist civil society here. It has been key to -- any positive move towards a more environmentally friendly way of organizing the oil and gas sector. Of course politicians may dislike it in the short run -- so may – businesses may also be dissatisfied in the short run. But I think politicians and business more and more come to the understanding that we need also the civil society to push these issues. When it comes to civil society on African context, I think it must be home grown,: civil society cannot establish from outside, but as long as there is home-grown civil society we can look into how we can provide support, capacity building, financial support, training, international networks in some cases...-- in some countries people in civil society are even living in tremendous danger. Some people are very, very brave in taking up the struggle against corruption. They may need an international network, who can support them, because that would also give some protection. So there are so many ways we can from abroad support civil society, but civil society is the absolute key. I would add to that, that of course also independent and free media, is also a key to the success of transparency. That’s been stressed by so many here, but of course transparency and accountability is the main factors in establishing a well- functioning oil and gas sector. Civil society can be a tremendous force for good there. Peter Eigen: Or maybe I can add a few words to this. Civil society is a very diverse group of organizations. It is defined by various people in different ways. But, it is much wider than what is normally considered to be the non-governmental organizations. Civil society organizations also -- I mean they include faith-based organization, they include professional organizations. They include particular interest groups. Some of them are huge, and are very competent they are civil society organizations at the international level like Oxfam, like Save the Children, Amnesty International, Transparency International, fall into that category, who are really global players, the very ultimate networks, network sectors in various parts of the world and they are very important also in African countries. But what is important is to mobilize also the civil society from the grassroots. And in some countries, in Africa for instance, we have very strong and vibrant civil society organizations, very often it has to do with the battle for independence, or against racism, like in South Africa. And very often, once there is a liberation, there is a reform, then there’s civil society that are the real agenda. One thing has to be also said, the civil society is not all good. The Ku Klux Klan is also a civil society organization. So this is why, for instance, international, advocacy and non-governmental organizations have gotten together in June of this year and they have produced a code of conduct for civil society organizations and accountability is higher. It is now being signed by many civil society organizations, which puts a lot of weight on transparency, also in their financial dealings. It puts a lot of weight on competence, on openness of decision- making, of the governance of the civil society organizations themselves. And also in many cases, emphasizes the need of civil society organizations to work in partnerships or at least in coalitions with the government and with the private sector. And of course, this is a balancing act; this is very, very difficult. In this particular case here, we have clearly decided that the civil society organizations that are going to participate are not going to throw bricks to their windows of (inaudible) in order to make this point. We will develop arguments, and we will bring these arguments to the table, at the board level, and there will be compromises necessary. There will be certain civil society organizations that will be unhappy, because they are more fundamentalist, they want to have a more pure approach to things, and others maybe more pragmatic, maybe willing to accept the fact that the best is the enemy of the good. In our case, here for instance, a big question about what is (inaudible) raised earlier. Some people feel that ….does not deserve to be mentioned as an example of progress of the EITI, because it has not really complied with some of the basic preconditions of the EITI validation guidelines. But how do you measure performance of one particular country against guidelines that don’t exist yet. They just have come into force half an hour ago, when the meeting out there, adopted these guidelines. So in the future, probably civil society, private sector, and the public sector in adopting these guidelines through a secretariat, through a board, and that would mean much more vigorous (inaudible) in making sure that there will be no free riders, there will be no people who harass and intimidate civil society in their country, as we have seen in some parts of Africa for instance. So, this will become a clearer system in the next two years or so. But we have to focus on a joint implementation of transparency for the Extractive Industries. We’re not trying to cover everything at the same time, as has been mentioned earlier by Mr. Wolfowitz. Vibeke Laroi, Bloomberg: Thank you. I’m Vibeke Laroi from Bloomberg) Mr. Wolfowitz you have said that in the economic and financial crimes commission in Nigeria, where they (inaudible) they have already recovered some $5 million in, I think assets stolen by corrupt officials – how much do you think (inaudible) Mention it (inaudible) how much has been recovered and what was (inaudible) for recovering it. Wolfowitz: First of all, it’s their number, not mine, their number was $5 billion, not $5 million. $5 million is the amount of money that we put into a grant from the World Bank to help them get started. The only part of that $5 billion, I can personally somewhat vouch for, is the $500 million that came back from Switzerland. I think most of the asset recovery that Nubu Ribadu was referring to, were assets in Nigeria that they had recovered. My guess is that there’s still a substantial amount that is fluctuating (inaudible) that is abroad, most of it in developed countries. That’s why, one of the reasons I think it is so important for the international community, and particularly in developed countries to approach more aggressively the whole issue of asset recovery. If you can pick up a problem, which involves complicated legal questions in every single country, well, some of the answers may be found. You have to go through court procedures, you have to go through legal procedures. It’s not something that’s simple, but it’s something that I think is very important, and it would be a major disincentive, this feeling in the first place, if people didn’t believe they could flee when their time is over, and enjoy comfortable life somewhere in Europe, or the United States, or somewhere else. Peter Eigen: And the good news is that the new UN Convention against corruption has some very clear rules for international registered corporations and recovery of stolen assets. Well, this will become much more a part of a global international legal system, than it has been in the past. Press officer: Thank you for coming, all of you Speakers: Thank you.
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