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World Bank Welcomes Assessment of its Promotion of Transparency in the Extractive Industries Sector

WASHINGTON , November 19, 2008 – Enhancing transparency in extractive industries is critical if revenue from natural resources is to promote sustained and broadly-shared growth in resource-rich countries, particularly in Africa, the World Bank has said.

“We fail the poor” when the management of income from the sector is not transparent and participatory enough to provide “a seat at the table” for communities, civil society and other stakeholders, the Bank’s Vice President for the Africa Region, Obiageli Ezekwesili, told an audience gathered November 18 at the Woodrow Wilson Center for Scholars in Washington, D.C.

Ezekwesili gave her speech as part of the launch of a new report, “Assessment of International Monetary Fund and the World Bank Group Extractive Industries Transparency Implementation, commissioned by Global Witness and the Bank Information Center (BIC).

But, transparency alone does not suffice, according to Ezekwesili.

“We agree with the report’s conclusion that focusing only on disclosure of revenues from extractive industries is not sufficient to make progress,” she said.

Recognizing the shortcomings of revenue disclosure alone, the Bank Group earlier this year launched the EITI++ approach, encouraging countries to take a comprehensive view on how to translate oil and mineral wealth into sustained growth and development impacts. Madagascar, Mozambique, Guinea, Tanzania and Mauritania are among the first African countries that have shown a strong interest or have already signed on to the implementation of such an approach.

Strong country ownership is crucial for success in programs designed to ensure that revenue from extractive industries fuels sustainable development, Ezekwesili explained, drawing from her experience as a minister in charge of the sector in Nigeria and from her time as a civil society activist, notably as a founding member of Transparency International.

Corinna Gilfillan of Global Witness USA and Heike Mainhardt-Gibbs of the Bank Information Center explained that the report’s findings flow from a review of “all publicly available documents” outlining how the Bank and International Monetary Fund implemented extractive industries transparency in their operations in 57 resource-rich countries from June 2003 (when they endorsed EITI) to April 2008. These included all project investments, program loans, technical assistance, and non-lending programs.

In the 51 countries in which the IMF has been involved and the 46 in which the Bank has been engaged in extractive industries since June 2003, the focus of the assessment was threefold: public disclosure of revenues; contract disclosure; and participation of civil society in the implementation and monitoring processes.

The Bank’s scorecard could do with some improvements. The report found that 90 percent of Bank operations do not promote contract disclosure. Civil society participation is present in only 25 percent of Bank operations. Only three of World Bank lending programs (19 percent) use revenue transparency as an indicator of progress. Transparency is a benchmark in 21 percent of country strategies in resource-rich countries. Contract disclosure is not addressed in more than 90 percent of World Bank/International Finance Corporation operations; among others.

There is also good news. Since June 2003, revenue disclosure is required in all projects implemented by the Bank’s private sector arm, IFC, the report notes. As of January 2007, all but one IFC extractive industries project investments required public disclosure of government payments. Since voluntary commitments began in October 2005, approximately 87 percent of extractive industries projects agreed to disclose revenues. And, the Bank has taken corrective action when it has seen that implementing arrangements in specific cases are no longer sufficient to assure the desired development outcomes in countries.

“The lessons of the Chad-Cameroon Pipeline Project are not lost to us,” Ezekwesili said referring to an oil field project from which the Bank withdrew in 2008.

She pointed out that the Bank understood it was time to withdraw once Chad repeatedly failed to honor its commitment to devote revenue from oil to poverty reduction programs.

In over 65 percent of the countries surveyed, the report found that transparency had increased significantly thanks to the role played by the Bank and Fund in promoting that agenda.

“Although contract transparency is not a formal Bank Group requirement, we strongly encourage it,” Ezekwesili said.

Countries and companies may sometimes choose to have confidential agreements for legitimate reasons, such as the need to protect commercially-sensitive information. The absence of mandatory disclosure should not be the pretext for leaving the traumatized poor holding the wrong end of the stick.

“While all extractive industries contracts are not publicly disclosed in Norway and Botswana – two of the countries most often cited for successfully avoiding the “resource curse” – that has not prevented both countries from being models in terms of management of their extractive industries sector,” Ezekwesili pointed out.

Concurring, both Gilfillan and Mainhardt-Gibbs stressed that the extractive industries sector will contribute to Africa’s development only if CSOs are integrated in a meaningful way to the process. They also reiterated calls from Global Witness and BIC that transparency measures become core criteria across all resource-rich countries as well as public disclosure of contracts in the sector.

“Single solutions are dangerous,” Ezekwesili said of the insistence on transparency as the key.

She appealed for a broadening of the pro-development coalition in Africa. If we are to succeed, she explained, we must connect to the work of everyone involved and build strong partnerships especially with African CSOs, helping them to engage, conduct research, analyze findings and data, and build local demand for accountability and governance if we are to succeed”.