3.5 billion people live in resource-rich countries and the majority of them remain in poverty. Natural resources contribute substantially to a country’s wealth but many problems remain to be solved: corruption, inequality and underdevelopment. Since the independence of Papua New Guinea in 1975, 18 billion Kina (more than 5.5 billion US dollar) have been generated in the country by the extractive industry but there is little visible impact on key indicators such as the country’s wealth or the standard of living of its inhabitants. Reducing the environmental footprint, developing these less-developed countries and creating a system that will fairly redistribute wealth, including a sustainable management of resources: here are the new challenges of the 21st century. How can we find a solution regarding the extractive industry that will be approved and respected by society as a whole?
The Extractive Industry Transparency Initiative (EITI) is trying to answer these problems by making cash flows in the sector less opaque and by encouraging countries to reveal who holds the contract or licence for exploiting the natural resources, thus uncovering the beneficial owner. The prevalence of corruption can be partially explained by the complexity of corporate structures, concealing the identity of the beneficiaries. The multi-stakeholder Board of the EITI represents all the stakeholders: international organisations, representatives from governments, civil society organisations, representatives of extractive companies and institutional investors. This initiative is the first institutional answer to the “Resource Curse” (also known as well as “paradox of plenty”) as it aims at maintaining transparency standards regarding oil, gas and mineral resources. In order to become “EITI compliant”, there is a set of requirements that governments and companies have to adhere to, called “EITI Standards”. These standards apply to activity reporting in the extractive industry and aim at ensuring free access of information for all populations. However, the EITI is hugely criticised because of its lack of enforcement capabilities and is seen as largely insufficient in fostering transparency; for instance, countries active in commodity trading are not covered by the initiative. The legitimacy of its membership should also be reviewed as its credibility was questioned after accepting candidate countries such as Ethiopia and Azerbaijan.
Even if all revenues that governments receive from the extractive industry, and the way these revenues are used were revealed, it may not be enough to improve the livelihood of resource-rich countries’ citizens. The trade structure is currently unbalanced since extractive industry businesses are often powerful corporations trading with vulnerable emerging countries. These economic players mostly take into account short-term results: on one side maximizing the business’ value and, on the other side, generating immediate revenue for the country. The World Trade Organisation (WTO) should also be involved (in addition to its support of the EITI) and adapt to these new challenges. The WTO should adjust its regulations covering the extractive industry in order to encourage fairer redistribution of resources: legal texts concerning budgetary, environmental and transparency standards are concerned and need to be reformed to integrate ethical, sustainable and inclusive growth goals. Researchers already brought to light some areas of common interest (development of the host country and achievement of business’ goals) that should be used as support for elaborating a new international policy in the extractive industry.
“The conservation of natural resources is the fundamental problem. Unless we solve that problem, it will avail us little to solve all others.” Theodore Roosevelt
The depletion of natural resources is an essential factor when considering this issue. Extracting resources from the natural environment, and exploiting them the way we do, have a fundamental impact on our environment and society. A new policy on resource management should be designed, ensuring that our consumption “meets the needs of the present without compromising the ability of future generations to meet their needs”. With increasing demand resulting from the growing world population, our energy consumption model should be reviewed. In 2014, 44% of CO2 emissions were generated by the production of energy from coal, one of the most polluting sources of energy. Investing more in renewable energies will reduce such pollution but also protect reserves of extractive resources from depletion.
We must help strengthen public finance institutions in less-developed countries so that they can also play an active role in a fairer extractive industry. International experts should get involved in this process in order to ensure the efficiency of the transparency policy and compliance with regulations. Many fields of expertise are concerned (bookkeeping, audit, etc.) and only with the help of local and global experts will new and fairer policies be successful. As explained previously, a fairer redistribution of value will allow for the development of these countries but also of their markets: local start-ups and international corporations in various sectors (education, health care, manufacturers, food & beverage, services etc.) will flourish.
Reinforcing the EITI by giving it means for action, more power and reviewing its membership, adapting the WTO’s international regulations regarding the extractive industry and involving financial institutions are all part of the modifications needed to break the ‘resource curse’. The need to act is crucial and every stakeholder will obviously benefit from it: less-developed states will grow and improve the daily life of their inhabitants and corporations will continue to achieve their business goals while enhancing their notoriety by proving their genuine concern with such issues. Let’s make it happen, now!