Tolukuma locals want the money

Editorial, Normal
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The National, Thursday July 19th, 2012

By SARA BICE
YOU are unlikely to find an accountant beside the banks of the Tolukuma River in remote Papua New Guinea.
But the locals farming alongside the polluted waters are very interested in how much money an international gold mining company pays to their government. And whether they will ever see a toea of it.
On July 1, the Commonwealth government launched a 12-month pilot of the extractive industries transparency initiative (EITI). The EITI promotes full disclosure of resources companies’ payments to governments and revenues received by those governments.
Countries and companies committed to EITI aim to create revenue transparency down to a local level.
It is early days for the Australian EITI pilot. But recent events in other countries, only slightly ahead of Australia in their EITI implementation, sound a warning bell for advances in corporate financial transparency, and about possible roadblocks to come.
Last month, big global miners joined up to voice reluctance to disclose payments made to governments on a project-by-project basis.
In a joint letter published on June 6 by the Financial Times, eight companies – including BHP, Rio Tinto and Xstrata – asserted that project-by-project financial disclosure, the public airing of monies paid according to mine site, will be misleading and is not aligned with tax structures in certain ports of operation.
The companies stated that the best way to allow communities to “follow the money” is to require reporting of payments made to different levels of government, not site-by-site.
The figures pursued through “publish what you pay” initiatives are not trivial.
The eight mining companies, which signed the Financial Times letter alone, generate more than US$90 billion in global corporate tax payments and royalties to the countries in which they operate. That is almost twice the GDP of Costa Rica or seven times greater than the GDP of Iceland, should you prefer a cooler climate.
Australia’s commitment to EITI follows years of debate involving public, non-profit and interest group pressure to regulate financial transparency in the extractive industries.
The timing of the government’s pilot scheme is well aligned with related moves by other OECD countries.
In the United States this year, resource companies will, for the first time, make public the tax and royalty payments made to the governments of the countries in which they operate.
Eight of the 10 most successful global miners fall under the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which also covers 90% of the major internationally operating oil and gas companies.
The companies writing to the Financial Times face similar requirements in the United Kingdom. There is talk in the European Union of “Dodd-Frank Plus”.
But returning to the riverbank: Why would poverty-stricken individuals who struggle to achieve life’s basic necessities take interest in the tax structures of huge multinationals?
Because, in many instances, Goliath companies operate in the back gardens of people who may harvest very little of the wealth extracted from their communities.
Increasingly, this is not because mining companies fail to provide community investment, infrastructure or services.
Many global miners, particularly those that operate within and from Australia, demonstrate progressive commitments to corporate social responsibility and have advanced leaps and bounds from the inglorious days of PNG’s Ok Tedi mine and similar community disasters.
Instead, the danger lies in funds which are shuttled by corrupt governments into individual pockets or projects which never filter back to the communities they were intended to assist in the first instance.
Transparent financial reporting is a two-birds one-stone practice. In making their expenditures public, major miners clarify their actions and their reputations – especially in the murkier of countries – while illuminating government tills.
As the EITI is piloted in Australia, project-by-project disclosures must be recognised as vital to better position mine-affected communities to negotiate with companies on more equal footing.
In these instances of massive power imbalance, hard information provides communities with much-needed capacity and leverage.
The companies themselves would also safeguard their reputations against corrupt governments through clear financial reporting which provides as much granular detail as possible.
Concerns about site-by-site reporting must also be considered. Misleading information helps no one. And where taxes or royalty payments are made at the country level, they should be reported as such.
But project-based taxation and payments do occur, and in large amounts. Take Rio Tinto’s US$700 million payment to the Guinean government for its Simandou iron ore project, for example.
Before unmoving refusal to report on individual projects crystallises, it would be better to reach agreement to provide site-based information wherever feasible with a view towards increasingly detailed disclosures as the practice matures.
Such a compromise now acknowledges a future in which the progressive adoption of anti-corruption regulation, a range of multilateral initiatives and a growing capability among social media savvy communities to voice concerns, will make site-based reporting both expected and demanded.
Meanwhile, the women and men of far-flung mining communities wait to be shown the money. – The Conservation

lSara Bice consults, educates and researches on sustainable development and corporate social responsibility. She has worked in developed and developing countries on matters including social and environmental impacts, stakeholder engagement and public participation.