Australian miners ‘lacking transparency’

Campaigns and Advocacy, Media Releases, Opinion article written on the 17 May 2010

Whether you believe them or not, threats by the mining sector of a mass exodus overseas as a result of the resource rent tax expose a glaring gap in how Australian companies conduct business around the world.

A combination of unprecedented commodity prices and resource-rich countries have for years been driving Australian mining investment into the developing world, including into Papua New Guinea, Indonesia and increasingly Africa, where more than 300 Australian companies are active, with current and prospective investment estimated at about $US20 billion ($A2.22 billion).

There is no doubt private sector investment can drive economic prosperity and reduce poverty in developing countries, provided appropriate regulation, transparency and accountability controls exist.

But with poor regulation and sometimes high levels of corruption, mining can be a driver of conflict and insecurity, the cumulative social and economic price of which can dwarf the supposed burden of the resource rent tax. Work by the Special Representative to the UN Secretary General on Business and Human Rights suggests that 28 per cent of alleged business and human rights abuses occur in the mining sector – the most of any sector – and most frequently in developing countries with weak governance and which are suffering conflict.

These impacts include loss of housing, land and livelihoods, social unrest and increased violence and conflict. For these people, the ”cries of unfair tax” by Australian miners mean little as they struggle to share in any of the benefits of their resource wealth and protect their livelihoods.

Those companies that are transparent and accountable, have robust human rights policies, engage with affected communities, and have effective complaints mechanisms, are well placed to manage and mitigate risk, improve their competitive advantage and foster investor confidence. However, a recent scan by Oxfam Australia revealed that only a handful of Australian mining companies meet these criteria.

Revenue transparency – disclosure of all payments by mining companies to governments on a country-by country basis – will go a long way towards reducing the risks of corruption and the potential for associated human rights violations. With the power to track mining revenue paid to governments by companies, revenue transparency helps communities to hold their own governments to account and improve the likelihood of them receiving at least some of the economic benefits associated with mining.

The Australian government can foster sustainable development, business integrity, and the protection of human rights among Australian companies and government departments that support the mining sector. However, despite Australia being one of the largest mining nations, we have not yet implemented key international initiatives in the extractives sector, such as the Extractive Industries Transparency Initiative (EITI).

The EITI is a global standard that promotes revenue transparency in the oil, gas and mining sectors. The idea is dead simple. If companies publish what they pay to governments, and governments disclose what they receive from companies in annual accounts, ordinary people are in a stronger position to hold governments and companies to account and therefore maximise the benefits from mining-related revenue.

While the Australian government has committed $1.45 million to the EITI trust fund, Australia has not agreed to implement it. To do so would demonstrate commitment to good governance, improved international credibility, and lessen the risk of corruption. It would demonstrate the sort of leadership recently shown by the Indonesian government to work towards EITI compliance.

The push for revenue transparency in extractives is gaining steam. In the US, the Energy Security Through Transparency Act (ESTT) of 2009 has been introduced. The bill will require energy and mining companies to reveal how much they pay to foreign countries in tax, royalties and other payments, and calls on the US to implement the EITI. But mining companies don’t need to wait for the Australian government. The energy they are expending around the resource rent tax might be better directed towards implementing voluntary disclosure of all payments to governments, country by country. This will reduce their risk of potential complicity in corruption and human rights violations.

Andrew Hewett, Executive Director, Oxfam Australia.

This opinion editorial first appeared in The Age (Business Day)  on 15 May 2010.