Publish What You Pay coalition statement to the EBRD annual meeting

The natural resource sector is one of the most important sources of income for transition countries. Transparency and accountability over the revenues paid by companies and received by governments is necessary to ensure that investment drives economic development and poverty reduction.

In order to achieve greater resource revenue transparency, the Publish What You Pay (PWYP) coalition, which numbers some 280 NGOs, is calling on governments to amend laws and financial regulations to require resource companies to disclose payments to governments. The PWYP coalition is also calling on international financial institutions like the EBRD to require transparency of extractive-industry revenue flows from all recipients of their funding, including governments as well as the private sector. It is in the self-interest of the EBRD to systematically promote revenue transparency as the knock-on benefits, like a more stable investment climate and reduced opportunities for corruption, will foster economic growth and development.

So far the EBRD has taken a voluntary, country-level approach to revenue transparency. The Bank’s active support of the Extractive Industries Transparency Initiative (EITI) has been an important first step. The Initiative provides a useful framework for countries to take the necessary steps towards greater revenue transparency, which involves consultation between government, industry and civil society. Azerbaijan and the Kyrgyz Republic, with the assistance of the EBRD, have already published figures on government revenues from the extractive sector. Other countries like Kazakhstan, Russia, Turkmenistan, Uzbekistan and Ukraine are not yet part of this initiative, though there may be cautious signs of greater engagement in the EITI in Kazakhstan. The EBRD has an important role to play in supporting this process in Kazakhstan by advising the government on implementation and providing capacity building assistance. PWYP and our local Kazakh partners from the NGO coalition “Oil Revenues – Under the Public Oversight” look forward to continued dialogue with EBRD staff on moving the process forward in Kazakhstan and implementation of the EITI becoming a core element of the Bank’s country strategy.

Given the importance of revenue transparency for macro-economic growth and stability in resource-rich transition countries, the EBRD must move beyond support for the country-level voluntary approach by itself and incorporate transparency requirements into its institutional policies for all lending to governments and project finance. This would ensure that the Bank’s policies are consistent for all member countries and business clients and match – if not exceed – other emerging international standards for extractive sector lending. It would also promote transparency in countries where the EITI has – and may continue to have – little traction, like Russia, Turkmenistan and Uzbekistan.

EBRD staff have informed PWYP partners in the past that it is already a rule that the Bank only engages with companies that disclose their contract terms and, furthermore, that loan agreements oblige borrowers to publish audited financial reports. While these general rules are to be highly commended, none of these transparency commitments are reflected in any EBRD operational policies. Moreover, the Bank currently does not disclose any sections of its loan agreements that contain a project’s specific revenue and contract transparency requirements. The lack of such published policy requirements on transparency and the non-disclosure of loan agreements hamper the efforts of local communities and civil society to hold both individual companies and governments accountable.

The World Bank Group, prompted by Extractive Industries Review and following extensive lobbying by civil society organisations across the globe, has committed to require revenue transparency for all extractive sector projects supported by the IFC and MIGA by September 2006. The development of the new EBRD Energy Policy provides the EBRD with the opportunity to apply transparency requirements on private sector clients. This should be done immediately and to all projects. However, whilst requiring transparency from payers of revenues at the level of individual extractive projects would be positive and welcome, their impact could well be negated if governments of resource-dependent countries that receive EBRD loans and assistance are not required to be transparent in their management of revenues.

Accordingly, the new Energy Policy should clearly reflect the following transparency requirements:

• Public disclosure of all revenue payments (including royalties, taxes, commodity based payments, signing bonuses etc) made to governments and their agents by all extractive projects that receive the financial support of the EBRD, including those made via financial intermediaries;
• Public disclosure of all revenue payments received from the extractive industries by governments receiving loans or technical assistance from the Bank;
• Public disclosure of key contractual agreements (HGAs, IGAs, & PSAs) for all extractive projects funded by the Bank; and
• Mandatory disclosure of the transparency-related requirements contained in loan agreements.

Promoting revenue transparency should be at the core of the EBRD’s engagements with member countries and companies that benefit from its assistance for extractive sector investments. The implementation of the above recommendations will go a long way to ensure that the EBRD’s activities contribute to sustainable economic development in transition countries and that the Bank is the standard-setter on transparency among the international financial institutions.

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