By Raymond C. Offenheiser Today many developing countries are oil rich but mostly dirt poor. They call it the resource curse. Five years ago this month, a landmark provision of the Dodd-Frank Act tried to reverse it. But the implementing rule has not been put in place by the Securities and Exchange Commission and for many citizens in these countries the curse continues.
Nigeria, Africa’s most populous country and biggest oil producer, is a case in point. According to press reports, the central bank governor says that an estimated $20 billion in profits is missing from the state oil company, money that should have gone to the government and could have been used to provide health care, education and other vital needs to Nigeria’s people.
In the oil-rich Niger Delta last month, Oxfam America staff visited a community called Rumuekpe where even with significant oil wealth, there are no roofs on many houses and only a tiny school without chairs or desks. Conflict in Rumuekpe between rival militant groups over access to oil money broke out in 2005 and left the community devastated. Drilling has continued to bring in money, but the community hasn’t benefited from it.
Nigeria isn’t alone in dealing with this corruption. Huge sums of money are funding government corruption and mismanagement around the world. These funds are not being spent to actually benefit the people most impacted by drilling. Billions of dollars are being paid to the governments of developing countries every year for their natural resources, yet 663 million people in these countries live in absolute poverty.
While five years ago, Congress passed a law to help address the problem of secrecy in payments from oil, gas and mining companies to governments where they operate, it has not been implemented. Section 1504 of the Dodd-Frank Act, also known as the Cardin-Lugar amendment, requires the Securities and Exchange Commission to issue rules to ensure that U.S.-listed oil, gas and mining companies disclose their payments to countries such as Nigeria — down to the project level. Congress recognized that beyond poverty creating breeding grounds for terrorists, this lack of transparency helped feed corruption, creating instability and uncertainty for U.S. companies, consumers and investors. The bipartisan law created a global wave of transparency, inspiring similar laws in the European Union, Canada and Norway. These laws have been implemented and companies are starting to disclose, with much more disclosure starting next year.
Unfortunately, the U.S. has now become a laggard, because this landmark provision has yet to be implemented by the SEC.
The American Petroleum Institute, backed by ExxonMobil, Chevron and Shell — the same companies active in Nigeria and many other poor countries around the world — sued the SEC to try to block implementation of the law, sending a final regulation back to the agency in 2013. Yet we’re still waiting on the SEC.
Senators, members of Congress, investors with more than $6 trillion in assets under management, and civil society groups are urging for a rule. Some oil companies, such as Kosmos Energy and Tullow Oil, have even started disclosing this information voluntarily, recognizing that transparency is good for business. But ExxonMobil, Chevron and Shell are still trying to undermine it and keep citizens and investors in the dark. They’re pushing the SEC to allow anonymous reporting, where they don’t have to put their name next to the payment they report. This not only guts the legislation, but it’s also an absolutely useless proposal for citizens and legislators in Nigeria and other resource-rich countries.
Transparency isn’t a fix-all for poverty in resource-rich countries. But with action by the SEC, we could shine a light on billions of dollars in payments to governments around the world. Armed with that information, citizens can hold their governments accountable for spending this money on poverty-fighting projects like health care and education.
Since Dodd-Frank passed, oil produced in developing countries was worth an estimated $1.55 trillion for their governments.
Imagine what that could do. It could close the funding gap for health and education in the poorest countries five times. It’s almost 10 times what the U.S. gave in foreign aid over the same period.
It’s long past time for the US to regain its leadership on transparency and finish this law.
Raymond C. Offenheiser is the president of international relief and development organization Oxfam America.
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