As the Earth Summit concludes, an initiative to make oil, gas and mining companies report all payments made to politicians overseas is aimed at reducing corruption. But will such measures really improve the lot of developing nations?
Link: Transparency on the agenda in Johannesburg
Financial transparency in the third world moved to the top of the sustainable development agenda this week after the government began moves to have companies publish details of payments made to overseas politicians and officials.
The move, aimed mostly at all oil, gas and mining companies, is intended to allow local people in the developing world see how much is being paid to politicians.
It is thought if the figures had to appear in company accounts it would be a severe blow to those guilty of corruption and the payments would soon disappear.
Campaigners believe that at least $1bn (£640m) of undeclared payments are made in Angola each year.
It is unclear whether a UK government-backed initiative would be based on introducing regulation or would appeal to companies to take voluntary action.
Senior politicians in many developing countries are said to be in favour of payments appearing in company accounts because it might root out low-ranking corrupt officials who operate virtually unrestrained.
Jeremy Pope, executive director at Transparency International, a supporter of the Publish What You Pay campaign for financial openness, gave broad support to government moves but expressed some reservations.
He said the measure would only work if all companies working in a country were to take the same steps to disclose their payments. If only a small number declared payments, they might be left at a competitive disadvantage.
‘What we want to see is countries and governments buying into this process.
You would then have collection of good guys saying this is how people should behave and then rules change for everyone.’
In June of this year, international financier George Soros launched a campaign with Publish What You Pay to disclose all fees, royalties and payments as a condition of being listed on stock exchanges around the world.
At the time Soros said: ‘This is a real chance to promote good fiscal governance and tackle global poverty.’
Such measures have also received the backing of charities such as Save the Children which have identified the advantages of improved financial disclosure.
‘By reporting in those countries on the revenues they pay governments, companies uphold public financial accountability and help create the enabling environment for successful development and child poverty reduction.’
Financial reporting measures are increasingly seen as a means of producing improvements in the developing world.
The South African Institute of Chartered Accountants recently called on companies in the country to disclose the effect of AIDS on their businesses in the annual report and accounts.
Other companies in the country have recently begun to supply AIDS drugs direct to employees – an expense that will have to be shown in the accounts.