Good morning and let me thank Publish What You Pay for organizing and hosting this discussion today, and let me particularly thank Ian Gary of Oxfam for moderating. It is exciting to be here in Sydney at what is so clearly a pivotal moment for the EITI and what it seeks to do to boost transparency and accountability and for extractive sector governance and transparency more generally.
Before discussing mandatory reporting requirements for the extractive a sector, I'd like to step back for a moment and speak to why the U.S. State Department and the U.S. government place a high priority on promoting good governance in the oil, gas, and mineral sectors.
A basic reason is the tremendous impact -- good or ill -- that the extractives sector can have on a country’s development.
Mismanagement of these resources, as we have seen too many times, can impede economic growth, reduce opportunities for trade and investment, divert critically-needed funding from social services and other government activities, and contribute to instability and conflict.
At the same time, (and this is a point that really bears emphasizing), proper, sound management of the sector means revenues generated from oil, gas, and mining can fuel a country’s economic growth, producing jobs and fostering responsible investments in infrastructure, health, education, and other high-impact sectors, as well as appropriate savings.
Speaking for a moment more on energy issues per se, I'd like to note the importance minerals and hydrocarbons continue to have for economic growth and people's well-being around the world. As we meet here in Sydney, there are 1.2 billion in the world without access to reliable electricity; over 2.7 billion lack a safe way even to cook their food, a situation that leads to 4 million preventable deaths each year. The resources present in the countries coming here for the EITI Global Conference in Sydney can be used by companies, by the people in these countries to play a positive role in addressing these development needs.
The resources being extracted, for example, can be utilized to provide access to reliable, affordable electricity to those currently without it. Energy access is strongly correlated to business development, which in turn leads to job creation and economic growth. Access to energy is essential for basic modern health care -- think for a moment of the needs for cold chains and directly storing vaccines. Energy is key to making information available. Better governance in the sector makes an important and not always well-recognized contribution to energy security by helping to create more stable investment environments, by reducing corruption, and so ultimately increasing resources that are available on international markets. Given the global competition for capital investment, jobs, and economic growth, countries will not be successful at securing the private investment they need unless they develop a sound and transparent operating environment to attract responsible companies.
Thus, furthering good governance and transparency in the extractive industries is central to the mission of the State Department and the U.S. government.
For these reasons and others, the United States has strongly supported EITI since its inception. Experience shows that EITI is valuable to countries in all regions and at all stages of development. Recognizing this reality, the U.S. government is hard at work, hand-in-hand with our private sector and civil society partners, to meet the requirements to become an implementing country, joining this growing community of more than 35 countries from Africa to Asia and the Pacific, Europe, the Western Hemisphere, and the Middle East.
As a member of the international EITI Board, I have worked closely with my government, civil society, and private sector colleagues on the Board and with the EITI Secretariat throughout the rule revisions process -- and the U.S. strongly supports the strengthened rules that we hope to adopt today. These strengthened rules and procedures will help ensure countries designated EITI compliant meet a high standard of transparency and accountability -- and benefit from them. They will help ensure, as well, that EITI reports present data that are reliable, understandable, and useable by citizens to hold their governments accountable.
In doing so, EITI has been a catalyst for action. Its reporting requirements should fit with -- and I think will fit with -- steps being taken by others to improve transparency, accountability, and governance in the extractives sector.
One of those efforts is contained in the U.S. Securities and Exchange Commission’s regulations implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law and the new regulations require certain companies that already file annual reports with the SEC to disclose certain of their payments to governments world-wide. Companies will report certain payments at the project-level, except for when the obligation is at the entity level, for example with corporate income taxes. This requirement for project-level disclosure is a significant step increasing the accountability of companies and governments, and one that we hope will become a global standard.
In this regard, we were pleased to see that the EU concluded its negotiations on a similar rule and that the European Parliament is likely to vote on such a rule this summer. These disclosure requirements will help people all over the world understand what their governments are receiving -- and their impact will increase to the extent other major financial jurisdictions implement similar requirements. To this end, it’s very positive that the EITI has agreed on a similar reporting standard to what is coming into force in the United States. This step will reduce the reporting burden for companies and broaden the number of companies – including state-owned companies in EITI implementing countries – that will report on a project-by-project basis.
With these actions in the United States and the European Union and with the new EITI rules, we see important progress toward global standards for reporting in the extractive industries. We also welcome the UK’s focus on this issue during their G8 presidency, and think the G8 can make a useful contribution to this growing global consensus. We appreciate as well the work of civil society and industry to push forward the transparency agenda. We’ve certainly seen this cooperative spirit in the context of U.S. implementation of EITI, and we hope it will extend to other initiatives as well.
As I stated at the beginning of this presentation, transparency in this sector benefits all actors – governments, civil society, and industry – and we look forward to continuing to work with all three on this issue to see further progress. The steps governments are taking to mandate reporting are important to achieving the transparency, clarity, and accountability that are fundamental to a well functioning extractive industry sector and to economic and democratic growth.