Precept 2

Precept 2

Resource governance requires decision makers to be accountable to an informed public.

Where resource wealth is managed on behalf of citizens, it can lead to sustained prosperity only if the government is publicly accountable. Ongoing scrutiny of behavior provides a strong deterrent against corruption and an incentive for improved performance across all levels of government. Furthermore, a national strategy of managing resource wealth will remain effective into the future only if this scrutiny ties present and future governments to the objectives they set themselves.

Provide transparency of information along the entire chain of decisions

Unlike many forms of economic activity, resource extraction and the management of revenues is often distant from the lives of the majority of citizens. The chain of decisions can be difficult to monitor, providing opportunities for corruption and a screen for poor management.

An essential prerequisite for accountability is transparency. However, piecemeal information is not sufficient. The government should disclose information about the whole chain of decisions, with a complete, complementary set of information. For instance, revenue data might be accompanied by information on the applicable tax rates and taxable income. Such information should be disclosed at an appropriate level of disaggregation such as location, project and product type. In addition, "machine-readable data" (data combined with descriptions of these data to enable automatic use by computers), with mutually agreed inter-operable standards can facilitate monitoring efforts.

Transparency is poor in extractive sectors worldwide. Only 10 of the 58 countries examined in the Revenue Governance Index publish most of their oil, gas and mineral contracts and licenses, though this group is growing with the recent disclosures by Afghanistan, Ghana and Guinea.
—Revenue Watch Institute, 2013.

Publishing the names of companies operating, bidding for and investing in extractive assets, as well as the identities and chains of ownership of their beneficial owners, can facilitate monitoring and enforcement of the applicable fiscal regime. The operations of nationally owned resource companies should be subject to at least the same level of disclosure as private companies. National resource companies should also be transparent in their strategies and spending outlook, and public interest may even demand higher levels of openness.

Authorities should make available data and reports on licenses, geological surveys, cadastres and reserves, as well as economic, environmental and social impact assessments. Critically, authorities should also publish contracts and make them readily available online.

Disclosing information that allows for national accounting and monitoring of sector management, revenue management and expenditures is also necessary. This information can be compared against any fiscal rule the government sets itself. Further, savings funds must have high levels of disclosure requirements, particularly considering the potential for off-budget activity. In particular, fund management ought to publish information on the balance sheet and cash flows, recipients of payments, and audits.

The government should disclose not only payments and spending, but also the relevant rules across the whole decision chain. In many cases, governments write large parts of these rules into complex contracts hidden from public inquiry. As far as possible, governments should write terms within legislation, which observers can scrutinize more easily than a contract. Any remaining concessions given in contracts which depart from standard legislated terms should be submitted to and approved by the legislature. Above all, confidentiality clauses in contracts should be avoided and contracts should be made public.

The public’s right to information is enshrined in many national and international conventions, and an increasing number of countries have freedom of information laws stipulating that all government information is public unless disclosure is specifically proscribed by law. Governments should adopt such rules to mitigate the risk of rights over resource extraction being signed away before members of the public can scrutinize agreements that affect them.

Government and business can also benefit from greater transparency. Disclosure requirements create the incentive to maintain effective systems of information management, which lowers the cost of collecting and maintaining good data and improves their accuracy. This is essential for efficient government operations: it informs management decisions; improves the quality of service provision to companies and citizens; and supports strong lines of accountability within government. Additionally, companies face the challenge of managing public expectations in the areas in which they operate: effective transparency allows them to alleviate distrust and strengthen the "social license to operate."

Provide clear roles to institutions

See Precept 1 on the framework of roles and responsibilities, and the capacities of institutions.

Roles and standards of behavior should be clearly defined and understood by all so that the public can monitor government action. A set of values and ethical standards, reflective of society’s expectations for those in positions of authority and codified in laws and regulations, ought to guide decision-making.

The government functions better if clear lines of responsibility are drawn, and the executive and bodies such as an independent auditor can monitor and bring to account those institutions that fail in their duties. Furthermore, to respond appropriately to the demand for better performance, government institutions should be able to make effective decisions—better accountability requires better capacity if governance is to improve.

Support a critical mass of informed citizens to demand good governance

The provision of information must be paired with the ability use it to monitor and judge the actions of the government. Civil society, including religious, academic, professional and social organizations, as well as the media, has an important role in this regard. For these organizations to be effective, they must be independent of the government and open about sources of funding and the interests they represent. The government in turn must establish and protect the rights of civil society, including the media, and allow it to operate without harassment.

Legislative oversight has been found to be poor across the decision chain. In 31 countries in the Resource Governance Index, such as Botswana and Timor-Leste, the legislature exerts negligible oversight of contracting and licensing processes, while in 29 countries the legislature has very limited oversight of resource revenues.
—Revenue Watch Institute, 2013.

The legislature is essential in its oversight of the executive. It can audit the activity of the government and other institutions, and act as a conduit for public concerns. For the legislature to perform this role it requires enhanced capacity and understanding of extractive issues, as well as access to reliable advice on the nuances of extractive resource management.

An informed citizenry is also better able discuss with the government the nation’s strategic direction. Also, given the transformational importance of resource governance for citizens, managing public expectations is critical. An effective communication strategy and relationship between government and civil society is essential in this regard.

Enforce the rules

Finally, along with the means to monitor actions, the government must commit to enforcing penalties, which requires political will and capacity to punish offenders. A credible and independent judiciary is paramount in this regard. Without a strong possibility of judicial action there is increased potential for corrupt or criminal activity.

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