Sta. Ana coordinates Action for Economic Reforms. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, August 13, 2007 edition, page S1/4.
To be in Bali is enough enticement to join an intensive five-day workshop on revenue transparency in the extractive industries.
On my list, I rank Bali as the top holiday destination in Southeast Asia. Its beaches, volcanoes, rice terraces, and lakes are postcard pretty. True, Bali’s landscape cannot equal the white-sand beaches of Boracay or Bohol, the almost perfect cone of Mayon volcano, the splendor of the Banaue rice terraces and the breathtaking Tagaytay panorama. Yet, the sum of Bali’s parts is greater than its parts. The small island is sprinkled with ancient temples, exotic architecture, rustic villages, verdant fields and lush forests, unspoiled rivers and lakes, and rich tropical flora and fauna.
On top of all this is the Balinese culture —the serene yet multihued way of life, the religious tolerance, the colorful rituals, the comforting music and skillful dancing, the exquisite artistry and craftsmanship—that defines the Bali aura.
But this time, I am not on holiday, and I might just miss Bali’s best attractions.
The workshop I am attending is heavy, tiring stuff. The downside is that we are billeted in a Ramada hotel that serves mediocre food and provides a dim, windowless conference room for the workshop. But we can bear the hotel’s shortcoming, for the over-all environment—the smiling people, the clean air, and the breeze from the sea—is conducive to our meeting.
The organizers of the conference wisely chose Bali as venue for an Asia-Pacific workshop on issues surrounding the extractive industries. The specific issues revolve around transparency, fair contracts, and correct payment of taxes.
The workshop’s principal organizer is a global coalition called Publish What You Pay (PWYP). Its mission is to promote accountability in the extractive industries, limit the scope for corruption, create strategies for the distribution of resource revenues that will benefit the poor, and strengthen civil society’s role as watchdog.
“Publish what you pay” aptly describes the main objective that the coalition is pursuing. PWYP hopes that it can contribute to eliminating the resource curse that plagues many richly endowed but poverty-stricken, low-growth countries.
PWYP has visible presence in sub-Saharan Africa and Central Asia. The activity in Bali intends to draw in non-governmental organizations (NGOs) from Southeast Asia and the Pacific islands.
Quite related to PWYP is the Extractive Industries Transparency Initiative (EITI). The EITI is a tripartite mechanism for the voluntary reporting of revenues drawn from the business of oil, gas, and minerals.
For the EITI to prosper, all the three parties—government, corporations, and NGOs—must be present. Like PWYP, the EITI wants an end to the resource curse by way of having revenue transparency.
The EITI was formed at the behest of PWYP. Thus, the perception that PWYP and EITI are the same banana, which is inaccurate.
How does the EITI work? A government must first commit itself to the EITI. The participation of corporations in the extractive industries and NGOs completes the picture. The corporations submit a report on their payment of tax and non-tax revenues, including royalties. Governments likewise disclose the amount of revenues that they receive from the extractive firms. An audit is done, and the results are published.
The EITI has to address a membership problem. At present, it is made up of weak or failed states. Badly governed states are eager to join the EITI club to have a change of image or to have a patina of credibility. Donors encourage such states to join the EITI.
The EITI then becomes a victim of adverse selection. Countries with success stories and good institutions tend to stay away from the EITI, fearing that their association with bad states would stain their reputation. A challenge for EITI is to convince well-governed developing countries to take part in it.
In the Philippines, the NGOs are amused that the President of the Chamber of Mines, and the former Environment and Natural Resources Secretary, Mike Defensor, are the ones most interested in having the Philippines join the EITI.
Of course, it is simplistic to say that transparency and accountability will end the resource curse. Many of the workshop participants from both the developed and developing worlds emphasize that revenue transparency is not enough and may not even be a decisive factor for the richly endowed but poor countries to escape the resource curse.
Still, transparency and accountability are values by themselves and should be pursued as part and parcel of institutional reforms. After all, the quality of institutions spells the sustainability or failure of growth in countries endowed with extractives.
The workshop’s country case studies (e.g., Cambodia, Fiji, Indonesia, Kazakhstan Mongolia, Papua New Guinea, Philippines, and Timor Leste) have similar stories to tell. The same issues cut across countries: the opacity of rules; the lack of disclosure vis-à-vis contracts, financial statements, and tax payments; the brazen corruption and massive bribery; the regulatory capture and the discretionary enforcement of rules; the restrictions on citizens’ participation in policy processes and the harassment of activists.
The Filipino participants in the workshop have asked themselves whether the EITI and PWYP can fly in the Philippines. The consensus is that the advocacy for revenue transparency in the extractive industries must be immediately and deliberately linked to the broader struggles for transparency and accountability and for tax reforms.
The current government is a shameless, unrepentant violator of transparency. The clear example is the supposedly stolen National Broadband Network contract that the administration has refused to disclose. The business community, the academe, the NGOs, and the mass media have roundly criticized this deal.
The main goal for transparency reforms is to put in place a law that enables the Constitution’s provision on the citizens’ access to public information.
On the issue of revenues, the main task is not getting the information regarding the amount of taxes that the extractive companies pay. Rather, it is demanding that they pay the optimal amount of taxes, taking into account the unwarranted fiscal incentives they enjoy and the externality costs of their operations. The fitting slogan is not “publish what you pay” but “publish what you don’t pay.”
For the local communities and the environmentalists, their demand is very fundamental—the scrapping of the Mining Act. It is awkward for them to focus on revenues from mining firms when their bottom line is the closure of large-scale mining operations.
At any rate, public interest groups like Action for Economic Reforms and the Access to Information Network can take up the cudgels for tax and transparency reforms.
I do hope that the Bali workshop’s outcomes will find relevance in the Philippines’ struggle for reforms. And I still nurse the wish that I could still find the time to explore Bali’s beauty.