Lack of transparency in contract, cause of restiveness in N-Delta – Okonjo-Iweala

Lack of transparency in contract, cause of restiveness in N-Delta – Okonjo-Iweala

News Nov 17, 2010 By Omoh Gabriel
LAGOS — Managing Director, World Bank, Dr Ngozi Okonjo-Iweala, said in China yesterday that lack of transparency and secrecy in government award of oil blocks led to the frostier relationship between multinational oil companies operating in Nigeria and the host communities.
Speaking to Chinese investors with focus in Africa, she warned against secrecy in contracts award and lack of transparency in procuring mining leases.
Dr Iweala said: “If the public does not know what you do, they will turn against you as they do not see the benefits of the investment or when accidents happen. My own country Nigeria may serve as an example.
Dysfunctional relationships between the local community and oil companies led to disruptions in operations in the Niger Delta, and the cost of investment increased exponentially due to security issues.
“The need for transparency is even greater when mining contracts are awarded in exchange for infrastructure and other investments. Today, many big Chinese construction companies are developing infrastructure projects in Africa.
Some of them have proposed infrastructure investments to be backed by mineral resources.  We all would agree that support for infrastructure is much needed as the continent faces an infrastructure financing gap of $31 billion a year.
“But investments in infrastructure in exchange for long_term contracts for minerals are inherently difficult to value. It is precisely in these cases that the agreements must be fully transparent so that citizens can form their own judgment on the basis of full information.
Make investment consistent
“The first core principle is to make investments consistent with national development priorities. If you want a country to welcome you, think smart and think of the country’s overall development agenda. Ask yourself how your investment fits within the country’s overall development objective and strategy.
Above all, this means to create jobs locally. The only labour brought in from outside must be those people whose skills are clearly missing in a country. This is the path to help ensure governments fully welcome your investments as an integral part of their economic development agenda.
Host country needs credible devt plans
“For this to happen, the host countries need to have credible development plans. So, for the ministers here today from African nations and other developing countries, I hope you are armed with your countries’ development and investment plans, and are ready to work within them to identify opportunities consistent with your needs and priorities.
“The third principle of smart and responsible investment is supporting the development of a value chain. Mining companies should not just come in to extract natural resources in a raw form and ship them away. This is colonial history. Today, they should establish some degree of processing adding value to the raw materials.
This creates employment, develops skills, and leads to more buy_in from the local people. Development in the mining sector also provides growth opportunities for other linked sectors.
“If all the associated services can be sourced to domestic providers such as domestic food production for miners, uniforms made from national cloth by local manufacturers, and domestic transportation services, it would put your investment squarely in the centre of local economy,” she argued.
Pay what is due, do what is right
Dr Okonjo Iweala further said: “The fourth and very important principle is to pay what is due and do what is right. Investors must pay taxes and avoid falling into well-known tax evasion techniques such as transfer pricing or bribes to a few high level officials.
Bribe paying is not only abhorrent but is counterproductive in the longer term. Many developing countries need tax revenue to invest in their people — a move which will lead to easier investment for you, but for that to happen, you must pay your proper taxes and royalties.
“It is impossible to imagine today with all the mining going on in DRC, for example, that the revenue to GDP ratio is only 8 percent. We owe the people of DRC more. To do business in Africa, you don’t have to pay bribes. My good friend, and one of the most successful African businessmen, Mo Ibrahim, is a living proof of that.
Mo was the founder of Celtel, which is now one of Africa’s largest mobile operators worth some $10 billion with some 20 million subscribers in 15 countries. He can tell you that successful investments can be made with clean hands.
The EITI principles
“In July this year, the U.S. finally passed the financial reform bill that requires oil, gas and mining companies to disclose payments they make to foreign governments. We hope other countries do the same.
At the World Bank, we are working with countries to encourage them to sign on to the Extractive Industry Transparency Initiative (EITI) principles.
“This requires they publish revenues from mining resources and agree to use these resources efficiently for the benefit of the people. Today, twenty African countries have signed on to these principles. When I was the Finance Minister in Nigeria, one of the key actions I took to restore people’s belief in their government was to work on a sound public financial management system and publish what the government earns and spends.
Investors also benefit from the EITI guidelines on how to conduct transactions transparently and legally. I encourage you to support and sign on to EITI if your company has not already done so,” she said.