Revenue Watch, which the Financial Times calls a New York-based “watchdog” group “backed by charitable foundations and rich-country governments”, has just published a lengthy report on the quality of governance in the oil, gas and mineral sectors of 58 resource-rich countries.
I have noted in earlier posts that SWFs, which are part of the universe Revenue Watch is studying in this report, some of the issues that arise with SWF disclosures (see, for instance, this post on SWFs and Investment Disclosure, and my forthcoming paper Sovereign Investing and Corporate Governance: Evidence and Policy). Adam Dixon and Ashby Monk also have a very thoughtful and nuanced article on Reconciling Transparency and Long-Term Investing within Sovereign Funds.
The Revenue Watch report gathers together a large number of data points on various resource governance components, including
- Institutional and Legal Setting;
- Reporting Practices;
- Safeguards and Quality Controls; and
- Enabling Environment (which measures the broader governance environment of the country)
I always reserve a bit of skepticism for such rankings, as judgments must often be made about how much one factor should matter (see, for example, the debate over the US News law school rankings). With that caveat, I find that they can often serve a useful bench-marking function.
So what does Revenue Watch find? The results are not kind to most SWF sponsor states:
Only 11 countries earn an overall score of above 70. The vast majority of countries exhibit serious shortcomings in resource governance. . .
More than half the sample, 32 countries, do not meet even
basic standards of resource governance, performing weakly
or simply failing. Among the 15 failing countries, seven score
below 30: Cambodia, Iran, Qatar, Libya, Equatorial Guinea,
Turkmenistan and Myanmar. As of 2012, when the data
collection took place, these countries failed to disclose any
meaningful information about the extractive sector and
lacked basic governance standards.
There is room for improvement even among the 11 top-ranked satisfactory performers. For example, Brazil and Chile fail to publish their extractive industry contracts. Western Australia does not require public officials to disclose information about their financial interest in mining projects.
An examination of the four RGI components clearly shows
the endemic nature of the resource governance deficit.
Only Norway, the United Kingdom and the United States
(Gulf of Mexico) earn a satisfactory score in all four components, leaving 95 percent of the sample without satisfactory standards in one or more areas. In the Reporting Practices component, the vast majority of countries (45 out of 58) have partial, weak or failing standards of transparency. In these countries, citizens lack access to fundamental information about the oil, gas and mining sector. For instance, a country might provide little or no information about which companies (domestic and foreign) operate in the extractive sector, how much the government collects in resource revenues and where those funds are allocated.
The entire report may be downloaded here.