Avoid confidentiality clauses in extractive sector contracts- NRGI warns Guyana, other nations

Jul 29, 2018 News

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…Says citizens cannot properly monitor govt., companies with piecemeal info.
By Kiana Wilburg
If the resource wealth of a nation is to be managed in a transparent manner, then the government must provide its people with information about the whole chain of decisions made for the respective sector.
As such, confidentiality clauses in contracts should be avoided at all costs since this forces the government to provide its people with piecemeal data.
This is according to the Natural Resource Governance Institute (NRGI), an independent nonprofit organization dedicated to improving countries’ governance over their natural resources.
NRGI believes that an essential prerequisite for accountability is transparency. It stressed, however, that piecemeal information is not sufficient. It insists that the government should disclose its decisions with a complete, complementary set of data.
For instance, NRGI said that revenue data might be accompanied by information on the applicable tax rates and taxable income.
NRGI also said that information should be disclosed at an appropriate level of disaggregation. It said that this would include location, project name, and product type. In addition, NRGI said that “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.
NRGI also stated that Governments of emerging countries like Guyana should publish 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. It insists that this can facilitate monitoring and enforcement of the applicable fiscal regime.
The Institute said that local authorities should make available, data and reports on licences, geological surveys, cadastres and reserves, as well as economic, environmental and social impact assessments. Critically, it said that authorities should also publish contracts and make them readily available online.
NRGI opined that disclosing information that allows for national accounting and monitoring of sector management, revenue management and expenditures is also necessary. It said that this information can be compared against any fiscal rule the government sets itself.
Further, NRGI said that savings funds must have high levels of disclosure requirements, particularly considering the potential for off-budget activity. In particular, it said that fund management ought to publish information on the balance sheet and cash flows, recipients of payments, and audits.
Further to this, NRGI said that the government should disclose not only payments and spending, but also the relevant rules across the whole decision chain. In many cases, the Institute said that Governments write large parts of these rules into complex contracts hidden from public inquiry. As far as possible, it said that governments should write terms within legislation, which observers can scrutinize more easily than a contract.
The institute said that any remaining concessions given in contracts which depart from standard legislated terms should be submitted to and approved by the legislature. Above all, NRGI said that confidentiality clauses in contracts should be avoided at all costs and contracts should be made public.
NRGI said that 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.
It noted that 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, the Institute said that companies face the challenge of managing public expectations in the areas in which they operate. NRGI stressed that effective transparency allows them to alleviate distrust and strengthen the “social license to operate.”
NRGI said that roles and standards of behaviour should be clearly defined and understood by all so that the public can monitor government action. It said that 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.
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, the organization stated.
To respond appropriately to the demand for better performance, NRGI said that government institutions should be able to make effective decisions. As such, it said that better accountability requires better capacity if governance is to improve.
According to NRGI, the provision of information must be paired with the ability to use it to monitor and judge the actions of the government. NRGI believes that civil society, including religious, academic, professional and social organizations, as well as the media, has an important role in this regard.
The Institute said that for these organizations to be effective, they must be independent of the government and open about sources of funding and the interests they represent. It said that the government in turn must establish and protect the rights of civil society, including the media, and allow it to operate without harassment.
NRGI said that the legislature is essential in its oversight of the executive. The Institute said that the Parliament can audit the activity of the government and other institutions, and act as a conduit for public concerns.
But for the legislature to perform this role, NRGI said it requires enhanced capacity and understanding of extractive issues, as well as access to reliable advice on the nuances of extractive resource management.
It stressed that an informed citizenry is also better able to discuss with the government the nation’s strategic direction. Also, given the transformational importance of resource governance for citizens, NRGI said that managing public expectations is critical.
It noted that an effective communication strategy and relationship between government and civil society is essential in this regard.

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