President Trump’s February 14 approval of the Joint Resolution repealing the rule that American companies disclose publicly all payments to governments for extracting oil and gas from their lands has provoked much lamenting. The lamenters see it as a major setback to the fight against corruption, taking it as a given that greater transparency in the oil and gas industry leads to less corruption.
Rather than assuming that this is true, I decided to look at the evidence. The best place I could find to look was the Extractive Industries Transparency Initiative. The 49 governments who along with their civil society groups and private sectors have committed to EITI regularly publish two things: 1) all significant (“material”) oil, gas, and mining payments made by companies, whether state-owned or privately-held, to the government and 2) all material revenues the government receives from these companies. EITI requires that this information be widely distributed in an accessible, comprehensive and understandable manner, and indeed EITI requires more than simple transparency. The total amount companies report paying and the total government says it receives must be reconciled annually by an independent administrator which must then report any discrepancies. No better a formula for ensuring that transparency leads to less corruption would seem on offer.
So what effect has EITI had in the decade plus it has been in operation? Does the transparency engendered by the EITI actually result in better governance and development outcomes in EITI compliant countries? How well do EITI countries perform, or improve over time, compared to other countries on selected political and economic indicators?
As luck would have it, these are precisely the questions Professors Benjamin Sovacool, Götz Walter, Thijs Van De Graaf, and Nathan Andrews address in a 2016 article in World Development. Their answers should bring cheer to those lamenting repeal of the U.S. rule. Continue reading