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AWB scandal - suppliers beware!

By Andrew Hewett - posted Monday, 6 March 2006

The Cole Inquiry into the legality of payments by the Australian Wheat Board and BHP Billiton to the former Iraqi regime highlights the need for Australian companies to publish what they pay to resource-rich countries. It also demonstrates the benefits of legislation that regulates the conduct of Australian companies abroad.

Revenue transparency is essential to ensuring that citizens can hold both companies and governments to account. This current case illustrates the inherent dangers facing Australian companies that fail to publish all payments they make to developing countries.

Many companies resist the push for transparency because they believe it provides an unfair advantage to less reputable companies and therefore would not be good for business. Clearly though, neither is it good business to have your company's reputation shredded at a public inquiry into payments to an abusive regime. A commitment to being transparent in corporate payments staves off attacks to reputation. It also contributes to the creation of an investment environment in which the rule of law prevails and in which project risks are lower, profits more stable and investment returns greater.


Most importantly, transparency is in the best interests of the citizens of the countries concerned. Revenue that is generated from natural resources in developing countries can contribute to poverty alleviation and economic growth.

Oil, gas and mining companies make legitimate payments to governments in the form of royalties, bonus payments or taxes. However, the citizens of many developing countries often have no access to information relating to those payments and ultimately cannot demand the benefits of those funds.

Approximately 1.5 billion people living in resource-rich countries survive on less than US$2 a day. Tragically for these people, in many instances the riches generated from oil, gas and mineral deposits end up in the hands of a corrupt elite. This is the so-called “resource curse”, where countries blessed with an abundance of natural resources are blighted with poverty, corruption, and conflict.

For this reason, Oxfam Australia and 280 other non-government organisations around the world are demanding that companies come clean. The Publish What You Pay coalition calls for the mandatory disclosure of companies’ payments to all governments for the extraction of natural resources. Companies should reveal the same basic information about net payments to developing countries that they already routinely disclose in developed countries.

Some companies and governments are recognising the value of open publication of payments and revenues. East Timor, for example, has committed itself to the Extractive Industries Transparency Initiative and has established a Petroleum Fund through which all revenues must flow in a fully-accountable process. If a fledgling state can make such a sound commitment, surely Australia’s biggest companies can do likewise.

The outcome of the Cole Inquiry is yet to be seen, however, the fact that such an inquiry can take place in Australia is critical. Australian laws which may have been breached in Iraq include laws that prohibit the bribing of foreign officials. These laws were brought into effect to implement the OECD Convention on Combating Bribery of Foreign Public Officials, which Australia has ratified. In the absence of these laws, Australia’s ability to make Australian companies accountable for activities that breach the Convention would be severely curtailed. After all, these are activities that may occur wholly outside Australian territory.


The question must be asked, however, “Why don’t we hold Australian companies to account when their actions undermine other conventions that Australia has ratified?” Why don’t we, for example, have legislation that prohibits Australian companies breaching fundamental human rights and environmental standards abroad? Oxfam Australia’s Mining Ombudsman has demonstrated the critical need for an official complaints mechanism within Australia that makes Australian mining companies adhere to certain basic standards wherever they operate.

At a time when the world’s attention is focused on the ability of Australian companies to uphold basic ethical standards, it is essential that companies commit to publish what they pay. It is also time that the Australian Government commits to making all Australian companies uphold basic international standards in their operations abroad.

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About the Author

Andrew Hewett is Executive Director of Oxfam Australia.

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