The Panama Papers scandal that broke in April 2016 highlighted how extractive companies and politically exposed persons use secret ownership structures to evade billions in tax obligations and hide improper relationships. Recent revelations that oil-rich Azerbaijan’s ruling elite used a network of opaque companies to launder USD 2.9 billion were another reminder of why company ownership transparency matters.
Indonesia’s finance ministry has also started probing the tax reports of 78 Indonesians named in the leaks. The papers also named 899 individuals and companies in Indonesia who have set up shell companies in a number of tax havens.
Beneficial ownership transparency was propelled into many government policy agendas when rules agreed to by the Extractive Industries Transparency Initiative in February 2016 required all oil, gas and mining companies operating in EITI member countries disclose these owners from 1 January 2020. Shortly after, at the U.K. Anti-Corruption Summit in May 2016, countries made 67 commitments on beneficial ownership. This included commitments by 16 countries to publicly disclose beneficial ownership data.
Next week, government representatives from the 52 implementing countries will meet in Jakarta at the Opening Up Ownership Conference to discuss the state of play on beneficial ownership transparency in the extractive sector. The EITI International Secretariat, in partnership with the Indonesian government and others, including NRGI, are hosting two days of discussion and workshops where governments and civil society representatives will highlight best practices and exchange experiences.
While 51 countries have developed roadmaps for how they will meet the requirement, actual implementation remains slow. The 2017 Resource Governance Index shows that while many countries at least plan to require public disclosure of this information, often due to EITI processes, only five countries assessed have laws requiring public beneficial ownership disclosures. Even fewer have public registries containing this information.
Given how much progress is still needed, knowledge exchange and experience-sharing are particularly important. The Jakarta conference will be an opportunity for civil society and government officials to discuss and work out approaches to the complexities of disclosure. These complexities include identifying beneficial owners who are politically exposed persons, assuring data accuracy and establishing legal frameworks for disclosure, which NRGI governance programs director Erica Westenberg will address in a session. NRGI president and CEO Daniel Kaufmann will moderate a panel discussion on the corruption-fighting potential of beneficial ownership disclosure. NRGI staff will share findings from Twelve Red Flags: Corruption Risks in the Award of Extractive Sector Licenses and Contracts, as well as a forthcoming publication on beneficial ownership in extractives licensing.
Conference host country Indonesia has started on the path toward beneficial ownership disclosure, producing a detailed roadmap. Officials are drafting a presidential regulation that would require companies registered in Indonesia to disclose their beneficial owners. The draft regulation embodies the broader anticorruption policy priorities of President Joko Widodo. Beyond beneficial ownership disclosure, Indonesia’s wider oil, gas and mining sector was classed as “satisfactory” in the RGI, and emerged a top performer regionally. Neighboring countries such as the Philippines and Myanmar fared less well, with weak and failing extractives sector governance, respectively.
Corruption is one of the key challenges for the region’s extractives sector. This challenge will be the main topic discussed by civil society organizations and journalists from across the region at a pre-conference event organized by NRGI, Publish What You Pay Indonesia, Tempo and Transparency International - Indonesia on 21 and 22 of October. The preconference event will also be an opportunity for civil society to prepare for their participation at the predominantly government-focused global conference. Civil society has a crucial role to play, helping foster the development of beneficial ownership policy and reviewing and analyzing resulting data.
Following the regional event and beneficial ownership conference, Kaufmann, an EITI board member, and colleagues will travel to Manila to attend the 38th EITI International Board meeting. At the close of the meeting, NRGI staff will present the Resource Governance Index and host a discussion with board members on the linkages between EITI and the index.