Poor governance and systemic corruption are prevalent in many resource-rich countries. Given their highly concentrated and highly profitable nature, the oil, gas and mining industries can generate the kind of political and private incentives that favor rent-seeking and institutional (or state) capture.
In these resource-rich countries, other sectors of the economy, as well as the overall political class, tend to have close links to the extractives sector. Because of these linkages, weaknesses in governance and corruption do not remain confined to one sector. Rather, they are a nationwide development challenge.
As illustrated by Brazil’s Petrobras scandal, high-level corruption in the extractive sector operates through sophisticated networks involving an influential and diverse range of players. The networks stretch across public, private and international spheres, and defy the traditional view of corruption as transactional bribery between two parties. Their members derive huge personal benefit from their ability to “capture” public resources, as well as regulatory and policy-making processes.
To identify pathways for addressing this challenge, multiple kinds of knowledge are required, and this information is often difficult to obtain. It is imperative to understand the politics of capture, and the make-up of the corruption networks – including their domestic and international dimensions. Moreover, this political understanding must be accompanied by an appreciation of the often-sophisticated processes through which corruption takes place. And the mechanisms of corruption adapt to and exploit the particular complexities and technicalities of the oil, gas and mining industries.
In this context, NRGI aims to provide evidence-based insight on corruption in the regions and countries in which we work. We have analyzed regional corruption trends in Latin America and Africa. We have also produced research on individual loci of corruption, such the conduct of crude oil sales by the national oil company in Nigeria (see next page.) Our evidence-based approach benefits from data tools such as the Worldwide Governance Indicators WGI), which help to illustrate the links between corruption and other dimensions of governance such as the rule of law. These data are inputs to our sector-specific Resource Governance Index (RGI), which measures the transparency and accountability of oil, gas and mining sector governance in 58 countries. Many of the indicators measured by the RGI – such as disclosure practices and the presence of checks and balances – constitute some of the recommended methods for fending off corruption risks.
Read the full document here.