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where. This raises questions as to where BHP Billiton’s US$1 million payment has gone, and how companies manage the risk of investing in corrupt environments. BHP Billiton reportedly decided to pull out of Cambodia in 2009 because it did not find bauxite in sufficient quantities to justify extraction6.

BHP Billiton is not unique. Other extractive companies have made large payments to the Cambodian government which are not showing up in the national accounts7. The government has recently begun to disclose “non-tax revenues” for the extractive industries. However, so far only single, aggregated monthly figures across the entire sector have been released, frequently with a reporting delay of more than 6 months, and some payments have not appeared at all. This is far from the international standard promoted through the Extractive Industries Transparency Initiative (EITI).

In April 2010 the U.S. Securities and Exchange Commission (SEC) announced it had launched an investigation into potential anti-graft violations by BHP Billiton. The country in which the alleged activities took place has not been named, but was widely reported in the press to be Cambodia8.

The mystery surrounding the destination of the US$1 million paid by BHP Billiton and the linking by the media of this figure and the SEC investigation underlies the vulnerabilities for companies operating in countries such as Cambodia. Despite pressure from international organisations, Cambodian civil society and its international donors, the government so far refuses to endorse EITI or adopt equivalent measures for disclosure of revenue transparency. The question is therefore, what can companies like BHP Billiton do in order to protect themselves from these vulnerabilities?

One potential solution is the provision within the recently passed U.S. Dodd-Frank financial reform bill obliging U.S.-listed companies engaged in oil, gas or mineral extraction anywhere in the world to report how much they pay to governments in their annual filing to the SEC. This includes all royalties, taxes and payments, project by project and country by country. This bill not only creates a level playing field for all U.S. registered companies, but also enables civil society in countries with inadequate transparency procedures to call their government to account on missing revenue.

A second solution is for companies to proactively agree to publicly disclose such information. In Cambodia BHP Billiton acted more responsibly than other companies involved in the extractive industries sector: it was the only company to disclose information to Global Witness about payments made to the government.

BHP Billiton has also taken the lead internationally through its announcement in May 2010 that it will disclose all payments to governments on a country-by-country basis. Although the company’s disclosures in their most recent annual report do not yet achieve this goal, Global Witness welcomes this commitment and hopes it will be followed by similar announcements from other international companies operating in the mineral and petroleum sectors.

PAPUA NEW GUINEA: Ok Tedi – a legacy of destruction

The Ok Tedi River, a tributary of the Fly River, is located in the Western Province of Papua New Guinea (PNG). Sourced in the rugged central mountain range of PNG, its water eventually flows

6 The Phnom Penh Post, “Billiton Shelves Bauxite Mine”, 28 August 2009, available for download at: http://www.phnompenhpost.com/index.php/2009082828051/Business/billiton-shelves-bauxite-mine.html (last accessed on 6 October 2010).

7 Interviews by Global Witness with confidential sources within Cambodia’s extractive industry, 2008. For further details see Country for Sale.

8 For example: The Australian, “BHP faces investigation into $2.7m Cambodia graft claim”, 22 April 2010, available for download http://www.theaustralian.com.au/business/mining-energy/bhp-faces-investigation-into-27m-cambodia-graft-claim/story-e6frg9df-1225856620017 (last accessed 6 October 2010) and The Sunday Times “Mining giant BHP Billiton admits it may have bribed foreign officials”, 22 April 2010, available for download http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7103456.ece (last accessed 6 October 2010).

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