By Kiana Wilburg
The local chapter of the Extractive Industries Transparency Initiative (EITI) is working towards creating a register that will be able to identify all politically exposed persons benefitting from the extractive industries.
This was confirmed yesterday with head of GUY-EITI, Dr. Rudy Jadoopat.
In an interview with Kaieteur News, Dr. Jadoopat said, “By January 2020, it will become compulsory for all EITI candidates to know the true beneficiaries of companies in the extractive sector… As such, we are creating a beneficial ownership roadmap which will show how the Guyana chapter intends to achieve this. That roadmap is on our website.”
The GUY-EITI Head noted that while there is nothing illegal about persons in high office having relationships with companies in the extractive sector, but for the purpose of transparency, this must be known.
Dr. Jadoopat said, “It is important that these relationships with political officials be disclosed so that if a company feels it is not getting fair access to concessions then we can look at the other companies benefitting to a greater extent and see why this is so.”
He added, “There are many countries in which failure to get beneficial ownership in order has hindered the extractive sector from growing. It has led to wide scale corruption and the wealth of the sector being channeled into the pockets of a few high political officials.
“Guyana can avoid falling into similar traps. And the Government of Guyana is behind all this transparency.”
As Guyana inches closer to becoming an oil and gas producer, several international institutions have called for there to be increased beneficial ownership screening to reduce the sector’s risk to corruption.
This was recently noted by the Natural Resource Governance Institute (NRGI), an independent nonprofit organization dedicated to improving countries’ governance over their natural resources. Since 2015, the institution has been providing advice to Guyana’s authorities.
The Institute noted that in most natural resource-rich countries, when a company is seeking the right to explore for or produce oil, gas or minerals, sector, rules require that regulators check some basic information before granting the company a license and accompanying contract.
In this regard, NRGI said that the regulator is supposed to judge whether the company is technically competent, financially sound, and is in compliance with environmental and safety rules.
It noted however, that licensing rules generally do not require screening of whether public sector officials have interests in an applicant company, which could create serious conflicts of interest.
The Institute said, “We reviewed over 50 mining and oil laws around the world and found that about half contained prohibitions on government officials or their close associates – often called ‘politically exposed persons’ (PEPs) – holding interests in companies applying for extractives licenses, but none required regulators to actually check whether or not such PEP interests existed as part of screening license applications.”
It added, “This is a potentially critical gap in regulatory oversight, because a large body of real-world cases suggests that the ability to hide a company’s true beneficial owner is a major enabler of corruption in the granting of extractive rights.”
In Guyana, there is no legislation or piece of regulation that requires beneficial ownership screening.
On that note, NRGI has pointed out that a growing number of governments are developing legal policies and information systems for collecting and publishing data about the beneficial owners of extractives companies – the real people who own, control, or economically benefit from a company.
It stressed that these reforms range from amending company registration laws and creating national public registers to sector-specific approaches like establishing extractives transparency laws and licensing requirements.
But to have an impact, NRGI said that extractive sector reforms may need to go beyond just requiring beneficial ownership disclosure, namely by establishing rules on what types of beneficial ownership linkages will be considered unacceptable self-dealing or corruption, and by determining the consequences that will apply when that line is crossed.
NRGI research shows that a number of countries have already established such rules, but monitoring and enforcement is lacking. Given the corruption risks, the Institute said that improving national policies and practices on allocating extractives licenses should be at the forefront of these efforts.
Going forward, NRGI said that resource-rich countries such as Guyana will need to choose beneficial ownership assessment rules that best address the political, legal and industry realities in which they award licenses.
Given the relative newness of evaluating corruption risks using beneficial ownership information in licensing decisions, NRGI said that officials may want to put much of the detail into less formal documents such as guidelines, so that the rules will be easier to amend based on lessons learned.
Regardless of where rules are stipulated, NRGI commented that they should be subjected to public consultation during their development, and publicly disclosed once finalized in order to facilitate monitoring and accountability.
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