The COVID-19 pandemic has laid bare the contrasting strengths and weaknesses in governance and leadership across the globe. Among high-income countries, many European states that have excelled in various governance dimensions, as measured by the annual Worldwide Governance Indicators (WGI), have also addressed the pandemic well. These include the women-led Germany and the Nordic countries (except for Sweden). By contrast, the pandemic is raging in much of the United States, with well over 130,000 deaths and 3 million reported cases (accounting for one-quarter worldwide, with only 4 percent of the world’s population).

Poor management of the pandemic in the U.S. correlates with the country’s declining governance over the years compared with many European countries—as well as with Japan and others in Asia. WGI data show that by 2018 the U.S. ranked only 29th in the world in “voice and accountability” measures, and 25th in control of corruption, following a decline over the past two decades. Worsening governance performance has been compounded over the past few months by a very poor leadership response to the pandemic. The high variance in governance performance across countries also applies globally, including among low- and middle-income countries. Among other emerging regions, Latin America has been generally struggling, with the virus out of control in Brazil and Mexico, among others, yet by contrast well governed countries like Uruguay and Costa Rica have been coping well.

Many countries, across all regions, including the majority of those rich in natural resources, exhibit weak—and often worsening—governance standards, including leadership failures; a retreat in “voice” and democratic accountability; and, related, high levels of corruption and capture by political and economic elites. Yet governance matters more than ever right now: Countries with better governance standards are exhibiting a better response and results in coping with the pandemic than poorly governed countries, as suggested by the association between COVID-19 testing ability and infection rates in Figures 1a and 1b, respectively, and various governance dimensions.

Source: Worldometers, https://www.worldometers.info/coronavirus/ and Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

The pandemic-induced socio-economic shock is afflicting countries all around the globe. It is unlikely to be temporary, with scores of millions falling back into poverty, a shrinking middle class, and growing social tensions. Depending on the extent to which vested economic interests influence policymaking, countries are differently navigating a perceived “tradeoff” between opting for health-induced lockdowns (and strict distancing with gradual re-openings), on the one side, or economics-driven rapid reopening and macro-economic rescue packages. But this is a false tradeoff, due to the havoc the virus is wreaking in states that didn’t implement strict distancing measures and/or rushed to re-open, forcing closure reversals and compounding the economic setback.

Countries are also contending with the need to implement fairly allocated and generous stimulus and rescue packages, while remaining prudent about debt and fiscal sustainability in the longer term. Again, governance matters. The COVID-19 Economic Stimulus Index (CESI) shows an association between countries exhibiting better governance in key dimensions and better performance of their economic stimulus programs:

Source: Worldometers, https://www.worldometers.info/coronavirus/ and Worldwide Governance Indicators (www.govindicators.org). Kaufmann, D., A. Kraay, & M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430.

One group of low- and middle-income countries are experiencing particularly acute challenges—those that are resource rich. With some exceptions, their governance woes are dire, as discussed in the past, and presented in detail in a new report on addressing corruption in natural resources.

Already weak health systems in resource-rich countries are struggling to cope. Only one-half of a percent of the population of these countries have been tested so far, ineffective for any containment. As depicted in Figures 3a and 3b respectively, recently both their infection and death rates have been increasing sharply, in contrast with other emerging economies (and also high-income countries, wherewith the exception of the U.S. rates have been falling sharply).

Source: Worldometers, www.worldometers.info/coronavirus/

Another shock, particularly for resource-rich countries, relates to the drop in demand for and prices of hydrocarbons and minerals, against the backdrop of the imperative to address climate change and environmental damage. The reality of lower demand for fossil fuels associated with lockdown restrictions is placing downward pressure on prices. The likely growth in appetite for cleaner energy (including due to expected post-pandemic demand for a healthier planet), and, on the supply side, the ease of entry in the shale oil and gas industry, complemented by ample reserves and inventories, will together cap future oil and gas prices. Supply chain disruptions and poor governance also hamper production and delivery.

In short, a confluence of a quartet of factors and shocks points to a perfect storm: particularly for resource-rich countries and the extractives sector, the pandemic itself; daunting governance, capture, and leadership challenges; socio-economic crisis; and the fall in prices of extractives. A strategic rethink is warranted. Here I suggest some initial pointers for further debate and elaboration:

• Reframing corruption and governance: the state capture lens. The governance of institutions and leadership in many countries has been compromised by the vested interests of the political and economic elite. In its purest form, we have called this state capture, referring to the narrow yet powerful elite vested economic and political interests who shape the “rules of the game” for their own benefit, at the expense of the public good. It is timely to traverse more systematically beyond traditional notions of corruption, which have typically focused on administrative corruption such as bribery, toward higher-level forms of political and economic misgovernance, such as state capture. Within the latter, of highest priority is identifying and rigorously codifying the main sources of capture, as well as the incentives and political economy drivers of capture in shaping of the laws, regulations, and policies of the state. Reformers must also address legal forms of corruption and misgovernance. In the pandemic context, policy analysts and activists could use such a lens to diagnose and counter inaction or self-serving public health responses and economic stimuli, as well as identifying and addressing obstacles to the required economic diversification and restructuring of the extractive industries. Further, diagnostic and action planning tools would also benefit from using the state capture lens to offer pointers to diagnose and help counter the attack on citizen “voice” and democratic institutions in many countries.
• Radical transparency. Vested economic and political interests are exploiting the pandemic to their benefit, including by some oil companies as well as billionaire-backed businesses and associates of the U.S. President having access to funds aimed at helping small firms in distress. This pernicious development threatens hard-won transparency gains attained over the past decade. Further, extractive companies in the U.S. and elsewhere are making the case for relaxing disclosures of their payments to governments, misleadingly arguing that they are onerous, when in fact transparency reforms tend to be low-cost and result in net overall savings (as I argued to the SEC). Rather than taking a defensive stance to partially protect existing disclosure requirements, international initiatives and NGOs should adopt a more radical and proactive approach. This is in part because much still lies ahead in terms of implementing effective transparency (responding to a need for more timely, granular and comprehensive data), and also because a more radical transparency—in industry and government—is needed to expose and address state capture. A more ambitious radical transparency drive would mean that decisive progress would be warranted in mechanisms such as the Extractives Industry Transparency Initiative (EITI), mandating pending disclosures regarding industry bailouts, subsidies, tax breaks, and industry cost structures, as well as on contracts, commodity trades, and climate and environmental impacts. Complementing these, think tanks and specialized NGOs should invest in frontier, evidence-based diagnostics and data tools that authorities and other stakeholders would use, in alignment with the current physically distanced pandemic circumstances.
• Health focus. A deliberate strategic pivot in governance, transparency and accountability in natural resources would also include supporting an enhanced response to the pandemic, given the evidence pointing to the links with governance. For a start, officials could leverage transparency and accountability to move toward more effective and equitable (and thus non-captured) economic policies and packages that strengthen the health sector and the pandemic response. Further, specific natural resource governance institutional initiatives could contribute to addressing the health challenge, e.g., via judicious utilization and improved governance of sovereign wealth funds. In diversifying away from oil dependency, further focus is needed on services, and within them, public health. And then there is the major imperative for the IMF, the World Bank, and other lenders and donors to link international aid and financial assistance to pending governance and transparency reforms by recipient countries. Providing funds where opacity and corruption still reign will again risk major leakages as well as the elite capturing funds, and will fail to strengthen responses to the pandemic and to economic contraction.
• Industry revamp and the energy transition. Over the years, incentives for the growth of renewable energy and for initiatives towards economic diversification have garnered significant interest. Yet arguably a very simple move in the direction of diversification and energy transition would be to focus squarely on the fossil fuel sector itself: start by “leveling the playing field.” The industry’s myriad implicit and explicit subsidies and tax breaks; bailouts; often opaque, captured and corrupt deals not made in the public interests pose major obstacles to the energy transition. And powerful vested interests in the sector, emanating from some governments and companies (both private and state-owned) conspire against the required restructuring of the sector and the reduction of resource dependency generally, and slow the energy transition. In particular, high-cost and new oil producer countries should adopt strategies aligned with a transition to diversified economies and a low carbon world. Likewise, the perfect storm afflicting resource-rich countries has far-reaching implications for the already generally weak state companies in extractives; plodding, incremental reform attempts will no longer be tenable. To avoid being left stranded and a continuing economic (including debt) and governance drag, public enterprises must undergo a radical transformation, becoming modern and well-governed energy companies attuned to the new economic and energy realities. In some cases, the only viable option may be to start from scratch. In fact, a major transformation of public and private industry needs to envisage a rather different company of the future in many settings—transparent, well governed, embracing frontier AI tools, sustainable, and focused on clean energy.

Against the backdrop of the ongoing tempest in resource-rich countries, this time it truly is different. Reactive approaches merely focused on adaptations to a traditional downturn or to mere volatility would be ill-advised. It is imperative that governments, industry, international organizations, NGOs, and think tanks consider and implement bold transformations commensurate with the extent of the challenge in a changed world.

       

On May 26, 2020 Daniel Kaufmann discussed natural resource governance in the context of the COVID-19 crisis.

       

On July 1, Governance Studies at Brookings hosted a webinar exploring solutions to the challenges of corruption along the natural resource value chain globally. Brookings Senior Fellow Norm Eisen and Alexandra Gillies of the Natural Resource Governance Institute led a discussion with a panel of experts to discuss key takeaways from a new LTRC report, “The TAP-Plus approach to anti-corruption in the natural resource value chain,” which includes an analysis of the history, successes, and limitations of anti-corruption initiatives to date, and the introduction of a framework to guide future work. They also discussed corruption risks in natural resource governance in the era of COVID-19 and the implications of the pandemic on global anti-corruption action-research initiatives such as LTRC.

A FRAMEWORK FOR ANTI-CORRUPTION INITIATIVES IN RESOURCE-RICH COUNTRIES

LTRC seeks to increase knowledge and understanding of the most effective ways to tackle corruption risks along the natural resource value chain. Eisen explained that LTRC picked the extractives sector, one of the world’s most corruption-challenged industries, to test whether progress is possible. Anti-corruption initiatives and literature over the last few decades have coalesced around the remedies of transparency, accountability, and participation (“TAP”)—where civic participation and engagement are more effective at imposing accountability and curbing corruption than transparency (freedom of information laws, open data, etc.) alone. While TAP interventions can have some success, LTRC posits that TAP alone is often insufficient and proposes a new framework for anti-corruption initiatives.

What, then, is the “Plus” in TAP-Plus? First, interventions must address the implementation gap—that is, the disconnect between laws on the books and conditions on the ground.

For example, a government may mandate the disclosure of contracts but do so with extreme delays or by releasing data which is indecipherable to the general public. Second, interventions must consider contextual factors, especially those relating to institutional design, function, and legitimacy, which will impact the effectiveness and operation of anti-corruption efforts. LTRC has identified five contextual areas of interest—state capture; social trust, political trust, and conflict; civic space and media freedom; rule of law; and government effectiveness and capacity.

Finally, interventions must consider complementary measures and reforms that lie outside the TAP field but interact strongly with TAP interventions. LTRC focuses on reforms, policies, and legislation pertaining to state-owned enterprises, sovereign wealth funds, and disclosure of beneficial ownership of companies (i.e., the identities of the actual owners of extractive companies, who often hide behind a chain of corporate entities).

By considering the implementation gap, contextual factors, and complementary measures, LTRC advances TAP-Plus as a robust and comprehensive framework for designing and evaluating anti-corruption efforts, Eisen argued.

COVID-19 & RESOURCE-RICH COUNTRIES

The COVID-19 pandemic has hit resource-rich countries (RRCs) the hardest, noted Daniel Kaufmann, a Brookings nonresident senior fellow and the former president and CEO (now chief advisor) of the Natural Resource Governance Institute. Compared to other nations, RRCs have the lowest testing rates overall and are experiencing dramatic upticks in infection rates. A confluence of four factors, driven by COVID-19, pose a major threat to resource-rich countries: (1) the public health crisis itself, (2) the governance stresses it has unleashed, (3) a major drop in demand for hydrocarbons and minerals, and finally, (4) a broadscale socioeconomic crisis. One particular worry is that the COVID-19 crisis is exacerbating weak governance practices in RRCs and may accelerate the closing of civic space and breakdown of democratic institutions in those states. Elites have the opportunity to double down on state capture during this period of turmoil when the pandemic restrains counterbalancing voices and accountability. Kaufmann discussed how this devastating quartet drives the needs for a renewed and proactive emphasis on radical transparency in the space, and how we need improved tools to check or catch the corruption boom that might be coming. You can read more of his thoughts about these issues here.

HOW CAN ANTI-CORRUPTION INTERVENTIONS USE THE TAP-PLUS MODEL

When LTRC initially was conceptualizing the report featured in the webinar, it wanted to identify successful anti-corruption interventions and then determine how to replicate them. However, the team found that proof of successful initiatives was often inconclusive or weak. So, in the paper, LTRC went a step further to try to understand why interventions did not work (or did not work as expected) and from there to weave together the TAP-Plus model, which among other things could help design future interventions.

As part of the initiative, the LTRC team also has worked on developing three pilot programs to test TAP-Plus in Nigeria, Peru, and Mongolia. Its initial work involved constant interaction with stakeholders in the individual countries as a way of identifying the country-specific contextual factors the pilot programs needed to engage with. Asking and taking seriously what is inhibiting anti-corruption work and then learning from local residents and citizens how to design better interventions is central to the pilot studies, Erin Fletcher and Mario Picon of Results for Development explained.

The COVID-19 pandemic has necessitated first a triage mode and then a new set of efforts where the team began to integrate more digital elements and to support its local partners through the crisis. RRCs had many structural and long-standing governance problems before COVID-19 intensified them. For example, the squeeze on civil space is perennial, Eisen noted. Progress in that space can be very easily be taken away. Yet, one of the most surprising findings of the initiative was the resilience of civil society at the grassroots level, Picon said.

And Fletcher pointed out that while the contraction has seriously hurt citizens’ abilities to hold governments accountable, recent protests also have uniquely mobilized millions of people, so perhaps civic space can persist.

       

Corruption is a massive global challenge, with the annual cost of bribery alone estimated at over $1.5 trillion. The social and economic consequences are even greater.

Corruption inhibits sustainable development and disproportionately harms vulnerable communities. It erodes public confidence and diverts public resources away from important services such as health, education, and infrastructure. One study estimates that if the wealth of the 94 (as of 2013) natural resource-dependent nations were used to pursue anti-poverty goals rather than corrupt or rent-seeking profits, more than half a billion people would be lifted out of extreme poverty by 2030.

Extractive industries like oil, gas, and mining are particularly prone to the corruption risks that undermine good governance. Given the complexity of these governance challenges, can natural resource corruption be reduced, or even eliminated?

In this introductory paper, we wrestle with these questions and try to find a better way forward. We introduce the Lever­aging Transparency to Reduce Corruption project (LTRC), a global initiative launched in 2017 by Brookings with support from Results for Development and the Natural Resource Governance Institute.

LTRC aims to develop best practices for reducing corruption along the natural resource value chain. LTRC’s approach is grounded in rigorous evidence and field work. This paper provides the initial basis for the LTRC project’s upcoming field studies.

Based in large part on our review of the existing evidence, an extensive bibliography review, and lessons from experience, we argue that narrowly focusing on the adoption of transparency, accountability, and participation (TAP) measures, while more likely to have some impact than transparency solutions alone, is unlikely to suffice. For step-change improvements that drive broader anti-corruption and development outcomes, more is needed.

Accordingly, we advance a framework called “TAP-Plus” in this paper. This framework highlights specific factors that need to be considered in addition to the traditional focus on the adoption of TAP measures.

Specifically, the TAP-Plus approach hypothesizes that three elements require particular attention for scaled-up impact: one, inter­ventions that address the implementation gap within TAP interventions; two, consideration of contextual factors in design of realistic TAP programs; and, three, inclusion of complementary measures—beyond the traditional TAP field—which interact with TAP interventions and may have a significant impact in preventing or reducing corruption and improve sus­tainable development outcomes. In this paper, we elaborate on these key elements.

For more information, read “The TAP-Plus Approach to Anti-Corruption in the Natural Resource Value Chain.”

Theodore Becker-Jacob, Andrew Kenealy, Kelsey Landau, Robin Lewis, Jimena Montoya Villavicencio, Christine Stenglein, Praneetha Vissapragada also contributed to this report. A full list of acknowledgments is available in the report.

       

It is the middle of the night and I am cloistered in my apartment in downtown Washington, D.C. I am facing four screens, including my smartphone, a laptop, a Mac desktop and a large wall monitor. I am trying to make sense of the fast-changing data on the spread and deadliness of the virus around the globe, while talking to an expert in Chile. He is rightly concerned about the situation there, with heretofore low case numbers rapidly increasing. It is but one locus of worry for all of us living in such an interconnected world. And one where the response to the coronavirus has again exposed serious differences in the quality of governance and leadership across countries, as well as over time within countries—a topic to be discussed in a separate contribution.

I am no epidemiologist, even if I understand numbers. On the science and on specific measures and policy prescriptions, I defer to the experts, as I hope that politicians everywhere will. Though in all humility it does seem to me that, beyond serious social distancing, isolation measures are very important, as is much more widespread testing, given the empirical evidence at hand (including from Korea and Taiwan, and the Italian town of Vo, near Venice, which totally stopped the spread of the disease). What I want to share during these extraordinary times is neither conventional nor analytical, but of a more personal nature.

My partner and I have been pretty strict regarding staying at home (with four cats) and in incessantly cleaning our hands and surfaces. We are extra careful, in part because let’s just say that we are not millennials—decades removed from it. But we are in decent health, and we also know that people of any age can be seriously afflicted (including young adults) or be silently carrying the virus, which is why we need to take such earnest distancing measures and more widespread testing.

Yesterday I did venture out, briefly. I went to the pharmacy a block away, estimating that the weekly truck may have come to partly replenish the empty shelves. We needed an item in particularly short supply: a hand sanitizer bottle, however small. I asked at the counter whether they had any; they had just sold the last few bottles, I was told. Then, a young woman paying at the next counter turned to me, opened her bag, and quickly handed me a small bottle of hand sanitizer. I resisted at first, telling her that it was truly hers and that she also very much needed to use it. She insisted that I take it, saying that she had two more bottles, and emphasized that we needed to share. She even flatly refused my offer to pay her for it.

I warmly thanked her, observing proper social distance, and she started departing. A man well into his eighties, using a cane, limped toward me, beaming at the sight of the just-gifted little bottle in my hand. He asked me if many were still left on the shelf, and where he could find them. There aren’t any left, I replied, but he could take mine. It turns out that the kind young woman overheard this exchange as she was leaving. She came to us, opened her bag again, took her second bottle, and told him that he should take her bottle, not mine. He was also touched. So each one of us left with one precious little bottle.

Outside of the store, I saw her again and asked her name and gave her mine, and inquired whether she was Canadian. She nicely said no; she was a U.S. citizen. She asked me my background, and hearing that I was from Chile she wondered aloud why I thought she was Canadian. So I introduced her to a new term just coined in Canada, and already a movement there, which I told her she was unknowingly part of: “caremongering.” It is solidarity and mutual help turned into concrete community action, which in a few days has quickly spread through Canada. She appreciated the exchange, and she asked whether we needed any help, and likewise I asked her. We parted.

In fact we are already “caremongering” individually in our communities and organizations, and there is more we can do ahead during these times. This also includes what we can do virtually, with people and communities in our governance and accountability field, globally. The wealth of expertise and data, the online and remote learning tools and courses—existing and upcoming—offer wonderful opportunities ahead, building on what we already have while innovating attuned to the new reality. For an illustration of the combined power of fun and substantive content via online tools, you may want to try the Petronia simulation game, a cool online learning tool to help avoid the resource curse!

Caremongering can also entail sharing special ways to enjoy long stays at home, where there will be time for some spirituality and reflection. Given some of my passions, I would like to contribute to this effort right now, even if in a small way, by suggesting online musical and art performances.

It turns out that given the forced closures of most performance venues around the globe, a number of great arts organizations are streaming full-fledged and very special classical music concerts and operas. For those of you who enjoy such music, let me share my list here. Such music can have wondrous effects on our minds and souls. Mindful that some may prefer other types of music, arts, or culture, I also provide other links here. And those who know me will not be surprised to find one brief mention of soccer. I also end with a mention of beloved Italy. Here we go:

Opera and classical music

I have been fortunate to have attended concerts and operas in over a dozen of the venues below and seen live the operas listed. I am no professional expert, yet take the liberty of highlighting in bold some opera houses that I know well.

1. Seattle Symphony offers some classical music concerts.
2. Berlin Philharmonic makes 600+ concerts free to stream for the next month. Just sign up, first month free, no cancellation needed. What an orchestra, and they even do some avant-garde opera—their Puccini’s “Suor Angelica” project is something!
3. Operavision is not an opera house per se, but Europe has a collection of free operas that can be browsed and streamed through YouTube—no sign-up needed.
4. The Metropolitan Opera is now streaming a free opera every day from New York. This is big. This evening the Met will stream Verdi’s “La Traviata” with a great cast, while Friday and Saturday there will also be two great opera performances, both by Donizzetti. And a major Wagner-fest next week! More performances here.
5. Teatro Regio di Torino
6. Bayerische Staatsoper, from Munich, with wonderful operas and concerts already available online and more ahead.
7. Teatro Massimo in Palermo.
8. Vienna State Opera (Staatsoper) is one of the best opera houses in the world, Verdi’s “Falstaff” is on now.
9. Budapest Festival Orchestra is led by Ivan Fischer, a great artist and democrat whose orchestra needs support.
10. Teatro Liceu, Barcelona.
11. Teatro Real, Madrid.
12. Opera de Paris (Bastille).
13. Finnish National Opera.
14. Teatro Mayor, Bogota (yes, there is vibrant opera on my continent as well!).
15. Finally, in this category, many U.K. organizations livestream concerts and make them available via YouTube or other channels, such as Wigmore Hall for chamber music concerts, and the BBC Scottish Symphony Orchestraand the London Symphony Orchestra YouTube channels.

I have also attended wonderful performances in opera houses in far flung places such as Manaus (Teatro Amazonas in Brazil), Cape Town (South Africa), Prague, at the famed teatros Colon (Buenos Aires) and Municipal (Santiago), as well as in Oslo, Copenhagen, Stockholm, Kiev, Moscow, Sydney, London (2 major opera houses), and Berlin (3!), among others. As of this blog going to press, none of them are yet streaming online, but please feel free to reach out if you find additional sites streaming good stuff from any opera venue.

Other music

For other types of music and concert streaming services, see this Los Angeles Times list. For Latin music and radio, see AccuRadio.

Theater

How about watching free online theater performances? Here are various options with links.

Museums

Want to go to a great museum, or many, over the coming weeks? Virtually of course. Here is a great list of 12. If you are ready for a binge, here’s access to 500 of them.

Soccer

Yes, you read that right, soccer, aka futbol! One can be passionate about both music and soccer, and many of my friends are at a loss for not being to play or watch soccer these days. Check here for FIFA matchday on YouTube for free streaming.

Empathy with Italy

To end for now—linking the dots between the virus, virtual opera, caremongering, and soccer—our warm empathy goes to quarantined Italy, where opera originated four centuries ago. In this breathtaking amateur video, the Italian Air Force flies a single jet, representing the virus, to meet other fighter jets streaming the colors of the Italian flag, while Pavarotti sings “Nessun Dorma” from Puccini’s “Turandot”, with the lyrics “we shall overcome.”

       

Yet the transparency revolution remains far from complete. Ongoing dependence on extractive industry revenues in many countries continues to limit the policy space for economic diversification and overall growth. At the same time, the use of national and subnational revenue distribution by elites to maintain their control over the democratic process continues to erode trust in government, constraining the political space for human rights and other accountability activists to monitor duty bearers and speak out against violations. Confidence in the quality and reliability of public data further creates challenges. In the end, greater transparency and accountability will make domestic resource mobilization more effective, leading to better economic and social outcomes for all.

On October 24, the Brookings Africa Growth Initiative, alongside Oxfam, the Natural Resource Governance Institute, and Publish What You Pay, co-hosted a two-panel public event to showcase victories and lessons learned in utilizing extractive industry transparency disclosures for the wider sustainable development and economic growth agenda. The first panel featured case studies of how data has been put to use to contribute to broader policy change efforts.  After a short break, a diverse set of issue experts reacted to the case studies, discussed emerging lessons, and commented on future directions for the transparency, accountability, and natural resource governance fields.

       

National oil companies (NOCs) are in the headlines a lot of late. In preparation for a $15 billion bond offer, Saudi Aramco disclosed its financial statements for the first time, showing that it is the world’s most profitable company. On the other side of the scales, amidst the chaos that has engulfed Venezuela, the dueling camps of Nicolás Maduro and Juan Guaidó are battling over how to handle the tens of billions of dollars in debt facing the state-owned oil and natural gas company PDVSA, and for control of its U.S. subsidiary.

Away from the attention of the international media, discussions rage about how to manage prominent NOCs in other countries as well. Ghana’s parliament and the Ghana National Petroleum Corporation (GNPC) are locked in intense debate about GNPC’s budget, including its ambitious social spending and plans to build a refinery, with important implications for the company’s growth agenda and the national economy. In the wake of its election, Indonesia faces challenging decisions around how to manage the ambitions and incentives of NOC Pertamina. And in Kazakhstan, the state has pushed back plans to begin to offer shares of KazMunayGaz to the public in an initial public offering, citing economic uncertainty.

Decisions about how to manage NOCs matter a lot; economies in resource rich countries can rise or fall based on what these companies do and how they are governed. Some NOCs—including Colombia’s Ecopetrol and Norway’s Equinor—have delivered strong returns on public investment and are generally well regarded by their peers across the oil industry. Yet in too many places these companies have struggled to develop into commercially efficient actors or to increase the long-term benefits their countries derive from exploration and production. And in extreme cases, they have actively contributed to large-scale corruption.

The Natural Resource Governance Institute (NRGI) conducted a survey of 71 NOCs worldwide in order to assemble the world’s largest open database of NOC operational and financial information. We believe that the database, launching on April 25 at www.nationaloilcompanydata.org, will help improve oversight—and aid NOCs’ leaders—by providing a stronger basis for understanding what peer companies are doing elsewhere and facilitating research on patterns across NOCs. The database contains more than 70,000 data points covering more than 100 indicators. (A launch event will be held in Washington, D.C. on April 25.)

Beyond the vicissitudes of the volatile oil market, two persistent challenges impede the development of effective and well-governed NOCs. The first is a lack of transparency. NOCs have historically been opaque. These companies often rank among the most important economic actors in their economies, but too often they share little valuable information with the citizens they are intended to benefit.

We wrote about the challenges of state-owned enterprise transparency in this space last year. The good news is that there has been some progress. The Extractive Industries Transparency Initiative (EITI) has strengthened its reporting rules, and NOCs in EITI member countries will now be expected to disclose audited financial statements and to report more extensively on the traditionally opaque oil sales contracts that generate billions of dollars every year. The Organization for Economic Cooperation and Development has circulated new “Anti-Corruption and Integrity Guidelines for State-Owned Enterprises,” with valuable guidance on company reporting systems. And many NOCs are implementing increasingly sophisticated systems for letting their citizens know what they are doing.

Still, too many NOCs fail to provide both governmental and informal oversight actors (including the media and the public) with the core information necessary to hold the companies to account. We found that some NOCs provide a wealth of data on exploration and production, revenues, spending, and payments to government. Reporting practices have grown stronger among NOCs in Eurasia, Latin America, and Europe. But in many cases—especially among companies based in the Middle East and North Africa—NOCs still skip these basic steps of disclosure, as illustrated by the table below, which shows the proportion of NOCs in each region that report on each of 10 key indicators. We found information sufficient for us to complete the database field “total NOC assets,” for example, for only 35 percent of the Middle Eastern/North African NOCs and 20 percent of the sub-Saharan African NOCs in the sample. Across the companies in the database, reporting on expenditure and on employment levels remains particularly spotty.

Table 1: National oil company reporting, by region, 2015

Source: Natural Resource Governance Institute, “National Oil Company Database Report,” 2019

Even where NOCs are transparent, however, that is not the end of the story. Which brings us to our second persistent challenge: oversight. Public sector actors tasked with monitoring NOC performance and ensuring a good return on public investment in these companies—including in regulatory bodies, parliament, and supervisory ministries—often lack the resources to do so effectively. Worse, in some cases, a lack of checks and balances has enabled corrupt political actors to actively interfere in the management of NOCs to push them toward corrupt ends. Nongovernmental oversight actors in the media and civil society have it even tougher, as they often lack access to decisionmakers and face steep deficits in financial and technical resources.

One of the major impediments to oversight is the complexity of NOC portfolios. Governments often call upon these companies to do it all, from financing the budget to executing public services, and this can make it hard to benchmark exactly what their priority goals should be.

National oil company total revenues as a percentage of general government revenues, 2013

Source: Natural Resource Governance Institute, “National Oil Company Database Report,” 2019

The combination of strong reporting and a vigorous system for oversight is critical to ensure that these companies maximize their incentives to perform effectively in the public interest. And for a number of oil-rich countries, the stakes could not be higher. We identified at least 25 countries worldwide in which the NOC, on its own, collects revenues equivalent to at least one-fifth of total government revenues. In these countries, the fundamental ability of the government to use oil revenues for development depends at its core on how well the NOC is run, how much revenue it transfers to the state, and the quality of its spending.

Looking at this new collection of data makes it clearer than ever that to maximize the chances for meaningful development—and reduce the serious economic and governance risks that seemingly come out of the ground with oil—it is critical for resource-rich countries to invest in making NOCs more accountable. For NOCs and their governments, this means emphasizing the importance of consistent public reporting, benchmarking against well-defined objectives and enhancing corporate governance and internal safeguards against corruption. For international organizations and NGOs, this means doubling down on advocacy around disclosures—especially around company expenditures—and providing regular forums for experience-sharing among companies.

       

The Leveraging Transparency to Reduce Corruption project (LTRC) is pleased to share an annotated bibliography (AB) of more than 150 books, papers, tools/datasets, and other resources addressing transparency, accountability, and participation (TAP) efforts along the natural resource value chain. We have also included work that addresses the contextual factors that enable or constrain the effectiveness of TAP approaches. We hope that the AB and related materials described below will serve as a helpful resource for practitioners, policymakers, researchers, donors, and other stakeholders interested in this field.

We have curated these items for the AB from our team’s initial review of a larger pool of more than 650 resources relevant to the LTRC project’s research agenda. That agenda is to establish and apply evidence-informed leading practices in TAP approaches that contribute to reducing corruption and achieving other sustainable development outcomes. To learn more about how we created the AB, including our selection and categorization process, please see the methodology section of the AB.

Readers can also explore the entries in the AB by using the mapping tool below. If you are using a desktop browser, note that countries colored yellow on the map are those covered by entries in the AB. Hover over the map to view the country name, then click on the country and scroll down to see the research for that location in the sortable list. Select the “Global/Regional” box at the top of the map to choose studies that focus on 15 or more countries around the world or on a specific region (e.g., Latin America and the Caribbean).

If you are using a mobile device, click on a continent and scroll below the map to view resources that cover location(s) within those continents, or select “Global/Regional” to choose studies that focus on 15 or more countries around the world or on a specific region.

The list of resources that follows the map below also includes links to the original research (where available online) and allows readers to view (and, in desktop browsers, sort by) author last name, resource title, focus area, location, and publication date. A spreadsheet containing this and additional information about each resource is available here.

The AB and this page will be periodically updated to include additional resources and features based upon our ongoing work, as well as in response to suggestions from users. Please contact us to suggest additional resources or features, or to provide other comments.