Rio Tinto participated in the most recent EITI reporting round in Mozambique, released in 2012, with the discrepancy between taxation declared as paid by Rio Tinto, and what was received by the government lower than the 3% threshold set by the EITI.
Overall, the Mozambique EITI team found that taxation payments from all companies largely reconciled, finding only minor discrepancies. As a leading multinational company operating in Mozambique, Rio Tinto’s support for the initiative is important in affirming the initiative’s legitimacy.
While Rio Tinto’s experience participating in reconciliation process was a positive one, it unfortunately did not reflect a strong relationship with the Mozambique government. Upon the announcement of Albanese’s departure, it was revealed that a disagreement with the government over plans to barge coal down the Zambezi (contrary to the government’s wish that it be transported by rail) and a lack of Portuguese speakers amongst Rio’s in-country staff had strained relations with the government, contributing to the firm’s huge writedowns.
Conversely, Papua New Guinea is yet to join the EITI. As recently as September last year the government showed interest in applying for membership and appeared openly committed to transparency in its mine licensing process. Unfortunately the implementation of any transparency measure in Papua New Guinea – including the EITI – would be hampered by pervasive corruption which sees Papua New Guinea ranked 150th on Transparency International’s Corruption Index.
The recent departure of Garnaut, a long-time Papua New Guinea watcher, as head of the PNG development fund was a result of the decision by PNG Prime Minister to effectively ban Garnaut from entering PNG.
At the time, Garnaut was chair of the $1.4 billion PNG Sustainable Development Program, a development fund established by BHP as a response to the Ok Tedi environmental disaster. The dispute arose from comments by Garnaut, which were interpreted as offensive by O’Neill and resulted in a travel ban and eventual resignation.
This reminder of the sovereign risk that Australian mining companies face in return for lucrative mineral deposits should, however, not overshadow the ability Australian firms have to lead the way in contributing to improved mining industry governance in our nearest neighbour.
Australia has signed a memorandum of understanding with the Papua New Guinea government supporting its aims to eventually join the EITI. This is an important step, but also needs to be accompanied by pressure on Australian mining firms to exercise private governance and lead on the issue of transparency and disclosure – as well as on important environmental considerations arising from mineral extraction.
While it’s been a tough week for Australian mineral extractive firms operating overseas, we should not lose sight of the benefits these firms can bring to host states. Research on private governance tells us that firms can both increase profitability and contribute to positive development outcomes – often through voluntary membership of initiatives such as the EITI.
The promotion of transparency and a focus on disclosure can not only assist citizens of developing states in holding their governments to account, it can also benefit the firms involved. Firms operating in EITI countries are likely to engage in less corruption and graft as well as meeting shareholder expectations of best-practice social responsibility.
As Rio Tinto’s experience in Mozambique shows us, while private governance is not a panacea for the potential downside risks of mining in the developing world, it remains one important piece of the puzzle.
Ainsley Elbra is a doctoral candidate in government and international relations at University of Sydney.
This article was first published at The Conversation.
