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Corruption in the Extractive Value Chain

Typology of Risks, Mitigation Measures and Incentives

image of Corruption in the Extractive Value Chain

One case of transnational corruption out of five occurs in the extractive sector according to the 2014 OECD Foreign Bribery Report. In this area, corruption has become increasingly complex and sophisticated affecting each stage of the extractive value chain with potential huge revenue losses for the public coffers. This report is intended to help policy makers, law enforcement officials and stakeholders strengthen prevention efforts at both the public and private levels, through improved understanding and enhanced awareness of corruption risk and mechanisms. It will help better tailoring responses to evolving corruption patterns and effectively countering adaptive strategies. The report also offers options to put a cost on corruption to make it less attractive at both the public and private levels.

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Executive summary

OECD Development Centre

Corruption in the value chain of extractives is a major impediment to development. The OECD Foreign Bribery Report shows the magnitude of the problem, finding that one in five cases of transnational bribery occur in the extractive sector. Corruption works as a tax on international investors, increasing the costs of doing business. It further deprives host countries of much needed revenues and significantly alters the efficient allocation and distribution of resources to achieve development objectives. Potential revenue losses are huge, considering that oil trading alone accounted for more than half of state public budgets in ten major sub-Saharan African countries in the period 2011-13. Participants in the OECD Initiative for Policy Dialogue on Natural Resource-based Development considered that a clearer understanding of the evolving patterns that perpetuate corruption is necessary for governments and companies to catalyse reforms and maximise the positive impact of extractive activities on development.

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