Foreword

The complex and specific corruption challenges related to the extraction and trade of natural resources and the management of its associated revenue flows are a source of growing concern across developing, emerging and developed countries. As a result, corruption in the extractive industries has been included in the Action Plans of the G20 Anti-Corruption Working Group. Recognising the need to step-up anti-corruption efforts, world leaders gathered at the Anti-Corruption Summit in May 2016 and explicitly identified the extractive industries as being among the sectors that are particularly vulnerable to corruption, undermining economic growth, threatening security and harming the poor.

For resource rich countries, corruption poses a major threat to development. The high rents generated by resource exploitation and the “gate-keeping” function performed by governments, combined with discretionary powers, limited competition among key economic players and an often blurred distinction between private and public interests, are among the factors that increase the exposure of the extractive sector to corruption. The adverse impacts on the public interest are huge. Corruption undermines trust in public institutions, disrupts sector effectiveness, reduces the level of revenue collected from resource production and distorts decisions on budgetary allocations.

The increasing global competition for access to natural resources coupled with the resource-seeking nature of foreign direct investment can also further exacerbate corruption risks and create perverse incentives for extractive companies. The proceeds from corruption often fuel transnational crime and illicit financial flows, and are facilitated by complex corporate structures, opaque financial transactions and off-shore centres.

Tackling the cross-border aspects of corruption in the extractive sector is vital. Focusing only on large multinationals, or only on host governments would fall short of achieving meaningful results. For example, the governing elite often rely upon resource rents to gain or maintain power, patronage and privilege. In these cases, supporting governmental reform and transparency and promoting the adoption of anti-corruption measures is important. However, relying exclusively on government action to effectively tackle corruption is illusory in situations where resource rents are the primary means for exercising and perpetuating political influence. Both the supply and the demand sides need to be addressed, at domestic and international levels, and between private and public actors.

Given these challenges associated with extractives governance, the OECD has developed, as part of its Initiative for Policy Dialogue on Natural Resource-based Development, Corruption in the Extractive Value Chain: Typology of Risks, Mitigation Measures and Incentives. This study provides, for the first time, a systematic mapping of corruption risks at each stage of the value chain. Designed through a multi-stakeholder process, the Typology makes an important contribution towards building a common knowledge base on how corruption works and better informing evidence-based policy design and action.

This work complements and supports existing international initiatives in the extractive sector that have already made important inroads in promoting transparency and integrity. Yet, the Typology is distinctive in providing a toolkit for identifying, assessing and proactively managing corruption risks across the extractives value chain. Not only are risks identified and mapped, but concrete, appropriate and complementary responses are also set out, which can be tailored to fit home and host country governments and extractive companies, raising the incentives to effectively tackle those risks. The practical guidance offered on mitigation measures and incentives stems from the collaboration of different constituencies that are committed to finding ways to effectively prevent corruption and fulfil the shared commitments of the 2030 Agenda for Sustainable Development to “substantially reduce corruption and bribery in all their forms”.

We encourage OECD and non-OECD countries, extractive industries and civil society to make use of this tool; both as a diagnostic framework to assess the corruption risks of resource-rich contexts, but also as a check-list for civil society organisations acting as corruption watchdogs and for the private sector to identify areas of risk and prioritise action. Going forward, this Typology can also serve as a common reference for developing a Compendium of Practices to track progress and identify good practices as part of the OECD Policy Dialogue on Natural Resource-based Development.

Angel Gurría

Secretary-General of the OECD