Study rates management of natural resources

Updated: 2013-05-16 10:57

By Chen Weihua in Washington (China Daily)

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China fares poorly in transparency and accountability in its oil, gas and mining sectors, behind many developing and emerging-economy countries, according to a study by the New York-based Revenue Watch Institute.

Of 58 resource-rich countries, China came in 36th in the 2013 Resource Governance Index released on Wednesday by the nonprofit group, which promotes transparency and public accountability in management of natural resources.

The countries were evaluated on a four-part scale -"satisfactory", "partial", "weak" and "failing".

China's overall score of 43 (out of 100) fell in the "weak" group, along with 16 other countries including Malaysia, Vietnam, Yemen and Nigeria. Norway was ranked at the top of the governance survey and Myanmar finished at the bottom, among 15 "failing" countries.

China also was rated "weak" in three of the study's four major components - institutional and legal setting, reporting practice, and safeguards and quality control. It dropped to the "failing" group in assessment of enabling environment, which refers to opaque budgets, limited government effectiveness and relatively high-level of corruption.

Daniel Kaufmann, president of the Revenue Watch Institute, said China needs to address its transparency challenges.

"We'll be very interested in engaging China," Kaufmann, who was born in Chile and is a former World Bank official, said after a presentation of the findings in Washington.

The study found that only 11 of the 58 countries, less than 20 percent, have satisfactory standards of transparency and accountability while a large majority displays serious shortcomings in resource governance.

The countries studied produce 85 percent of the world's oil, 90 percent of diamonds and 80 percent of copper, researchers said.

"Fortunately, some countries, including several emerging economies, show that satisfactory performance in resource governance is possible," Kaufmann said.

Chile and Peru were in the best-performing "satisfactory" group, while oil-rich Qatar was among those deemed "failing". Emerging economy Brazil ranked fifth (satisfactory), while India stood in 12th place (partial).

"By publishing the information into the public domain, multiple stakeholders will be able to use the information and improve the way governments manage these crucial resources and improve the well-being of their population," said Tamar Manuelyan Atinc, a visiting fellow at Washington's Brookings Institution and development expert at the World Bank.

Using 2010 data, the study found that extractive resource sectors accounted for 8 percent of China's GDP in a year during which the country produced 3.2 billion tons of coal, more than 40 percent of the world total. China also was ranked as the sixth-biggest producer of crude oil and No 9 in natural gas based on 2011 figures.

In the institutional and legal setting, where China scored a "weak" 43 points out of 100, the study pointed to the nation's "convoluted legal framework and a marked lack of public information".

China's "weak" finish in reporting practices reflected a lack of transparency regarding contract terms, revenue streams and resource-funded subsidies, while the "weak" score in safeguards and quality controls showed a lack of effective oversight and the poor quality of government reports, according to the study.

In governance of state-owned companies, China National Petroleum Corp was 11th among 45 companies. The country's biggest oil and gas producer has a publicly traded unit, PetroChina, with listings in New York and Hong Kong. CNPC, which invests heavily in oil and gas assets abroad, has published an annual report on its corporate social responsibility since 2007.

The Revenue Watch Institute's governance study recommends that countries disclose government contracts with resource-extraction companies and that national regulators publish timely, comprehensive reports on oil, gas and mining operations.