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Resource companies won't like new transparency rules agreed in Brussels this week. But the benefits of requiring European oil and mining companies to detail project-by-project dealings with governments should outweigh the costs.
Assuming it's approved by the EU parliament and member states, the project-by-project reporting will put Europe's transparency requirements broadly on par with those of the U.S., which adopted similar rules last year. The idea is that opening up projects bigger than €100,000 ($132,500) to public scrutiny should make it easier for activists, journalists and other watchdogs to spot and expose doubtful deals or outright corruption.
It's hardly surprising that resource giants would rather not disclose the details of their dealings with governments, particularly those in developing countries with poor reputations for managing resource wealth. Discretion is usually good for business.
There are two reasonable objections to increasing disclosure. The stronger is that other countries, such as China and Russia, aren't rushing to impose similar requirements on their mining and energy companies. That arguably puts disclosing firms at a competitive disadvantage. Also, the new rules will bring more paperwork at a time when the industry is already struggling with high project costs. For smaller miners, the extra compliance burden could be significant.
Neither of these arguments outweighs the benefits of greater transparency. Greater scrutiny of tax payments, royalties and bonuses for individual projects should make it harder for governments to get away with bad stewardship of their resources. Project-level disclosure will complement reporting of country-level data under the voluntary Extractive Industries Transparency Initiative (EITI). It will also provide greater transparency on projects in countries that haven't signed onto the EITI.
Resource companies should ultimately benefit, too. Extra sunlight doesn't just increase the odds of exposing malfeasance, it can also make it easier to spread best practices. Governments that know they are getting a fair deal should be less likely to try to grab profits or expropriate assets later. These new rules will be worth the hassle they cause.