Hear John Christensen from Tax Justice International speak on how tax havens cheat developing countries and mean the rest of us have to pay more tax or miss out on services. He should know. For 11 years he was on the inside as economic adviser to the government of Jersey. He is now the founder of the Tax Justice Network, campaigning for an end to secrecy jurisdictions. 

Developing countries lost an estimated $1,300 billion in illicit financial transfers in 2009, most of it through tax evasion and most of it laundered through secrecy jurisdictions. This comes at the cost the lives of millions of people every year.

Here's your chance to learn about how to combat this corruption!

Event: Thursday 24th November, 2011, 6-7pm

Lecture Theatre, Cardinal Knox Centre 383 Albert Street, East Melbourne (Corner Albert and Lansdowne Streets - enter via Lansdowne Street Car Park)

RSVP by Wednesday 23 November to: jim@victas.uca.org.au or phone (03) 9251 5271

Full event details here: Invitation - Tax us if you can! - 24 November, 2011

The global financial crisis or the “credit crunch” as it has been labelled has sent shock waves around the world. Plunging share prices and record market lows have many analysts convinced that a US and European recession is virtually assured.

The chaos in financial markets has been explained as a lack of credit available to banks on the international markets. Inject liquidity, restore lenders’ confidence to start lending again, and everything will come right. Hence the $700 billion US bail out.

But is this really about lack of credit, or about massive over-accumulation of debt? Driven by greed, many of the largest and oldest investment banks in the world embarked on irresponsible and reckless lending practices in the sub-prime mortgage market, giving loans to people with no capacity to repay their debt. Using a complicated web of financial instruments, these debts were repackaged and resold onto brokers and investors around the world.

The crisis of debt in the North bears frightening resemblance to the debt crisis that poor countries have faced since the early 1980s. Today developing countries’ debt stocks stands at a staggering US$2.9 trillion and every day the poorest countries pay the rich world almost $100 million in debt repayments.

But compare and contrast how developing countries are treated by rich governments to how international banks are being treated. The former are told to get their house in order before they receive financial support. Meanwhile they are left paying. The latter are being bailed out with incomprehensible sums. And where are the conditionalities to these bail outs?

The current crisis provides an opportunity for these issues to come centre stage.

As a series of bailout packages have been negotiated with Greece, Ireland and soon Portugal, it is time to examine the global orthodoxy in dealing with debt. In mid-May a bailout, expected to equal approximately €80 billion, with the European Union and the International Monetary Fund, is set to be agreed upon with Portugal. The package will see ordinary people bear the greater burden of reform as a program of shock therapy, involving large spending cuts, tax increases and labour market reforms, is introduced. Those banks largely responsible for the reckless private lending which spawned the current crisis are set to be the largest benefactors. 

Increasing resistance to the bailouts has been felt across Europe as nationals express their opposition to paying for the excesses of their banking elite. In Iceland, voters recently rejected a government-backed deal to repay Britain and the Netherlands following the collapse of Icelandic banks in 2008. The decision will not be without consequence for the country, which faces an impending court case by the UK and the Netherlands, the potential block to its bid to join the European Union and a lowering of its credit rating on international markets. In Greece, hundreds of academics, politicians and activists have called for a debt audit commission to examine the legitimacy of the country’s debt, in the hope of holding to account those responsible.

The European debt crisis points to a greater systemic problem of dealing with debt. Across the Global South, the IMF has repeatedly negotiated ‘emergency’ packages, which have seen foreign banks bailed out, while the governments themselves spiral down deeper into debt, at great cost to citizens who had nothing to do with causing the crisis. The European crisis is an opportunity for leaders to challenge the global mechanism for dealing with debt. Our attention is on these leaders as developments continue to unfold. 

Last week Australia’s export credit agency, EFIC, released the updated version of its Policy for Environmental and Social Review of Transactions. Jubilee’s long-term engagement in monitoring the activity of EFIC, and our continued calls for greater transparency paid dividends when the launch confirmed the adoption of new reporting and auditing procedures that go a considerable way to making the agency’s decisions more accessible and accountable to the public, including a commitment to arrange an independent audit of its adherence to the Policy every two years by an independent expert.

The updated Policy and Procedure launched on May 4, sets out how EFIC will review export finance applications for likely social and environmental impacts. When an Australian exporter applies to EFIC for financial assistance, whether the company is seeking a loan, guarantee or other such product to assist it in winning business in an overseas markets, EFIC is obliged to review the application for its likely social and environmental impacts, thanks to efforts by campaigners in Australia to make sure EFIC adopted an Environment Policy back in 2000. Given that EFIC financing of mines and other extractive projects in the Pacific and Africa is on the increase, this process is of vital importance, especially for communities living in surrounding areas, whose very livelihoods are affected by these projects.

In 2010 EFIC undertook a review of its Environment Policy, coinciding with the release of Jubilee’s Risky Business report (December 2009) case studying EFIC involvement in the gold mine in Solomon Islands and the PNG LNG project. The report successfully drew the attention of other civil society groups, individuals, academics and members of parliament to the high stakes of EFIC finance decisions for communities in the Pacific.

As part of the Review, EFIC considered the views of civil society organisations including Jubilee Australia and Oxfam Australia. EFIC even agreed to host a full day independently facilitated workshop in December 2010 to discuss CSO recommendations.

 “We congratulate EFIC on making changes to the Policy and Procedure for Environmental and Social Review of transactions that demonstrate a genuine intention to find a more appropriate balance between public accountability and the commercial interests of Australian corporations,” said Adele Webb, Jubilee Australia Director.

“Looking to the future, there is still more work to be done by governments around the world, including Australia, to ensure their national export credit agencies do not facilitate irreversible environmental damage, social unrest and the violation of human rights in less-developed countries.”

In February, we made a submission to the Independent review of aid effectiveness -highlighting (1) the potential for dominance of national interest agendas such as trade and investment policy and energy security in Australia’s aid program to directly and indirectly shift the institutional objectives of Australia’s aid program away from achievement of the Millennium Development Goals (MDGs); and (2) the need for the Australian government to have a clear framework and strategy to guide the aid funding it channels through the World Bank Group (WB) the Asian Development Bank (ADB).

In December 2010, our Risky Business report (December 2009) along with a were presented to members of the Joint Standing Committee as part of the Parliamentary Inquiry into Australia’s Relationship with the Countries of Africa. We then gave evidence to MPs and Senators at a public hearing of the Inquiry in Sydney on 7 December, appearing on the schedule just before BHP Billiton and Australia’s export credit agency, EFIC. The transcript of the hearing is available to read on the Committee website.

One year on from the signing of Papua New Guinea’s largest ever extractive industry project, led by American giant Exxon Mobil and Australian partners Oil Search and Santos, the PNG LNG project has already been linked with a number of worrying incidents, including tribal conflict, local landowner unrest, alleged abuses by the companies involved, and concerns over transparency of government decisions. In recent weeks the project reached boiling point when landowners closed down gas plants and mobilised on project sites following increased discontent over their benefits payments. A National Court Judge has stepped in to stop all LNG payments from banks and to freeze all accounts relating to benefit agreements until proper and transparent processes are set up for the distribution of landowner payments. Jubilee Australia is concerned that this and a number of other developments during the first year of the project warrant serious examination, not least by the Australian government, which has helped finance the project through its largest ever export credit loan.  

The national PNG Government, itself having gone through a complete upheaval in the last two months with its PM exiting and then abruptly returning to power, is responsible for a number of developments related to the LNG project. In October the PM confused onlookers by appointing a new minister to assist on the LNG project, only to dismiss him, and then re-appoint him, within a matter of weeks. There have been a number of public statements of concern over the LNG project by prominent PNG figures, including the former Attorney General, who claims that he was never properly consulted over the signing of the LNG deal in 2009.  Media reports have also detailed accusations between the Cabinet and the former Police Commissioner in relation to LNG operations. Meanwhile, the government discovered that it did not have enough money in its budget to fund preliminary logistical and infrastructure needs related to the LNG project and had to rush through a supplementary budget mid year. Just some examples of the confusion surrounding government involvement in the LNG project.  

While contracts have been awarded and construction has advanced, local landowners in project areas have become increasingly unsettled, with a number of work stoppages occurring throughout 2010 due to attacks on project sites and machinery, with the deaths of local people involved in the conflicts. Since the beginning of 2011, growing discontent in project areas surrounding the Hides gas conditioning plants in the Southern Highlands, has seen groups of landowners gather in their hundreds to stop work on project sites. The latest work stoppage on 22 January was led by an angry group of landowners who mobilised when a local boy lost his life after consuming a toxic substance obtained from one of the project sites. The Hides gas conditioning plant in the Southern Highlands currently remains closed with Exxon Mobil staff having been withdrawn from the site. The angry locals point to unfulfilled promises from the national government and local authorities, relating to benefit funds and business development grants they say they have not yet received. A number of landowner organisations are also asking questions about the payment of business development grants to a select number of landowner corporations that met with government officials in a resort near Port Moresby just after Christmas, rather than conducting a proper consultation process involving the larger group of landowners through the Departments of Petroleum and Energy and Commerce and Industry. 

Media reports have cited the use of mobile unidentified police squads throughout projects sites, and proposals by authorities to establish a Special Operations Group for the LNG project. These developments are eerie reminders of the days of the Bougainville Copper project which saw a number of human rights violations against the local population at the hands of such mobile squads. A special feature story from Dateline in May 2010 reported one incident of local boys being taken away and beaten up by security forces, using a  vehicle owned by Australian company Oil Search. In addition to these issues, wider concerns have arisen as to the effect of making large cash-payments to powerful males in various communities and the impact this has on exacerbating the causes of conflict and disputes between tribes, not to mention the impact on women which must be taken very seriously. 
Locals have reported feeling the effects of inflation on PNG’s economy, with prices for basic staples already being distorted and Port Moresby becoming prohibitively expensive. These and other developments provide cause for concern when predicting the long term effect of the LNG project. 

Meanwhile, plans for the management of project revenues are being advanced. In June 2010 the government announced the creation of a new company, Kroton 2, to manage the State’s interest in the project as well as any future petroleum projects in the country.  Kroton 2 was previously a subsidiary of the Independent Public Business Corporation (IPBC), which itself was a key player in the LNG deal, directed by the Prime Minister’s son, Arthur Somare. 

Announcements at the end of 2010 shed light on the establishment of PNG’s Sovereign Wealth Fund following discussions between the PNG Government, the Australian government and various other international actors. The Sovereign Wealth Fund will hold the revenues from the LNG project in an offshore location, with three main pots of money: A Strategic and Stablisation Fund, a Future Fund and an Infrastructure Fund. How this fund will be governed and the oversight mechanisms that are involved are still to be seen. 

We consider it vital to closely monitor the revenue streams and mechanisms for revenue management throughout the project, especially given past experiences of wealth from large mining projects in PNG failing to translate into progress on human development targets such as life expectancy, education and health services in PNG.

The more recent progress report commissioned by PNG LNG joint venture partners’ (including the Australian government) make no mention of deaths that have occurred due to project-related conflict and only brief mention of grievances and disputes.  The report notes that the Environmental and Social Management Plan (ESMP) for the project went through its first revision in September and a revised plan was presented to the Lenders group.  We would urge lenders, including the Australian government’s export credit agency, EFIC, to make public this updated plan and to take into account the serious developments that are taking place on the LNG project. 

We will continue to monitor the project and related developments, with a 40 page report on the LNG project and management of revenues to be released by Jubilee Australia mid 2011. 

In January, as part of the Robin Hood Tax coalition we made a submission to the Department of Climate Change and Energy Efficiency’s consultation on “Long Term Options for International Climate Finance”.

[Media Statement, Jubilee Australia 11 February 2011]

A report released in the last week by New York NGO Human Rights Watch confirms allegations of torture and rape by private security squads at the Porgera Gold mine in Papua New Guinea, the most recent in a spate of evidence implicating Australian companies, Australian banks and even Australian taxpayer funds in the serious violation of the rights of individuals and communities in our region.  

Australian loans made to support mining projects in PNG, deemed in Australia’s ‘national interest’, have been put in the spotlight this week by a visit to Australia by United Nations Independent Expert on Human Rights, Foreign Debt and International Financial Obligations, Dr Cephas Lumina. 

Among other matters, Dr Lumina’s visit to Australia considered the role of lenders such as Australia’s Export Credit Agency (EFIC) in financing projects in countries that face huge social and political challenges with high risk of human rights abuses, conflict and worsening corruption. In a press conference today to conclude his visit, Dr Lumina identified as one of his key concerns the lack of information available to the public about the transactions undertaken by the EFIC. He urged the Australian Government to “ensure accountability and transparency in EFIC’s operations, particularly those undertaken under its National Interest Account.”

One of the latest such deals was a multi-million dollar Australian government loan contract signed in favour of PNG’s largest ever mining venture, a US$15 billion Liquefied Natural Gas (LNG) project led by Exxon Mobil, with Australian companies Santos and Oil Search in toe. More than $300 million will come directly from Australian taxpayers, despite the benefits of the loan concentrating heavily in the bank accounts of the private companies involved. 

Even in the project’s early construction phases there are signs for concern, with unidentified mobile police squads patrolling the areas around the project sites and a number of incidents, including shooting deaths, reported in national media. The entire project came to boiling point in recent weeks with local landowners closing down gas plants and mobilising on project sites after increased discontent over payments owing to them as compensation. 

In the case of the Porgera mine, also in PNG, in the early 1990s the Australian government provided loans worth over $200 to facilitate Australian private sector involved in the controversial project.   

Australia’s export credit agency, EFIC is a statutory authority providing this finance on behalf of Australian citizens and government. Yet the agency hides behind an unusual exemption from the Freedom of Information Act and a lack of scrutiny applied to it by the Trade Minister.  

“Mining projects undertaken by Australian corporations in developing countries have, in many reported cases, had unacceptable consequences, including social unrest, irreversible environmental damage, and the infringement of individual and community human rights”,  said Adele Webb, National Coordinator of Jubilee Australia. 

“While it is not reasonable to expect Australia’s export credit agency to solve these issues, we do expect EFIC not to make them worse”. 

“Australian taxpayers deserve to know what is being done with their money, especially if there is evidence it is financing problem projects in the region. At the very least, the Trade Minister should seriously consider removing EFIC’s exemption from the Freedom of Information provisions, and require the agency to meet more stringent reporting requirements”.

Groundbreaking legislation passed through the US Congress in July 2010 has sent a wave of momentum around the globe relating to transparency requirements for payments in extractive industry projects.  President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act last year, which in addition to financial regulatory reform, requires all U.S and foreign companies registered with the U.S. Securities and Exchange Commission to disclose, on a disaggregated basis, how much they pay governments for access to their oil, gas and minerals.  The requirement applies on a country-by-country and project-by-project basis, which is a level of disclosure not yet required by any other regulatory body around the world.  A handful of other stock exchanges have notable requirements, such as the London Stock Exchange’s Alternative Investments Market which puts extra disclosure requirements on extractive industry companies and the Hong Kong Stock Exchange which started mandating country-by-country reporting in early 2010; however to this point nothing has yet reached the level of the US standards. Given the widespread impact of the Dodd-Frank legislation, which will require compliance by 90% of the world’s largest internationally operating oil and gas companies, it has provoked calls for the new international accounting standard to be replicated in other countries. 

In late November, the Canadian Publish What you Pay Coalition published a paper that calls on Canada to harmonise its regulations in line with the Dodd-Frank requirements.  In December 2010 the European Commission carried out a consultation to discuss the possibility of introducing such requirements for EU-listed companies.  In addition, the UK Parliament passed a motion to consider further disclosure of payments to governments including country-by-country reporting requirements. 

The Revenue Watch Institute has further information on the latest developments related to the Dodd Frank act.

Finally, the World Bank recently released its Annual Extractive Industries Report in which it makes special mention of the Dodd-Frank legislation as an international standard to consider.  These developments are encouraging and strengthen the global movement for transparency and accountability in revenues derived from oil, gas and mining projects.  Advances such as the Dodd-Frank Act, along with the Extractive Industries Transparency Initiative (EITI) and the work of international networks such as the Publish What You Pay coalition are vital to unlocking the opacity surrounding to extractive industry projects around the world.  

Jubilee Australia is a member of the Australian Publish What You Pay Network, along with Oxfam Australia and Transparency International.