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Udviklingspolitisk direktør Ib Petersens tale på Ibis-konference om udvindingsindustrien den 23. oktober 2009.

Let me start off by welcoming you all to Eigtveds Pakhus for this conference. It

is indeed a pleasure to see so many present here. I should also like to thank the

lead organizers of today’s conference, Ibis, for inviting me to make some

opening remarks.

Today we focus on the Extractive Industries, but I would actually like to start

by highlighting the subtitles on the programme: “Unleashing Economic

Potentials - Respecting People and the Environment”. In times like ours, where

developing countries are particularly hard hit by an unprecedented global

economic crisis, and by the impact of climate changes on the environment, I

certainly subscribe to an approach focusing not on the problems but on the

potentials.

There is no doubt that the issue for today’s discussions raises important but also

very complex questions. Developing countries and their partners face a lot of

challenges in trying to solve these questions. The aim of your efforts here today

will be to come up with recommendations for how to turn these challenges in to

opportunities.

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But before I leave the floor to the key speakers of the conference, I would like

to comment briefly on the main issues to be debated.

[Protection of human rights and the environment:]

Denmark has a long standing tradition as a responsible nation with responsible

companies that treat employees decently and respect human rights as well as the

environment. Denmark has made a determined effort internationally to promote

respect for human rights, the rights of employees, the protection of health and

environment, as well as the fight against corruption. Bilaterally, we have

promoted human rights, decent working environment for employees through

good governance initiatives, business sector programmes and other initiatives in

our partner countries. These efforts have indeed been based on our basic values

and our long term political priorities and political interests.

As a more recent example, let me mention that last year in May 2008 the

Danish government presented its Action Plan for Corporate Social

Responsibility (CSR). The action plan aims at promoting CSR and

strengthening the efforts to ensure that Denmark and Danish businesses are

generally associated with responsible growth. I expect that Mr. Carsten

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Ingerslev from the Danish Commerce and Companies Agency [Erhvervs- og

Selskabsstyrelsen] will tell you more about the action plan later today.

Clear and transparent international rules and principles are important in order to

ensure that companies operate on equal terms. Our point of departure is clear. It

is a state responsibility to protect human rights. And it is a state responsibility

to set environmental policies and regulatory frameworks in place to cater for a

sustainable development. But private business itself has responsibilities as well.

In this respect, the United Nations Global Compact initiative and the 10

universally accepted principles in the areas of human rights, labour,

environment and anti-corruption, play a crucial role. They have indeed

stimulated interest in CSR in recent years. In June this year the Ministry of

Foreign Affairs together with UNDP published a booklet with ten Danish case

stories on human rights, labor standards, environment and anti-corruption in

international business activities. By showing how Global Compact works in

practice for a number of Danish companies, we hope to inspire companies

worldwide to take action on these issues. This strategic policy initiative and the

ten principles are also relevant for businesses in the extractive industries.

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I should like to mention a few other initiatives. The Danish government last

year launched a strategy on “The international human rights cooperation”. With

this strategy, the government pledges to ensure that the promotion and

protection of human rights is mainstreamed into all foreign policy and

development policy areas and activities. Within the EU, Denmark has also

played an active role in bringing about a common EU position on CSR.

And finally, Denmark politically and financially supports the mandate and the

work of the “Special Representative on the issue of human rights and

transnational corporation and other business enterprises”, John Ruggie. We

look forward to the Special Representative’s development of a set of guiding

principles for states and businesses, applicable in all sectors and all regions.

This will be of great value to all stakeholders, but most importantly to private

companies.

[Extractive industries – unleashing the economic potentials, mobilising

revenues and combating tax evasion]:

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Regarding the possibilities for mobilizing resources from extractive industries

in developing countries – in other words, unleashing the economic potentials in

extractive industries – I think today’s discussion has a perfect timing.

Internationally, there is indeed an increasing focus on what is normally called

domestic resource mobilization. Sustainable development is only possible if

domestic resource mobilization can be increased and sustained. It is a question

of both broadening the tax base, basically by attracting investments and creating

jobs, and of building up national institutional capacities for formulating and

implementing relevant tax regimes.

There is no doubt that the extractive industry is a significant potential source

of income and revenue for many developing countries. More than three and a

half billion people live in countries rich in oil, gas and minerals. The potential

for stimulating growth and reducing poverty in developing countries with tax

revenues and royalties from natural resources like oil, gas and minerals, is huge.

Yet, many of these developing countries do not today obtain more than a small

fraction of the taxes and royalties which they could have received in the best of

all situations.

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Generous tax holidays for extractive industries offered to attract them in the

first place and a lack of expertise in developing countries for negotiating more

favorable deals for the countries concerned seem to be the main reason for this

state of affairs. But the lack of transparency often surrounding these deals and

operations also serve to hide illicit transaction with revenue being directed to

private accounts rather than to the state treasury.

Obviously, and almost by definition, it is difficult to get exact data on the

precise amount of illicit financial flows associated with the extractive industry.

However, in 2007 the Stolen Asset Recovery (StAR) Initiative, launched by the

UN and the World Bank, estimated the cross-border flow of the global proceeds

from criminal activities, corruption and tax evasion to be between $1 trillion

and $1.6 trillion per year. According to a report published in December 2008 by

Global Financial Integrity in Washington, illicit financial flows out of

developing countries are estimated at some $850 billion to $1 trillion per year.

There are no exact data concerning extractive industries as such in this context.

However, it seems that significant problems do exist in extractive industries as

well. For instance, according to a report published in August this year by the

Nigeria Extractive Industries Transparency Initiative (NEITI), financial

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discrepancies and outstanding payments totaled more than $ 5 billion for

revenues generated by the oil and gas sector in Nigeria in 2005. This is an

enormous amount of money that could have brought better education and health

or other essential services to a large number of people.

At the same time, I should indeed like to caution against jumping to quick but

inaccurate conclusions on the behavior of a whole industry. Being in the

extractive industries in developing countries certainly does not automatically

imply that companies engage in illegal activities, nor does it imply that a

company is involved in systematic illicit financial transactions, criminal

conduct or illegal tax evasion. There are plenty of examples and experiences of

mining companies living up to their corporate social responsibility. And theses

experiences of course form an important input to today’s discussion.

As already mentioned, a very significant part of the solution to the problems

concerning tax evasion in developing countries is capacity building and good

governance. Capacity building and support to good governance are important

elements in the bilateral cooperation between Denmark and our partners in

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Africa, Asia and Latin America. Denmark has also supported national tax

administration in several countries, for instance in Tanzania and Mozambique.

However, the solution to tax evasion is indeed also to be found outside the

developing countries, that is, in the developed countries. And here we see

progress being made. Bilaterally, Denmark has recently concluded agreements

concerning exchange of information with a number of countries [Schweiz,

Østrig, Luxembourg og Singapore]. Work is in progress at multilateral levels,

especially between the Nordic countries and within the EU and between the

OECD countries. And as you probably are aware, the Group of Twenty [G20]

recently confirmed their commitment to fight so-called non-cooperative

jurisdictions.

According to the G20 statement from Pittsburgh in September this year, the

participants are committed to maintain the momentum in dealing with tax

havens, money laundering, proceeds of corruption. G20 welcomed the

expansion of the Global Forum on Transparency and Exchange of Information

– including the participation of developing countries – and welcome the

agreement to deliver an effective program of peer review. According to the G20

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statement, the G20 stands ready to use countermeasures against tax havens from

March 2010. These are welcome steps, taking their political significance from

the fact that G20 encompasses both developed and developing economies.

I am sure that Steen Lohmann Poulsen from the Ministry of Finance will tell

you about the Danish measures in relation to taxation and financial markets

later today in the afternoon.

Transparency is the key to accountable government, and to the mobilization of

resources for sustainable growth. Therefore, the Extractive Industries

Transparency Initiative (EITI) is an important initiative promoting the

fundamental interests of developing countries in this respect. The EITI sets a

global standard for managing revenues from natural resources and aims to

strengthen governance by improving transparency and accountability in and

around the extractive industry. In addition, EITI helps improve the international

credibility by enabling governments to affirm their commitment to fight

corruption. Denmark supports that developing countries seek membership of

EITI, and in this respect it is important that the IMF and the World Bank as

well as a number of other donors including Denmark encourage the

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governments of developing countries to seek membership and exploit the

benefits of this in the future.

[Afsluttende bemærkninger]

Finally, let me go back to my initial remarks and emphasize that the challenges

facing developing countries are many and difficult, especially after the global

financial crisis. Therefore, it is as important as ever to assist these countries

through effective international solutions. This also applies to the challenges

related to ensuring that the extractive industrial sector in developing countries

play its part in fighting poverty, by unleashing economic potentials and

respecting people and the environment.

Thank you.