Tag Archives: transparency industry

How the Shipping Industry Gets its Way: pollution from ships

Do not give the regulated power over the regulators, unless you want consumers to lose out and producers to game the system. ..That lesson has been learned in many places around the world. National regulators are increasingly independent of the firms they regulate. But international ones still have further to go—and none further than the specialised agencies of the United Nations, such as the International Maritime Organisation (IMO) for shipping where the interests of the shipping industry are upheld d in several ways. The first is the distribution of voting rights between countries. At the IMO, for example, Panama and Liberia, with populations of just 4m and 4.8m respectively, can automatically get seats on its decision-making body as they have the world’s biggest merchant fleets.

The second is the assignment of those voting rights by individual countries. Remarkably, many governments have handed voting rights to private-sector firms… At the IMO least 17 countries have assigned their voting rights to flag registries operated by private firms, reckons Transparency International, an anti-corruption group; that adds up to about a tenth of delegates. At an IMO environmental-committee meeting in 2017, almost a third of countries were represented, at least in part, by business interests.

The third way in which producer interests are protected is through a spectacular lack of transparency. The agenda of the IMO’s council in November 2018 in London is available only to those with a password. Journalists are forbidden to report what delegates say or how they vote. There are no rules on the suitability or conflict of interests of delegates. In 2014 St Lucia appointed a Saudi billionaire without previous shipping experience as its IMO representative; a court in London judged in 2016 that the appointment was obtained in order to gain diplomatic immunity against divorce proceedings. There are no limits on the amount of gifts that can be showered on representatives. Goodies put on top of desks at an IMO assembly meeting last year were so heavy that they broke 137 sets of headphones underneath.

Such swampiness matters. The IMO is responsible for limiting emissions from ships, which were excluded from the Paris climate deal.   Some countries are interested in reform. At the imo council meeting this week Australia proposed allowing journalists to report on its meetings as a first step. The Marshall Islands has taken back some of its votes from the private firm that runs its flag registry. But more radical change is needed. Countries should send civil servants, not private actors, as their representatives. The un’s rules on conflicts of interest should be imposed. And voting rights should be allocated with the interests of consumers in mind. These lessons have been widely absorbed within borders. They ought to cross them, too

Excerpts from UN Regulatory Bodies: Agency Problems, Economist, Nov. 24, 2018, at 15

Mining Companies Love Least Developed Countries

An expert panel led by Kofi Annan, a former UN secretary-general, looked at five deals struck between 2010 and 2012, and compared the sums for which government-owned mines were sold with independent assessments of their value. It found a gap of $1.36 billion, double the state’s annual budget for health and education. And these deals are just a small subset of all the bargains struck, says the report, which Mr Annan presented in Cape Town, South Africa, on May 10th.

The report highlights some puzzling details. For instance ENRC, a London-listed Kazakh mining firm, waived its rights to buy out a stake in a mining enterprise owned by Gécamines, Congo’s state miner, only to acquire it for $75m from a company owned by Dan Gertler, an Israeli businessman, which had paid $15m for it just months earlier. Mr Gertler is close to Joseph Kabila, Congo’s president. ENRC, which is being investigated by the Serious Fraud Office in Britain, was Congo’s third-largest copper producer last year. Both ENRC and Mr Gertler deny wrongdoing.

African countries often fail to collect reasonable taxes on mining, says Mr Annan’s panel. For example, Zambia’s copper exports were worth $10 billion in 2011, but its tax receipts from mining were a meagre $240m. The widespread use by mining firms of offshore investment vehicles as conduits for profits creates scope for tax avoidance. Their use is not restricted to rich-world companies. Much of the oil that Angola ships to China is via a company called the China International Fund. Its trading prices are not made public…

Congo’s prime minister, Matata Ponyo Mapon, promises change. In January 2013… Mr Ponyo said he would rein in the state-owned mining companies and increase transparency in the industry. “We must avoid situations where we’re not publishing our mining contracts, where our state assets are undervalued, and where the government doesn’t know what its state mining companies are doing,” he told miners and officials at a conference in January….

Last year miners in Congo, which include Freeport-McMoRan and Glencore Xstrata, shipped $6.7 billion-worth of copper and cobalt from the country.

Business in the Democratic Republic of Congo: Murky minerals, Economist, May 18, 2013, at 74