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Tougher disclosure rules for resources giants

US-listed corporations in Cambodia, including Chevron, Total, CNOOC and ConocoPhillips, that are engaged in extractive industries are now required to comply with additional transparency rules.

The US Securities and Exchange Commission (SEC) implemented new regulations last week, two years after the legislation was initially passed by Congress.

Cambodian monitors have lauded the new requirements and even suggested further implementation of such measures by the Cambodia government, but industry analysts have said the developments may do nothing more than push illicit activities further underground.

The added reporting requirements of Section 1504, known as the “Cardin-Lugar” provision, regarding any payments of US$100,000 or more to foreign governments from companies listed on a US stock exchange are not without their critics.

Some believed the new rules would lead to “transparency elusion” or “transparency avoidance”, Daniel Kaufmann, senior fellow of global economy and development at the Brookings Institution, said in a statement on the institute’s website last week.

Cambodians for Resource Revenue Transparency and its executive director, Sarath Chhay, however, expressed great support for the transparency regulations, calling them “an important vote for fairness, transparency and disclosure which will have significant impact in Cambodia and around the world”.

“US-listed companies investing in Cambodia must comply with this law, and that means open access to information for both citizens and civil society,” Sarath said.

The SEC now requires the disclosure of all specific payments during all phases of development, including taxes, royalties, fees and licences, production entitlements, bonuses and signature bonuses, dividends and infrastructure improvements.

‘Social development funds’ must also be included, according to a statement by Cambodians for Resource Revenue Transparency.

Although Oxfam America has applauded the developments, it is calling on the Cambodian government to implement similar measures in its pending regulations, particularly the draft petroleum law.

“Similar transparency requirements should be enshrined in current Cambodian draft laws that will govern the oil, gas and mining sector, and we hope Cambodia will look for an opportunity to develop a similar national disclosure policy,” Brian Lund, Oxfam America’s regional director for East Asia, said.

“Cambodia could help bring these rules to life — for example, by sharing this mandatory, disaggregated, project-by-project information on the Ministry of Finance and Economy’s Table of Government Financial Operation (TOFE) website,” Lund suggested.

Kaufmann said: “Effective disclosure is by no means guaranteed, as the SEC could issue weak rules, rendering disclosure ineffective.

“Thanks to the Dodd-Frank legislation mandating transparency, the main danger is no longer wholesale ‘transparency evasion’ by many companies, but the more nuanced risk of enabling ‘transparency elusion’ (or ‘transparency avoidance’) by companies that wish to skirt detailed disclosure, thereby masking possible misdeeds.”

Companies will have to “comply with the new rules and disclose payments made to the Cambodian government on a project-by-project basis for fiscal years ending after September 30, 2013 in 2014,” according to the statement from Oxfam America.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was adopted by Congress in July 2010 and with the latest ruling by the SEC having taken place on August 22. The new regulations mean all statements will be freely available on the web for the public to view at any time.

Neither the Cambodian National Petroleum Authority nor Chevron responded to requests for comment.

To contact the reporter on this story: Gregory Pellechi at gregory.pellechi@phnompenhpost.com

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