The irony of the Extractive Industries Transparency Initiative issue is that, though it was launched in 2004, the United States did not apply as a “candidate country” until March 18, 2014 and it is still pending.

“US candidacy will serve as a role model for other countries interested in implementing EITI that are dealing with complex federal systems,” said Paulo de Sa, Manager of World Bank’s Sustainable Energy, Oil, Gas, and Mining Unit in a statement.

Policy Recommendations

Since the report was released, Kar says they have had some response from African governments that have been mostly positive.

“They recognize that this is a serious issue, that they need to focus on this, but I’m not aware of any negative comments, you know sort of ‘I don’t believe it’ or that they think we’ve exaggerated or anything like that,” Kar told AFKInsider. “So there is a lot of support in different quarters, both from the academic as well as from the political side, the policy side, that they need to focus on this issue.”

Kar says they haven’t heard anything from the US government.

In order to garner greater transparency in domestic and international financial transactions and shut down the channels through which illicit money flows, the report recommends a number of steps these five countries can take.

This includes boosting their customs enforcement to better detect intentional misinvoicing of trade transactions.

Insufficient data and limited processes for questioning invoices are plaguing efforts of each government to curtail trade misinvoicing and reduce the reach of the shadow financial system since customs authorities are not usually collecting, or do not have the ability to collect, the data they need to understand the magnitude of illicit flows of capital, according to the report.

“The countries we studied are moving in this direction with the establishment of electronic customs systems and, in some cases, the creation of financial intelligence units, which are responsible for monitoring issues of financial crime and opacity,” notes the report.

Other recommendations include: “create central, public registries of meaningful beneficial ownership information for all companies formed in their country to combat the abuse of anonymous shell companies; and require that all banks in their country know the true beneficial owner of any account opened in their financial institution; and participate in the worldwide movement towards the automatic exchange of tax information as endorsed by the G20 and the OECD.”

The report also urges Kenya and Uganda follow the lead of Ghana, Mozambique, and Tanzania in joining and complying with the Extractive Industry Transparency Initiative.

“The scope is pretty large just for these five countries. But then if you want to go into the details of commodity breakdown, that becomes a much larger project and financing also becomes an issue. So we have to go with what the contract says and the contract didn’t say that we should look into this commodity breakdown.” Kar told AFKInsider.

“But yes, commodity trade also affords a more focused analysis of what commodities and countries where there is a high risk of misinvoicing.” Kar told AFKInsider.

Getting a handle on tracking trade revenue is even more important now in light of a new World Bank report that notes developing countries are headed for a year of disappointing growth, as first quarter weakness in 2014 has delayed an expected pick-up in economic activity.

According to the World Bank’s Global Economic Prospects report, released June 10,
national budgets of developing countries have deteriorated significantly since 2007. The reports states: “In almost half of developing countries, government deficits exceed 3 percent of GDP, while debt-to-GDP ratios have risen by more than 10 percentage points since 2007. Fiscal policy needs to tighten in countries where deficits remain large, including Ghana, India, Kenya, Malaysia, and South Africa.”

“In addition, the structural reform agenda in many developing countries, which has stalled in recent years, needs to be reinvigorated in order to sustain rapid income growth,” notes the World Bank.