In pursuit of transparent trading in Switzerland

Despite having very few natural resources itself, Switzerland has become the world’s major commodity trading hub for natural resources. With its favourable corporate fiscal regime, the country is very attractive for extractive companies. As major companies have set up their headquarters in the country, 60% of the global trade in metal and 35% of global crude oil trading activities take place in Switzerland. But by offering these extractive companies great advantages, such as favourable tax conditions and little transparency regulations, is Switzerland putting profits before people? Through a new law, Switzerland now has the opportunity to change this.

Since two thirds of the world’s minerals and energy resources come from developing countries, the transactions of Switzerland-based trading companies are critical to many resource-rich developing countries. Plagued by the resource-curse, citizens are held back by lack of sustainable and long-term development and much needed public infrastructure. If natural resource revenues were better managed, it would be possible to use these revenues for the socio-economic development of these countries. But internal corruption and mismanagement combined with a lack of transparency of Switzerland-based commodity traders, are contributing to keeping citizens of developing countries poor and the wealth of their resources out of their reach. Because of its key role in commodity trading, Switzerland has a responsibility to participate more actively in ending the resource curse.

It is time to centre policy making on people, and no more on companies. Transactions involving natural resources should be make more transparent as they directly impact the wellbeing of local populations. Trading and transactions that directly affect citizens should include greater transparency in both host and home country. Disclosing payments made by companies to government is an essential prerequisite to ensure payments are monitored and scrutinised. The Swiss government plays a crucial role and should subject the major companies trading on its soil to stricter rules and regulations, including increased transparency.

Through the EITI, great strides in increasing transparency in the extractive industries have been made including some steps towards commodity trading transparency. But the EITI is not the panacea and needs to move towards requiring that countries break down payments by individual sales as well as require a reconciliation with company details. Moreover, voluntary disclosures are not enough as some key opaque countries are not participating in the EITI. Therefore the Swiss government has a key leadership opportunity to close this gap very soon by introducing mandatory disclosures. In November, the Swiss parliament will debate a revision of the Swiss company law. In the current draft, the Swiss Federal Council applied the payment disclosure provisions only to exploration and production activities, thus excluding trading activities—even though traders dominate the Swiss commodity sector. If the government does not alter its course, the Swiss transparency law will have limited added value for citizens of resource-rich countries. It will simply create a law that is not fit for purpose.

As the EU, US, Canada and Norway have made great strides towards adopting a global transparency standard, Switzerland needs to seize the opportunity to play a key role in advancing this in their own backyard. Up until now it has avoided participating but this new law is a key opportunity for the Swiss government to be part of the change and impact the lives of citizens in resource-rich countries.

This article is based on a joint policy paper by NRGI, SwissAid, Berne Declaration and the global coalition PWYP. Download the paper here.

Read our joint press release here.