ANNUAL REPORT 2005

BREAKINGTHE LINKSBETWEENNATURAL RESOURCES,CONFLICT AND

CORRUPTION

Collectively we are known as Global Witness, but theorganisation’s work and finances are split into distinct entities.

Global Witness Limited is a non-profit company limited byguarantee and incorporated in England (Company No. 2871809).Global Witness Limited exposes and breaks the links betweenthe exploitation of natural resources and the funding of conflict,corruption and human rights abuses. Global Witness Limitedcarries out investigations in countries devastated by conflict,corruption and poverty and our findings from these investigationsare used to brief governments, intergovernmental organisations,civil society and the media. Global Witness Limited is recognisedas the equivalent of a US public charity as described in section 509(a)(1) of the US Internal Revenue Service Code 1986.

The Global Witness Trust is a UK registered charity (CharityNo.1071946). The Trust promotes research into the impact thatenvironmental damage or change has on the human rights ofinhabitants. The Trust is legally independent of Global WitnessLimited and is governed by a voluntary board.

The Global Witness Foundation is an independent Californiannon-profit public benefit corporation which is tax exempt underSection 501(c)(3) of the US Internal Revenue Code. TheFoundation supports research and investigations into the causesand effects of the exploitation of natural resources by public andprivate entities throughout the world, specifically where suchexploitation is used to fund conflict, human rights abuses andcorruption. The Foundation is legally independent of GlobalWitness Limited and is governed by a voluntary board.

Global Witness Publishing Inc. is incorporated in Washington, D.C.and publishes reports relating to the links between exploitation ofnatural resources and human conflict.

Global Witness has offices in London and Washington, D.C.

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ABOUTGLOBALWITNESS

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RAINFOREST IN MALAYSIA: GLOBAL WITNESS HASPIONEERED INDEPENDENT FOREST MONITORING ASA TOOL TO COMBAT ILLEGAL LOGGING AND ENABLELOCAL PEOPLE TO HAVE A GREATER INFLUENCE ONTHE MANAGEMENT OF FORESTS.

GLOBAL WITNESS CAMPAIGNS TO ACHIEVE REAL CHANGE BYHIGHLIGHTING THE LINKS BETWEENTHE EXPLOITATION OF NATURALRESOURCES, CONFLICT AND CORRUPTION.

Through a combination of covert investigationsand targeted advocacy, Global Witness haschanged the way the world thinks about theextraction and trading of natural resources, and the devastating impact their unsustainableexploitation can have upon development,human rights and stability.

Since launching our first campaign in 1995,Global Witness’ pioneering investigations haveexposed countless cases of corruption,domestic and international crime and statelooting. Our findings and recommendationshave catalysed international thinking andsignificantly shaped global policy. We seek notsimply front-line relief from the consequencesof conflict and corruption, but lasting solutionsto bring about their end – our ultimate vision isof a world in which populations as a whole areable to benefit from natural resource revenues.

One of the best watchdogs on resource issues isGlobal Witness, a small organization in Londonthat publishes excellent reports even though its2004 budget of $3.4 million would not cover thefund-raising costs of its big American brothers.

PETER MAASS

NEW YORK TIMES, 18 DECEMBER 2005

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”DIRECTORS’STATEMENT

In May 2005, Global Witness celebrated itstenth anniversary, an event that coincided withus being awarded the Gleitsman FoundationInternational Activist Award.

In the decade since we initiated our firstcampaign we have been successful in creatinga growing international awareness that poorgovernance and exploitation of natural resourcesleads to massive human suffering. Ourundercover investigations, hard-hitting reportsand targeted advocacy have unequivocallyshown that unaccountable resource exploitationleads to poverty, human rights violations andgeo-political and economic destabilisation.Global Witness’ findings have significantlyshaped global policy and with relatively limitedstaff and resources, we have sought - and

continue to seek - not just front-line relief fromthe consequences of conflict and corruption, but long-term and lasting solutions to bringabout their end.

As we enter our second decade, Global Witnessis working towards the creation of a number ofinternationally-recognised mechanisms forpreventing the misappropriation of naturalresources and resource-fuelled wars once andfor all. We believe that revenue from naturalresources can drive peaceful and sustainabledevelopment in the world’s poorest countries,rather than providing the logistics for war andcorruption. In order for this to happen however,the global legal framework, the policies ofgovernments and multilateral bodies and thebehaviour of private companies and financial

THE GRASBERG MINE IN WEST PAPUA, INDONESIA, ISRUN BY FREEPORT MCMORAN COPPER AND GOLD, INC.IT HAS THE LARGEST KNOWN RESERVES OF GOLD INTHE WORLD AND ONE OF THE LARGEST OF COPPER. ROB HUIBENS / PANOS PICTURES

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institutions all need to be overhauled. This is a huge and challenging task but one which we feel must be undertaken if the underlyingcauses of conflict and poverty are to beaddressed. Our success will depend as alwayson Global Witness’ staff, partners and supporters.We’d like to take this opportunity to thank themany people without whom the achievements of the last ten years could not have happenedand without whom we would not be able tocontemplate the task that lies ahead. We’d alsolike to express our deep sorrow at the passing of Alan Gleitsman, whose recognition of socialactivism and support of Global Witness will long be remembered.

PATRICK ALLEY, CHARMIAN GOOCH AND SIMON TAYLOR, DIRECTORS OF GLOBAL WITNESS

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INSTIGATING THE KIMBERLEY PROCESSGlobal Witness’ campaign on conflictdiamonds led directly to the establishmentof the Kimberley Process Certification Scheme, an international agreement to prevent the trade in conflict diamonds.

INSTIGATING THE PUBLISH WHAT YOU PAY COALITIONGlobal Witness pioneered the campaign to expose corruption in the oil, mining and gas industries operating in the developingworld. This led to the establishment of the300+ strong Publish What You Pay coalitionand the creation of the UK government’sExtractive Industries Transparency Initiative(EITI), which is supported by the majority ofthe world’s oil, mining and gas companies and institutional investors worth US$8.3 trillion.

HELPING TO CLOSE DOWN THE KHMER ROUGEGlobal Witness successfully campaigned, in 1995, for the closure of the Thai-Cambodiaborder to the Thai/Khmer Rouge timber trade.This deprived the Khmer Rouge of US$90million per year and contributed to themovement’s disintegration.

CONSISTENTLY PUSHING FORWARDS THE INTERNATIONALCONSENSUS ON CONFLICT RESOURCES AND CORRUPTIONPolicies and concepts formulated by GlobalWitness now form the basis of rafts ofinternational policy, including those of theInternational Financial Institutions, theUnited Nations, the UK Africa Commission,the EITI, the Kimberley Process and theannual US Appropriations Acts.

CONCEIVING INDEPENDENT FOREST MONITORINGGlobal Witness conceived and pioneeredthe concept of Independent ForestMonitoring to expose illegal logging, working with host governments. GlobalWitness established the first twoIndependent Monitoring operations, inCambodia and Cameroon, which haveresulted in numerous prosecutions oflogging companies, the generation ofmillions of dollars of fines and, inCambodia, a total logging moratorium and a significant decrease in illegal activity.

CUTTING OFF CHARLES TAYLOR’S ACCESS TO NATURALRESOURCE REVENUESGlobal Witness’ investigations andcampaigning directly led to the impositionof precedent-setting UN Security Councilsanctions on exports of Liberian timber,depriving former President Charles Taylor’sdespotic regime of vital revenue andestablishing international recognition of thepotential role of the timber trade in armstrafficking and the funding of conflict.

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UNDER THE KIMBERLEY PROCESS,PARTICIPANTS EXPORTING ROUGH

DIAMONDS COMMIT TO ISSUINGCERTIFICATES STATING THAT STONES

ARE CONFLICT-FREE. GLOBAL WITNESSIS CAMPAIGNING FOR LOOPHOLES TO BE CLOSED AND FOR GREATER

OVERSIGHT OF DIAMOND POLISHINGAND CUTTING CENTRES.

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TEN YEARSAND TENTHINGS TOBE PROUD OF

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EXPOSING THE INDIVIDUALS,CORPORATIONS AND INSTITUTIONS THAT PROMULGATE NATURAL RESOURCE EXPLOITATIONOn 18th March 2005 Guus Kouwenhoven,president of the Oriental Timber Company, wasarrested by the Dutch authorities and chargedwith involvement in war crimes and breaking aUnited Nations arms embargo, relating to hisactivities in Liberia (he has since been foundguilty of the latter). This is the first time anyonehas been charged with these offences in relationto the trade in natural resources. According to the press release of the Dutch prosecutor, theinvestigation was instigated because of the workof both Global Witness and the UN ExpertPanels on Liberia.

BRIEFING THE UNITED NATIONS SECURITY COUNCILIn January 1999 Global Witness was the first NGO to be asked to provide an informalbriefing to the UN Security Council. The briefingconcerned conflict diamonds. Since then wehave continued to brief the United Nations onissues around conflict resources.

UNCOVERING MINERAL SMUGGLINGOPERATIONS IN THE DEMOCRATICREPUBLIC OF CONGO (DRC)In 2004 Global Witness’ investigations in theDRC’s Katanga province uncovered large-scalecopper and cobalt smuggling operations whichdeprived the country’s economy of betweenUS$1-4 million per day. This exposé has resultedin a sharp increase in international attention onpolitical and economic tensions relating to therole of natural resources in the DRC, and inKatanga in particular.

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EXPOSING BURMA’S $250 MILLION A YEAR ILLEGAL TIMBER TRADEGlobal Witness’ investigations have uncovered the key players and the political and economic motivations driving the unsustainable logging whichhas destroyed large swathes of virgin forests in one of the world’s ‘hottest’biodiversity hotspots. As a result of Global Witness’ advocacy the EU haschanged its Common Position on Burma to allow for support for environmentalprotection, and the destructive logging of Burma’s forests has been made apriority issue for EU-China diplomatic discussions.

CHINESE TRADERSINSPECTING TIMBER FROMBURMA: GLOBAL WITNESS IS CAMPAIGNING FOR CHINATO TAKE ACTION TO END THEUNSUSTAINABLE LOGGINGOF BURMA’S FORESTS.

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GLOBAL WITNESS LAUNCHED THE METAPROJECT IN 2005. WE HAVE LEARNEDTHAT ALTHOUGH CAMPAIGNS FOCUSEDON A SINGLE COUNTRY OR RESOURCECAN BE HIGHLY EFFECTIVE, THEYOFTEN TAKE PLACE AFTER THE MOSTDESTRUCTIVE PHASE OF A CONFLICTHAS OCCURRED. THE META PROJECTTHEREFORE, ACTS AS ANOVERARCHING INITIATIVE, FOCUSINGON CHANGING THE GLOBALARCHITECTURE OF NATURALRESOURCE EXTRACTION AND TRADING,IN ORDER THAT THE INTERNATIONALCOMMUNITY CAN ACT TO PREVENTCONFLICTS BEING FUNDED BYNATURAL RESOURCE EXPLOITATIONAND TO ENSURE THAT NATURALRESOURCES ARE NOT MISMANAGED INPOST CONFLICT COUNTRIES.

NATURAL RESOURCES AND CONFLICT Since launching the Meta Project GlobalWitness has carried out extensive analysis toprepare an internationally recognised definitionof conflict resources, which we will present tothe UN Security Council and other key policymakers throughout 2006. An agreed UNdefinition of conflict resources will help create aninternational framework to better control naturalresources and the flows of conflict finance.Once implemented it could greatly speed upinternational responses and action in regard tospecific cases of state looting and could preventa reoccurrence of what happened in Liberia,where it took two years of Global Witnesscampaigning before the UN Security Councilrecognised timber as a conflict resource andtook action to deny the warring powers animportant source of finance.

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NATURAL RESOURCESIN THE DEMOCRATICREPUBLIC OF CONGO

WE HAVE LED CALLS FOR THEINTERNATIONAL COMMUNITY TOADDRESS THE TRADE IN CONFLICTRESOURCES IN THE DEMOCRATICREPUBLIC OF CONGO (DRC) AND TOWORK WITH THE DRC GOVERNMENT TO END THE MILITARISED CONTROL OF RESOURCES IN MINING AREAS.

EXPOSING THE ROLE OF NATURAL RESOURCES IN ONGOING INSTABILITY IN THE DRCIn 2005, we released Under-Mining Peace: Tin - The Explosive Trade in Cassiterite inEastern DRC, documenting how, despite thesupposed reunification of the country in 2003,mines in the eastern part of the DRC remainunder the control of various armed factions,including the national army. As a result, notonly are groups with appalling human rightsrecords gaining unfettered access to worldmarkets but huge amounts of revenue thatcould be funding development andreconstruction in the DRC are being lost.

RWANDA’S GAIN, THE DRC’S LOSS?Our investigations have revealed that much ofthe DRC’s cassiterite (tin ore) is being smuggledthrough neighbouring Rwanda (which has beenclaiming the production as its own, exportingfive times as much ore as it officially producedin 2004). Our evidence indicates that no taxesfrom this multi-million dollar trade are reachingthe Central Bank in the Congolese capital,Kinshasa. With the majority of the DRC’s budgetcurrently being funded by the internationalcommunity, we are calling on the DRCgovernment to urgently start capturing revenuesfrom the country’s vast natural resource wealth.

MILITARISED CONTROL OF RESOURCESIn June, the UK’s Channel 4 national newsprogramme broadcast a special report into thebrutal cassiterite trade in the DRC. In this report,which we facilitated, foreign correspondentJonathan Miller travelled to mines located inremote areas of eastern DRC, far beyond therealms of UN peacekeepers. Here, cassiterite,the most traded metal on the London Exchange,

is extracted under the control of the nationalarmy. Five armies or armed groups have battledfor control of these mines in just five years.These mines are at the heart of the world'sdeadliest conflict, which has claimed the lives ofnearly four million people in the past eight years.

LOOKING AHEADIn 2006 we will publish the findings of new field research on abuses and corruption in thecopper and cobalt trade in Katanga province.Throughout the year, we will focus worldwideattention on the exploitation of the DRC’sforests, pushing for the current loggingmoratorium in the DRC to be maintained untilsignificant reforms are implemented to limitlogging to sustainable levels, protect the rightsof the local population and ensure revenuetransparency. We will also examine in moredetail the cross-cutting issue of labourconditions, as a common thread that links allthe different resources we investigate to thebroader problems of conflict, corruption andthe enrichment of individuals or companies at the expense of the population as a whole.

You can urge a corrupt government to reform itself, but itsown corruption constitutes an obstacle ...outsiders have to beginby overhauling their own practices and institutions. In the pastfive years or so, there's been remarkable progress in this field -much of it driven by newcomers to the development scene such asGlobal Witness, a terrific activist group in London. Global Witnessand its allies are on the brink of persuading the developmentestablishment to give their agenda the priority it deserves.

SEBASTIAN MALLABY THE WASHINGTON POST 8 AUGUST 2005

THE META PROJECT

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COMBATING CONFLICT DIAMONDS

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CHILD MINER IN SIERRA LEONE:MOST MINERS OR 'DIGGERS'ARE THE POOREST OF THEPOOR, DOING BODY-BREAKINGWORK WITH NO CERTAINTY OFFINDING ANY STONES, BUT WITHTHE ILLUSION OF UNCOVERINGA LARGE STONE THAT WILLPROVIDE WEALTH FOR LIFE;NOT A COMMON RESULTKADIR VAN LOHUIZEN

practice and put forward recommendations foraddressing weaknesses. Our efforts have led toconcrete improvements in the scheme, helpingto further curb the trade in conflict diamonds.Another major indicator of the campaign’ssuccess this year has been the decision of theUnited States government, heavily influenced byGlobal Witness’ campaigning efforts, to improveits methodology for reporting diamond importsand exports. This decision was made in light ofthe fact that the US has been reporting importand export statistics in a manner incomparableto that of the other countries participating in theKimberley Process. The US decision to changetheir methodology is significant as statistics are avery important tool for detecting trading inconflict diamonds and without consistency it ismuch more difficult to analyse them effectively.As the largest diamond consumer in the world,the full compliance of the United States in theKimberley Process Certification Scheme isessential and their leadership is crucial to itsoverall success.

INVESTIGATING AND EXPOSING: COTE D’IVOIRE AND ARMENIAIn 2005, we carried out investigative work thatexposed serious loopholes in the KimberleyProcess, showing the extent to which conflict

GLOBAL WITNESS’ CONFLICT DIAMONDSCAMPAIGN, WHICH WAS LAUNCHED IN1998, HAS EXPOSED HOW THEINTERNATIONAL DIAMOND INDUSTRY’SLACK OF CORPORATE RESPONSIBILITYWAS FUELLING SOME OF AFRICA'S MOSTDESTRUCTIVE CIVIL WARS. SINCE THISTIME, GLOBAL WITNESS HAS BEENINSTRUMENTAL IN THE CREATION ANDIMPLEMENTATION OF THE KIMBERLEYPROCESS CERTIFICATION SCHEME, AMULTI-STAKEHOLDER INITIATIVECOMPRISING GOVERNMENTS, THEDIAMOND INDUSTRY AND CIVIL SOCIETYWHICH WORKS TO PREVENT CONFLICTDIAMONDS FROM ENTERING THELEGITIMATE TRADE.

WORKING TO FURTHER CURB THE TRADE IN CONFLICT DIAMONDSIn 2005, a key focus of our work was to advocatefor improvements in the effectiveness of theKimberley Process. We participated in monitoringmissions to Angola, Armenia, Belarus, China,Guinea, Namibia and Ukraine, to review hownational diamond control systems are working in

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DIAMONDS FOR DEVELOPMENTAnother focus for 2005 has been onencouraging the utilisation of diamonds as atool for development, with particular attention to the potential benefits of artisanal mining tolocal communities across Africa. In January2005 we co-hosted a meeting to discuss theissue of diamonds and development and as aresult the international Diamond DevelopmentInitiative (DDI) was officially launched at ameeting in Accra, Ghana in October. We have also participated in an initiative in SierraLeone to monitor the chain of custody frommine to export in five diamond cooperatives.This initiative provides on the ground experiencein relation to effectively tracking diamondsmined in the artisanal sector, in order to preventthem being used to fund conflict.

IN 2006, GLOBAL WITNESS WILLCONTINUE TO ENCOURAGE THE USE OFDIAMONDS AS A POSITIVE FORCE FORDEVELOPMENT, WITH A PARTICULARFOCUS ON STRENGTHENING CONTROLSOVER, AND REGULATION OF, THEALLUVIAL MINING SECTOR.

2006 will be a critical year for the diamondcampaign because the Kimberley Process willundergo a review, providing an opportunity forus to press for further strengthening and broad-based implementation of the scheme and formore monitoring of the diamond industry’scompliance with the agreement.

diamonds continue to enter the legitimatediamond trade. We released Making it Work: Whythe Kimberley Process Must Do More to StopConflict Diamonds, which showed how conflictdiamonds mined in rebel-held northern Coted’Ivoire are being smuggled into neighbouringWest African countries. We released this report atthe Kimberley Process annual plenary meeting inNovember 2005, and in December 2005 theUnited Nations Security Council imposed anembargo on the export of all Ivorian diamonds. We will advocate for the continuation of thisembargo until reforms have been implemented to ensure Ivorian diamonds are conflict-free. Alsodetailed in the Making it Work report were thefindings of an investigation in Armenia, a diamondcutting and polishing centre, to bring greaterattention to the need for more governmentoversight of the diamond trade in trading, cuttingand polishing centres, as well as the countrieswhere diamonds are mined.

We presented the findings of this investigation atthe Kimberley Process plenary meeting and aninterest in establishing best practices for diamondcutting and polishing centre has been expressedby a number of participating governments.

NGOs like Global Witness have beeninstrumental in documenting the trail ofillegal natural resource exploitation andholding politicians and officials to account.

HILARY BENN, UK SECRETARY OF STATE FOR INTERNATIONAL DEVELOPMENT

24 FEBRUARY 2006

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MAKING GOVERNMENTS ANDCOMPANIES TRANSPARENT

GLOBAL WITNESS STARTED THEINTERNATIONAL FOCUS ON REVENUETRANSPARENCY IN THE EXTRACTIVESSECTOR IN 1998 AND WE CO-LAUNCHED THE PUBLISH WHAT YOUPAY (PWYP) COALITION IN 2002.

The coalition now consists of over 300 NGOsfrom both the global North and South. PWYPled directly to the creation of the ExtractiveIndustries Transparency Initiative, or EITI, a UKgovernment led multi-stakeholder process todeliver revenue transparency. A core remit ofour current work is deepening and broadeningthe PWYP coalition and, as a member of the EITI International Advisory Group, ensuring thefull implementation of EITI as a binding andeffective process.

OPENING A SPACE FOR CIVIL SOCIETY PARTICIPATIONIn 2005 a set of six minimum criteria for genuineparticipation in EITI was agreed. One of thecriteria, heavily influenced by our campaigning,is the active engagement of civil society in thedesign, monitoring and evaluation of the EITIprocess, with the ability to contribute towardspublic debate on revenue transparency. Civilsociety’s access to information and their

involvement in applying domestic andinternational public pressure is crucial to thepromotion of revenue transparency. There is now a coherent network of PWYP platforms inSub-Saharan Africa, working towards a regionalstrategy. Throughout 2006 we will work to buildsupport for coalitions in Asia, the Middle Eastand North Africa and the Americas.

FOCUS ON THE USIn 2005, members of the PWYP US coalition and Global Witness successfully worked toensure provision in this year’s US ForeignAppropriations Bill that requires the US TreasuryDepartment to press the International FinancialInstitutions on resource revenue transparency,and to allocate funding to supportimplementation and civil society monitoring of the EITI. This reflects an increasing interestand awareness in Congress of the issues wework to address.

INVESTIGATING AND EXPOSING: INDONESIAIn 2005, we continued to investigate andexpose the individuals, groups and corporationsthat promulgate natural resource exploitation,and in turn corruption, entrenched povertyand conflict. In July, we published Paying forProtection: The Freeport Mine and the

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A SLUM IN LUANDA;WHEREVER THE MONEYFROM ANGOLA'S MANYLOANS GOES, IT ISN'T HERE.JEREMY HORNER / PANOS PICTURES

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I am proud to be associated with Global Witnessand the Publish What you Pay Campaign

GEORGE SOROS

FOUNDER AND CHAIRMAN OF THE OPEN SOCIETY INSTITUTE

AND THE SOROS FOUNDATIONS NETWORK.

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also admitted receiving “informal inquiries” fromUS government agencies about its payments, apositive development given our concern aboutpossible violations of the US Foreign CorruptPractices Act.

INVESTIGATING AND EXPOSING:THE REPUBLIC OF CONGO In December we published The Riddle of theSphynx: Where has Congo’s oil money gone?detailing a court judgment which describes howtop officials in the Republic of Congo have beenselling state oil at a cut price to privatecompanies owned by the head of the state oilcompany, with no evidence of the profits endingup in the public purse. The scandal raisestroubling questions about the sincerity of thegovernment’s promises to reform a corrupt

and mismanaged oil sector, at a time when the impoverished African country is asking the international community for debt relief. Weare advocating for international donors to putappropriate safeguards in place to ensuretransparent and accountable futuremanagement of Congo’s oil money beforeproviding any non humanitarian financial aid tothe country, in order to prevent the ruling elitebankrupting the country again.

THE TRADE IN TURKMEN GASThroughout 2005 we have undertaken research into the misappropriation of Turkmengas revenues in the context of instability informer Soviet countries and gas supplies toEurope. The findings of this research will bepublished in 2006.

Indonesian Security Forces. This report revealssuspicious payments that appear to have beenmade by Freeport McMoRan Copper & Gold Inc,which runs the world’s biggest gold mine,directly to Indonesian military and police officersin a conflict region where the security forceshave a track record of corruption and brutality. We are calling for these payments to beinvestigated under anti-corruption laws in theUnited States and Indonesia and are working inpartnership with a number of Indonesian civilsociety groups, who are using Paying forProtection to advocate for military reform. TheIndonesian government has subsequentlyannounced an investigation into the case andhas promised to regulate payments by privatecompanies to the military in future. Freeport has

A TIMBER YARD ON THE CHINESESIDE OF THE NEARBYBORDER WITH BURMA,WHERE HARDWOODHAS BEEN ILLEGALLYLOGGED. MARK HENLEY / PANOS PICTURES

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ENDING ILLEGAL ANDUNSUSTAINABLE LOGGING

BURMESE TIMBER - CHINESE DEVELOPMENT?In October 2005 we published A Choice forChina: Ending the destruction of Burma’snorthern frontier forests which exposed thestaggering extent of illegal timber exports toChina from northern Burma. As a direct result ofthis report, the Burmese and Chinesegovernments met in November 2005 to discusshow to bring the illegal cross-border trade undercontrol and shortly afterwards the Burmeseforest minister admitted for the first time that thecountry has a big problem with large-scaleillegal timber trading.

In the last months of 2005, the Burmese military regime appears to have banned loggingand timber transport in Kachin State, northernBurma. Questions remain, however, overwhether this is the start of a sustainableapproach to forest management or an attemptby the Burmese regime to undermine ceasefiregroups in Kachin State that derive much of theirincome from timber taxes.

THROUGHOUT 2006 GLOBAL WITNESSWILL BE ADVOCATING FOR THECHINESE GOVERNMENT TO STOPTIMBER IMPORTS FROM BURMA WITHIMMEDIATE EFFECT, AND TO TAKEACTION AGAINST THE COMPANIES ANDOFFICIALS INVOLVED IN THE ILLEGALCROSS-BORDER TRADE.

PROMOTING SUSTAINABLE FOREST MANAGEMENTA further focus for 2006 will be on ensuring that EU governments better support civil societyin Burma in promoting sustainable forestmanagement. In 2004, as a result of ouradvocacy, the EU changed its Common Position on Burma. The EU has for many years suspended non humanitarian aid and development programmes in Burma buthas now included an exemption to supportenvironmental protection and in particular,programmes addressing non sustainablelogging resulting in deforestation. In 2005, again as a result of our advocacy, the EU madethe role of China in the destructive logging ofBurma’s forests a priority issue for EU-Chinadiplomatic discussions. Whilst Global Witnesswelcomes these positive developments thereremains a need for the EU and internationalgovernments to take further action to addressthe issue of illegal and predatory logging inBurma, with a specific focus on in-countryinitiatives and donor coordination.

CAMBODIAAs a result of recurrent threats made to localstaff and their families, we were forced to closeour office in Cambodia in September 2005. Wehave not received any credible explanation fromthe Cambodian authorities as to why our staffhave been targeted in this way, although theredoes appear to be some connection with thepublication of our Taking a Cut: InstitutionalisedCorruption and Illegal Logging in Cambodia'sAural Wildlife Sanctuary report in November

2004. This report is a detailed documentation of Cambodia’s shadowy timber business, where corruption is so entrenched thatalmost everyone in a position to do so appearsto be taking their cut. As it names middling tohigh ranking officials, we anticipated a stronggovernmental reaction to the report and indeed, three months after its publication, the Cambodian authorities impounded 2,000 copies of it.

THE CLOSURE OF GLOBAL WITNESS’CAMBODIA OFFICE HAS TAKEN PLACEIN THE CONTEXT OF A WORRYING RISE IN THE LEVEL OF INTIMIDATIONTARGETED AT CIVIL SOCIETYORGANISATIONS AND MEMBERS OF THE PUBLIC BY THE CAMBODIANGOVERNMENT.

Intimidation has been directed particularly at individuals and groups addressinginstitutionalised corruption, land rights issues,illegal logging and human rights abuses.

PUSHING REFORMFrom September 2005 we have continued towork towards the reform of the forest sector inCambodia from our head office in London. Anotable success of the last few months hasbeen the World Bank finally acknowledging thatthe concessions system in Cambodia isirredeemable. For years the Bank has clung tothe notion that the mafia-style loggingsyndicates which have ravaged Cambodia’sforests can be reformed. Its recent u-turn camein the context of an investigation into the Bank’sforestry project in Cambodia by the InspectionPanel – the Bank’s internal ombudsman. Thisinspection was triggered by a request forinspection submitted by us and local activists.We will be following up on the Inspection

Panel’s findings on the Cambodia case, whichare due to be published in May 2006, to pushthe World Bank to undertake more wide rangingchanges to the way it approaches forestryprojects worldwide.

Meanwhile the Cambodian government andinternational donor community are continuing to use Global Witness’ recommendations onincreasing transparency in the management ofnatural resources as the basis for reform targets.These were reiterated as a primary element inthe 2006/07 reform agenda at the March 2006Consultative Group meeting of Cambodianofficials and donor representatives.

SEEKING SOLUTIONSThroughout 2006 we will seek to broaden the scope of our Cambodia campaign. As thefundamental obstacle to meaningful progress inforestry reform (and arguably to reform of any kind) in Cambodia is the consolidation of a political elitewhich is totally unaccountable, rather than seekingsolutions to forest management problems in isolation,we will use our investigations into Cambodia’s forestsas an entry point into broader issues of corruption,human rights, democracy and development. At thesame time, we will link our forest management andtimber trade work more closely to related initiatives we are pursuing at regional and international levels.

BURMAOUR WORK ON BURMA, WHICH WASLAUNCHED IN 2003, HAS DOCUMENTEDTHE $250 MILLION A YEAR ILLEGALTIMBER TRADE CARRIED OUT BY THEBURMESE REGIME AND THE COUNTRY’SCEASEFIRE GROUPS.

The objectives of the campaign are to exposeillegal and unsustainable logging in Burma and tofacilitate international support for local andinternational initiatives to prevent predatory naturalresource exploitation in the country. For years,timber revenue and the political support gainedfrom granting logging concessions havemaintained Burma’s highly oppressive militaryregime’s grip on power and have exacerbatedconflict in ethnic minority areas. The timber trade islinked to increased criminality, human rightsabuses and escalated rates of HIV/AIDS. A primaryfocus of our campaign is calling on the Burmesegovernment to demonstrate a real commitment tothe sustainable development of Burma’s forestsand to the long-term interests of the localpopulation. Over the last year we have increasinglyexpanded our advocacy targeted at Chinesepolicymakers, calling for them to take a moresustainable approach to cross-border timberimportation from Burma.

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It is widely recognised that countries highlydependant on natural resources are significantlymore likely to experience civil war. Timber anddiamonds provided the funding and logistics forrecent warfare in Liberia and Sierra Leone andnatural resources are instrumental in the currentconflict in Cote d’Ivoire.

Since 2000, we have campaigned successfullyto break the nexus between the timber anddiamond industries in Liberia and conflict andregional instability. We successfully lobbied forthe United Nations Security Council to imposesanctions on the export of Liberian timber in2003, and as a consequence drasticallyreduced the warring parties’ ability to exploit thecountry’s forests to fund conflict. Less than sixweeks after the imposition of the timberembargo, former president Charles Taylor leftLiberia for exile in Nigeria and a Comprehensive Peace Agreement was signed. Since the warended in 2003 we have advocated for themaintenance of sanctions until sufficientreforms are put into place to prevent timberand diamonds from again being used to fundregional war.

The election of a new president, Ellen Johnson-Sirleaf, in November 2005 presents Liberia withan historic opportunity to pursue policies thatwill bring about peace and prosperity. To ensurethat natural resources are used to contribute tothe country’s development, rather than beingexploited to fund or fuel conflict, we will seizethis opportunity to develop proposals for wide-ranging reforms in the natural resource sectorin Liberia and to engage in dialogue with thenew government on their implementation.

INVESTIGATING AND EXPOSINGNATURAL RESOURCE EXPLOITATIONThroughout 2005, we have gathered extensiveevidence to demonstrate the extent to which theillegal Liberian timber and diamond tradescontinue to pose a threat to good governanceand stability in the region. This evidence waspublished in two reports. Timber, Taylor, Soldier,Spy, published in June, detailed the continuedthreat that Charles Taylor posed to West Africathrough his ongoing contact with key militaryand government figures in Liberia and hisinfluence over a number of Liberian politicalparties. An Architecture of Instability, presentedto the incoming Liberian Government, the

United Nations Security Council andinternational donors in December 2005,demonstrated how a lack of employmentopportunities was causing ex-fighters to driftinto natural resource extraction and warned that an upsurge in the illegal extraction ofnatural resources could lead once again to huge amounts of revenue ending up in thehands of warlords.

PREVENTING FUTURE RESOURCE FUELLED WARSThroughout 2006, we aim to work in cooperationwith the new Liberian government and tocontinue to monitor the natural resource industryin order to ensure that the same individuals andcompanies who perpetuated conflict in the pastare not granted new concessions. In the short-term, the continued enforcement of UNsanctions will be an important way of keepingup the pressure for reform and goodgovernance of the industry. We will also beconducting comprehensive research into therole of natural resources in exacerbating conflictin Cote d’Ivoire and formulating specificrecommendations to the UN Security Counciland other key actors aimed at ending resourcefuelled wars in West Africa once and for all.

The Presidentwishes me toconvey to youappreciation for the importantwork and rolethat GlobalWitness hasplayed inbringing to theattention ofLiberians and the world themismanagement by previousgovernments ofour country’sresources.

LETTER TO GLOBAL WITNESS

ON BEHALF OF HER EXCELLENCY

PRESIDENT ELLEN JOHNSON-SIRLEAF

FEBRUARY 2006

SOLDIERS OF THE FORCES NOUVELLES PARADING THROUGHBOUAKÉ, NORTHERN COTE D'IVOIRE:GLOBAL WITNESS INVESTIGATIONS HAVESHOWN HOW CONFLICT DIAMONDSMINED IN FORCES NOUVELLES HELDAREAS OF THE COUNTRY AREENTERING THE GLOBAL MARKET.SVEN TORFINN/ PANOS PICTURES

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On a policy level we have also made significantprogress. IFM has gained wide support in thecourse of 2005 and a recent indicator of thiswas the long-awaited Briefing Note 9 from theEU Forest Law Enforcement Governance andTrade (FLEGT) process, through which the EUhas made it clear that Independent Monitoringwill be a core component of their legalitylicensing system for timber products.

SUPPORTING CIVIL SOCIETYIn 2006, in addition to delivering further pilotmissions, Global Witness will maintain a keyfocus on ensuring the role of civil society inholding their governments to account aroundforest issues. IFM training workshops areplanned in Indonesia, Central America and West Africa.

INDEPENDENTFORESTMONITORING

As well as a ceremony in May to celebrateGlobal Witness’ three directors receiving theGleitsman International Activist Award and theorganisation’s 10th anniversary, 2005 saw GlobalWitness hosting a reception at London’s NationalTheatre (June) and an event in Washington DCto mark a year since the opening of our officethere (October).

The National Theatre was putting on aperformance of The UN Inspector, a modern day satire on endemic corruption adapted fromGogol's masterpiece The Government Inspector.We contributed factual elements to the play,briefed the cast on corruption issues in someformer Soviet states, wrote programme notes and invited guests to a performance of the play, followed by a reception.

In Washington, we hosted a reception tohighlight to distinguished guests, includingpoliticians, funders and the media, the significantextent to which we are now raising awarenesswithin the US government about the importanceof adopting policies to address resource revenue transparency.

In 2005 we received grants from a number ofnew funders including: the Swedish InternationalDevelopment Agency, the Rufford Maurice LaingFoundation, The Diana, Princess of WalesMemorial Fund, Global Opportunities Fund,HIVOS (Humanist Institute for Co-operation withDeveloping Countries), and the NationalEndowment for Democracy.

RAISING OURPROFILE

IFM EXPANSION: HONDURASIn Honduras, we have conducted a pilot IFMproject, carried out in conjunction with theHonduran Commission for Human Rights(CONADEH). Field missions have documentedillegal activities in timber harvesting, transportand processing, as well as corrupt officialpractices. A civil society group has reported that,since the monitor has been active in Honduras,there has been a change in attitude of forestoperators, who now pay more attention torespecting the law. The impact of the projecthas also been acknowledged by thegovernment, which has expressed a stronginterest in seeing it continue and increasing itsscope to cover the whole country and becomea long-term initiative. The international credibilitythat Global Witness brings has been singled outas a key element in the success of the project.

EXPLAINING AND PROMOTING IFMAnother major achievement of 2005 was theproduction of a definitive Guide to IndependentForest Monitoring, which has been widelydistributed to international and local NGOs,government agencies and other organisationsworking in forest control and monitoring. Theguide aims to meet this increasing demand forIFM around the world by building theprofessionalism of monitors and potentialmonitors as well as those who fund and hostIFM. It provides a detailed step-by-stepdescription of IFM design, emphasising theofficial-yet-independent status of the monitorand covering practical aspects of fieldinvestigations and the production of authoritativeand objective mission reports.

SINCE 1999, WE HAVE PIONEEREDINDEPENDENT FOREST MONITORING(IFM), AS A TOOL TO COMBAT ILLEGALLOGGING AND IMPROVE SUSTAINABLESYSTEMS OF FOREST LAWENFORCEMENT. THE ULTIMATE GOAL OF IFM IS TO ENABLE THEPOPULATIONS OF THE COUNTRIESWHERE IT IS IMPLEMENTED TO BENEFIT MORE EQUITABLY FROM THESUSTAINABLE USE OF THEIR FORESTS.

2005 saw the conclusion of Global Witness’role as Independent Monitor in Cameroon. As a result of our work in Cameroon over fiveyears, the forest ministry was able to levypenalties on logging companies breaking thelaw totalling over US$7.5 million, a significantcontribution to state coffers and a strongdeterrent to illegal logging. Building on thissuccess, and at the request of state officialsin each country, throughout 2005 weconducted scoping studies for initiating IFM inPeru, Ghana, Honduras and Mozambique.

LABELLED LOG,INDONESIA: GLOBAL WITNESSWORKS TO SUPPORTLOCAL COMMUNITIES IN HOLDING THEIRGOVERNMENTS TOACCOUNT OVER FOREST MANAGEMENT.FRED HOOGERVORST / PANOS PICTURES

THE UN INSPECTOR MANUEL HARLAN

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AS WE ENTER OUR SECOND DECADEWE ARE ACTIVELY SEEKING TO EXPANDOUR FUNDING BASE TO MEET THE EVERINCREASING FINANCIAL DEMANDS OF A GROWING ORGANISATION.

We rely entirely on raising voluntary income to meet the costs of our activities and it is onlythrough the vision and forethought of our donorsthat we are able to achieve what we do.

Our operating budget for 2005/06 is £2.6 million and we have grown at an average rate of 25% per year for the last four years. If we areto reach our objectives for the next five years,we need to raise in the region of £20 million between 2007 - 2012.

Currently, around 43% of our income comesfrom private trusts and foundations, 40% comesfrom statutory sources such as the Dutch,Swedish and UK governments and 17% is madeup of revenue from development NGOs (likeOxfam and its European equivalents), corporatedonors and individuals.

INCOME £

Grants from Global Witness Trust 602,429Grants from governments 563,013Grants from trusts and foundations 525,619Grants from Non-governmental Organisations 224,481Other income 91,828Bank Interest 3,397

TOTAL INCOME 2,010,767

EXPENDITURE £

Combating Conflict Diamonds 197,318Making Companies and Governments Transparent 314,686Meta Project 102,535Conflict Commodities and West Africa 220,199Ending Illegal Logging - Burma 118,289Ending Illegal Logging - Cambodia 163,937Natural Resources in the Democratic Republic of Congo 204,151Independent Forest Monitoring (IFM) 201,631Cameroon ForestMonitoring Project 131,819i2 Project 197,559Other Projects 193,609Systems and Communications 5,677Governance Costs 23,307Fundraising and Publicity 114,486

TOTAL EXPENDITURE 2,189,203

INCOME £

Grants from governments 143,633Grants from trusts and foundations 445,000Grants from Non-governmental Organisations 78,794Online and individual donations 7,265Bank Interest 1,935

TOTAL INCOME 676,627

EXPENDITURE £

Combating Conflict Diamonds 77,295Making Companies and Governments Transparent 30,000Meta Project 95,000Conflict Commodities and West Africa 86,882Ending Illegal Logging - Burma 29,988Ending Illegal Logging - Cambodia 59,986Natural Resources in the Democratic Republic of Congo 34,640Forest Policy 20,000i2 Project 133,636Systems and communications upgrades 100,000Governance costs 5,959

TOTAL EXPENDITURE 673,386

Global Witness is not a membershiporganisation and we do not spend largeamounts of money on publicity or mailing outfundraising appeals and updates. We are proudof the fact that our fundraising, marketing andpublicity costs represent only 6% of our totalexpenditure and our administration and centralcosts represent only 15% of total expenditure.

For the last ten years we have been successfulin securing the necessary funds required tounderwrite our campaign activity. As the majorityof these funds are project allocated and timebound however, income and expenditure hasnever taken us beyond an annual break-evenpoint. We are actively trying to build a workingreserves base and new programmes fund inorder that we can plan our work, develop newinitiatives, and react quickly to critical newcampaigning needs.

The summarised financial statements oppositecontain information from the Global WitnessTrust and Global Witness Limited auditedaccounts for the period 1st December 2004 –30th November 2005. The accounts can beviewed in full at:

GLOBALWITNESS’FUNDING

FINANCIALBREAKDOWN

www.globalwitness.org/donate/financial_disclosure.php

LOGGING COMPANYBULLDOZING ROADSTHROUGH THE RAINFORESTIN CAMEROON: UP TO 1.6BILLION PEOPLE WORLDWIDEDEPEND IN WHOLE OR IN PART ON FORESTS FOR THEIR LIVELIHOODS.SVEN TORFINN/ PANOS PICTURES

CLEARING A FOREST IN THE DEMOCRATICREPUBLIC OF CONGO: GLOBAL WITNESS ISCAMPAIGNING FOR SAFEGUARDS TO LIMITLOGGING IN THE DRC TO SUSTAINABLE LEVELS.NICK ROBINSON / PANOS PICTURES

Global Witness Limited is a non-profit company limitedby guarantee and incorporated in England (CompanyNo. 2871809). The activities of Global Witness Limitedinvolve campaigning and political lobbying and as suchit is not eligible for charitable status.

The Global Witness Trust is a UK registered charity(Charity No.1071946). As a charity it is able to receivetax efficient gifts, such as gift aid.

GLOBAL WITNESS LIMITED GLOBAL WITNESS TRUST

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OUR FUNDERS

GLOBAL WITNESS LIMITED

Canadian Department of Foreign Affairs and International Trade

Ethical Investors

The Gleitsman Foundation

Global Opportunities Fund

Humanist Institute for Co-operation with Developing Countries (Hivos)

i2 Limited

IUCN - The World Conservation Union

The National Endowment for Democracy

Netherlands Ministry of Foreign Affairs

Open Society Institute

Oxfam GB

Oxfam Novib

The RH Southern Trust

Swedish International DevelopmentCooperation Agency (Sida)

UK Department forInternational Development (DFID)

GLOBAL WITNESS TRUST

Ajahma Charitable Trust

Concern Worldwide

The Diana, Princess of Wales Memorial Fund

The Doen Foundation

Mary Webb Trust

The Rufford Maurice Laing Foundation

The Sigrid Rausing Trust

The Staples Trust

Trócaire

US Agency for International Development

GLOBAL WITNESS WOULD LIKE TO EXPRESS OUR DEEPTHANKS TO ALL THOSE WHO SUPPORTED US IN 2005

WE WOULD ALSO LIKE TOTHANK ALL OUR INDIVIDUALAND ANONYMOUS DONORSWHO ARE NOT LISTED HERE

MONROVIA, LIBERIA: RESOURCE FUELLED WARSDESTROY HOSPITALS, SCHOOLS,ELECTRIC GRIDS AND ROADSAND LEAVE MILLIONS HOMELESS,DISABLED AND ORPHANED.TIM HETHERINGTON / PANOS PICTURES

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