Towards a better EITI Standard

Clare Short outlines 5 of the proposed improvements.

By Clare Short, EITI Chair

Next year will mark ten years since the first EITI Conference, where the EITI Principles were agreed. These principles state that wealth from a country's natural resources should benefit all its citizens and that this will require high standards of transparency and accountability.

At this year's EITI Conference, an improved EITI Standard will be adopted. This will be a significant moment in the EITI's history: it will bring us many steps further towards realising the aspirations that were first laid down in the EITI Principles.

We have have worked together on a revised Standard over the last year. There is an emerging consensus on changes that will ensure higher quality EITI Reports, simpler implementation and use of the EITI as a platform for wider reforms. Although there are some issues that have not been resolved, the EITI Board have come close to agreement in principle on a wide range of proposals. 

These proposals can be found in the Board Paper Building on Achievements. The minutes from the Board’s last meeting, in Lusaka in October, contains a good record of agreements so far.

I would like to draw attention to five of the changes - out of many - that we are working on:

1) Making the EITI Reports more understandable

At present, most EITI Reports are difficult to read and interpret. They often require that the reader has significant technical understanding and knowledge about the country's extractives sector and government accounting.

The Board has therefore agreed that reports in the future should contain contextual information. The revised Standard is likely to require that EITI Reports include information about the contribution of the extractive sector to the economy, production data, a description of the fiscal regime, an overview of relevant laws, and a description of how extractive industry revenues are recorded in national budgets. It is also proposed that countries should provide an overview of licenses and license holders.

2) Making EITI more relevant in each country

EITI needs to be better grounded in a national dialogue about natural resource governance.

In the revised EITI Standard, it is proposed that stakeholders in each country should agree a work plan with objectives and activities that are related to domestic reforms and priorities, thus strengthening the link with the EITI Principles. Countries will be encouraged to articulate what they want to achieve with the EITI and set out how they want to achieve it. The scope of EITI implementation and links to other reforms should be tailored to contribute to these desired objectives.

3) Better and more accurate disclosure

Most countries disclose what each company is paying to the government, though the EITI standard only requires these figures in aggregate.

The proposal is that we should require that EITI Reports disclose the payments broken down by each company, and by revenue stream. EITI reports will in the future also be made available electronically.

4) Recognising countries that go beyond the minimum

The Validation system, which tests whether countries implement the EITI in accordance with its Rules, is currently not functioning adequately, nor does it recognize countries that perform well.

With a proposal for more frequent and nuanced validations, I believe that the EITI will, to a greater extent, recognise countries that exceed the minimum requirements, and create incentives for more innovative use of EITI to the benefit of the country.

5) A clearer set of rules, with room for adaptation

With its principles, criteria, requirements and policy notes, the EITI Rules can be hard to understand. Many of the requirements are overlapping and repetitive.

The revised EITI Standard will be restructured, in order to condense the current 21 requirements and policy notes to a shorter and more coherent set of requirements.

When the EITI Board meets, in February in Oslo, we will consider final detailed proposals and we aim to shortly thereafter finalise the revised Standard. We appreciate and take very seriously the comments, expertise and views that have been put forward throughout the process.

You can leave a comment below, or if you prefer send by email to strategy@eiti.org. All comments and feedback will be carefully considered.

Comments

3 Comments
Dear Sir, Thank for your share of information regularly. Here, May I request deeply, that is would like to study the case study similiarity with Myanmar Situation. I am working in Energy Sector, and therefore, I request you for share of information such as case study; how to ? Regards
Dear Aung, Please contact drogan@eiti.org, she is the country manager for Myanmar.
Transparency Value Cycle Understanding Transparency Value Cycle-TVC is prerequisite for better accurate and comprehensive “Transparency Reporting” in the extractive industry in general and petroleum (oil and gas) in particular. TVC simply implies that all and every “investments”, “revenues” and “payments” done by or/and received by each involved “partners” should be disclosed in full, accurate and verifiable. In petroleum industry the concept of TVC is basically aims at tracing and accounting for all “resource and cash flows” pertaining to this industry through three logically semi-consecutive, connected and cyclical flows of main components. The first component is about the “Payments made by IOCs”. These cover “all” cash payments, investment and tax deductions in the host country, made before contracting, upon contracting and during the entire duration of the contract period. The second component covers “Resource flowcharts and revenues.” This covers two flows generated as results from IOCs involvement above mentioned: revenues generated from domestic consumption (in local currency) and those generated from export revenues (in foreign currencies). The third component deals with “Payments by host country to IOCs.” This covers all types and categories of payments to IOCs depending on the nature of governing contracts. These include investment recovery; fees or share in production, overhead charges, etc. Such payments could be made in cash and or in-kind as stipulated in the related contracts. The above three components cover considerable list of items that are very essential to ensure transparency of all “flows” related to petroleum industry but basically the actual investment, related payments and generated revenues. Two basic requirements are needed to structure the country’s EITI report on the premises of TVC: First, proper understanding of the actual contracting modalities and legal frameworks that govern the upstream petroleum sector in the concerned country; and second proper understanding of the upstream petroleum industry and its linkages with the domestic sectors and international oil market. The above are prerequisite for all those involved in preparing the national EITI report especially the “Reconciler” and the “Validator”. Needless to say the national EITI report is much more than “accounting” or “auditing” report. Ahmed Mousa Jiyad, Development Consultancy and Research, Norway. Mou-jiya@online.no 15 March 2013

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