By Negbalee Warner, Head of the LEITI Secretariat, and Eddie Rich, Deputy Head of the EITI International Secretariat.
Liberia's natural resource wealth has long been at the centre of the country's conflicts and tumultuous history, as well as the root of much of its corruption. Despite an abundance of iron ore, diamonds, gold, timber and rubber, Liberia was for fourteen years ravaged by a civil war that devastated the nation and brought it near the bottom of the UN's Human Development Index. When the war ended and general elections were held in 2005, the new government led by President Ellen Johnson Sirleaf vowed to ensure national growth, development and reconciliation, through better transparency in how revenues from the extractives sector are managed. Liberia accordingly joined the Extractive Industries Transparency Initiative (EITI), and established the Liberia EITI (LEITI) as a multi-stakeholder body responsible for implementation of the EITI in the country.
The EITI sets a global standard for transparency in oil, gas and mining. Launched in 2002 and now endorsed by many international bodies and institutions, including the United Nations General Assembly, the World Bank, and the OECD, the EITI aims to strengthen governance by improving transparency and accountability in the extractives sector through the full publication of company payments and government revenues from oil, gas and mining. The standard is overseen by a coalition of governments, companies and civil society both at an international level and in each of the 30 countries in which it is being implemented. The EITI has a robust yet flexible methodology that ensures that a global standard is maintained throughout the different implementing countries. The EITI Board is the guardian of that methodology. Implementation itself, however, is the responsibility of individual countries.
Conscious of the role of corruption, mismanagement and distrust in fuelling the war, the Liberian Extractive Industries Transparency Initiative (LEITI) has made a special effort to be inclusive – covering the mining and oil sectors and other main export sectors including rubber and forestry (the first country to do so). There have been extensive efforts to raise awareness of the initiative across the whole country. LEITI has conducted intense consultations with communities on the results of the country’s first EITI Report, including town hall meetings, radio programmes, newspaper articles, street theatre, and posters of the data in every public building in Liberia. The Report is quite revealing, and has generated quite a contagious interest among many Liberians in and out of Liberia.
But what does Liberia’s first ETI Report actually reveal? The Report contains the various taxes and contributions paid to the Government by mineral and forestry companies and the corresponding revenues the Government receives from the companies. The amount of the taxes are presented on a company-by-company basis that matches reported payments against reported receipts, thereby showing clearly any discrepancy between what a company reports as paid and what an agency of the Government acknowledges as received. The value of discussions about the Report cannot be overemphasized, especially in the context of Liberia where information of this sort is hardly ever in the public domain.
Firstly, the taxes and other contributions to government that the companies pay are an important contribution to the creation of sustainable development and stability in Liberia. However, the extent of this contribution is not always recognised, even within the direct community in which they operate. The Report increases the knowledge and understanding of communities and their residents relative to the true contribution of the extractive companies they see around them on a daily basis.
For example, the Luxemburg-based global mining giant, ArcelorMittal, was a subject of criticism, negative publicity and suspicion from Liberia citizens when an earlier billion dollar Mineral Development Agreement it signed with the former transitional government of Liberia was rejected by the current government as not being in the interest of Liberia. And therefore the agreement was subject to renegotiation. The LEITI Report shows that ArcelorMittal met all their tax and royalty requirements and that nearly US$24.0 million received from them by the Government constituted three-quarters of the total tax and royalties from the oil, gas, mining and forestry sector in the country during the period July 1, 2007-June 30, 2008.
It is significant that about US$7.0 million of the total amount paid by ArcelorMittal is for the direct benefit of the counties/communities where the company has its operations. The agreement provides that ArcelorMittal will pay US$3.0 million annual to these communities during the period of its operations in Liberia. The LEITI Report therefore represents an independent confirmation that the agreed benefits to the designated communities have been paid by ArcelorMittal, and that the Government of Liberia has also acknowledged receiving the payment on behalf of the communities.
Mr Joe Mathews, CEO of AreclorMittal-Liberia says that ‘The EITI is playing a key role in our relations with stakeholders, helping us to connect with the communities where we operate and with the government. Participation in the EITI also helps us to uphold the strong principles of corporate responsibility we believe in through supporting fair and transparent business practices and ensuring that proper accounting is made of all payments in our operations in Liberia’.
As previously noted, the Report also identified discrepancies between what the companies say that they have paid, and what the Government reports as received payments. Most of these were of a minor nature, likely to have arisen because of differences between companies and Government in how they classified payments and revenues. However one significant unresolved discrepancy concerned a withholding income tax payment of over $100,000 by AmLib, which the Government denied receiving. A subsequent investigation discovered that the alleged payment was not officially received by the Government. AmLib identified the discrepancy to an errant and suspicious payment on their side, and have agreed to pay the fund amount to the Government; over 75% of the amount has already been paid by AmLib with the balance due by end of September, 2009. AmLib is presently taking appropriate legal action and shoring up its financial systems. AmLib representatives have attended many of these town hall meetings themselves and explained this issue directly to the communities and what it is doing to prevent such a thing happening again.
The Report also highlighted a number of unexplained and suspicious payments and some companies that had failed to report at all. This created a significant amount of interest and discussion within the communities. Who is operating the mine down the road? What and who are they paying? Why was this payment made? How is this having an impact on our community? How can we raise our concerns with government and with the companies themselves?
Through the LEITI these questions are being discussed openly and frankly with the companies and government in a safe, non-combatative environment. They have also used the opportunity to raise questions about how the money is being allocated and used, and whether the communities are receiving a fair return for their resources.
In July 2009, following the publication of this first Report, the LEITI Act came into force. The Act requires that all government agencies and extractive companies comply with the Liberia EITI process. It goes far beyond the core EITI requirements, requiring that the payments by individual companies and that operating contracts and licenses are published and reviewed. This has reassured citizens and companies that all the extractive companies operating in Liberia from China, Malaysia, and elsewhere, will operate on an open and level playing field, and that there is a forum where stakeholders can voice their concerns. A company refusing to report will now be subject to criminal proceedings.
A new report for 2008-09 is being prepared and will be released later this year.
Building trust in a resource-rich post-conflict environment like Liberia may take years, but LEITI is taking the first bold steps in creating an environment for reconciliation. As President Ellen Johnson-Sirleaf herself says ‘Trust is the greatest asset a country can have. LEITI represents an important step in advancing our efforts to engage with stakeholders, to talk about our resources, and to build trust in our communities’.