Challenge one: Integrating the EITI into government systems

In the first of a set of contributions, Clare Short reflects on her time as EITI Chair.

After five years working extensively with the EITI and visiting many countries that are using the EITI to help improve the management of their extractive industries, I conclude that the EITI has achieved a lot in recent years. But given that our aim is to improve the management of these resources for the benefit of the people of resource rich countries, much remains to be done. 

The EITI has evolved from a narrow set of rules focused on revenue reconciliation, to a Standard covering all aspects of the extractive industry value chain, from licensing and contractual arrangements, to the operation of state owned enterprises and improved accountability on revenue management and expenditure. In 2015, 37 of the 49 member countries produced EITI reports. It is a very welcome development that each has a focus on the country’s own priorities. This reporting has led to more informed debate and some clear reforms in implementing countries. Attitudes and practices on issues like contract transparency, beneficial ownership and commodity trading have evolved rapidly; and trust and cooperation have been built so that there is more agreement on the reform agenda. 

Over the weeks leading up to the conference, I will reflect on the four challenges that I consider particularly important in the period to come. I begin today by commenting on the need to better integrate EITI reporting into transparent and robust government systems, rather than duplicate reporting that is already in place. I will then address how we must do better in turning recommendations into reforms; how we can make progress in reporting of who owns the companies and who benefits; and lastly the need for better participation by implementing governments, parliaments and citizens.

Annually around USD 50m is spent on EITI implementation across the world. This covers hundreds of billions of dollars of revenue and other information about the extractive sector in our 50 member countries. The reports cover much more than they previously did and are more comprehensible to interested citizens. 

However we must not fall for the temptation of imposing increasingly burdensome requirements on our member countries, and generating more and more elaborate EITI reports that are used by very few people.  The EITI is not an end in itself but a means to achieve reform and improved accountability in our member countries. Some EITI reports have become absurdly detailed, others unacceptably expensive compared to the size of the sector and payments made in country. The era of much reduced commodity prices is imposing new challenges that make the reform agenda even more urgent and EITI must help to drive it forward.

Requiring the duplication in EITI reports of information that is readily available elsewhere is indefensible.  In Norway, the reconciliation process has not revealed a discrepancy for the past six years.  No one doubts the figures, so requiring an expensively procured EITI report is not a good use of time or money.  In Timor Leste, the government makes monthly disclosures online at the website of the National Petroleum Authorities (http://www.anp-tl.org/), it therefore makes no sense to produce an EITI report repeating the figures at a later date.  Other countries such as Kazakhstan, Mongolia and Sierra Leone, have made progress in developing on-line repositories of data, publishing the required information in a more timely, accessible, and attractive manner than in long EITI tabular reports.

The EITI must seek to ensure that transparency is meaningful. Obviously reports should continue to to demand independent information when it is not otherwise available, but where information and systems are reliable, reports should point to the information, summarise its significance and discuss the challenge of managing the resources for the benefit of the people. Embedding transparency into national systems will help to entrench permanent transparency and make the EITI process less expensive and more useful.  

A successful EITI must not be measured by the number and length of reports and the amounts spent on implementation, but by whether the process has strengthened government and company transparency and accountability.  

The agreement reached in Sydney to ensure that EITI reporting covered the whole value chain was essential to ensure that transparency drives reform and improved accountability.  But there is a danger now that countries are being asked to deliver more and more elaborate, difficult and expensive reports.  In the next period, there is a need for a strong focus on encouraging countries to integrate reporting into transparent government systems.  The EITI must listen and learn from the experience of member countries and not seek to dictate from on high without taking full account of on the ground experience.