Charting the next steps for transparency in extractives
When the over 1000 delegates from 95 countries meet in Sydney later this month, it will be at a defining moment for the emerging global coalition to ensure transparency of natural resources, known as the EITI.
Ten years since the first EITI Conference
It will be ten years since the very first time governments, companies, and civil society came together to agree the EITI Principles. They agreed that since a country's natural resources belong to all its citizens, all citizens should be able to see benefits from them. Ensuring this requires 'high standards of transparency and accountability', they further said. Developing these high standards of transparency and accountability has been in the very core of the EITI's mission ever since.
The main driver for these high standards have been the stakeholders in the 37 implementing countries that require full disclosure of government revenues from their extractives, as well as establishing a national commission to oversee the process and stimulate a public debate about how the country’s natural resources should be managed. Many countries have reason to be proud of how they have innovated beyond the core requirements of the EITI. For those of you who will be able to go to the EITI Conference in Sydney, I encourage you to spend time at the EITI National Expo where all the countries will showcase some of their progress.
A better EITI Standard
It is based on the experiences from these first countries that the international EITI Board and the EITI’s partners have spent two years consulting and working together to improve the EITI Standard. The revised Standard encourages more relevant, more reliable and more usable information, as well as better linkages to wider reforms. It is also important that we put in place a minimum standard that is not too onerous for countries facing a major reform challenges but which also encourages continuing improvement whatever the starting point.
EITI Chair Clare Short outlined the proposed revisions in a blog post earlier this year. Now that the Standard is close to being agreed, let me outline in further detail some of the changes to the EITI Standard over the previous edition of the EITI Rules:
- Each country's EITI sets its own objectives. All EITI implementing countries already develop an 'EITI work plan'. In the revised EITI Standard, a country's work plan will have a much more significant role. EITI multi-stakeholder groups (MSGs) in each country are required to set their own implementation objectives. These should articulate what they want to achieve with their EITI, and how they plan to realise these objectives. This ensures that the EITI is well-grounded in the national dialogue about how their natural resources are governed.
Presenting the context. In order to make the EITI Reports easier to understand and use, the revised EITI Standard introduces a new requirement that EITI Reports must contain basic contextual information about the extractive sector. This includes
- ensuring disclosure of production figures,
- ensuring disclosure of ownership of the license holders, with disclosure of ultimate beneficial ownership being encouraged,
- a description of how revenue allocations into state, local or other accounts,
- a description of the fiscal regime, with disclosure of production contracts being encouraged.
- New disclosure requirements. Several of the EITI reporting requirements found in the previous EITI Rules have been strengthened and the EITI Standard introduces new reporting requirements in a number of areas:
- Comprehensive and accurate disclosures. It is required that the EITI Report contains full government disclosure of all revenues received from the extractive industries. The reporting procedures have also been strengthened, requiring the Independent Administrator and the MSG to assess prevailing auditing practices and agree procedures for assuring the data to be disclosed in the EITI Report. These changes seek to ensure that the EITI Report provides a complete picture of the revenues received, and that the EITI Report more clearly addresses the reliability of the data.
- Disaggregated reporting. The data in the EITI report must now be presented by individual payment type, company and government agency and by project. Project level reporting is to be consistent with requirements in the US and EU.
- State-owned companies. The revised EITI standard requires more transparency in of state-owned companies (SOEs) activities. SOEs will now report on financial transfers between SOEs and other government entities, revenues collected on behalf of the government, including revenues from the sale of the state’s share of production, and any expenditure on social services, public infrastructure or fuel subsidies executed by the SOE. SOEs are also required to disclose their level of ownership in any extractive companies operating in the country.
- Subnational transfers. In many countries, most of the revenues from natural resources accruing at subnational levels are not derived from company payments to local government entities, but from transfers from the central government. Depending on the revenue-distribution frameworks in place, these transfers can be a considerably larger source of revenue for subnational entities than taxes and fees collected at local levels. The revised EITI standard requires that such transfers are reported where mandated by law and where material.
- Social expenditures by companies. Where companies are legally or contractually required to make social contributions, these must be disclosed.
- Payments from transit. Where countries collect significant revenues from the transportation of oil, gas and minerals, such as pipelines, the government is required to disclose the revenues received.
- Annual activity reports. The requirement to publish annual activity reports is no longer limited to Compliant countries, but is now a requirement for all implementing countries. It is foreseen that countries will report on progress with meeting the EITI requirements as well as efforts to achieve the objectives set out in their work plans.
- Improved EITI Validation procedures. Changes to the EITI quality assurance process aim to improve the quality, efficiency and consistency of Validation assessments. Validation will now be procured and managed by the International Secretariat rather than by implementing countries. Countries will undertake Validation more frequently, with Compliant countries being revalidated every three years as opposed to every five years.
- Simplified and restructured. Part one 'Implementation of the EITI Standard' includes: the EITI Principles, which have not been modified. Part two now includes the seven EITI Requirements, which set out the expectations of implementing countries in a clearer and more logical way. The requirements incorporate the majority of the provisions found in the EITI Criteria, Requirements and Policy Notes in the 2011 EITI Rules. The Validation Guide has been revised to reflect the agreement that Validation will be administered by the International Secretariat. The Civil Society Protocol - identical to Policy Note 6 in the 2011 Rules – has been retained. Part three on Governance and Management sets out how the EITI is governed and includes: slightly amended Articles of Association; the EITI logo policy; the EITI openness policy; and slightly amended draft EITI constituency guidelines.
- Making the data machine-readable. With the wealth of new data in future EITI Reports as well as through the new disclosure rules in the EU and the US, this vast amount of data will be of little use unless it is made available in open and accessible formats. In the revised EITI Standard, countries are encouraged to make their data available in machine-readable formats so that citizens, journalists and analysts can use the information to analyse, visualise and compare it with other data sources.
You can now download the EITI Standard at http://eiti.org/document/standard.
I look forward to meeting many of you in Sydney, and to discussing how we can ensure that this revised EITI Standard leads us closer to the transparency and accountability that are necessary to ensure that natural resources benefit all.