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EITI to a new level

A quick update for those that are new and old to the EITI

Many in the Northern hemisphere are returning from holidays and a new term begins. This is in many ways also true for the EITI. Earlier in the year, a revised and expanded EITI Standard was agreed at our biennial global conference in Sydney. Shortly thereafter the UK Government put transparency high on the agenda when the leaders of the G8 met. France, Italy and the UK followed the US leadership among G8 countries, committing to implement the EITI. With 39 countries implementing the EITI, and another dozen or so preparing to do so, the EITI is making rapid progress toward becoming a global standard. So far, the more than 400 people that around the work full time on EITI have ensured that over a trillion USD of payments by companies to governments for natural resource extraction has been made public through independent reporting.

After all of the buzz in recent months, the remaining part of our year will largely be devoted to rolling out the revised EITI Standard. In the new standard the EITI has evolved into a stronger platform for wider reforms. For those of you who are new to the EITI, the original EITI model had two key elements: an EITI report covering what companies paid and governments received, sometimes with a lot of detail about each companies’ payments, sometimes with only a summary number; and a national EITI commission, or EITI multi-stakeholder group (MSG), including representatives from government, companies and civil society. The MSG is critical, as it establishes how the EITI will be implemented, based on national objectives and characteristics, and the EITI’s global requirements.

The EITI Standard 2013

What the EITI requires today is significantly different. Through the adoption of the revised EITI Standard, all of the EITI’s stakeholders have agreed that the EITI should do more. Firstly, there were a couple of minimum requirements and weaknesses that needed to be addressed. In some reports, the quality of the data was poor, the information was outdated, and the level of detail was inadequate.

Workplan – where it all starts

It all starts with the EITI workplan. Based on the EITI Standard, the in-country group, the MSG, should discuss and agree what the EITI should cover. For sure, there are some things that have to be included, such as tax payments, but there is a wide scope for addressing other issues that are considered important. The workplans should also address why the EITI is being implemented. The EITI is relevant in different ways in different countries. Is it implemented to address specific concerns about say, corruption, lack of trust, or to attract foreign direct investment.

The revised EITI standard requires:

  • Improved reliability of data. The Independent Administrator tasked with compiling the EITI report, and who is almost always an auditor, will have to assess the comprehensiveness and reliability of the data received from the companies and governments. The government must also disclose all payments, even smaller ones that may not be reconciled.  
  • More detail, including reporting of payments at the company level or further broken down.  
  • 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 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.
  • Information about oil and gas sales. Implementing countries are required to disclose additional details regarding the revenues from the sale of the state’s share of production.

In order to make the EITI Reports easier to understand and use, the EITI Standard introduces a new requirement that EITI Reports must contain basic contextual information about the extractive sector. 

This includes:

  • Disclosure of production figures,
  • Disclosure of ownership of the license holders and the way licenses are issued,
  • A description of revenue allocations into state, local or other accounts,
  • A description of the fiscal regime, and
  • The EITI encourages contract transparency, and a pilot is underway on the disclosure of beneficial ownership.

It may all seem like a lot for implementing countries to do. But let us remember that the revised Standard is a reflection of what is already good practice in many EITI implementing countries. It is also important to note that not all of this information needs to be included in the EITI report itself. In many cases it will be sufficient to reference other sources.

It will take some time before the revised Standard is applied in full in all 39 implementing countries. The EITI Board recently agreed the detailed arrangements about how the new rules will come into force. It is however clear that by the end of 2013 all implementing countries will have to have a workplan for 2014 approved setting out how the MSG plans to develop the EITI to meet the demands of local stakeholders and to ensure compliance with the revised global requirements.

We will therefore all be working closely together in preparing these workplans. It is great to hear that already a number of EITI MSGs are having detailed discussions about these workplans. The Secretariat is working hard to meet the growing demand for advice and guidance, drawing on the best practices that implementing countries are putting in place. A number of technical working groups have been established to developed detailed guidance. There will also be a number of regional meetings to promote peer learning, including in Astana and Abidjan in October.

Implementing the revised EITI Standard will be a challenge for us all, though more importantly, it is an opportunity. We have a model for transparency and improved governance that seems to work. Now we have the opportunity to really put it to work and make it relevant.