Philippines seeks to use the EITI to drive reforms.
“Is there such a thing as too much transparency?” a college student asked me during one of Philippine EITI’s (PH-EITI) outreach activities.
While seemingly academic, the question’s significance is that it triggers a more important one: to what end are we promoting transparency?
Even prior to producing our first EITI Report, stakeholders were already aware that transparency in the Philippine extractive sector should not be an end in itself. Instead, the goal should be transparency that translates to accountability and drives reform: the starting point towards that goal is to address gaps in existing systems that the report has identified.
In our first report, we (the MSG and Independent Administrator) have found such gaps and are addressing these by providing recommendations to the Mining Industry Coordinating Council (MICC), a high-level body tasked to implement reforms in the mining sector. The Council directed government agencies to develop concrete action plans based on PH-EITI’s recommendations.. The recommendations relate to both improving how the EITI works in the Philippines, but more importantly, on how the natural resources are governed.
The following reforms are already underway as a result of our recommendations:
Full disclosure of information of local government units’ (LGUs) shares of national wealth.
In the Philippines, local governments are entitled to 40% of the total collections from extractive companies in their locality. To facilitate the transfer of LGUs’ shares, the collecting agencies issue a certification to the Department of Budget and Management (DBM), which is then tasked to release the shares to the LGUs. However, local governments currently do not have a clear picture of how much they receive from the extractive companies, because the money is collected by regulatory agencies, transferred to a central agency, lumped with other payments and then distributed to local governments.
This makes it impossible to identify which portion came from mining companies. This prevents LGUs from quantifying the exact contribution from mining companies and consequently limits their ability to assess the value, impact and desirability of mining activity in their area. It also hinders them from forecasting the contribution of the sector, which could help them in budget preparations.
To address this gap, the MSG recommended that the DBM disaggregate the share allocated to LGUs from the national budget according to the different types and sources of payment. Specifically, DBM should inform LGUs about the names of the companies in their locality, the tax collections from each company, type of revenue, date of payment, place of extraction and computation of the LGU share.
Acting on this recommendation, DBM will now disclose the above information to local governments to enable them to see how much they are receiving from each company—a vital input to their local development plans and exercise of local taxing powers.
Speeding up the distribution of LGU shares
Even though there have been efforts to speed up the transfer of the money to LGUs, it is still often delayed. This is due to the many steps in the distribution process requiring the approval and certification of various agencies.
The EITI Report shows that of the 32 LGUs covered, only one LGU reported figures that tally with DBM figures. The discrepancy may be attributed to the delay in the distribution of shares.
The EITI contributed to the discussions to solve this matter during forums and MSG meetings where the underlying causes of delay were extensively discussed and brought to the attention of key government officials. In a meeting with EITI Chair Clare Short in June 2015, DBM Secretary Butch Abad relayed its plan to implement a system of direct transfers of shares from the Bureau of Treasury to the LGUs. This scheme was included in the President’s budget message for 2016, and was announced by DBM to local stakeholders during the recent PH-EITI roadshow. For the succeeding releases, LGU shares will no longer pass through the DBM, effectively cutting one layer in the process.
A new method of direct transfer is expected to lead to a more speedy disbursement of money belonging to LGUs. The EITI process has clearly contributed to this outcome.
Integration of EITI data in existing local government reporting systems
Gathering data on revenue from LGUs for the first report proved to be difficult due to distance, time and resource constraints. In addition, some LGU data are not yet in open formats, let alone digitized.
To simplify the process, the Bureau of Local Government and Finance (BLGF), as part of improving their existing electronic reporting system, piloted a project integrating EITI data in their regular reporting requirements. This means that information that the EITI requires to be disclosed shall be part of the LGUs usual reporting requirements so that all information can now be obtained from one online portal of the BLGF.
This significantly reduces the complexity of data gathering from individual LGUs and ensures the credibility of the data. It further assures that the data shall be complete, regularly updated, and produced in an open format. More importantly, since LGUs are legally mandated to submit their reports to BLGF, participation of all LGUs in the EITI process is now guaranteed.
Too much transparency?
While it is early to evaluate the impact of EITI in the Philippines, the value of the first report was that it was able to surface issues and gaps that, when fully addressed, could lead to a better-governed sector.
This is transparency at work: if this is the result of “too much transparency” then maybe, in this instance, too much is exactly what we need.