As 2021 dawns, it is clear that the COVID-19 crisis will continue to have a severe long-term impact. Even if the health pandemic is brought under control, oil and commodity price volatility will have enduring effects on revenues and economic activity in many EITI implementing countries. In view of these continued challenges faced by resource-rich countries in 2021 and beyond, the EITI’s strategic framework seeks to ensure that EITI implementation continues to be relevant, responsive and cost-effective.
A core objective of the EITI – expressed in its founding principles – is to generate public understanding of government revenues to inform realistic options for sustainable development. Revenue from the extractive sector can make a difference in the ability of governments to fight the COVID-19 pandemic. The 55 countries implementing the EITI have reported over USD 2.71 trillion of total government revenue from the sector. Yet revenues from oil and gas are much reduced. And corruption risks remain present, especially with diminished economic opportunities.
As 2021 progresses, attracting investment and maximising revenues from extractive resources for development will remain high priorities for many countries. These will require transparency to be maintained and reinforced. The EITI requirement on contract disclosure – effective as of 1 January – offers a major opportunity for taking this agenda forward.
Opportunities for impact
The EITI’s strategic framework for 2021 and 2022 envisages six shifts – opportunities for the EITI to be used by countries to improve extractive sector governance through and beyond the current crisis – while remaining true to the EITI Principles that underpin its mission.
1. Energy transition
The energy transition is gaining momentum and EITI data can be used to inform public debate and policy decisions on transition pathways. The EITI will support implementing countries and multi-stakeholder groups in building awareness of the transition to come, making use of data that is available and working with other countries and other partners to achieve sustainable outcomes.
2. Addressing corruption risks
Addressing corruption risks is core to the mandate of the EITI. Yet the link between transparency and the fight against corruption is not always explicit. The EITI has the potential to contribute to anti-corruption efforts, drawing on existing mechanisms such as EITI reporting and multi-stakeholder group oversight.
Some countries are already using EITI implementation to address corruption risks in the extractive sector, for example through licensing transparency in Argentina, Ghana, Kyrgyz Republic, Madagascar and Mexico. The United States recently approved legislation on defence spending that enshrines beneficial ownership transparency and in effect bans anonymous shell companies operating in the country. A major new project in collaboration with Open Ownership will seek to translate political commitment for beneficial ownership transparency into sustained implementation of this complex reform agenda.
3. Domestic revenue mobilisation
Reducing opportunities for corruption contributes directly to increased revenue mobilisation. The 2019 EITI Standard requires more ambitious and detailed disclosures which will strengthen the relevance of EITI data for tax collection. Bolstered by enhanced support from the International Secretariat and partners such as the IMF, these requirements can help ensure that extractive revenues are maximised for public benefit rather than private gain.
4. Informing investment decisions
Investment decisions in the extractives sector are increasingly informed by environmental, social and governance (ESG) metrics. The provisions of the EITI Standard contribute to the evolving framework for the assessment of ESG performance. The EITI’s recently launched guidelines on commodity trading transparency, for example, offer a consistent approach to the disclosure of substantial and complex commodity trades, to enable progress towards a more transparent and accountable sector.
5. Open data
Ensuring the data is accessible and usable through open data platforms will increasingly become the norm for EITI implementation in 2021 and beyond through systematic disclosure. Currently, around one fifth of disclosures against the EITI Standard is reported at the source through government and company systems.
Proactive disclosure of timely, usable and accessible data will gradually replace retrospective reporting to inform decision making, foster independent analysis and promote public debate. Alongside this transition, we see an opportunity for the role of multi-stakeholder groups to evolve from collecting data to promoting the use, analysis and dissemination of data.
6. Measuring impact
The challenges of sustaining funding for extractive governance – which yields longer term benefits – cannot be underestimated in the immediacy of the fight against COVID-19. To continue to attract financial support and promote learning, we need to ensure that we measure the EITI’s impact and enable implementing countries to do so. The EITI Board has endorsed the commissioning of an independent evaluation in 2021. We will be taking forward this review in the coming year.
A flexible and responsive EITI
In May 2020, the EITI Board introduced flexible measures to EITI reporting requirements. These were designed to enable countries to focus on publishing information that supports understanding of potential pathways for managing the triple crisis. Ten implementing countries intend to use these revised requirements in reports for 2020 and the EITI Board has agreed an extension of flexible reporting requirements through 2021.
The Board has also agreed a new approach to Validation, the EITI’s quality assurance mechanism. Validation has been successful as a tool for enabling countries to improve extractive governance. Corrective actions that arise from Validation provide a focus for multi-stakeholder groups and governments to work together on policy and disclosure. While the Validation process will maintain its rigour, the new approach is designed to support countries better in addressing pressing governance challenges and using the EITI as a tool to improve extractive sector management.
From commitment to action
Over 70% of country-level EITI activity is funded by implementing governments. Yet a recent survey reveals potential funding gaps of up to 40% in 12 EITI countries. The International Secretariat will continue to work with the World Bank and other development partners to help close these gaps and ensure a sustainable approach to funding.
Country-level work plans have been a substantial feature of EITI implementation and a key requirement for countries wishing to join and implement the EITI. While current circumstances make planning challenging, the development of country-level work plans has been an opportunity to deploy the EITI in a new and exciting way. The 2021 work plan of the International Secretariat will seek to support countries in these efforts through the prism of EITI’s new strategic framework.