What's the point of transparency?

To improve use of resource revenues, EITI needs use its voice as well as its rules, writes Diarmid O'Sullivan.

"Ensuring that EITI stimulates public debate" is one of the topics that will be discussed at the EITI Global Conference in Sydney. In this blog post Diarmid O'Sullivan starts the discussion by arguing the need for a rethink of the EITI's role in the efforts to improve governance of natural resources.

The EITI Conference in Sydney will mark a critical moment for the EITI. It has extended its reach to more than 30 countries and seen its rules influence legislation in the United States, European Union and several EITI countries. Yet a 2011 evaluation found that the effects of EITI reporting, so far, have not had the wider improving effects on the governance of natural resources which many people had hoped for.

The new EITI Standard is the response to this mixed record. My research on the EITI in the last year as an Open Society Fellow, published in a report entitled “What’s the Point of Transparency?” concludes that the new rules are a step in the right direction, but there needs to be a rethink about how the EITI relates to the governance of natural resources.

The report is based on research in Liberia and Timor Leste and on my time on the EITI Board between 2009 and 2012, representing Global Witness and the civil society constituency.  The report suggests that the EITI should probably be seen as a useful contributor to the improvement of natural resource governance, not a transformative one in itself, and needs to act on the basis that:

The role of EITI reporting will often be to delineate problems that will need to be solved by other means. For example, reports can show that state agencies are not properly accounting for large sums in revenue, or that mining companies are paying very low rates of tax. But the EITI does not assess whether or not governments actually act on such findings, which means that Compliance in itself is not a strong indicator of wider improvements in natural resource governance.

The EITI is right to widen the scope of its reports because the more of the extractive sector they cover, the more problems of governance they can diagnose. Ultimately, the impact of the EITI will depend on the capacity of concerned citizens to interpret its reports, and the willingness and capacity of governments to undertake reforms which the reports show to be necessary. These factors will vary widely from one country to another and it needs to be acknowledged that in some, they may be so weak that the EITI can expect to have little effect on the quality of governance in the short term. 

So to maximize its influence, the EITI needs to make much more use of its power to confer or withdraw reputation, by creating new incentives for EITI countries to enact reforms which the reports reveal to be necessary and using its own voice to call for such reforms. The status of Compliance should be downgraded to ‘compliance with the minimum requirements’ to make way for new incentives. These could include, for example, the reservation of government seats on the EITI Board for countries where EITI reports are shown to be contributing to wider reforms: since most EITI countries are not from the West, this could also help with the problem that the EITI is often seen as Western-dominated.

The transparency which the EITI is helping to create is a historic breakthrough in a part of the world economy often characterized by secrecy and ruthless exploitation. But it is also just a first step in a long and difficult effort to use the revenues from natural resources (which are often worth much less, per capita, than many people assume) to improve the lives of citizens in EITI countries. The EITI needs to contribute as much as it can to that effort, using its voice as well as its reporting rules.

Diarmid O'Sullivan is an Open Society Fellow studying the effects of the EITI on the governance of natural resources, with particular reference to Liberia and Timor Leste. He previously worked for eight years as a campaigner at Global Witness, the London-based non-governmental organisation, and spent of these three years as an alternate and full Member of the EITI Board.