The Board agreed that Timor-Leste has made satisfactory progress in implementing the 2016 Standard.

Decision on Timor-Leste's Validation

Decision reference: 2018-15 / BM-39
Decision basis: 2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

12 February 2018

Board decision

The EITI Board agreed that Timor-Leste has fully addressed the corrective actions from the country’s first Validation. Consequently, Timor-Leste has made satisfactory progress overall in implementing the EITI Standard.

The EITI Board commends Timor-Leste for addressing the corrective actions by improving the level of disclosures in EITI Reports and by enabling more meaningful participation by the civil society and companies.

The Board also welcomed progress in mainstreaming EITI implementation, are encouraged the Multi-Stakeholder Working Group (MSWG) to consider further the opportunities to improve government and company disclosures.

The Multi-Stakeholder Working Group (MSWG) should continue to ensure adherence to the EITI Principles and Requirements. Where concerns are raised about whether implementation of the EITI has fallen below the required standard, the EITI Board reserves the right to require the country to undergo a new Validation. In accordance with Requirement 8.3.b, stakeholders may petition the EITI Board if they consider that Timor Leste’s status should be reviewed. Otherwise, in accordance with Requirement 8.3.d.i, Timor-Leste will be revalidated in three years, with the next Validation commencing on 14 February 2021.

Background

Timor-Leste was accepted as an EITI Candidate in February 2008 and was designated as compliant with the EITI Rules in July 2010.

The first Validation of Timor-Leste commenced on 1 July 2016. On 11 January 2017, the EITI Board found that Timor-Leste had made meaningful progress in implementing the 2016 EITI Standard. The Board established seven corrective actions related to:

Industry engagement (requirement 1.2);
Civil society engagement (requirement 1.3);
MSG governance (requirement 1.4);
Disaggregation (requirement 4.7);
Data quality (requirement 4.9);
Mandatory social expenditures (requirement 6.1); and
Outcomes and impact of implementation (requirement 7.4).

The Board asked Timor-Leste to address these corrective actions to be assessed in a second Validation commencing on 11 January 2018.

Timor-Leste’s second Validation commenced on 11 January 2018. The Validation has been conducted in accordance with a procedure agreed by the Validation Committee and per the 2018 work plan. Specifically:

The MSG was advised regarding the commencement of Validation, and invited to contact the Secretariat with any comments and concerns regarding EITI implementation and progress in addressing the corrective actions;
The EITI International Secretariat undertook a desk review, assessing the progress made in addressing the seven corrective actions established by the EITI Board. The desk review followed the standardised procedure for data collection and stakeholder consultation as per the Validation procedures. The Secretariat’s draft assessment concluded that Timor Leste has addressed all of the corrective actions and has made “satisfactory progress” on the corresponding requirements.
The draft assessment was sent to the Timor Leste Multi-Stakeholder Working Group (MSWG) for comment on 19 January.
Following receipt of these comments, the Secretariat’s assessment will be finalised for consideration by the EITI Board via the Validation Committee.
The Validation Committee reviewed the Secretariat’s assessment and the feedback from the MSG. The Committee made a recommendation to the Board on 30 January 2018.

Implementation of the 2016 EITI Standard

As of: 13 February 2018

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Download full Validation report

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
The government is committed to the EITI and relevant government representatives are part of the multi-stakeholder group (MSG).
1.2Company engagement
The issues regarding disaggregated data and confidentiality agreements were addressed during the preparation of the 2014 and 2015 EITI Reports. Discussions during MSWG meetings subsequent to the first Validation show that the companies are continuously engaged in the EITI process and are willing to adhere to the principles of the EITI. Even though the constituency has reserved the right to require confidentiality agreements if it becomes necessary, it appears that the companies are willing to forego these agreements as long as they are satisfied with the credibility of the Independent Administrator (IA). To ensure this, companies were closely involved in the selection of the IA for the 2014 and 2015 EITI Reports.
1.3Civil society engagement
Civil society has made efforts to improve the quality of their participation in the EITI process as shown by the contributions to the discussions of the EITI Report, annual progress report and mainstreaming, consultations with local CSOs, regular participation in MSWG meetings and efforts to improve the process for selecting representatives to the MSWG.
1.4MSG governance
It appears that the CSO representatives have implemented the activities in the capacity building plan and have sought external assistance from government and international partners to improve their understanding of the sector and of revenue management. Civil society has also addressed the issue of language barrier by pushing for the use of Tetum in all meetings and documents. Consequently, they have been able to participate in the technical discussions related to EITI reporting such as the sustainability of the petroleum fund, the need for disaggregated data for social expenditures and local content, and the scope of beneficial ownership disclosures.
1.5Work plan
The work plan has clear objectives linked to national priorities for the extractive sector, as well as more detailed actions and timelines. Costing is missing for some items, and implementation is slightly behind schedule.
Licenses and contracts
2.2License allocations
The 2013 EITI Report and the Supplementary Report provide sufficient detail about license allocations including the financial and technical criteria and deviations applicable to PSC 11-106. This requirement was not applicable in 2012 as no licenses were transferred or awarded.
2.3License register
Although coordinates are not all available online, ANPM (National Petroleum and Mineral Authorities) has confirmed that they can be obtained without restriction. ANPM has provided reasonable justifications for why the date of application for the licenses is not available. On balance, the Secretariat’s assessment is that it would be disproportionate to consider this requirement unmet, and that there has been satisfactory progress with meeting this requirement. It is recommended that ANPM updates its online license map to include these details for future PSC awards.
2.4Policy on contract disclosure
The 2013 EITI Report refers to contract summaries found in other sources such as the NPA’s website and “Jornal de Republica”. The 2016 EITI work plan also lists contract transparency as a priority. The EITI Report comments on actual practice on contract transparency, and government representatives have clarified the government’s policy on contract disclosure.
2.1Legal framework
Comprehensive disclosure of relevant laws, regulations and fiscal regime in both the 2012 and 2013 EITI Reports.
2.5Beneficial ownership	Not assessed
There is no evidence that the multi-stakeholder group has discussed this topic in any detail.
2.6State participation	Not applicable
The 2013 EITI Report states that this requirement is not applicable in Timor-Leste as state-participation does not yet give rise to material revenues. However, some information related to Timor Gap has been provided.
Monitoring production
3.1Exploration data
The 2013 EITI Report provides an overview of the sector, including a brief overview of one exploration activity.
3.2Production data
Production volumes are not disaggregated by commodity, and production values by commodity are not included in the EITI Report but ANPM (National Petroleum and Mineral Authorities) subsequently provided this information on their website.
3.3Export data
Export values are not disaggregated by commodity, and export volumes by commodity are not included in the EITI Report but ANPM (National Petroleum and Mineral Authorities) subsequently provided this information on their website.
Revenue collection
4.3Barter agreements	Not applicable
There was no mention of barter and infrastructure payments in the 2013 and 2012 EITI Reports. However, the 2015 Annual Activity Report confirms that barter and infrastructure arrangements are not applicable.
4.6Direct subnational payments	Not applicable
There was no reference to subnational direct payments in the 2013 and 2012 EITI Reports. However, the 2015 EITI Annual Activity Report confirms that subnational direct payments are not applicable.
4.7Disaggregation
All revenues in the 2014 and 2015 EITI Reports are disclosed to the levels required by the Standard. Further, the data is disaggregated by individual project. Consequently, the corrective action on Requirement 4.7 has been addressed.
4.9Data quality
The Secretariat is satisfied that the 2014 and 2015 EITI Reports were produced in accordance with the ‘agreed upon procedure for EITI reports’ as outlined in the standard Terms of Reference for Independent Administrators developed by the EITI Board. There was a concerted effort from the MSWG to address the deficiencies in the reporting process, particularly in ensuring that the templates were developed in consultation with the IA. The 2014 and 2015 EITI reports also now clearly explain the assurance procedures for companies and government. Concerns regarding the credibility of the IA have been addressed, with the MSWG members confirming that they perceive the current IA to be credible and competent.
4.1Comprehensiveness
For both 2013 and 2013 EITI Reports, disclosures of payments and revenues are comprehensive.
4.2In-kind revenues	Not applicable
The 2013 and 2012 EITI Reports confirm that in-kind revenues were not applicable in 2012.
4.4Transportation revenues	Not applicable
The 2013 and 2012 EITI Reports include disclosure of a pipeline fee. Given that the fee is not material relative to total government revenues from the sector, the International Secretariat’s initial assessment is that this requirement is not applicable.
4.5SOE transactions
The 2013 Report discusses Timor GAP’s (the national oil company) financial relationship with the government, as well as its management of Tasi Mane project and provides all disclosures related to transactions between the government and Timor GAP.
4.8Data timeliness
The 2013 EITI Report was published by the deadline of 31 December 2015. The national multi-stakeholder group is encouraged to explore opportunities for publishing more timely EITI data.
Revenue allocation
5.1Distribution of revenues
The 2012 and 2013 EITI Reports disclose how revenues are allocated.
5.2Subnational transfers	Not applicable
The 2014 Annual Activity Report confirms that sub-national transfers are not applicable.
5.3Revenue management and expenditures	Not assessed
In response to public interest in spending, the national multi-stakeholder group has included transparency in public expenditure, including investment decisions as one of its priorities in the 2015 and 2016 work plans. There are references to how to access further budget and expenditure data in the 2015 Annual Activity Report.
Socio-economic contribution
6.1Mandatory social expenditures
The Secretariat is satisfied that the type and value of mandatory social expenditures have been sufficiently explained and disclosed for all relevant companies in the 2014 and 2015 EITI Reports to the levels required by the Standard. Extensive discussions on the type and nature of social expenditures of companies were had during the International Secretariat’s meeting with the MSWG in April 2017. The inputs provided by ANPM and the companies during that meeting clarified what should be considered mandatory social expenditures in Timor-Leste and these were accordingly reflected in the 2014 and 2015 EITI Reports.
6.2Quasi-fiscal expenditures	Not applicable
State-participation in the extractive sector does not yet give rise to material revenue in Timor-Leste both for the 2012 and 2013 EITI Reports.
6.3Economic contribution
Most of this data has been provided, however estimates of informal sector activity and data on extractive industry revenue as a percentage of total government revenue should be disclosed in the future.
Outcomes and impact
7.2Data accessibility	Not assessed
TL-EITI does not yet provide EITI data in open data formats. There are considerable efforts underway to mainstream transparency in government systems.
7.4Outcomes and impact of implementation
The Secretariat is satisfied that the MWSG has exerted efforts to assess impact and outcomes from their EITI implementation as documented in their 2016 Annual Progress Report. Consequently, the corrective action on Requirement 7.4 has been addressed.
7.1Public debate
The national multi-stakeholder group has taken steps to ensure that the EITI Report is comprehensible, actively promoted and publicly accessible. Through the organisation of dissemination events and workshops, TL-EITI has ensured that the EITI has also contributed to public debate.
7.3Follow up on recommendations
The national multi-stakeholder group has taken steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and to consider the recommendations for improvements from the Independent Administrator.