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The EITI Board agreed that Albania has made meaningful progress in implementing the 2016 EITI Standard, with considerable improvements.

Decision number
2019-44
Decision basis
2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences
15 October 2019

Board decision

Following the conclusion of Albania’s second Validation of 2019, the EITI Board concluded that Albania has made meaningful progress overall in implementing the EITI Standard, with considerable improvements across individual requirements.

The EITI Board agreed that Albania has partly addressed the corrective actions from the country’s first Validation. Consequently, Albania has made meaningful progress overall with implementing the EITI Standard, with considerable improvements across several individual requirements.

The Board recognised Albania’s efforts to use the EITI as a diagnostic tool of government’s public finance management of extractive revenues. Public reporting of subnational transfers of royalties has generated significant public interest and demonstrated the importance of the EITI in providing a platform for multi-stakeholder oversight. Albania’s EITI implementation is also recognised as having provided a key centralised source of information on the extractive industries, in some cases being the key source of data on licenses and contracts.

The Board nonetheless encouraged Albania to further enhance public disclosures, particularly related to license allocations, state participation in oil and gas and the comprehensiveness and reliability of disclosures, including at the subnational level. While civil society had made welcome efforts to better structure the constituency’s coordination, the Board encourages the constituency to further expand its membership to ensure representation of the diversity of civil society active in Albania.

The Board welcomed Albania’s consideration of opportunities to improve government and company disclosures through systematic disclosures of data required under the EITI Standard.

The Board has determined that Albania will have 12 months, i.e. until 17 June 2020 before a third Validation to carry out corrective actions regarding civil society engagement (1.3), license allocations (2.2), state participation (2.6), comprehensiveness of disclosures (4.1), direct subnational payments (4.6) and data reliability (4.9). Failure to achieve meaningful progress with considerable improvements across several individual requirements in the third Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, Albania’s MSG may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

Background

Albania’s second Validation commenced on 13 February 2019. In accordance with Requirement 8.3.c, the International Secretariat assessed the progress made in addressing the 12 corrective actions established by the EITI Board following Albania’s first Validation in 2017. In accordance with the Validation procedures, the draft assessment  [English | Albanian] was sent to Albania’s Multi-Stakeholder Group (MSG) on 26 April 2019. Comments [English], together with a set of annexes [English], were received on 17 May 2019 and the assessment was finalised [English | Albanian] for review by the Validation Committee. Following review by the Validation Committee on 29 May 2019, a recommendation was finalised for consideration by the EITI Board. Additional background documentation in available here.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Albania. Progress in addressing these corrective actions will be assessed in a thrid Validation commencing on 17 June 2020:

  1. In accordance with Requirement 1.3.e, civil society stakeholders including but not limited to members of the MSG must be substantially engaged in the design, implementation, monitoring and evaluation of the EITI process, and ensure that it contributes to public debate. The civil society constituency is encouraged to implement all provisions of its Code of Conduct in practice, including those related to regular coordination and canvassing of views, and ensure that adequate outreach is undertaken towards all CSOs with potential interests in EITI implementation.

  2. In accordance with Requirement 2.2, Albania is required to publicly disclose a comprehensive description of the process for transferring or awarding licenses in mining, oil and gas, including the specific technical and financial criteria assessed. Where licenses are awarded through a bidding process, the government is required to disclose the list of applicants (including non-winning applicants).

  3. In accordance with Requirement 2.6, Albania should publicly clarify the rules and practice related to Albpetrol’s ability to raise third-party financing, any changes in state participation in the year under review and any outstanding loans and guarantees from either Albpetrol or the state to companies in the mining, oil and gas sector. Albania may wish to consider improvements in the accessibility of Albpetrol’s published audited financial statements as a means of clarifying the practice of financial relations between Albpetrol and the state.

  4. In accordance with Requirement 4.1, Albania should ensure that the materiality threshold for selecting companies in future EITI reporting ensures that all payments that could affect the comprehensiveness of EITI reporting be included in the scope of reconciliation, and ensure that all material companies participate in EITI reporting. Albania may wish to consider revisiting its materiality threshold for selecting mining companies to strike a balance between the comprehensiveness of disclosures and the quality of reporting. The MSG may wish to consider a sampling approach, which would allow these payments to be investigated without creating an unreasonable reporting burden.

  5. In accordance with Requirement 4.6, Albania is required to ensure that all company payments to subnational government entities, when material, are disclosed and reconciled. Albania is encouraged to publicly disclose a more detailed explanation of the types of local taxes collected by local governments and to enhance its outreach to local governments ahead of future EITI reporting and reconciliation of material direct subnational payments.

  6. In accordance with Requirement 4.9.a, the EITI requires an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. In accordance with requirement 4.9.b.iii and the standard Terms of Reference for the IA agreed by the EITI Board, the MSG and IA should develop and agree quality assurance procedures for Albania’s EITI reporting, based on a review of audit and assurance practices in the year under review. Albania should ensure that the IA provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested information. Any gaps or weaknesses in reporting to the IA must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness and reliability of the report. Albania should ensure that the IA provides an assessment of comprehensiveness and reliability of the (financial) data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided. In accordance with requirement 8.3.c.i, the MSG should develop and disclose an action plan for addressing the deficiencies in the reliability of reporting documented in the initial assessment.

Scorecard for Albania: 2019

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

The government is committed to the EITI. A senior individual has been appointed to lead on the implementation of the EITI and relevant government officials are represented on the MSG.

1.2Industry engagement

Oil, gas and mining companies are actively and effectively engaged in the EITI process, both as providers of information and in the design, implementation, monitoring and evaluation of the EITI process. Hydro-power companies participate on a voluntary basis.

1.3Civil society engagement

There is no evidence of any legal, regulatory or practical barriers to civil society’s ability to engage in EITI nor to their ability to freely operate, communicate and cooperate with the broader constituency. The civil society constituency developed an action plan for addressing the deficiencies in civil society engagement documented in the first Validation, but did not disclose it until March 2019. Implementation of the project only began in December 2018. While there is evidence that mechanisms for the constituency’s coordination and canvassing of opinions have recently been established, leading to more regular ongoing contacts and renewed representation on the AlbEITI MSG, the number of organisations involved in the constituency appears too narrow. There is growing evidence of civil society input to the MSG’s technical discussions, outreach and dissemination, although this appears to be entirely focused on subnational royalty transfers rather than other EITI-related issues.

1.4MSG governance

The MSG has been formed and includes self-appointed representatives from each stakeholder group with no suggestion of interference or coercion, even if nominations procedures for industry had yet to be publicly codified at the commencement of Validation (13 February 2019). The constituency guidelines for nominating industry representatives were published on the websites of AlbEITI and the industry association (FIAA) after the commencement of Validation, in March 2019. CSO members of the MSG are operationally and in policy terms independent from government and companies. Information on nominations procedures is publicly available. The ToR for the MSG addresses the requirements of the EITI Standard and stakeholders have not highlighted any significant deviations from the ToR in practice. Meetings are convened with sufficient advance warning and MSG members generally appear to have sufficient time to review documents. Attendance of the large majority of MSG members is consistent. The MSG does not practice a per diem policy.

1.5Work plan

The 2016 AlbEITI work plan is in line with provisions of Requirement 1.5. It has clear objectives linked to national priorities for the extractive sector, as well as more detailed actions and timelines. The execution of the current work plan appears to be on track.

Licenses and contracts

2.1Legal framework

The 2015 EITI Report includes an overview of relevant laws, government entities, fiscal terms in the mining, oil and gas sector, the degree of fiscal devolution and brief commentary on current reforms.

2.2License allocations

The 2016 EITI Report and mining, oil and gas license registers published on the AlbEITI website identify the mining, oil and gas licenses awarded and the license transfers in 2016. While descriptions of the general processes for awarding and transferring licenses are publicly available for both mining and oil and gas, there is no evidence that the detailed technical and financial criteria for mining, oil and gas license awards and transfers are available to the public. Although the 2016 EITI Report highlights the MSG’s assessment of non-trivial deviations in mining, oil and gas license awards, it does not describe the MSG’s approach to assessing non-trivial deviations in license transfers in 2016. The report is transparent about legal constraints hindering disclosure of non-winning bidders for mining licenses awarded through licensing rounds, although this could be a significant challenge to Albania’s adherence to Requirement 2.5.

2.3License register

The 2016 EITI Report and mining, oil and gas license registers published on the AlbEITI website provide all of the information listed under Requirement 2.3.b (including license-holder name, dates of award and expiry, commodity(ies) covered and coordinates), albeit not the dates of application for licenses held by material companies. The report is transparent about challenges in sourcing dates of application. The International Secretariat’s view is that the lack of publicly-accessible dates of application is a marginal issue that does not affect Albania’s progress in meeting the overall objective of transparency in license information.

2.4Policy on contract disclosure

The 2016 EITI Report clarifies the government’s policy on contract disclosure in the oil and gas sector, but not in the mining sector. Stakeholder consultations confirmed that the government had a pro-disclosure policy in practice in the mining sector. While there is little evidence that the MSG has taken steps to codify this government policy for the mining sector, the Secretariat’s view is that the government’s pro-disclosure policy for mining contracts in practice, combined with the small number of contracts in the mining sector (three), mean that the broader objective of contract transparency has been achieved.

2.5Beneficial ownership

Not assessed

The 2015 EITI Report does not clarify the government’s policy on beneficial ownership disclosure in extractives companies but the names of legal owners of all material companies are publicly available on the National Registration Centre website.

2.6State participation

The 2016 EITI Report clarifies that Albpetrol was the only material SOE for EITI reporting purposes in 2016 and describes the financial relations between Albpetrol and the state, both statutorily and in practice, aside from the rules related to its ability to raise third-party financing. Stakeholder consultations confirmed that the Albpetrol company statutes clearly codified the rules related to third-party financing, although the public accessibility of these statutes was unclear during Validation. The report provides an overview of state equity in extractive companies, including terms associated with state equity, and stakeholder consultations confirmed that there were no changes in state participation in 2016. The report only confirms the lack of outstanding loans and guarantees from Albpetrol to extractive companies in 2016, without reference to any government loans or guarantees to extractive companies.

Monitoring production

3.1Exploration data

The 2015 EITI Report provides an overview of the mining, oil and gas sectors, including significant exploration activities. In the International Secretariat’s view, Albania has made efforts to go beyond the requirement by including extensive information on the hydro-electricity sector.

3.2Production data

The 2015 EITI Report provides the production volumes and values of all major minerals produced including oil, chromium, ferrochrome, copper, iron-nickel & nickel-silica, and limestone, although an aggregate production value is only provided for chromium and ferrochrome. While the use of export prices to calculate production values is a concern, given the government’s lack of reporting of domestic prices (in contrast to previous years), it is notable that the MSG has made efforts to provide an estimate of production values in the 2015 EITI Report. While the lack of information on natural gas production is also a concern, it appears that total natural gas production in Albania is negligible and not sold.

3.3Export data

The 2015 EITI Report provides export values for crude oil, but not specific oil export volumes, and the value of the main three mineral exports, but not volumes and values of all exported minerals.

Revenue collection

4.1Comprehensiveness

The 2016 EITI Report includes the MSG’s definition of the materiality thresholds for payments and companies to be included in reconciliation, including a justification for this approach to scoping. While two of the revenue flows listed in Requirement 4.1.b have only been excluded from reconciliation based on general reference to their lack of materiality, stakeholders confirmed that their value in 2016 was below the materiality threshold for revenues. The companies that did not report are named and the value of their payments to government is provided relative to government-reported revenues. A total of 39 of the 121 material extractive (mining) companies did not report, up from six non-reporting companies in 2015, accounting for 19% of total mining revenues and 4,62% of total extractive revenues unilaterally disclosed by government. Although 38 of these 39 non-reporting companies accounted for less than 0,5% of total extractive revenues each, one company, Gener 2 that is one of Albania’s largest construction companies accounting for 1,47% of extractive revenues in 2016. There is little evidence of follow-up with non-reporting companies on the part of government or industry. Full government unilateral disclosure of material revenues was provided.

4.2In-kind revenues

The 2015 EITI Report reconciles crude oil volumes collected under PSAs, discloses crude oil volumes sold and the value of proceeds from crude oil sales, disaggregated by buyer. The report provides volumes collected, volumes sold and sales proceeds for both the share of oil production under PSAs as well as Albpetrol’s equity oil, albeit without disaggregation between the two. While there is a case for considering that Albania has gone beyond the minimum requirement by disclosing information on the sales of Albpetrol’s equity oil, the International Secretariat’s initial assessment is that Albania has made satisfactory progress in meeting this requirement given the lack of disaggregation between the state’s in-kind revenues and Albpetrol’s equity oil.

4.3Barter agreements

Not applicable

The International Secretariat’s initial assessment is that this requirement is not applicable to Albania in the year under review (2015). However, the 2015 EITI Report’s lack of comment on the MSG’s consideration of Requirement 4.3 is a concern.

4.4Transportation revenues

Not applicable

The International Secretariat’s initial assessment is that this requirement is not applicable to Albania in the year under review (2015). The 2015 EITI Report describes infrastructural arrangements for the transportation of crude oil, but not of natural gas or minerals. However, the International Secretariat understands that the government and SOEs do not receive any revenues from the transportation of minerals, crude oil or natural gas.

4.5SOE transactions

While the 2015 EITI Report includes a reconciliation of oil and gas company payments to extractives SOEs (Albpetrol) and of some of Albpetrol’s payments to government, it only provides Albpetrol’s unilateral disclosure of its dividends to government, which are not reconciled with MEDTTE receipts. While Albpetrol’s dividends to MEDTTE are material, they account for only 0.39% of government revenues from the mining, oil and gas sectors. However, the International Secretariat understands that MEDTTE’s receipt of Albpetrol dividends are disclosed in the annual budget execution report, given that MEDTTE’s revenues are recorded in the national budget (see Requirement 5.1). In addition, the fact that Albpetrol’s annual financial statements are audited (see Requirement 4.9) provides a high degree of quality assurance for Albpetrol’s unilateral disclosure of its dividends to government.

4.6Direct subnational payments

The 2016 EITI Report provides a summary of the MSG’s assessment of the materiality of direct subnational payments and its selection of seven material local governments on the basis of regional production data. There are significant gaps in local governments’ reporting of direct subnational revenues, with only four of the seven material local governments submitting EITI reporting templates.

4.7Disaggregation

The 2015 EITI Report presents reconciled information disaggregated by company, revenue stream and government entity.

4.8Data timeliness

All of Albania’s EITI Reports under the EITI Standard have been published within two years of the close of the fiscal year(s) under review. However, the fact that the time stamp on the 2015 EITI Report is marked as two months prior to the actual publication of the report, and the fact that a significantly revised version of the 2015 EITI Report was published without MSG approval (or knowledge) is a concern. This is further detailed in the assessment of MSG oversight above (see Requirement 1.4).

4.9Data quality

The reconciliation of payments and revenues has been undertaken by an IA, appointed by the MSG, and applying international professional standards. The IA and the MSG agreed ToR for the production of the 2016 EITI Report consistent with the standard ToR and agreed upon procedures issued by the EITI Board, and applied this ToR and procedures in practice. The final report provides a statement from the IA on the comprehensiveness of the (financial) data presented, including an informative summary of the work performed by the IA and the limitations of the assessment provided, but does not provide the IA’s assessment of the reliability of the reconciled data. It is possible to calculate the final reconciliation coverage and there is sufficient information in the report to assess the materiality of payments from reporting companies that did not adhere to the agreed quality assurances for their EITI reporting, which are significant. The 2016 EITI Report adequately sources information, provides an overview of follow-up on recommendations from EITI Reports and Validation and provides a new set of recommendations. Summary EITI data tables have been prepared.

Revenue allocation

5.1Distribution of revenues

The 2016 EITI Report identifies the extractives revenue streams that are not recorded in the national budget and provide an explanation of and links to audited financial statements of Albpetrol, which collected and retained around 10% of government oil and gas revenues in 2016. While the report identifies AKBN as a government agency collecting and retaining 0,4% of government oil and gas revenues in 2016 without providing a link to the agency’s financial statements, it does provide a cursory explanation of AKBN’s management of retained revenues.

5.2Subnational transfers

The 2015 EITI Report describes statutory subnational transfers of royalties, provides the general formula, budgeted and actual transfers for 2015 in aggregate terms, albeit reported on an accrual rather than cash basis. However, the report does not provide the specific formula for calculating subnational transfers to individual LGUs, nor the level of budgeted and executed subnational transfers disaggregated by LGU, even if it highlights discrepancies between budgeted amounts and actual transfers. While AlbEITI published executed 2015 subnational transfers disaggregated by LGU on a cash-accounting basis after the start of Validation, the level of budgeted 2015 subnational transfers disaggregated by LGU is not publicly available.

5.3Revenue management and expenditures

Not assessed

It is encouraging that the MSG has made some attempt to including information on the auditing process in the 2015 EITI Report, although the International Secretariat’s view is that AlbEITI has made only modest efforts to include additional information on the budget-making process.

Socio-economic contribution

6.1Mandatory social expenditures

Not applicable

The 2016 EITI Report states categorically that there are no mandatory social expenditures in either mining or oil and gas, based on its review of available contracts and consultations with government and industry stakeholders. While material companies were requested to report details of their voluntary social expenditures in the 2016 EITI Report, none of the reporting mining, oil and gas companies reported such payments.

6.2Quasi-fiscal expenditures

Not applicable

The 2016 EITI Report includes a summary of the MSG’s deliberations on quasi-fiscal expenditures and its conclusions that Albpetrol did not undertake any quasi-fiscal expenditures in the year under review (2016).

6.3Economic contribution

While the 2015 EITI Report provides, in absolute and relative terms, estimates of the extractive industries’ contribution government revenues, exports, employment and the location of major activities, it only provides the mining, oil and gas sector’s contribution to GDP in relative, not absolute, terms. However, it is possible to access the value of GDP in 2015 in both current and constant prices through the INSTAT website, which allows readers to calculate the contribution of extractive industries to GDP in absolute terms.

Outcomes and impact

7.1Public debate

The EITI Reports are published on a regular and timely basis in hard copies and online. The AlbEITI Secretariat has been the key driver of communications and outreach, at times sacrificing multi-stakeholder engagement, and widely disseminated and promoted EITI Reports in the regions and online through videos, news items and surveys. There is some evidence of use of EITI data from some stakeholders including government, journalists and to a lesser extent civil society. The MSG has agreed a policy on access, release and reuse of EITI data that is aligned with the broader government agenda.

7.2Data accessibility

Not assessed

Requirement 6.2 encourages the MSGs to make EITI reports accessible to public in open data formats. The MSG agreed on the Open Data Policy and included more accessible data as one of the objectives of the EITI work plan. Such efforts are encouraged but not required and should not be considered in assessing compliance with the EITI Standard.

7.3Follow up on recommendations

The AlbEITI MSG has, belatedly (in February 2019), established a working group with a time-bound plan to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and weaknesses of the EITI process and to consider the recommendations for improvements from the IA.

7.4Outcomes and impact of implementation

The MSG has produced an account of activities undertaken in 2016 through their Annual Progress Report. The APR notes the strengths and weaknesses of the EITI process in Albania. Despite the lack of impact assessment in the APR, there is evidence of MSG efforts to assess impact through other means, such as opinion polls.