The Board agreed that Tajikistan has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Tajikistan.

Decision reference: 2020-02 / BC-284
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

22 January 2020

Board decision

Following the conclusion of Tajikistan’s second Validation, the EITI Board agrees that Tajikistan has made meaningful progress overall in implementing the 2016 EITI Standard and lifts the suspension.

The Board commends Tajikistan for using the EITI to improve disclosures of data in the extractive sector and to create a platform for dialogue among different stakeholder groups. The Board acknowledges the EITI Council’s efforts to disclose information on production and export of gold, silver and other precious metals that had not been previously publicly available. The Board also recognises the Government’s commitment to improve EITI implementation and the country’s efforts to strengthen industry and civil society engagement. The Board takes note of the ongoing development of the online mining cadastre and welcomes the further focus on systematic disclosure of information about the extractive sector through government and company systems. Furthermore, there is sufficient evidence to suggest that the EITI is playing an important role in widening the civic space in relation to the extractive industries and that civil society representatives are sufficiently engaged in design and monitoring of the EITI process in Tajikistan. The Government of Tajikistan is urged to continue ensuring that there are no legal, regulatory or practical constraints for civil society to fully, actively and effectively engage in all aspects of EITI implementation and debate about natural resource governance, particularly in terms of freedom of expression, operation and association.

The Board nonetheless encourages Tajikistan to clarify the legal framework for licensing processes, further enhance disclosures related to state-owned enterprises and their financial relations with government, as well as ensure comprehensive disclosure of information about social and quasi-fiscal expenditures. Tajikistan should also ensure that the EITI reporting process focuses on assessing the comprehensiveness and quality of available data as well as documents impact and outcomes of EITI implementation. Tajikistan is encouraged to use EITI reporting as an annual diagnostic of public and private sector audit practices as a means of supporting broader public finance management reforms. Moreover, further work on beneficial ownership and contract transparency is welcomed and encouraged.

The Board has determined that Tajikistan will have 18 months, i.e. until 23 July 2021, before a third Validation to carry out corrective actions regarding requirements relating to license allocations (#2.2), license register (#2.3), policy on contract disclosure (#2.4), state participation (#2.6), export data (#3.3), comprehensiveness (#4.1), SOE transactions (#4.5), data quality (#4.9), mandatory social expenditures (#6.1), quasi-fiscal expenditures (#6.2), outcomes and impact of implementation (#7.4). Failure to achieve satisfactory progress in the third Validation will result in temporary suspension in accordance with the EITI Standard. In accordance with the EITI Standard, Tajikistan’s EITI Council may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Tajikistan. Progress in addressing these corrective actions will be assessed in a third Validation commencing on 23 July 2021.

In accordance with Requirement 2.2, Tajikistan should ensure that the statutory procedures for awarding and transferring licenses through direct negotiations, including technical and financial criteria assessed, are clearly described and publicly-available. Tajikistan should ensure that the specific licenses awarded and transferred, and the identity of license-holders be publicly accessible, alongside an assessment of any non-trivial deviations from statutory procedures for awarding and transferring licenses. To strengthen implementation, Tajikistan is encouraged to use EITI reporting as a means of commenting on the efficiency of the current licensing system.
In accordance with Requirement 2.3.b, Tajikistan should maintain a publicly available register or any other cadastre system with information on all active extractives licenses, including dates of application and license coordinates. Given that the Department of Geology is currently working on the establishment of Tajikistan’s extractives cadastre system, Tajikistan EITI is encouraged to start disclosing information through this cadastre system rather than through publication of open data files on the government websites.
In accordance with Requirement 2.4.b, Tajikistan is required to publicly document the government’s policy on disclosure of licenses and contracts that govern the exploration and exploitation of oil, gas and minerals. This should include relevant legal provisions, and any reforms that are planned or underway. To strengthen implementation, Tajikistan is also encouraged to publicly clarify the differences in contractual obligations across different contracts and investment agreements.
In accordance with Requirement 2.6.a, Tajikistan must disclose an explanation of the prevailing rules regarding the financial relationship between the government and state-owned enterprises (SOEs) and any SOE subsidiaries operating in the extractive sector. In accordance with Requirement 2.6.b, Tajikistan should ensure that the terms attached to the state (and any SOE’s) equity stake in mining, oil and gas companies is publicly disclosed, including their level of responsibility to cover expenses at various phases of the project cycle, e.g., full-paid equity, free equity, carried interest, are disclosed. Where there have been changes in the level of government and SOE(s) ownership during the EITI reporting period, the government and SOE(s) are expected to disclose the terms of the transaction, including details regarding valuation and revenues. Where the government and SOE(s) have provided loans or loan guarantees to mining, oil and gas companies operating within the country, details on these transactions should be disclosed.
In accordance with requirement 3.3, Tajikistan must disclose export data for the fiscal year covered by the EITI Report, including total export volumes and the value of exports by commodity and by state/region of origin. This could include sources of the export data and information on how the export volumes and values disclosed in the EITI Report have been calculated.
In accordance with Requirement 4.1, Tajikistan should ensure that the scoping study is based on a comprehensive list of all extractive companies operating in the extractive industries in Tajikistan. Tajikistan should ensure that the materiality threshold for selecting companies ensures that all material companies that could affect the comprehensiveness of EITI reporting be included in the scope of reconciliation, and ensure that all companies making material payments to the government comprehensively disclose these payments in accordance with the agreed scope. Tajikistan should ensure that the report provides an assessment of the materiality of payments from non-reporting companies and their impact on the comprehensiveness of the reconciliation.
In accordance with Requirement 4.5, Tajikistan must ensure that the reporting process comprehensively addresses the role of state-owned enterprises (SOEs), including material transfers between SOEs and other government agencies, in particular 10% net profit pay and Treasury transfers to SOEs, including comprehensively reconciling such transfers where material. The EITI Council should review the materiality of 10% net profit pay and document its decision.
In accordance with Requirement 4.9 and the standard Terms of Reference for Independent Administrators (IA), Tajikistan should ensure that the IA provides a clear assessment of the comprehensiveness and reliability of reconciled financial data, as well as a final reconciliation coverage in light of reporting omissions. Tajikistan is encouraged to use EITI reporting as an annual diagnostic of public and private sector audit practices as a means of supporting broader public finance management reforms.
In accordance with requirement 6.1, the EITI Council should review and agree whether mandatory social expenditures mandated by law or the contract with the government (including local governments) that governs the extractive investment exist and where these provisions are stipulated. Tajikistan must disclose and, where possible, reconcile the mandatory social expenditures. Where such benefits are provided in kind, it is required that implementing countries disclose the nature and the deemed value of the in-kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary be disclosed. Where reconciliation is not feasible, countries should provide unilateral company and/or government disclosures of these transactions.

To strengthen implementation, the EITI Council could review and agree whether discretionary social expenditures and transfers are material and develop a reporting process with a view to achieving transparency commensurate with the disclosure of other payments and revenue streams to government entities. Additionally, to address the issue of interpretation of the government expectation, the government and EITI Council should work together to establish a credible reporting system to record social infrastructure and other social expenditures committed by companies during bidding process.
In accordance with Requirement 6.2, Tajikistan should review its definition of quasi-fiscal expenditures for EITI reporting purposes to ensure it is aligned with the definition provided in the EITI Standard and the IMF’s Fiscal Transparency Manual. Tajikistan should ensure a level of transparency in quasi-fiscal expenditures commensurate with other payments and revenue streams and should include SOE subsidiaries and joint ventures.
In accordance with Requirement 7.4iv-v, the EITI Council should ensure that future annual progress review include an assessment of progress with achieving the objectives set out in the work plan including the impact and outcomes of the stated objectives, as well as a narrative account of efforts to strengthen the impact of EITI implementation on natural resource governance. This should include an overview of the EITI Council’s responses to and progress made in addressing the recommendations from reconciliation and Validation in accordance with Requirement 7.3.

The government and the EITI Council are encouraged to consider the other recommendations in the International Secretariat’s assessment, and to document the EITI Council’s responses to these recommendations in the next annual progress report.

Background

Tajikistan was accepted as an EITI Candidate in February 2013. The country was suspended in April 2015 as it was unable to produce its first EITI Report in accordance with the reporting deadline of 26 February 2015. The 2014 EITI Report was published in November 2015. The first Validation of Tajikistan commenced on 1 July 2016. On 8 February 2017, the EITI Board suspended Tajikistan due to inadequate progress overall in implementing the 2016 EITI Standard. Seventeen corrective actions were identified by the Board, pertaining to the following requirements:

Industry engagement (#1.2),
Civil society engagement (#1.3),
License allocations (#2.2),
License register (#2.3),
Contract disclosure (#2.4),
State participation (#2.6),
Production data (#3.2),
Export data (#3.3),
Comprehensiveness (#4.1),
In-kind revenues (#4.2),
Infrastructure provisions and barter arrangements (#4.3),
SOE transactions (#4.5),
Data quality and assurance (#4.9),
Mandatory social expenditures (#6.1),
Quasi-fiscal expenditures (#6.2),
Public debate (#7.1),
The outcomes and impact of EITI implementation (#7.4).

The EITI Board asked Tajikistan to address these corrective actions to be assessed in a second Validation commencing on 8 September 2018. Tajikistan has undertaken a number of activities to address the corrective actions:

On 26 December 2016, the EITI Council approved an Open Data Policy paper.
On 30 January 2017, the EITI Council approved the 2016 Scoping Study.
On 30 January 2017, the EITI Council approved the ToRs for the 2015-2016 EITI Report and hired the Independent Administrator on 31 March 2017.
In April 2017, the CSO Coalition “Transparency for Development”, with support from PWYP, developed an action plan to address the corrective action on civil society.
In June 2017, EITI Tajikistan conducted a meeting with the company constituency, where the industry constituency action plan was developed and approved.
On 16 June 2017, the EITI Council approved the 2016 Annual Progress Report.
In February 2018, Tajikistan published its second EITI Report, covering 2015-2016 fiscal years. The report was updated with supplementary information and shared with the EITI International Secretariat in August 2018.
On 2 May, the EITI Council approved the 2018 EITI work plan.
On 1 June 2018, the EITI Council approved the 2017 Annual Progress Report.
In August 2018, the CSO MSG members prepared and published an assessment of the corrective actions.

In addition to addressing the corrective actions, the EITI Council conducted a number of studies, including on quasi-fiscal expenditures, legal review, government’s commitments on transparency and others.

Tajikistan’s second Validation commenced on 8 September 2018. Having reviewed the steps taken by Tajikistan to address the seventeen corrective actions requested by the EITI Board, the Secretariat’s assessment is that Tajikistan has fully addressed six corrective actions, having made “satisfactory progress” on four of the corresponding requirements, with two requirements now assessed as “not applicable in the year under review. Of the other eleven outstanding corrective actions, the International Secretariat’s assessment is that Tajikistan has partly addressed eight of the corrective actions and has not addressed three of the corrective actions. The draft assessment was sent to the EITI Council in English on 11 September and in Russian on 23 September 2019. Following receipt of the EITI Council’s comments on 14 October 2019, the assessment was finalised for consideration by the EITI Board. The Validation Committee reviewed the case on 8 January 2020 and agreed the recommendation.

Implementation of the 2016 EITI Standard

As of: 21 January 2020

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
In 2017, the industry constituency’s action plan for addressing weaknesses identified in Tajikistan’s first Validation was developed by the national secretariat and approved by the EITI Council. Nonetheless, industry membership on the EITI Council was renewed in 2017 and since then it has been fully, actively and effectively engaged in the EITI process.
1.3Civil society engagement
There is evidence to suggest that there have been improvements in terms of civil society representatives’ engagement and expression. There are several examples where previously taboo topics are now being discussed more openly (gold production, beneficial ownership and licence allocation), and no obvious gaps in engagement on issues related to EITI implementation where the most likely explanation is self-censorship. Rather, there is considerable evidence that the EITI platform is working as intended to open up more space for debate.
1.4MSG governance
The multi-stakeholder group (MSG) comprises relevant actors and all stakeholders feel adequately represented. The Statute that serves at the Terms of Reference (ToR) for the EITI Council is largely followed in practice. Although the ToRs do not fully address the requirements of the EITI Standard, this does not appear to have affected the functioning of the MSG.
1.5Work plan
The work plan has clear objectives linked to national priorities for the extractive sector, as well as detailed actions and timelines. Although there were significant delays in implementation of previous work plans, the execution of the current work plan appears to be on track.
Licenses and contracts
2.2License allocations
The 2015-2016 EITI Report provides more detailed information on the licensing process. However, while the report highlights the main deviation that licenses in 2015-2016 were awarded through direct negotiations rather than the statutory bidding, it does not include the EITI Council’s assessment of any other non-trivial deviations from statutory procedures in the award of licenses in 2015-2016.
2.3License register
The 2015-2016 EITI Report provides all information listed under Requirement 2.3.b for all active mining licenses in Tajikistan other than dates of application and license coordinates.
2.4Policy on contract disclosure
The updated 2015-2016 EITI Report describes the main types of agreements, notes that contracts are not currently disclosed in practice and mentions reforms that are currently underway. However, the report does not clarify the government’s policy or any legal provisions related to contract disclosure.
2.1Legal framework
The 2014 EITI Report discloses legal and fiscal framework, with a brief description of the roles and responsibilities of government agencies involved in the extractive sector.
2.5Beneficial ownership	Not assessed
Tajikistan has already commenced work on beneficial ownership through the beneficial ownership pilot project. In addition, the EITI Council has proposed amendments to the subsoil use law aimed at making beneficial ownership transparency mandatory.
2.6State participation
The 2015-2016 EITI Report describes prevailing practices regarding the financial relationship between the government and state-owned enterprises (SOEs) in the extractive industries. However, the report does not comprehensively describe the statutory financial relations between SOEs and the government, aside from the rules governing SOEs’ reinvestments. The report includes an assessment of loans and guarantees from the government to SOEs, but not from SOEs (nor government) to companies operating in the mining, oil and gas sector.
Monitoring production
3.1Exploration data
The 2014 EITI Report provides a comprehensive overview of the extractive sector, including exploration activities.
3.2Production data
The updated 2015-2016 EITI Report discloses total production volumes and the values for 2015 and 2016 by commodity. Given that the location of production is provided for most minerals and information on the production of ores and silver by region can be accessed online, the Secretariat considers that most of the mineral production in 2015-2016 was disaggregated by region.
3.3Export data
The updated 2015-2016 EITI Report discloses total export volumes and values by commodity, including gold and silver, during the two fiscal years covered by the report. However, the report neither provides export data by region of origin, nor links to where this information can be found.
Revenue collection
4.3Barter agreements	Not applicable
The EITI Council comprehensively reviewed the legal framework and practice on infrastructure provisions and barter agreements in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities in Tajikistan. The government and extractive companies shared the terms of the relevant investment agreements, disproving that infrastructure and barter agreements in the extractive industries were in force in Tajikistan.
4.6Direct subnational payments	Not applicable
Only one revenue stream i.e. ‘compulsory fees for issuing licenses or other permits’ may be paid to “the public authorities or local self-government, depending on the type of payment”. Based on the payment data disclosed for this revenue stream, it is reasonable to conclude that there are no material direct subnational payments.
4.7Disaggregation
The 2014 EITI Report is disaggregated to the levels required by the EITI Standard.
4.9Data quality
The reconciliation of payments and revenues has been undertaken by an IA, appointed by the EITI Council, and applying international professional standards. The IA and the EITI Council agreed ToRs for the production of the 2015-16 EITI Report consistent with the standard ToRs. However, the report does not provide a final reconciliation coverage in light of reporting omissions, nor the IA’s clear assessment of the comprehensiveness and reliability of reconciled financial data.
4.1Comprehensiveness
The 2015-2016 EITI Report provides descriptions for some, but not all, material revenue streams. While the decisions related to the materiality of companies and revenue streams are clearly set out and documented, the adjustments in reporting companies after the start of data collection raises serious questions over the comprehensiveness of the reconciliation, as well as of broader government record-keeping systems.
4.2In-kind revenues	Not applicable
The 2015-2016 EITI Report clarified that the government collects gold in-kind from Tilloy Tochik for the State treasury depository, but that the Treasury holds this gold rather than selling it to a third party. There are thus no proceeds from the sale of the gold collected in-kind. Nonetheless, volumes of transfers of gold and their value based on market prices are disclosed for the reporting period.
4.4Transportation revenues	Not applicable
The 2014 EITI Report contains a description of transportation arrangements on p.33. The Report confirms that there were no material transportation payments in 2014 (p. 57).
4.5SOE transactions
The 2015-2016 EITI Report confirms that SOEs do not collect revenues from other extractive companies on behalf of the government. The report discloses details of dividends paid by 7 material SOEs operating in the extractive industries. The 10% net profit pay was below EITI Council’s materiality threshold and thus was not disclosed.
4.8Data timeliness
The 2014 EITI Report was published in November 2015 and, therefore, meets the requirement on data timeliness.
Revenue allocation
5.1Distribution of revenues
In the 2014 EITI Report the proportion of the distribution between the central and local budgets is determined by the law on budget for the specific year. This is not limited to distribution of extractive industry revenues, but all revenues.
5.2Subnational transfers	Not applicable
The 2014 EITI Report confused budget allocations to local governments with subnational transfers. However, stakeholder consultations have confirmed that there are no statutory or mandatory transfers of extractive industry revenue in Tajikistan.
5.3Revenue management and expenditures	Not assessed
The Supplementary Report provides some limited information on revenue management and expenditures.
Socio-economic contribution
6.1Mandatory social expenditures
The Secretariat concludes lack of clarity on the legal regime for mandatory social expenditures in Tajikistan. Therefore, the EITI Council should make further work to demonstrate the applicability of the requirement.
6.2Quasi-fiscal expenditures
The definition of quasi-fiscal expenditures agreed for EITI reporting is narrower than that provided in Requirement 6.2 and the IMF’s Fiscal Transparency Manual and is applied to only six of the 23 SOEs, and their five subsidiaries. Additionally, the identity of beneficiaries of these quasi-fiscal expenditures is unclear from the report.
6.3Economic contribution
The 2014 EITI Report provides comprehensive overview of the contribution of the extractive industry to the economy.
Outcomes and impact
7.2Data accessibility	Not assessed
Tajikistan’s 2014 EITI Report is not machine-readable. Tajikistan adopted the Classification system on revenues and expenditures with instruction of use, however, it does not seem to be used in the 2014 EITI Report.
7.4Outcomes and impact of implementation
In 2017, the annual progress report was prepared and approved by the EITI Council in a timely manner. Although the report provides a useful overview of the last year’s activities and outcomes, it still lacks a thorough assessment of the impact of EITI implementation, of progress in meeting the objectives set out in the work plan and of efforts to address recommendations from past EITI Reports.
7.1Public debate
The EITI Report was published in three languages – English, Russian and Tajik – and was officially launched at the regional conference as well as made publicly available through different relevant websites. While the civil society constituency led the dissemination activities and communication with media, there is a sufficient evidence of government and company engagement and support in the outreach process.
7.3Follow up on recommendations
The MSG has taken steps to act upon lessons learnt, to identify, investigate and address the causes of discrepancies and to consider the recommendations for improvements from the Independent Administrator for the 2014 EITI Report. The EITI Council also established a working group to assess the gaps and prepare to the Validation.