Publication Type: 
Guidance note
Published Date: 
October, 2020

Guidance Note: EITI Requirement 2.6

State participation and state-owned enterprises

This guidance note refers to the 2019 EITI Standard

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Summary

State-owned enterprises (SOEs) play important roles in exploiting natural resources and managing the extractive sector. While some are commercial or operational companies —selling crude oil or raw minerals, managing state equity or participating directly in extractive operations — others are regulatory or administrative entities or instruments of economic or state development. 

Many SOEs perform a mix of commercial and non-commercial duties. SOEs can generate significant revenue for the state, enable a government to exercise greater control over the sector, help improve local technologies and skills, manage exposure to energy transition risks, or address market failures by providing services that would not otherwise be provided by the private sector. State equity is also used by many countries to secure additional government take (beyond tax revenue) from extractive projects.

Governance of state participation and SOEs have considerable implications for public finances and the economy in general. Although some SOEs have made significant contributions to development and revenue generation, others have struggled with poor governance and corruption. Early results from EITI reporting and Validation have shown that although financial transactions related to state-owned companies have become more transparent, there is still a demand for improvement of transparency standards around SOE governance.

Requirement 2.6 of the EITI Standard requires that, where state participation in the extractive industries gives rise to material revenues for the state, the following information should be reported (1) an explanation of the prevailing rules and practices regarding the financial relationship between the government and state-owned enterprises (SOEs), and (2) the level of ownership by the government and SOE(s) in mining, oil and gas companies operating in the country, including those held by SOE subsidiaries and joint ventures. 

This note provides guidance to multi-stakeholder groups (MSGs) on how to report on state participation as part of EITI implementation, offers a set of examples from implementing countries and outlines opportunities to strengthen the dissemination and use of data.