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Albania has achieved a moderate overall score in implementing the 2019 EITI Standard.

Outcome of the Validation of Albania

Decision number
2022-15
Decision basis
EITI Articles of Association 2019-2021, Article 12.1. ix)
16 February 2022

Board decision

Albania has achieved a moderate overall score in implementing the 2019 EITI Standard (82 points). The overall score reflects an average of the three component scores on "Stakeholder engagement", "Transparency" and "Outcomes and impact".

The EITI Board commends Albania for achieving a high score on "Outcomes and impact" (87 points). This reflects Albania EITI’s contributions to policy dialogue and reform on issues relevant to the extractive industries, including to the development of beneficial ownership and mining legislation as well as environmental regulations. The Board commends the Albanian EITI’s emphasis on issues relevant to energy transition, including reporting on the hydropower sector, and for ensuring that EITI objectives are aligned with national priorities for the extractive industries. Albanian stakeholders, particularly civil society, have used EITI data on subnational revenues and transfers to support policy engagement. The Board encourages Albania EITI to expand open data disclosures to enhance the impact of implementation by ensuring inter-operability of EITI data with other government disclosure systems. Albania was awarded 2.5 additional points for the effectiveness and sustainability of EITI implementation.

On "Transparency", Albania reached a moderate score (77 points). Albania has made commendable efforts to build on existing systematic disclosures to improve the comprehensiveness of EITI reporting, although challenges remain in opening up subnational revenue collection from the extractive industries. The Board welcomes the improvements in disclosures related to state participation and encourages Albania to expand the use of EITI reporting to track the future contributions of gas transit revenues associated with the newly commissioned Trans-Adriatic Pipeline. Albania has made progress on new aspects of the 2019 EITI Standard related to contract transparency, beneficial ownership, project level reporting and environmental payments, although further efforts are required to ensure granular disclosures that meet stakeholder demands for information on these aspects of extractive industry governance. The Board encourages Albania to explore further opportunities to restructure annual EITI reporting and build on its open data and cadastre portals to add value to existing systematic disclosures by government and companies. 

Albania achieved a moderate component score also on "Stakeholder engagement" (83 points). Stakeholders have effectively used the EITI platform for public debate on reform of the extractive industries. The government remains fully engaged in EITI implementation, while civil society has gradually expanded its engagement, outreach, and coordination with the broader constituency. However, the Board notes evidence of the weakening of industry participation in EITI and highlights the opportunity for companies to use EITI implementation to improve their corporate performance on environmental, social and governance indicators. The multi-stakeholder group has overcome challenges caused by the Covid-19 pandemic to retain oversight of all aspects of EITI implementation, although further efforts to consider gender aspects of representation in EITI implementation are encouraged. 

The Board has determined that Albania will have until a next Validation commencing on 1 April 2024 to carry out corrective actions regarding industry engagement (Requirement 1.2), contract and license allocation (Requirement 2.2), contracts (Requirement 2.4), beneficial ownership (Requirement 2.5), comprehensiveness (Requirement 4.1), subnational payments (Requirement 4.6), disaggregation (Requirement 4.7), data reliability (Requirement 4.9), social and environmental expenditures (Requirement 6.1) and follow-up on EITI recommendations (Requirement 7.3). Failure to demonstrate progress on Outcomes and impact, Stakeholder engagement and Transparency in the next Validation may result in temporary suspension in accordance with Article 6 of 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

In November 2019, the Board agreed that Albania had made “meaningful progress with considerable improvements” in implementing the 2016 EITI Standard.The next Validation of Albania was scheduled to commence on 17 June 2020. Due to the transition to the revised Validation model, the Board rescheduled the Validation to commence on 1 October 2021.

Albania EITI collated documentation for Validation using the Board-agreed data collection templates on "Stakeholder engagement", "Transparency" and "Outcomes and impact". The files are available on the Albania EITI website. The International Secretariat’s Validation team prepared an initial assessment following the Validation procedure and Validation Guide. In accordance with the Validation procedure, a public call for stakeholder views on EITI implementation was open from 1 September to 1 October 2021. Virtual stakeholder consultations were undertaken from 13 to 25 October 2021.

The draft assessment was shared with the MSG for feedback on 6 December 2021, with a deadline of 3 January 2022. MSG comments were received on 31 December 2021, after which the assessment was finalised for the Validation Committee’s review.

In accordance with Article 4.c of Section 4 of the 2019 EITI Standard, the overall assessment consists of component scores on "Stakeholder engagement", "Transparency" and "Outcomes and impact", as well as an overall numerical score. The component score represents an average of the points awarded for each applicable requirement. The points awarded on the effectiveness and sustainability indicators are added to the component score on "Outcomes and impact". The overall score is the average of the three component scores.

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 the next Validation commencing on 1 April 2024:

  1. In accordance with Requirement 7.3 on recommendations from EITI implementation, Albania must ensure there is a clear and documented process that ensures actual review and follow up on recommendations from EITI reporting and validations. To further improve on stakeholders’ capacity to address recommendations, Albania is encouraged to ensure adequate funding is secured from government to address the relevant recommendations, and to request support from the EITI Secretariat when undertaking capacity building or technical exercises.

  2. In accordance with Requirement 1.2, companies must be fully, actively and effectively engaged in the EITI process, which should include the wider constituency beyond the MSG. In addition, the industry constituency should ensure they comply with the MSG’s Terms of Reference Article 7 on the composition of the MSG to include five business representatives. The recent renewal of the industry constituency is a step in this direction and opportunity for Albeiti to address broader objectives to increase company reporting and develop awareness of the benefits of corporate disclosure. However wider industry engagement is particularly key for Albania to improve on its comprehensiveness of reporting, especially given the legal barriers for government disclosure of revenues.

  3. In accordance with Requirement 2.4, Albania should ensure that any contracts, license certificates or other legal agreements that award companies rights to exploit oil, gas or mineral resources as of 1 January 2021 are disclosed. While systematic disclosure of certain contracts, concessions and licenses exist in Albania, it is unclear (i) what Albania considers as "the full text of different licenses, concessions and contracts, including any of their appendixes, addendum or riders", and (ii) whether Albeiti maintains a list of which licenses, contracts or concessions are currently published in their entirety (including all annexes, amendments and riders), with specific references to each published document. In order to maintain an overview of which licenses and contracts are publicly accessible, Albeiti may wish to consider providing this overview through its regular publications of the registries on its website, and in line with similar recommendations on monitoring EITI implementation under Requirement 7.3.

  4. In accordance with Requirement 2.2.a.iv, Albania should document its assessment of whether there have been any material deviations from statutory procedures with regards to the award or transfer of oil, gas and mining licenses. In order to do so, the Albeiti MSG may wish to conduct a licensing process review for its oil, gas and mining sectors, selecting either some (either based on company materiality or risk perceived by Albeiti) or all of the licenses awarded or transferred for a deeper analysis of whether the legal procedures were actually followed in practice, explaining any deviations thereto, and identifying if any of them were material (non-trivial). To ensure continued adherence to the EITI Requirements, Albeiti would benefit from clarifying whether there are legal barriers to disclose non-winning bidders, and to ensure that lists containing the names of all bidders (and winners) are made publicly accessible on a regular basis.

  5. In accordance with Requirement 2.5 and to prepare for the second phase of Validation of Requirement 2.5 from January 2022 onwards, Albania is required to ensure that the beneficial ownership of all companies holding or applying for a mining, oil and gas license is comprehensively and reliably disclosed as of January 2022. In the meantime, in accordance with Requirement 2.5.c, Albania is required to ensure that the MSG publishes an assessment of the comprehensiveness and reliability of beneficial ownership disclosures of each company holding or applying for a mining or oil and gas license. In accordance with Requirement 2.5.d, Albania should ensure that politically exposed persons that directly or indirectly own shares in extractive companies in Albania, are publicly identified either through EITI reporting or through publicly accessible government portals. Albania, through the MSG, is encouraged to review its PEP thresholds for reporting to ensure alignment across Requirements 2.5.d and 2.5.f.ii. Publicly listed companies, including wholly owned subsidiaries of companies listed on stock exchanges, are required to disclose the name of the stock exchange, and include a link to the stock exchange filings where they are listed, in accordance with Requirement 2.5.f.iii.

  6. In accordance with Requirement 4.1.d, Albania should ensure that the government is provides aggregate information about the amount of total revenues received from each of the benefit streams agreed in the scope of EITI implementation, including revenues that fall below agreed materiality thresholds. Furthermore, in accordance with Requirements 4.1.b and 4.1.d, 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. In the longer term, Albania may wish to seek legislative changes through amendments or new legislation that can overcome tax confidentiality issues. Another possibility is for Albania to seek multi-year waivers from extractive companies in order to ensure the government can fully disclose what it receives from companies involved in extractive activities.

  7. In accordance with Requirement 4.7, Albania should continue to improve its coverage of revenues by project (license, contract and concession). Albania should ensure that any substantially interconnected agreements or overarching agreements are identified, and that relevant data for each company is sufficiently linked to individual projects both for mining and petroleum companies. In order to further improve on Albanian government systems, and their ability to monitor payments on a per-license basis, Albeiti is encouraged to engage regional or local government entities, or AKBN, to explore whether royalty-payments are or can be recorded as part of regular corporate declarations to government that occur on a per-license basis. This could include exploring whether any changes are needed in laws or in statutory instruments and regulations, while ensuring such changes are cost-effective.

  8. 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 the standard Terms of Reference for the IA agreed by the EITI Board, Albania 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 EITI Report includes 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 each entity’s omission is likely to 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 IA and the limitations of the assessment provided. When implementing an ex-post verification of the company selection, Albeiti should ensure that any omissions are contrasted towards all material revenues, not one or two revenue streams.

  9. In accordance with Requirement 4.6, Albania should undertake appropriate scoping of direct subnational payments by extractive companies to LGUs, establishing a comprehensive basis for materiality discussions regarding direct payments to LGUs. Albania is required to ensure that all company payments to subnational government entities, when material, are disclosed and reconciled, and is encouraged to which local taxes are collected by local government units and paid by extractive companies. In case the MSG wishes to continue using production and transfer of royalties as a proxy for calculating the materiality of direct subnational payments, it is important to establish the clear linkage between these subnational transfers and direct subnational payments, for example through applicable laws and regulations.

  10. In accordance with Requirement 6.1.b, Albania must undertake an assessment of the materiality of mandatory environmental payments by extractives companies in Albania as part of its EITI reporting. Where material, such payments must be disclosed. Albania is also required to agree a procedure to address data quality and assurance of information on environmental expenditures, in accordance with Requirement 4.9. Where reconciliation is not feasible, Albanian EITI should provide unilateral company and/or government disclosures of the environmental expenditures.

Albania is encouraged to consider the following recommendations to strengthen EITI implementation:

Outcomes and impact

  1. To strengthen implementation on workplans (Requirement 1.5), Albania may wish to improve its description of how activities relate to wider objectives in general, including how they link with anti-corruption efforts and goals of the government. Albania may also wish to diversify its sources of funding and technical assistance to better facilitate the full participation of all stakeholder groups in all of its activities. To further strengthen implementation, Albania could consider a results-based approach of activities in work plan to provide a better basis for monitoring and evaluation. Lastly, to improve on its documentation of follow up on findings and recommendations of EITI reporting and Validation, Albania could ensure that these are included as specific activities as part of future workplans.

  2. To further improve on data accessibility and open data (Requirement 7.1), Albania may wish to consider sharpening the focus of its communications publications to clearly identify target audiences and its contributions to public debate. The Albeiti website could be further improved by ensuring automation of information transfer between open data portal and mining cadastre and government systems that maintain EITI-related data.

  3. To further enhance its annual review of EITI outcomes and impacts (Requirement 7.4), Albania is encouraged to reach out to broader stakeholder constituencies, including increased use of telecommunications platforms to mitigate the potential limitations of outreach during the COVID-19 pandemic. To improve its efforts to document the impact of the Albanian EITI process, Albania should also identify targets for priority areas and develop precise mechanisms to monitor the country’s development. 

Stakeholder engagement

  1. To strengthen EITI implementation as part of its full, active and effective engagement in the EITI process (Requirement 1.1), the government may wish to review its resourcing of EITI to ensure that there is sustainable funding for all aspects of implementation, including for activities, disclosures and dissemination of EITI-related data.

  2. To further strengthen civil society participation in the EITI process (related to Requirement 1.3), Albeiti may wish to consider ways to diversify its funding sources, e.g. increase government funding of activities. This could also improve the financial sustainability of Albeiti.

  3. To strengthen implementation in connection with Requirement 1.4.b.i, Albeiti is encouraged to undertake knowledge-building activities to strengthen members’ capacity to work on licensing, beneficial ownership and contract transparency. For example, for each of the topics mentioned Albania could (i) define what constitutes complete disclosure of one license, one beneficial owner, and one transparent contract, and; (ii) monitor to which extent routine government publications provide complete disclosures of each extractive company’s licenses, contracts and owners. Albania would then be well positioned to develop precise baselines, milestones and targets related to levels of transparency in the country.

Transparency

  1. To strengthen implementation, Albania should ensure that its EITI implementation cooperates with INSTAT to explore systematic disclosures of government revenues by economic activity categories as defined under United Nation’s System of National Accounts, or the International Standard Industrial Classification of economic activities (ISIC).

  2. To strengthen implementation on Requirement 2.1, Albania may wish to consider providing a precise indication of where applicable laws and regulations, identified in EITI reporting, are systematically disclosed. This could also entail an annual review by the MSG of which government agencies regularly update their websites and portals to provide explanations or summaries of the most recent and relevant legislative changes.

  3. To strengthen public access to environmental impact assessments, and ensure that local communities are well informed of the obligations and risks of extractive companies’ operations in Albania, the MSG may further wish to work with the National Environmental Agency to explore the potential for opening up the electronic portal maintaining Environmental Impact Assessments for public disclosure.

  4. To strengthen implementation, Albania may wish to address the systemic barriers that prevent it from collecting and disclosing the dates of application for its remaining mining licenses, and for all of its hydrocarbons licenses. Albeiti may wish to collect and disclose this information at least prospectively if it is not possible retrospectively. Dates of application for oil, gas and mining licenses are an important data set to measure whether there were any material deviations in license awards. This holds true in case of competitive bids, and also in case of first-come-first served methods of license allocations. Albeiti may also explicitly publish the dates of expiry of its mining and hydrocarbons licenses for ease of access.

  5. To strengthen implementation Albania may wish to consider resuming the commodity trading disclosure practice from 2016, where oil sales were disaggregated by cargo as per Requirement 4.2.c. To progress towards systematic disclosure, Albpetrol is encouraged to liaise with the EITI commodity trading network to publish oil sales disaggregated by cargo on its own website, as well as ensure its systematic disclosures extend to encompass the rules and practices related to their operating and capital expenditures, procurement, subcontracting and corporate governance, as per Requirement 2.6.c.

  6. To strengthen implementation, Albania may wish to replicate the exemplary work on financial transactions between the State and the SOEs in the hydropower sector, and apply the same coverage to the upstream and midstream petroleum sectors.

  7. To ensure its continued adherence to EITI Requirements, Albania is strongly encouraged to ensure that only data from the reporting period in question is used for determining whether quasi-fiscal expenditures are applicable or not, and refrain from citing former Validations or EITI Reports as evidence. Albeiti must rely on assessments of materiality to ascertain whether these requirements are applicable or not.

  8. To strengthen implementation, Albania may wish to consider disclosing extractive commodity production figures disaggregated by region and project.

  9. To strengthen implementation, Albania is encouraged to disclose production and export data, including both volumes and values, for each commodity extracted in Albania, regardless of the small size of such production or exports. To strengthen implementation, the MSG is encouraged to systematically disclose the production and export figures through the relevant agencies (AKBN and INSTAT), with the same level of details than EITI Reporting. Albania could furthermore consider applying internationally recognised data standards such as the Harmonised System Codes for commodity classification at 4- or 6-digit levels, or other equivalents, in its public disclosure of extractive export or production data.

  10. In order to more effectively estimate the full government revenues from extractive companies, and overcome certain practical barriers of estimation, Albeiti may wish to use a dual approach for estimation, comparing the total revenues received from companies registered with their main activities in “B. Mining and quarrying (including petroleum)”, as per UN’s ISIC rev4 data standard, versus total revenues received from exploration, mining and petroleum rights holders.

  11. To ensure the continued adherence to EITI Requirements, Albania is strongly encouraged to ensure that only data from the reporting period in question is used for determining whether EITI Requirements are applicable or not, and refrain from citing former Validations or EITI Reports as evidence. Especially in view of an increasing importance of revenues from gas transportation through the country, Albeiti must rely on assessments of materiality to ascertain whether these requirements are applicable or not.

  12. To strengthen implementation and improve the EITI data’s contribution to public debate, Albania is encouraged to improve on the timeliness of EITI data (Requirement 4.8), by building on existing systematic disclosures by companies and government, possibly in combination with opting for alternative or flexible reporting frameworks.

  13. To strengthen implementation, on revenue management (Requirements 5.1 and 5.3) Albania may wish to use its EITI reporting to reference the systematically disclosed audited financial statements of Albpetrol and support AKBN to annually add an additional degree of accountability and assurance with regards to Albania’s off budget revenues. Albania may also wish to use EITI reporting to provide an annual diagnostic of government reforms of off-budget revenues to strengthen public accountability in the reform of agencies such as AKBN. Lastly, Albania is recommended to use the EITI process to ensure that forecasts and expenditures are adjusted to provide realistic estimates of future revenues and ability of these revenues to service the country’s expenditures in the medium to long term.

  14. To strengthen implementation, Albania may wish to use its EITI reporting as a means of ensuring timely government disclosures that would further public understanding and debate around issues of revenue sustainability and resource dependence, including the assumptions underpinning forthcoming years in the budget cycle and relating to projected production, commodity prices and revenue forecasts arising from the extractive industries and the proportion of future fiscal revenues expected to come from the extractive sector. Such EITI reporting could further strengthen Albania EITI’s contribution to the public debate on the impact of the energy transition on the extractive industries.

  15. To strengthen implementation under Requirement 5.2, Albania may wish to distinguish in its EITI reporting between revenues that should be transferred sub-nationally, revenues that are actually budgeted for such transfers, and the actual transfers that are made. Further disaggregating and disclosing this data on a per-LGU basis would enable Albeiti to better inform the country’s ongoing national dialogue on sub-national revenue sharing from extractive industries. Currently, Albeiti only discloses the revenues that should be transferred sub-nationally and the actual transfers made in an aggregate basis for all LGUs. This makes it difficult to perform a detailed comparison of how much each LGU should have received according the formula, whether the budgeting process was accurate, and whether the LGU actually received the budgeted amount. Implementing this strategic recommendation, however, would enable Albeiti to better inform stakeholder dialogue on whether LGUs receive their fair share of extractives revenues through intra-governmental transfer mechanisms.    

The government and the MSG are encouraged to consider these recommendations, and to document the MSG’s responses to these recommendations in the next annual review of outcomes and impact of EITI implementation.

Scorecard for Albania: 2022

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Component View more
Score

The three components of Validation each receive a score out of 100, as follows:

Low 0-49
Fairly low 50-69
Moderate 70-84
High 85-92
Very high 93-100
View more

Outcomes and impact

86.5 High
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Outcomes and impact

Effectiveness and sustainability indicators

2.5

1.5 Work plan

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring that the annual planning for EITI implementation supports implementation of national priorities for the extractive industries while laying out realistic activities that are the outcome of consultations with the broader government, industry and civil society constituencies. The annual EITI work plan is a key accountability document for the MSG vis-à-vis broader constituencies and the public. There is no evidence to suggest that there has been backsliding on Requirement 1.5, which was assessed as ‘satisfactory progress’ in the previous Validation. The work plan reflects strategic objectives agreed by the MSG, aligned with national priorities and stakeholder needs. The work plan is publicly accessible via the Albeiti website. The workplan would still benefit from a clearer link between objectives and how activities will deliver outcomes to achieve them. Additionally, civil society stakeholders noted financial constraints that can limit stakeholders’ ability to fully deliver on activities. As the Albeiti workplan almost exclusively depends on a single development partner there is scope to identify domestic and external sources of funding and technical assistance to ensure timely implementation of the agreed work plan.

7.1 Public debate

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to enable evidence-based public debate on extractive industry governance through active communication of relevant data to key stakeholders in ways that are accessible and reflect stakeholders’ needs. Significant aspects of the requirement have been implemented, and the broader objective of the requirement is mostly fulfilled. There is no evidence to suggest that there has been backsliding on Requirement 7.1, which was assessed as ‘satisfactory progress’ in the previous Validation. Disclosures and reporting are widely accessible to the public via the Albeiti website. The MSG increased outreach to regions and broader civil society including academics, think tanks and journalists, though stakeholders noted that the 2019 earthquake and COVID-19 pandemic adversely affected communication and outreach activities with limitations on movement and in-person participation. Albeiti collaborated with the OSCE and Ministry of Interior on the impact of the extractive industries in local communities, raising awareness among regional stakeholders and supported advocacy work on subnational payments. Albeiti may still wish to sharpen the focus of the communications strategy to also specify target audiences that would potentially use these tools for public debate.

7.2 Data accessibility and open data

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to enable the broader use and analysis of information on the extractive industries, through the publication of information in open data and interoperable formats. The broader objective of the requirement has been fulfilled, and all required aspects of the requirement have been addressed. There is evidence that the MSG made efforts to improve open data access. Albeiti have developed an Open Data Portal and a Mining Cadastre, where data about the oil, gas, mining and hydropower sectors can be downloaded in various open formats. Summary data was completed in due course subsequent to publication of EITI reports. These efforts, while recently expanded could be further improved by ensuring real-time linkage to government systems.

7.3 Follow up on recommendations

60

The Secretariat’s assessment is that Albania has mostly met the objective of this requirement to ensure that EITI implementation is a continuous learning process that contributes to policymaking, based on the MSG regularly considering findings and recommendations from the EITI process and acting on those recommendations it deems are priorities. The level of progress has deteriorated since the previous Validation. There was some progress in addressing recommendations originating from EITI reports. MSG representatives contributed to drafting a new legal framework for royalties. Through the Ministry of Infrastructure and Energy (MIE), Albeiti contributed to drafting a law on beneficial ownership and a decision to create a BO register. The contribution included convening an expert group who prepared a legal review of transparency in the extractive industries as input to the MIE for what became Law 112/2020 on the “Register of the Beneficiary Owners.” The previous Validation in 2019 noted that Albeiti had belatedly 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 any recommendations for improvements by the IA. This Validation confirmed the MSG process for learning, review and action on recommendations includes a Working Group on Corrective Actions. However, the Secretariat’s consultations and documentation review was unable to locate any evidence of group’s discussions or decisions since the 2019 Validation. Additionally, Albeiti did not respond to several corrective actions (see requirements 4.1, 4.6 and 4.9), in particular related to challenges of the reconciliation exercise. In combination these issues call into question the MSG’s mechanisms for consistent follow-up on recommendations and corrective actions. It is still important to note that the 2017-18 EITI Report does provide a reference to progress, or lack thereof, on addressing findings and recommendations from EITI reporting and validations.

7.4 Review of outcomes and impact of implementation

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to ensure regular public monitoring and evaluation of implementation. There is no evidence to suggest that there has been backsliding on Requirement 7.4, which was assessed as ‘satisfactory progress’ in the previous Validation. The MSG tracks outputs, outcomes and impact through surveys, annual progress reports (APRs), and meetings with stakeholders. Consultations found that the COVID-19 pandemic had reduced overall EITI engagement including feedback collection. The 2021 APR highlighted social and environmental impact studies, including recommendations to closely monitor rights of vulnerable groups, including gender implications of the extractives sector.

Stakeholder engagement

82.5 Moderate
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Multi-stakeholder oversight

1.1 Government engagement

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to ensure a full, active and effective government lead for EITI implementation. There is no evidence of back-sliding since the previous Validation, in which Requirement 1.1 was assessed as “satisfactory progress.” A broad range of government representatives expressed support for the mission of Albeiti and consultations clearly revealed a full, active and effective engagement, with strong coordination across various ministries led by the MSG Chair, the Deputy Minister of Infrastructure and Energy. The government funds the National Secretariat including staff salaries and operating expenses but does not financially support implementation activities. The MSG confirmed this through its comments to the draft Validation report, and clarified that the government did fund certain communication

1.2 Industry engagement

60

The Secretariat’s assessment is that Albania has mostly met the objective of this requirement to ensure that extractive companies are fully, actively and effectively engaged in the EITI, both in terms of disclosures and participation in the work of the multi-stakeholder group, and that the government ensures an enabling environment for this. The level of progress has deteriorated and there is evidence to suggest back-sliding since the previous Validation. The MSG Terms of Reference state that the industry constituency shall include “five business representatives selected from the largest companies operating in the country in the extractive sector and hydropower, as well as the Association of Investors in this sector or Chambers of Commerce with a focus on natural resources.” In practice, there were three vacancies on the MSG between 2019 and 2021 which indicate that industry has not been fully and effectively engaged (unrelated to the COVID-19 pandemic). While the participation of two industry members since 2019 is commendable, the appointment of three remaining business representatives in September 2021 occurred just before commencement of Validation. Weaknesses in industry engagement are also reflected in company reporting practices since the last Validation. A relatively low share of material companies participated in EITI reporting for 2017-2018, despite company reporting constituting a key corrective action related to Requirement 4.1 from the last Validation. For Albania to improve on company participation in EITI reporting and to progress further on systematic disclosures, the engagement of the wider extractive industry and awareness of the benefits of corporate disclosure is key. The constituency’s inability to engage with non-reporting extractive companies therefore suggest that there are additional efforts needed for Albania to ensure that extractive companies are fully, actively and effectively engaged in the EITI, both in terms of disclosures and participation in the MSG’s work. As part of the MSG’s comments to the draft Validation report, it was noted that these findings may highlight the need for review and amendment of legal aspects in order to ensure data disclosure for the public.

1.3 Civil society engagement

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to ensure that civil society is fully, actively and effectively engaged in the EITI process, and that there is an enabling environment for this. The level of progress has improved since the previous Validation. There is no evidence of any barriers to civil society participation or input to the EITI process related to freedom of association, expression, operation, or access to public decision-making. Albania’s corrective action from its previous Validation mandated the civil society constituency 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. Evidence and stakeholder consultations indicate that such improvements have occurred during the period under review. The nomination procedure, codified in December 2018, is publicly available on the website of Albeiti and has been followed in practice during the last round of nominations in 2019. The AlbNet is leading the constituency, coordinating most of the outreach and dissemination activities, and strengthened its engagement, outreach, and coordination. Stakeholders did note that there are financial constraints that may limit participation in all EITI activities, though this was not cited as a concern related to civil society members’ abilities to engage within the MSG. There was a clear consensus among stakeholders that the constituency had expanded the group to newer organisations, with more regularly coordination with a broader constituency. The MSG comments to the draft Validation report clarified that future World Bank funding is foreseen to consider financing civil society activities, which remains to be assessed in future Validations. Civil society in its broader sense uses and disseminates EITI data in research and local communities. A particular emphasis has been on issues related subnational transfer of royalties, and environmental and social impact, though there is scope to broaden some of AlbNet’s areas of focus in the coming years.

1.4 MSG governance

90

The Secretariat’s assessment is that the MSG includes appropriate stakeholders relevant to the extractive industries in the country. There is no evidence to suggest that there has been backsliding on Requirement 1.4, which was assessed as ‘satisfactory progress’ in the previous Validation. The MSG operates under Terms of Reference agreed in 2016. Meeting minutes are published on the Albeiti website. The format and quality of the minutes varies. Members operated according to the Code of Conduct and there was no evidence of conflict of interest in carrying out responsibilities. Stakeholders indicated the MSG process was effective in the inclusion of all constituency groups in decision-making. MSG members generally appear to have sufficient capacity to carry out their duties. However, industry’s representation on the MSG was not complete in the 2019-2021 period. Still, these gaps appear to reflect broader weaknesses in the industry constituency and are thus assessed in conjunction with the broader constituency’s engagement in EITI (see Requirement 1.2). Knowledge of MSG members on some subjects such as subnational payments was particularly strong, though MSG members could benefit from building their capacity to work on licensing issues and new requirements including beneficial ownership and contract transparency. EITI peer learning opportunities within the Eurasia region could support capacity building.

Transparency

76.5 Moderate
Scorecard by requirement
Assessment
Assessment of EITI Requirements

Validation assesses the extent to which each EITI Requirement is met, using five categories. The component score is an average of the points awarded for each requirement that falls within the component.

Overview of the extractive industries

3.1 Exploration data

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring public access to an overview of the extractive sector in the country and its potential, including recent, ongoing, and planned significant exploration activities. There is no evidence to suggest that there has been backsliding on Requirement 3.1, which was assessed as ‘satisfactory progress’ in the previous Validation.

6.3 Contribution of the extractive sector to the economy

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring a public understanding of the extractive industries contribution to the national economy and the level of natural resource dependency in the economy. There is no evidence to suggest that there has been backsliding on Requirement 6.3, which was assessed as ‘satisfactory progress’ in the previous Validation. Albeiti provides data for the extractive sector’s contribution to GDP, government revenues, and exports. Additionally it provides employment data disaggregated by gender, as well as providing an estimate of artisanal and small-scale mining activities in the country, and the extractive sector’s contribution to investments.

Legal and fiscal framework

2.1 Legal framework

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring public understanding of all aspects of the regulatory framework for the extractive industries, including the legal framework, fiscal regime, roles of government entities and reforms. There is no evidence to suggest that there has been backsliding on Requirement 2.1, which was assessed as ‘satisfactory progress’ in the previous Validation. The level of fiscal devolution is clarified, though documentation is not provided as to how/where LGUs are awarded authority to impose taxes and fees (this issue is highlighted under EITI Requirement 4.6). MSG comments on the draft Validation report did highlight the relevant legislation, though the MSG could also ensure to cover this in EITI reporting. Additionally AlbEITI could improve on providing a precise indication of where applicable laws and regulations, identified in EITI reporting, are systematically disclosed.

2.4 Contracts

30

The Secretariat’s assessment is that Albania has partly met the objective of this requirement to ensure the public accessibility of all licenses and contracts underpinning extractive activities. Significant aspects of the requirement have not yet been addressed: It remains unclear whether the full texts of all licenses, concessions and contracts awarded in 2021 are publicly disclosed. There is currently no clear government policy, though the MSG appear to deem the legal framework and practice conducive for comprehensive disclosure of the contents of future or current licenses and contracts. It appears that general practice is to (at least partially) publish production sharing agreements (PSAs) through the Official Gazette and mining licenses issued through the National Business Registry (QKB). Albeiti also appears to collate the most complete list of licenses that exists in Albania, but does not indicate what documents would constitute a comprehensive disclosure of appendixes, addendum or riders of a concession, contract or license. While Albanian stakeholders confirm their intention to publicly disclose the contents of concessions, contracts and licenses entered or amended from 1 January 2021, it still remains unclear (i) what the MSG considers as "the full text of different licenses, concessions and contracts, including any of their appendixes, addendum or riders", and (ii) whether Albeiti maintains a list of licenses, contracts or concessions that are publicly accessible at present. While MSG comments to the draft Validation report identified several companies that were awarded mining permits in 2021, the comments did not appear to address the two issues highlighted above. While Albeiti appears to maintain lists of active licenses and contracts, they do not appear to provide references to whether or (precisely) where the full text of these documents can be accessed, covering both the body of the contract and license as well as any annexes, amendments and riders where applicable. Lastly, Albeiti's workplan for 2021 references a study to explore the legal framework for contract or license disclosure, but the execution of this study remains unclear. Stakeholders from different constituencies did not seem to be aligned in whether this requirement’s objective is fulfilled.

6.4 Environmental impact

Not assessed

Requirement 6.4 is an encouraged aspect of the EITI Standard and is therefore not assessed in Validation unless there is evidence that the country has exceeded the requirement. Still, the Secretariat’s assessment is that Albania has met the objective of providing a basis for stakeholders to assess the adequacy of the regulatory framework and monitoring efforts to manage the environmental impact of extractive industries, and to assess extractive companies’ adherence to environmental obligations. The report clarifies the role of various government agencies, including requirements for extraction rights holders, and identifying AKBN as the agency assessing companies' compliance with environmental terms of licenses and concessions. However, the EITI Report does not strictly reference public documents where e.g. Environmental Impact Assessments, can be accessed. Still the MSG provided information about several reports including the annual National Environmental Monitoring Plan and specific forms for Environmental Rehabilitation requirements for companies. Albeiti also appears to have provided inputs to legal amendments with an emphasis on environmental considerations.

Licenses

2.2 Contract and license allocations

60

The Secretariat’s assessment is that Albania has mostly met the objective of providing a public overview of awards and transfers of oil, gas and mining licenses, the statutory procedures for license awards and transfers and whether these procedures are followed in practice. Progress has especially been made towards the corrective action from the previous validation with regards to describing the process for transferring or awarding licenses in the mining sector including the specific technical and financial criteria. Where licenses were awarded through a bidding process during the year under review in the mining sector, the government has also disclosed information on the list of applicants (including non-winning applicants) in accordance with Requirement 2.2 (c). This is despite perceived legal barriers to disclosure of non-winning bidders as documented by the IA. Albeiti, however, has not yet provided documentation of how the MSG assessed whether there are any non-trivial deviations in the allocation or transfer of licenses in the mining sector in accordance with requirement 2.2 (a) (iv), especially considering that the EITI Report was “not able to conduct an assessment”. No license allocations or transfers were made in the oil and gas sector in the year under review, also confirmed through MSG comments on the draft Validation report.

2.3 Register of licenses

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring the public accessibility of comprehensive information on property rights related to extractive deposits and projects. There is no evidence to suggest that there has been backsliding on Requirement 2.3, which was assessed as ‘satisfactory progress’ in the previous Validation. Albeiti maintains a mining cadastre as well as a bi-annually updated mining license register and hydrocarbons license register. All datapoints required under Requirement 2.3 are disclosed by Albania online and systematically, except for date of license applications for many mining licenses and all oil and gas licenses, though in Albania’s second EITI validation the EITI Board took the view that the lack of publicly accessible dates of application was a marginal issue that did not affect Albania’s progress in meeting the overall objective of transparency in license information. This view is being retained in the current validation as well. It is to be noted that while the dates of expiry of mining and hydrocarbons licenses are not explicitly provided, these can be surmised from the dates of award, and duration of licenses which have been provided in the online license register for the mining and hydrocarbons sectors. In its comments to the draft Validation report, the MSG confirmed this possibility and Albeiti’s intention to provide this data in the future.

Ownership

2.5 Beneficial ownership

60

The Secretariat’s assessment is that Albania has mostly met the objective of this requirement to enable the public to know who ultimately owns and controls the companies operating in the country’s extractive industries. Most aspects of Phase I of beneficial ownership requirements have been addressed, in that BO data has been requested from all companies in Albania (not merely those holding and applying for extractive licenses). However, in the MSG’s assessment of comprehensiveness and reliability of BO disclosures, Albeiti does not reference publicly accessible information per company (only publishing their conclusions, not the underlying BO data). The MSG has also not assessed disclosures through the newly launched beneficial ownership registry of the National Business Centre (QKB). Albeiti does not appear to maintain a list of material companies’ legal or BO owners themselves at present. The Beneficial Ownership Register also appears to have some gaps in its beneficial ownership disclosures and does not indicate in any way which companies are publicly listed on (foreign) stock exchanges. While the register does include some BO information, it does not currently indicate whether beneficial owners are publicly exposed persons (PEPs), and current legislation does not appear to guarantee that all PEPs are indicated as BO for any company, regardless of their level of control. Legal ownership of extractive companies is disclosed by the QKB. Lastly, the EITI Report clearly indicates that there are no current verification methods or means by the government agencies, with the exception of penalties for failure to disclose or incorrect disclosures.

State participation

2.6 State participation

90

The Secretariat’s assessment is that Albania has fully met the objective of the requirement 2.6, ensuring an effective mechanism for transparency and accountability for well-governed SOEs and state participation more broadly through a public understanding of whether SOEs’ management is undertaken in accordance with the relevant regulatory framework. Albpetrol is considered the sole SOE of the upstream extractive sector, given that the Hydropower sector is not covered by Validation. Additionally, two SOEs in the midstream sector are highlighted, though not material: Transnafta Sh.a. and Albgaz. State participation in Albpetrol gives rise to material revenues through Albpetrol’s payments of dividends to the state as its sole shareholder. These payments are determined on the same terms as private companies, and through its sale of the state’s in-kind revenues. The 2017-2018 EITI Report clarifies the rules and practice related to Albpetrol’s ability to raise third-party financing and document the changes in state participation in the year under review. On the practice of SOE governance, the EITI Report draws from the publicly available audited financial statements of Albpetrol to document two loans from private banks to Albpetrol. The 2017-2018 Report also notes the absence of state loans to private companies in the mining, oil and gas sector including (the lack of) state guarantees.

4.2 In-kind revenues

90

The Secretariat’s assessment is that Albania has fully met the objective of this requirement to ensure transparency in the sale of in-kind revenues of minerals, oil and gas to allow the public to assess whether the sales values correspond to market values and ensure the traceability of the proceeds from the sale of those commodities to the national Treasury. The 2017-2018 EITI 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. Disaggregation between equity and profit share of production does not occur. Albpetrol also systematically discloses each sale and auction process on its own website. Compared to the previous Validation, the sales are not disaggregated by cargo anymore, which is encouraged, though there is no evidence to suggest that there has been backsliding on required aspects Requirement 4.2, which was assessed as ‘satisfactory progress’ in the previous Validation.

4.5 SOE transactions

90

The assessment of the Secretariat is that Albania has fully met the objective of the requirement 4.5, ensuring the traceability of payments and transfers involving SOEs and strengthen public understanding of whether revenues accruable to the state are effectively transferred, as well as the level of state financial support for SOEs. There is no evidence to suggest that there has been backsliding on Requirement 4.5, which was assessed as ‘satisfactory progress’ in the previous Validation. There might be scope for replicating additional details covered on hydropower SOE transactions to be published for the petroleum sector as well. This would be increasingly important as EITI reporting begins to cover the flows from Albania’s gas transportation SOE, Albgaz. The level of progress in addressing this requirement have been maintained since the previous Validation.

6.2 SOE quasi-fiscal expenditures

Not applicable

There is no evidence to suggest that there has been backsliding on Requirement 6.2, which was assessed as ‘not applicable’ in the previous Validation. According to the Report, the MIE and Albpetrol informed that law and regulations governing Albpetrol’s activity do not include quasi-fiscal expenditures or similar arrangements. However, it does not explain the methodology followed to reach such conclusion. There is consensus among stakeholders that there have not been any quasi-fiscal expenditures for the year under review. The financial statements of Albpetrol have been audited according to international standards and did not make reference to such non-commercial liabilities, nor result in a qualified or adverse opinion.

Production and exports

3.2 Production data

90

The Secretariat’s assessment is that Albania has fully met the objective to ensure public understanding of extractive commodity(ies) production levels and the valuation of extractive commodity output, as a basis for addressing production-related issues in the extractive industries. The methodology for estimating production values is based on export sale prices. While comments from the MSG to the draft Validation report implied that there could be missing commodities from the published data, Albeiti's data portal does include data on the highlighted commodities. Thus, there is no evidence to suggest that there has been backsliding on Requirement 3.2, which was assessed as ‘satisfactory progress’ in the previous Validation.

3.3 Export data

90

The Secretariat’s assessment is that Albania has fully met the objective to ensure public understanding of extractive commodities export levels and the valuation of extractive commodity exports, as a basis for addressing export-related issues in the extractive industries. The Report notes however that 10% of mineral exports came from companies that did not hold mining permits. There is no evidence to suggest that there has been backsliding on Requirement 3.3, which was assessed as ‘satisfactory progress’ in the previous Validation.

Revenue collection

4.1 Comprehensiveness

60

The Secretariat’s assessment is that Albania have mostly met the objective of ensuring comprehensive disclosures of company payments and government revenues from oil, gas, and mining as the basis for detailed public understanding of the contribution of the extractive industries to government revenues. The level of progress in addressing this requirement have been maintained since the previous Validation, i.e. without significant improvements. In determining material revenues and companies, it does not appear the MSG has made progress on the corrective action from the 2019 Validation to reconsider materiality thresholds for selecting mining companies. The methodology appears to be unchanged since last Validation, and the report indicates that no thresholds were used for determining material flows [revenues].The International Secretariat also cannot conclude that the government in Albania provides a full government disclosure of revenues from the extractive sector by individual revenue stream. The EITI Report states that it does not provide full government disclosure, and multiple revenue streams appear to have been excluded seemingly without consideration of their individual total values. Mining companies continue to be selected based on production, without a per-company breakdown of companies’ contribution to government revenues, followed by an ex-post confirmation only determined for a single revenue stream. Given that 31 of 137 companies did not report, this remains a significant challenge for determining the comprehensiveness of reporting, in combination with uncertainties related to full government disclosure of revenues. Lastly, two government entities did not report for either 2017 nor 2018; Ministry of Finance and Economy (MFE) and the Ministry of Tourism and Environment (MTE).

4.3 Infrastructure provisions and barter arrangements

Not applicable

The Secretariat’s assessment is that Requirement 4.3 remains 'Not Applicable' in Albania in the period under review. The level of progress in addressing this requirement have been maintained since the previous Validation, though the MSG is advised to re-confirm its non-applicability annually, through the EITI reporting process.

4.4 Transportation revenues

Not applicable

The Secretariat’s assessment is that Requirement 4.4 remains 'Not Applicable' in Albania in the period under review. The level of progress in addressing this requirement have been maintained since the previous Validation, though the MSG is advised to re-confirm its non-applicability annually, through the EITI reporting process. There are no SOEs or government agencies regulating the transportation of minerals, and though the EITI Report identifies some companies and public-private partnerships (PPP) in the midstream petroleum sector (oil and gas transportation), stakeholder consultations confirm that any such arrangements were inactive or under development during the period under review. The SOE Transnafta Sh.a. was inactive during the period, and while Albgaz was subject to gas transportation tariffs set by ERE, it was not operational during the 2017-2018 period. A PPP arrangement involving La Petrolifera Italo-Albanese Sh.a. (PIA), indicates and descriptions of the Trans Adriatic Pipeline (TAP) indicate there were no remunerations to the Government of Albania in 2018.

4.7 Level of disaggregation

60

The Secretariat’s assessment is that Albania have mostly met the objective of this requirement to ensure disaggregation in public disclosures of company payments and government revenues from oil, gas and mining that enables the public to assess the extent to which the government can monitor its revenue receipts as defined by its legal and fiscal framework, and that the government receives what it ought to from each individual extractive project. The level of progress in addressing this requirement have been maintained since the previous Validation, i.e. without full incorporation of the requirement’s new aspects. The EITI reporting highlights significant challenges for government systems to publish revenue data disaggregated by revenue stream, company and government entity, due to issues of prior consent of licensees for the disclosure of tax and customs data. However, the EITI Report does disaggregate data for those companies that provided consent to such publication. In terms of project-level reporting (PLR), Albania applies definitions of projects in line with the EITI Standard; a single Petroleum Agreement for the oil and gas sector and "each license " for mining sector. Royalties are the only revenue stream deemed to be imposed at project levels. However, there are also substantial challenges related to PLR due to mining companies holding multiple licenses, though government systems only recording per unique company ID. Stakeholder consultations do imply that AKBN, or other agencies than the General Tax Administration, receive regular declarations from license/concession/contract holders on a per-project basis, which may reveal a potential for project-level reporting through government systems. Regardless, Albeiti sought to collect PLR data from companies to overcome this issue, to which it has been partially successful. The data provided through Validation templates and in the 2017-2018 EITI Report so far does not indicate that Albania comprehensively reports data per project, in line with Requirement 4.7 of the EITI Standard.

4.8 Data timeliness

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring that public disclosures of company payments and government revenues from oil, gas and mining are sufficiently timely to be relevant to inform public debate and policy making. There is no evidence to suggest that there has been backsliding on Requirement 4.8, which was assessed as ‘satisfactory progress’ in the previous Validation.

4.9 Data quality and assurance

60

The Secretariat’s assessment is that Albania has mostly met the objective of ensuring that appropriate measures have been taken to ensure the reliability of disclosures of company payments and government revenues from oil, gas and mining. The aim is for the EITI to contribute to strengthening routine government and company audit and assurance systems and practices and ensure that stakeholders can have confidence in the reliability of the financial data on payments and revenues. The level of progress in addressing this requirement have been maintained since the previous Validation, i.e. without significant improvements. Statutory audit procedures are clear in the EITI Report. However, no government entity or state-owned enterprise (SOE) submitted their audited financial statements or reports to the Independent Administrator (IA) for 2018, and only 25 companies published results of external audits, without information broken down per reporting company. The report indicates that only 45% of reconciled revenues were audited in 2018 (42% of oil & gas, 8% of mining and 89% of hydropower). Furthermore, the report highlights that the MSG did not opt for a different method in assessing assurances related to the 2017-2018 reporting process and contest that they followed the Standard TOR for Independent IAs. The EITI Report does not clarify how the MSG influences the design of reporting templates, citing an outdated template approved in 2011, with an additional template for beneficial ownership data (see Requirement 2.5). MSG comments on the draft Validation report appears to provide examples of how reporting is discussed and decided by the MSG, by submitting extended MSG meeting minutes for 27 July 2021. The meeting minutes and MSG comments clarify that these issues are under discussion though the MSG have not reached a clear decision on additional assurances and/or reporting templates. The outcome of these discussions should be reassessed in future Validations. The EITI Report provides multiple, and at times contradictory assessments of comprehensiveness, though does not provide an explicit conclusion on the reliability of EITI data. Even when given the limitations above, it does not affect the MSG’s view of the comprehensiveness of the EITI Report. Assessments are included per individual revenue stream, even if contradicting other limitations on total extractive revenues (see Requirement 4.1). Lastly, limitations of providing an ex-post verification of the company selection reveal that comprehensiveness is only assessed towards a single revenue stream, not towards total coverage.

Revenue management

5.1 Distribution of revenues

90

The Secretariat’s assessment is that Albania has fully met the objective of ensuring the traceability of extractive revenues to the national budget and ensuring the same level of transparency and accountability for extractive revenues that are not recorded in the national budget. There is no evidence to suggest that there has been backsliding on Requirement 5.1, which was assessed as ‘satisfactory progress’ in the previous Validation. All of Albania’s mining revenues are recorded in the national budget, alongside 72% of the oil and gas revenues. Extractives revenue streams that are not recorded in the national budget mainly consists of Albania’s Share of Oil Production and Bonuses that are received by Albpetrol, with its financial statements available online. The report also identifies AKBN as collecting and retaining a minor portion of oil and gas revenues in 2018 (bonuses).

5.3 Revenue management and expenditures

Not assessed

Progress in addressing Requirement 5.3 is not assessed in Validation unless there is evidence that the country has exceeded the requirement. The Secretariat’s assessment is that Albeiti have met the objective of strengthening public oversight of the management of extractive revenues, the use of extractives revenues to fund specific public expenditures and the assumptions underlying the budget process. There is no evidence to suggest that there has been backsliding on Requirement 5.3, which was assessed as ‘satisfactory progress’ in the previous Validation.

Subnational contributions

4.6 Subnational payments

60

The Secretariat’s assessment is that Albania has mostly met the objective of enabling stakeholders to gain an understanding of benefits to local governments through transparency in companies’ direct payments to subnational entities and strengthening public oversight of subnational governments’ management of their internally generated extractive revenues. Albania established that six reporting LGUs were material based on production and subnational transfers of royalty. However, some subnational payments to LGUs are reported by companies under “Other Payments made to the LGU”, not per revenue stream, though only partially and with delays and discrepancies (2017-2018 Albania EITI Report at pp.186-187). The EITI Report (p. 152) as well as the Albeiti MSG confirm most of the payments to the LGUs are local taxes unrelated to the extractives sector. Still, Albania’s progress does not address the corrective action of the EITI Board, that the MSG should undertake appropriate scoping of direct subnational payments by extractive companies to LGUs, establishing a comprehensive basis for the MSG’s materiality discussions regarding direct payments to LGUs. MSG comments to the draft Validation report clarify the precise law which awards LGUs with the mandate to impose local taxes and fees (see Transparency template attached to this Validation report), though does not clarify the value of each LGU’s revenues in accordance with the law in the period under review. Other recommendations on Requirement 4.6 have also not been fulfilled, to ensure all extractive payments to subnational government units, when material, be disclosed and reconciled, and to publicly disclose a detailed explanation all types of local payments. The prevailing scenario brings to question the comprehensiveness of reporting sub-national direct payments in Albania.

5.2 Subnational transfers

90

The Secretariat’s assessment is that Albeiti has fully met the objective of enabling stakeholders at the local level to assess whether the transfer and management of subnational transfers of extractive revenues are in line with statutory entitlements. There is no evidence to suggest that there has been backsliding on Requirement 5.2, which was assessed as ‘satisfactory progress’ in the previous Validation. While the process of allocation of 5% royalties to the LGUs is done by the Directorate of Local Finances in the Ministry of Finance and Economy, the actual transfers are executed by the General Directorate of Taxes through the government’s single treasury system. The 2017-2018 Albania EITI Report describes statutory subnational transfers of royalties, provides the general formula, and budgeted and actual transfers for 2017 and 2018. However, Albeiti stops short of specifying the budgeted subnational transfers disaggregated by LGU, nor compare any strict 5% calculation of royalties that should have been distributed per LGU. This prevents the assessment of any discrepancy between the budgeted and actual amount transferred, disaggregated by LGU. This was accepted by the EITI Board as sufficient in their previous Validation, and Albania’s progress towards this requirement has been maintained. Additionally, as part of MSG comments on the draft Validation report, a recent development of 2021 is the opening of a dedicated account in the Unified Treasury System: 7204100 “Local Unit Grants from the Participation in the royalty tax”. While the comments do not influence the assessment of fully met, the comments indicate that government systems will improve further on its monitoring revenues earmarked for subnational transfers from mineral royalties collected in 2022 onwards.

6.1 Social and environmental expenditures

60

The Secretariat’s assessment is that Albania has mostly met the objective of enabling public understanding of extractive companies’ social and environmental contributions, and providing a basis for assessing extractive companies’ compliance with their legal and contractual obligations to undertake social and environmental expenditures. The level of progress in addressing this requirement have been maintained since the previous Validation, i.e. without full incorporation of the requirement’s new aspects. Social payments are not mandatory in Albania, but the EITI Standard 2019 also cover environmental payments to government. Environmental payments are mandated by law and as reported in the EITI Report 2017-2018, made to the Ministry of Tourism and Environment (MTE), and are classified as environmental/social expenditures. Therefore, while social payments may be excluded from the purview of reporting, the materiality of environmental payments must be assessed. Aggregate environmental payments by revenue stream for all sectors (and not just extractives) are directly disclosed online by Albeiti and are available at: http://www.instat.gov.al/en/themes/environment-and-energy/environmental-accounts/. For the year under review 2018, these payments amounted to Albanian Lek 51,146 million. This total amount far exceeds the materiality thresholds established by Albeiti for reporting its extractives revenue streams. Although it is unclear how much of these environmental payments are attributable to extractive industries, it raises the possibility that they might be material. However, the Albeiti MSG has not discussed the materiality of these payments. The fact that the universe of government revenues has not been disclosed in accordance with Requirement 4.1 further complicates such calculation. Stakeholder consultations during validation revealed that some of these environmental payments may be substantial for mining exploration companies. As another example, while the Albania 2017-2018 EITI Report discloses carbon tax for the oil, gas and mining sectors (tables 14 and 23), it is akin to an excise duty in Albania (See also: The United Nations Economic Commission for Europe’s (UNECE) third environmental performance review of Albania at p.37). The Albeiti MSG has not discussed whether it has considered carbon tax or other environmental payments as material environmental payment. MSG comments on the draft Validation report confirmed that there are mandatory environmental payments to be paid by extractive companies, though the precise type of tax and mode of calculation remains unclear.

Países
Albania