Leading the way in beneficial ownership and commodity trading.
The extractive sector may have decreased in prominence in global debates, but the EITI continues to be at the forefront of discussions on accountability and governance, as it leads the way in two emerging issues: beneficial ownership and commodity trading.
Leading the way in disclosing hidden owners
EITI Board members and around 80 stakeholders gathered today in Oslo for the 34th EITI Board meeting to discuss progress made by the EITI in fostering transparency in company ownership. In February 2016, the Board made beneficial ownership (BO) disclosure mandatory for all countries implementing the EITI. Under this new rule, all companies that bid for, operate and invest in extractive projects in EITI implementing countries must disclose their beneficial owners. Since then, the EITI and it 51 member countries have been hard at work in creating awareness on this issue and in creating a roadmap for BO disclosure. This requirement is rather timely in the wake of the Panama leaks.
The board meeting today was a good opportunity to discuss experiences of countries that have pioneered this undertaking such as the Democratic Republic of Congo, the United Kingdom and Ukraine. What was evident in the discussion is that while an institutional approach such as legislation and creation of registries may be helpful to effectively drive the process as in the case of the UK and Ukraine, beneficial ownership disclosure need not be through an institutional approach but may also be through efforts such as the EITI which is driven largely by government and the MSG, as in the case of DRC. What is important is for the process to be flexible enough to accommodate lessons learned along the way. Amongst the challenges encountered by countries have been securing the buy-in of companies, lack of means to verify the information, and lack of capacity in terms of enforcement and understanding how to use the data. Moving forward, the EITI will continue to provide assistance to countries to gain better understanding on BO and how to implement this new requirement
Enhancing disclosure of commodity trading
The Board agreed to enhance reporting of commodity trading in six EITI implementing countries. The objective was to assist EITI implementing countries with significant commodity trading activities by the state or state-owned enterprises to find and promote innovative reporting on revenues from the sale of the state’s share of production including reporting by product, price, market and sales volumes, as well buyers. Nigeria, which has started reporting on commodity trading stated that it has been helpful to them in improving the quality of reporting of SOEs. Among the countries being considered for this work are Colombia, Ghana, Nigeria, Myanmar and the Republic of Congo.
Reviewing the Funding of the EITI at the international level
The Board also discussed possible revisions to funding arrangements to ensure its sustainability. Based on a wide consultation conducted by the International Secretariat, several options were put for consideration, which included fees from implementing countries, and minimum contributions from supporting countries and supporting companies. The discussions were just preliminary, so no decision was yet taken by the Board.
And back to beneficial ownership…
The day ended on a high note, with a public debate on beneficial ownership. The EITI Chair Fredrik Reinfeldt elaborated on the importance of this work by highlighting that developing countries lose about USD 1 trillion per year as a result of corrupt or illegal deals, many of which involve anonymous companies. He emphasised that we should not underestimate the scope of the work that countries need to do in terms of gathering and understanding data, capacity building and strengthening of institutional framework for effective implementation. As he put it “We have started the journey, it may be a complicated process, but we are moving in the right direction.”