How to become an implementing country
To become an EITI implementing country, a country must complete five sign-up steps. These steps relate to the commitment of the government, company and civil society engagement, the establishment of a multi-stakeholder group and agreement on an EITI work plan. They are layed out in requirement 1 of the EITI Standard.
When a country has completed the sign-up steps, the government, with the support of the multi-stakeholder group (a coalition of representatives from government, companies and civil society), should submit an EITI Candidature Application. The application form can be requested from the EITI International Secretariat.
When the EITI Board admits an EITI implementing country, it establishes deadlines for publishing the first EITI Report and undertaking Validation.
An implementing country’s first EITI Report must be published within 18 months from the date that the country was admitted as an EITI country.
Implementing countries are required to commence Validation within two and a half years of becoming an EITI country.
All deadlines are summarised in requirement 8 of the EITI Standard.
- What is the EITI?
- What is the legal status of the EITI?
- What is the EITI Standard?
- How can a country apply to become an EITI candidate?
- My country does not have significant revenues from extractive resources, should it still implement the EITI?
- My country is already transparent about its revenues from extractive resources. What do we have to gain from the EITI?
- Why do we need EITI if we have disclosure requirements for companies in US and EU?
- What is the difference between the EITI and the other efforts to improve revenue transparency?
- What are the costs of EITI implementation?
- What is an EITI Report?
- What does it mean to be an EITI candidate?
- What does it mean to be EITI compliant?
- What does it mean to be suspended from EITI?
- Is the EITI voluntary?
- What are the benefits of EITI?
- What are the proven impacts of EITI?
The EITI (Extractive Industries Transparency Initiative) is an international standard for openness around the governance of oil, gas and mineral resources. At its heart, governments disclose how much they receive from extractive companies operating in their country and these companies disclose how much they pay. In addition, many other key data is published. Governments sign up to implement the EITI Standard and must meet seven requirements.
The EITI is established as a non-profit association under Norwegian law. It is registered as “The Association for the Extractive Industries Transparency Initiative” or “EITI Association”. See also the articles of association.
The EITI Standard is the set of requirements countries have to comply with once they have been admitted as an EITI implementing country. Learn more here.
When a country has completed the “sign-up” steps and wishes to seek EITI candidature, the government should submit an EITI candidate application, endorsed by the multi-stakeholder group, to the EITI Board. The application should describe the activities undertaken to date and provide evidence demonstrating that each of the sign-up steps have been completed. The application should include contact details for government, civil society and private sector stakeholders involved in the preparations for implementing the EITI.
Once submitted, the application will be made publicly available on the EITI website. The EITI Board, working through the Outreach and Candidature Committee, will review the application and assess whether the sign-up steps have been completed. The International Secretariat will work closely with the government and other stakeholders to clarify any outstanding issues. Based on this and any other available information, the Outreach and Candidature Committee will make a recommendation to the EITI Board on whether a country’s application should be accepted. The EITI Board takes the final decision.
The EITI Board aims to process applications within eight weeks of receiving the application.
My country does not have significant revenues from extractive resources, should it still implement the EITI?
A country should only implement the EITI if it is useful. The process may be useful even in countries that do not have significant revenues from extractive resources. For example, the EITI might establish a useful forum for dialogue about areas of potential concern in the sector: tax and royalty levels, types of taxes and benefits, diminishing revenue, devolution, etc. This is particularly relevant where the impact of extractive activities on a sub-national level is significant, even though on a national level the revenues from extractive resources may be relatively limited. It can be particularly useful if linked to other government efforts to facilitate discussions and information on the extractive sector. Some countries have decided to implement the EITI Standard to demonstrate international or regional leadership and then persuade others to follow.
My country is already transparent about its revenues from extractive resources. What do we have to gain from the EITI?
Many countries use the EITI to publicly verify that company and government accounting and auditing systems are working efficiently and effectively. The EITI is also used to highlight opportunities to reform and strengthen these systems. The EITI is not just about transparency, it is also about accountability. By establishing a multi-stakeholder platform and informing public debate, the EITI can improve dialogue and trust between all key parties, especially on areas of contention.
The US enacted mandatory disclosure legislation as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1504 requires that all companies listed in the US disclose their payments to governments in all countries where they operate. The European Union has passed similar legislation for companies listed in the EU.
In short, the EITI complements these other efforts:
- If a country decides to implement the EITI, all companies operating in the country, including state-owned enterprises, are required to publish what they have paid to the government, wherever they are registered.
- The EITI requires a reconciliation of what government discloses that it has received, as well as what companies report they have paid.
- Most importantly, the EITI establishes a mechanism for debate about the resources inside the country.
There are four key ways in which the EITI differs from these complementary efforts to improve revenue transparency:
- The EITI is not only about publishing the numbers. Countries implementing the EITI have a multi-stakeholder platform for dialogue about all aspects of the use of their country's extractive resources.
- The EITI is not only about companies being required to report their payments to governments. Governments also have to report on revenues received. Then there is an independent reconciliation of what the companies say they paid and what the government says it received. In doing this independent reconciliation, discrepancies and inaccuracies are uncovered and can be acted upon. For example, in Nigeria, USD10 billion was uncovered in unpaid taxes through their EITI process.
- A significant proportion of extractive resources are exploited by companies that are not listed in the US or the EU, especially by state-owned enterprises. The EITI requires disclosure of all companies' payments in a country.
- The EITI upholds an international standard, but is implemented nationally. This means that the national multi-stakeholder group determines how to adapt the EITI implementation process to reflect local circumstances, needs or preferences. Examples would be a specific legal environment or the detail of the payments to be published.
The costs of EITI implementation in each country vary widely, depending on the complexity of the extractive industries, the scope of the reporting exercise, and the amount of related capacity building and communications activities. EITI implementation does not need to be a heavy financial burden and proportionality should be considered in deciding the scope of the process at the national level. Care should be taken to ensure that the scope of the EITI is reasonable in light of the total revenues from the sector.
The EITI process is led by the government, and all implementing countries provide financial means for the implementation of the national EITI work plan. Technical and financial assistance is available from a number of bilateral and multilateral donors, for example, the Extractive Global Programmatic Support (EGPS) Multi-Donor Trust Fund managed by the World Bank. The International Secretariat does not provide direct financial support, but it can provide advice regarding accessing technical and financial assistance.
Countries implementing the EITI Standard publish annual reports that disclose the revenues from the extraction of the country's extractive resources. Companies report payments to government (taxes, royalties, etc.) and the government reports what it has received. An Independent Administrator reconciles these figures. Other data about the sector is included in the report such as beneficial ownership disclosure, license and contract information as well as policies and information about the country's extractive sector.
A country implementing the EITI begins as an EITI candidate. Before being admitted as an EITI candidate, the country has to demonstrate that it has met the sign-up requirements. From the date of being admitted as an EITI candidate, the country has two and half years to meet the remaining requirements for compliance with the EITI Standard. At this point, the EITI Board will assess whether the country has satisfactorily met all the EITI Requirements. A country cannot hold candidate status for more than five years from the date that it was admitted as an EITI candidate.
An EITI implementing country has EITI compliant status when it has met all of the requirements of the EITI Standard. The country must maintain adherence to the EITI Principles and Requirements in order to retain compliant status. "EITI compliant" does not indicate whether there is corruption in the country or not. It simply means that the country has complied with all seven EITI Requirements and thus has sufficient mechanisms of public disclosure of the revenues and payments from extractiveresources. From this basis, there can be a well-informed debate with agreed facts about how to address the key challenges of the sector.
A country implementing the EITI can be suspended for many reasons - both political and technical. For example, the relations necessary for EITI implementation might temporarily not exist after political upheaval. Or the country may have failed to achieve compliance after two attempts or missed important deadlines for reporting.
Countries can choose to sign up to begin implementing the EITI. However, once implementation begins, the country is required to achieve compliance with the EITI Requirements. To do this, all companies and government agencies making or receiving payments must participate. The EITI leads to full disclosure within implementing countries. EITI implementation is mandated by law in a number of countries, including Liberia, Nigeria and Norway.
Governments benefit from following an internationally recognised transparency standard that demonstrates commitment to reform and anti-corruption, and leads to improvements to the tax collection process and enhanced trust and stability in a volatile sector.
Companies benefit from a level playing field in which all companies are required to disclose the same information. They also benefit from an improved and more stable investment climate in which they can better engage with citizens and civil society.
Citizens and civil society benefit from receiving reliable information about the sector and a multi-stakeholder platform where they can better hold the government and companies to account. Energy security is enhanced by a more transparent and level playing field. This increased stability, encourages long-term investment in production – and thus improves the reliability of supply.