EITI expectations - necessary but not sufficient

With 22 of the 30 countries around the world having to go through the EITI quality assurance mechanism, Validation, by March 2010, it is tremendously encouraging to hear about implementation in full swing in so many countries.
 
We at the International Secretariat often get questions about why the EITI doesn’t cover things like contract transparency or require company-by-company reporting or improved transparency about how governments spend their money. I am therefore in this posting revisiting some of the arguments why it is important that the EITI keeps its focus and why it is precisely this tight focus that makes the EITI important in fostering wider change.

First, I wish to be clear that the EITI does not suggest that it is the solution to what has become known as the resource curse. Revenue transparency by itself is not enough to ensure that natural resource wealth generates benefits and development for a country's citizens. Revenue transparency, probably the EITI, is necessary but not sufficient. That the EITI is not sufficient to address some of our times' greatest development challenges is something we would be the first to recognize. I therefore find it disappointing when the impressive implementation work done in many EITI countries is criticised for not being the solution. It is naïve to think that the EITI would be the solution to the complex problems in the Niger Delta, for example. The EITI's impact on the situation in the Delta may in fact be tiny, but we've got to start somewhere and that somewhere is likely to include the EITI.
 
Sometimes governance of natural resources is explained by a so-called value chain, originally I believe developed by Professor Paul Collier. With the EITI drawn into such a value chain, it may look like this:

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Just as a reminder; the EITI rests on two pillars. The first one is about transparency between producing companies and the government, illustrated above with the three blue boxes. The second pillar is about accountability between government and its citizens, illustrated above by the blue oval and the required in-country multi-stakeholder group.
 
A first observation is as our chairman Peter Eigen often says, "Different parts of the value chain require different kinds of governance." It is really quite simple, we don’t consider that an initiative with big private companies and small NGOs on its board should be issuing requirements on how governments spend their money. It is for the citizens of that country, through democratic processes, to decide how public money should be spent.
 
A second observation refers to the dotted red lines below the value chain. We are seeing in country after country how even basic revenue transparency can become the starting point for other governance discussions. We are seeing how some basic information about what governments receive leads to discussions about how the money is spent or to why oil, gas and mining contracts look like they do.
 
The EITI is undoubtedly an ambitious initiative. Our ambition lies in helping countries implementing the EITI to do it better. And our ambition lies in ensuring that more countries implement the EITI in order to create a high global standard for revenue transparency. It is by doing our part of the value chain better that we can best contribute to changes elsewhere along the chain.

That governance in many resource-rich countries is inadequate is no secret. However, responsible contributions to solving the problem of poor governance acknowledge the complexities of the problem and resist oversimplification. So I ask those that mainly seem to find flaws with the EITI: Is it better to be negative about the world around us and keep dreaming of a silver bullet solution, or to actually contribute towards a real solution by building on the incremental changes that initiatives like the EITI are generating?

 

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