The Board agreed that Albania has made meaningful progress in implementing the 2016 EITI Standard.
The Board came to the following decision regarding Albania's status:
Following the conclusion of Albania’s Validation, the EITI Board decides that Albania has made meaningful progress overall in implementing the EITI Standard.
The Board congratulates the Government of Albania and Multi-Stakeholder Group (MSG) on the progress made in improving transparency and accountability in the extractive industries by using the process to address local concerns, both through active dissemination and outreach efforts and by expanding the scope of EITI reporting to the hydro-power sector. The Board encourages the government to continue the recent discussions on transparency in off-budget revenues and subnational transfers, and to improve the disclosures of transactions related to state-owned enterprises in order to address existing transparency gaps.
Eight years of the EITI implementation has led to tangible impacts through government reforms and host communities’ greater awareness of their rights. For instance, EITI reporting of delayed subnational mining revenue transfers led to legal reform and gradual clearing of arrears in transfers to local governments. The Board encourages the government and the MSG to further entrench an enabling legal environment for EITI implementation by enacting the draft Law on Transparency in the Extractive Industries, aligned with the EU Transparency Directive, and moving towards mainstreamed transparency in government and company systems.
The Board recognises Albania’s efforts to go beyond the requirements of the EITI Standard regarding expanding its scope to hydropower. The Board also takes note of the government’s efforts to increase beneficial ownership transparency by including mandatory beneficial ownership reporting for all oil, gas and mining companies in the draft Law on Transparency in the Extractive Industries. The Board encourages the government to establish a transparency and accountability framework for the Trans-Adriatic Pipeline (TAP) project.
The Board has determined that Albania will have 12 months, i.e. until 13 February 2019 before a second Validation to carry out corrective actions regarding the requirements relating to civil society governance (1.3), MSG governance (1.4), license allocations (2.2), license register (2.3), policy on contract transparency (2.4), state-participation (2.6), direct subnational payments (4.6), data quality (4.9), distribution of revenues (5.1), social expenditures (6.1), SOE quasi-fiscal expenditures (6.2) and follow up on recommendations (7.3), with social expenditures and SOE quasi-fiscal expenditures being the main areas of concern. The Board highlighted the need for the CSO constituency to be more fully, actively and effectively engaged in the EITI process. The corrective actions agreed by the Board include a requirement to develop and disclose an action plan for addressing the deficiencies in civil society company engagement documented in the initial assessment and the Validation Report within three months of the Board’s decision. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with 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.
The Board’s decision followed a Validation that commenced on 1 July 2017. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed by an Independent Validator, who submitted a draft Validation report to the MSG for comment. The MSG’s comments on the report were taken into consideration by the independent Validator in finalising the Validation report and the independent Validator responded to the MSG’s comments. The final decision was taken by the EITI Board.
The Government of Albania committed to implement the EITI on 27 December 2008 by enacting Order Nr.156 on establishing an Inter-Institutional Working Group. Albania was accepted as an EITI candidate on May 2009 at the EITI Board’s meeting in Washington DC. A permanent MSG was appointed on 21 July 2011 following Prime-Ministerial Decree Nr.71.
The Validation process commenced on 1 July 2017. In accordance with the Validation procedures, an initial assessment was prepared by the International Secretariat. The Independent Validator reviewed the findings and wrote a draft Validation report. Comments were received from the MSG. The Independent Validator reviewed the comments and responded to the MSG, before finalising the Validation report.
The Validation Committee reviewed the case on 4 December 2017. Based on the findings above, the Validation Committee agreed to recommend the assessment card and corrective actions outlined below.
The Validation Committee agreed to recommend a period of 12 months to undertake the corrective actions. This recommendation takes into account that the challenges identified are relatively significant and seeks to align the Validation deadline with the timetable for Albania’s 2017 and 2018 EITI Reports.
The EITI Board agreed the following corrective actions to be undertaken by Albania. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 13 February 2019:
- In accordance with requirement 1.3.a, the civil society constituency should demonstrate that they are fully, actively and effectively engaged in the EITI process. Specifically, civil society should ensure that they are able to fully contribute and provide input to the EITI process and that they have adequate capacity to participate in the EITI. In accordance with requirement 8.3.c.i, the civil society constituency should develop and disclose an action plan for addressing the deficiencies in civil society engagement documented in the initial assessment and the Validation Report within three months of the Board’s decision, i.e. by 13 May 2018. The constituency may wish to undertake an independent review of civil society engagement in the EITI in Albania, broadening the engagement with CSOs with potential interests in EITI implementation. Undertaking a capacity needs assessment and formulating actions to address civil society capacity constraints are crucial, not least to unlock funding from development partners and other relevant parties.
- In accordance with requirement 1.4.a.ii, the MSG should ensure that its procedures for nominating and changing multi-stakeholder group representatives are public and confirm the right of each stakeholder group to appoint its own representatives. To strengthen implementation, the government is encouraged to ensure that relevant state entities, such as the national oil company Albpetrol, given gaps in reporting on state participation (see Requirement 2.6), are represented on the MSG and that their level of seniority is commensurate with the need for the MSG to take informed decisions and follow up on agreed actions. In accordance with requirement 1.4.b.ii and 1.4.b.iii, the MSG should undertake effective outreach activities with civil society groups and companies, including through communication such as media, website and letters, informing stakeholders of the government’s commitment to implement the EITI, and the central role of companies and civil society. Members of the MSG should liaise with their constituency groups. In accordance with requirement 1.4.b.vi, the MSG should ensure an inclusive decision-making process throughout implementation, particularly as concerns industry and civil society. It is also recommended that the MSG reviews evaluation procedures for its members that all constituencies would agree to follow.
- In accordance with requirement 2.2.a, the MSG should ensure annual disclosure of which mining, oil and gas licenses were awarded and transferred in the year(s) under review, highlighting the technical and financial requirements and any non-trivial deviations from the applicable legal and regulatory framework governing license awards and transfers.
- In accordance with requirement 2.3.b, Albania should ensure that dates of application, award and expiry, commodity(ies) covered and coordinates for all oil, gas and mining licenses held by material companies are publicly available. The government is encouraged to make this information available for licenses held by all companies, regardless of their materiality.
- In accordance with requirement 2.4.b, Albania is required to document in future EITI Reports the government’s policy on disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals. This should include relevant legal provisions, any reforms that are planned or underway as well as an overview of contracts already published.
- In accordance with requirement 2.6.a, the MSG should provide an explanation of the prevailing rules and practices related to SOEs’ retained earnings, reinvestment and third-party funding. The government should also ensure annual disclosure of any changes in government ownership in SOEs or their subsidiaries, and provide a comprehensive account of any loans or loan guarantees extended by the state or SOEs to mining, oil, and gas companies in line with requirement 2.6.b.
- To strengthen implementation, the MSG is strongly encouraged to ensure that future EITI Reports include Albpetrol’s dividends to government in the scope of reconciliation, in line with requirement 4.5.
- In accordance with requirement 4.6, 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. The MSG may wish to consider a sampling approach, which would allow these payments to be investigated without creating an unreasonable reporting burden.
- 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 requirement 4.9.b.iii and the standard Terms of Reference for the Independent Administrator agreed by the EITI Board, the MSG and Independent Administrator should:
- Examine the audit and assurance procedures in companies and government entities participating in the EITI reporting process, and based on this examination, agree what information participating companies and government entities are required to provide to the Independent Administrator in order to assure the credibility of the data in accordance with Requirement 4.9. The Independent Administrator should exercise judgement and apply appropriate international professional standards in developing a procedure that provide a sufficient basis for a comprehensive and reliable EITI Report. The Independent Administrator should employ his/her professional judgement to determine the extent to which reliance can be placed on the existing controls and audit frameworks of the companies and governments. The Independent Administrator’s inception report should document the options considered and the rationale for the assurances to be provided.
- Ensure that the Independent Administrator provides an assessment of comprehensiveness and reliability of the (financial) data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided.
- Ensure that the Independent Administrator provides 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 Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness and reliability of the report.
- In accordance with requirement 5.1.a, the MSG should ensure that the allocation of extractives revenues not recorded in the national budget are explained, with links provided to relevant financial reports as applicable. The MSG may wish to explore the extent to which it could use extractives-specific GFS classifications from its EITI summary data tables as a means of disaggregating the extractives components of common taxes in existing MoF systems.
- In accordance with requirement 6.1.a, the MSG should agree a clear distinction between mandatory and voluntary social expenditures prior to data collection and ensure that material mandatory social expenditures are comprehensively disclosed in future EITI Reports. Where beneficiaries of mandatory social expenditures are a third party, i.e. not a government agency, the MSG should ensure that the name and function of the beneficiary be disclosed. The MSG may wish to consider the extent to which disclosure of actual mining, oil and gas contracts (or review of key terms) would be necessary to provide a comprehensive assessment of the existence of mandatory social expenditures. The MSG may also wish to consider the feasibility of reconciling mandatory social expenditures.
- In accordance with requirement 6.2, the MSG should consider the existence and materiality of any quasi-fiscal expenditures undertaken by extractive SOEs and their subsidiaries, ensuring that all material quasi-fiscal expenditures are disclosed in future EITI Reports.
- In accordance with requirement 7.3, the MSG should take steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies, and to consider the recommendations resulting from EITI reporting. The MSG, in consultation with government stakeholders in particular, may wish to consider institutionalising its mechanisms for following up on recommendations from EITI Reports and Validation as a means of ensuring stricter attention to implementation.
The government and the MSG are encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report