The Board agreed that Timor-Leste has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Timor-Leste.

Decision reference: 2017-04 / BC-224
Decision basis: 2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

11 January 2017

Board decision

The Board agreed that Timor-Leste has made meaningful progress overall in implementing the 2016 EITI Standard. In taking this decision the EITI Board noted the strong commitment by the Government of Timor-Leste to EITI implementation and the effective oversight provided by the Timor-Leste Multi-Stakeholder Working Group (MSWG). The EITI Board highlighted that the EITI has provided a positive platform for discussion and debates about oil sector management, involving all stakeholders and the wider public. The EITI Board was encouraged by the government’s efforts to make government systems transparent and urged the MSWG to work towards further mainstreaming EITI disclosures.

The Board’s determination of Timor-Leste’ progress with the EITI’s requirements is outlined in the assessment card, below. The EITI Board agreed that Timor-Leste had not made satisfactory progress on requirements 1.2, 1.3, 1.4, 4.8, 4.9, 6.1 and 7.4. The major areas of concern relate to company engagement (#1.2), civil society engagement (#1.3), including capacity of civil society to carry out their duties (#1.4), disaggregation (#4.7), data quality (#4.9), social expenditures (#6.1) and documentation of impact (#7.4). The EITI Board disagreed with the validator on the following requirements: license registers (#2.3) and comprehensiveness (#4.1).

Accordingly, the EITI Board agreed that Timor-Leste will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second Validation commencing on 11 January 2018. 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, the Timor-Leste Multi-Stakeholder Group 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 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed an Independent Validator, who submitted a Validation Report to the EITI Board. Timor-Leste’s Multi-Stakeholder Working Group were invited to comment throughout the process. The Multi-Stakeholder Working Group’s comments on the Report were taken into consideration. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Timor-Leste. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 11 January 2018:

In accordance with requirement 1.2, companies should demonstrate that they are fully, actively and effectively engaged in the EITI process. In accordance with requirement 8.3.c.i, the company constituency is requested to develop and disclose an action plan for addressing the deficiencies in company engagement documented in the initial assessment and validator’s report within three months of the Board’s decision, i.e. by 11 April 2017. The government should also ensure that there is an enabling environment for company participation with regards to relevant laws, regulations and administrative rules.
In accordance with requirement 1.3.a, civil society should demonstrate that they are able 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 is requested to develop and disclose an action plan for addressing the deficiencies in civil society engagement documented in the initial assessment and validator’s report within three months of the Board’s decision, i.e. by 11 April 2017.
In accordance with requirement 1.4.i, civil society members of the multi-stakeholder group should ensure that they have the capacity to carry out their duties.
In accordance with requirement 4.7, the MSWG should ensure that the financial data disclosed is disaggregated by individual company, individual government entity and individual revenue stream. to the levels required by the EITI Standard.
In accordance with requirement 4.9.c, the MSWG and the Independent Administrator should ensure that future EITI Reports are produced in accordance with the ‘agreed upon procedure for EITI reports’ as outlined in the standard Terms of Reference for EITI Reports developed by the EITI Board. Specifically, the MSWG should ensure that:
The procedure for safeguarding confidential information do not disadvantage any stakeholders or create obstacles and delays to EITI Reporting;
Future reporting templates are developed in consultation with the Independent Administrator and that there is no deviation from the templates approved by the MSG; and
A review of prevailing auditing and assurance practices is undertaken and that assurances are agreed upon prior to commencing data collection.
The Independent Administrator is viewed by all MSG members as credible, trustworthy, and technically competent.
In accordance with requirement 6.1, the MSWG should ensure that mandatory social expenditures are disclosed, and where possible, reconciled. Specifically, with regards to local content commitments provided in-kind, the MSWG should ensure that the nature and the deemed value of each in-kind commitment is disclosed.
In accordance with requirement 7.4.a.iv and v, the MSWG should ensure that future annual progress reports include an assessment of progress with achieving the objectives set out in its work plan, including the impact and outcomes of the stated objectives. The annual progress report should also include a narrative account of efforts to strengthen the impact of EITI implementation.

The MSWG is 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.

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
The government is committed to the EITI and relevant government representatives are part of the multi-stakeholder group (MSG)
1.2Company engagement
Companies are actively engaged in the design and implementation of the EITI, including MSG deliberations. However, the lack of enabling legislation seems to affect companies’ willingness to disclose information such as disaggregated revenue and production data. In addition, the lengthy review processes, insistence on confidentiality agreements, and lack of substantiation of arguments that certain information is confidential, makes it difficult to conclude that companies are effectively engaged in the EITI process in a way that supports the principles of the EITI.
1.3Civil society engagement
There is an enabling environment for civil society participation. Civil society is involved in implementation. However, capacity constraints are affecting their ability to be fully and effectively engaged in the design, implementation, monitoring and evaluation of the EITI process.
1.4MSG governance
The multi-stakeholder group (MSG) comprises relevant actors and all stakeholders feel adequately represented. The TOR for the MSG addresses the requirements of the EITI Standard and appears to be largely followed in practice. There have been concerns about decision-making, however since the fallout in 2013, there is no evidence that any new decisions have been taken without consensus. The MSG meets frequently and attendance and record keeping appears adequate. While capacity is strong among government and companies, there is limited evidence that civil society MSG members have sufficient capacity to carry out their duties.
1.5Work plan
The work plan has clear objectives linked to national priorities for the extractive sector, as well as more detailed actions and timelines. Costing is missing for some items, and implementation is slightly behind schedule.
Licenses and contracts
2.2License allocations
The 2013 EITI Report and the Supplementary Report provide sufficient detail about license allocations including the financial and technical criteria and deviations applicable to PSC 11-106. This requirement was not applicable in 2012 as no licenses were transferred or awarded.
2.3License register
Although coordinates are not all available online, ANPM (National Petroleum and Mineral Authorities) has confirmed that they can be obtained without restriction. ANPM has provided reasonable justifications for why the date of application for the licenses is not available. On balance, the Secretariat’s assessment is that it would be disproportionate to consider this requirement unmet, and that there has been satisfactory progress with meeting this requirement. It is recommended that ANPM updates its online license map to include these details for future PSC awards.
2.4Policy on contract disclosure
The 2013 EITI Report refers to contract summaries found in other sources such as the NPA’s website and “Jornal de Republica”. The 2016 EITI work plan also lists contract transparency as a priority. The EITI Report comments on actual practice on contract transparency, and government representatives have clarified the government’s policy on contract disclosure.
2.1Legal framework
Comprehensive disclosure of relevant laws, regulations and fiscal regime in both the 2012 and 2013 EITI Reports.
2.5Beneficial ownership	Not assessed
There is no evidence that the multi-stakeholder group has discussed this topic in any detail.
2.6State participation	Not applicable
The 2013 EITI Report states that this requirement is not applicable in Timor-Leste as state-participation does not yet give rise to material revenues. However, some information related to Timor Gap has been provided.
Monitoring production
3.1Exploration data
The 2013 EITI Report provides an overview of the sector, including a brief overview of one exploration activity.
3.2Production data
Production volumes are not disaggregated by commodity, and production values by commodity are not included in the EITI Report but ANPM (National Petroleum and Mineral Authorities) subsequently provided this information on their website.
3.3Export data
Export values are not disaggregated by commodity, and export volumes by commodity are not included in the EITI Report but ANPM (National Petroleum and Mineral Authorities) subsequently provided this information on their website.
Revenue collection
4.3Barter agreements	Not applicable
There was no mention of barter and infrastructure payments in the 2013 and 2012 EITI Reports. However, the 2015 Annual Activity Report confirms that barter and infrastructure arrangements are not applicable.
4.6Direct subnational payments	Not applicable
There was no reference to subnational direct payments in the 2013 and 2012 EITI Reports. However, the 2015 EITI Annual Activity Report confirms that subnational direct payments are not applicable.
4.7Disaggregation
The EITI Standard requires that the financial data is disaggregated by individual company, government entity and revenue stream. The 2013 and the 2012 EITI Reports only provides aggregated revenue data per company, and aggregated data per revenue stream. Even though government subsequently published disaggregated figures for payments collected by ANPM (National Petroleum and Mineral Authorities) such as profit oil, FTP and royalties, other taxes collected by NDPT such as income taxes are still not disaggregated.
4.9Data quality
The assessment of data quality highlights gaps in the use of the agreed upon procedure for EITI Reports, including concerns about reporting templates and cumbersome reporting procedures caused by confidentiality agreements.
4.1Comprehensiveness
For both 2013 and 2013 EITI Reports, disclosures of payments and revenues are comprehensive.
4.2In-kind revenues
The 2013 and 2012 EITI Reports confirm that in-kind revenues were not applicable in 2012.
4.4Transportation revenues	Not applicable
The 2013 and 2012 EITI Reports include disclosure of a pipeline fee. Given that the fee is not material relative to total government revenues from the sector, the International Secretariat’s initial assessment is that this requirement is not applicable.
4.5SOE transactions
The 2013 Report discusses Timor GAP’s (the national oil company) financial relationship with the government, as well as its management of Tasi Mane project and provides all disclosures related to transactions between the government and Timor GAP.
4.8Data timeliness
The 2013 EITI Report was published by the deadline of 31 December 2015. The national multi-stakeholder group is encouraged to explore opportunities for publishing more timely EITI data.
Revenue allocation
5.1Distribution of revenues
The 2012 and 2013 EITI Reports disclose how revenues are allocated.
5.2Subnational transfers	Not applicable
The 2014 Annual Activity Report confirms that sub-national transfers are not applicable.
5.3Revenue management and expenditures	Not assessed
In response to public interest in spending, the national multi-stakeholder group has included transparency in public expenditure, including investment decisions as one of its priorities in the 2015 and 2016 work plans. There are references to how to access further budget and expenditure data in the 2015 Annual Activity Report.
Socio-economic contribution
6.1Mandatory social expenditures
The 2013 EITI Report contains only aggregated data on value and spending of social expenditures by company. The ANPM (National Petroleum Agency) annual report for 2013 likewise only provides aggregate figures. In light of this, it is difficult to conclude that the “nature and the deemed value of the in-kind transaction” is disclosed.
6.2Quasi-fiscal expenditures	Not applicable
State-participation in the extractive sector does not yet give rise to material revenue in Timor-Leste both for the 2012 and 2013 EITI Reports.
6.3Economic contribution
Most of this data has been provided, however estimates of informal sector activity and data on extractive industry revenue as a percentage of total government revenue should be disclosed in the future.
Outcomes and impact
7.2Data accessibility	Not assessed
TL-EITI does not yet provide EITI data in open data formats. There are considerable efforts underway to mainstream transparency in government systems.
7.4Outcomes and impact of implementation
The national multi-stakeholder group has produced annual progress reports documenting progress and outcomes of implementation. Further work on assessing impact should be considered.
7.1Public debate
The national multi-stakeholder group has taken steps to ensure that the EITI Report is comprehensible, actively promoted and publicly accessible. Through the organisation of dissemination events and workshops, TL-EITI has ensured that the EITI has also contributed to public debate.
7.3Follow up on recommendations
The national multi-stakeholder group has taken steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and to consider the recommendations for improvements from the Independent Administrator.