Liberia 2016 Validation

Liberia's Validation commenced on 01 July 2016.

On 24 May 2017, Liberia was validated against the 2016 Standard

Validation is the EITI's quality assurance mechanism and measures the progress countries have made in meeting the requirements of the EITI Standard. For more information about the country, visit the country page on eiti.org.

The Board's decision

On 24 May 2017, the EITI Board came to the following decision on Liberia's status: 

The Board agrees that Liberia has made meaningful progress overall in implementing the 2016 EITI Standard. The Board’s determination of Liberia’s progress with the EITI’s requirements is outlined in the assessment card below.

The EITI Board agreed that Liberia has made meaningful progress in meeting requirements 1.4, 1.5, 2.2, 2.3, 4.1, 4.7, 6.1, 6.3 and 7.4. The Board also agreed that Liberia has made inadequate progress in meeting requirements 2.6, 4.9, 5.1 and 6.2, and no progress in meeting requirement 4.3. The major areas of concern relate to multi-stakeholder group governance (#1.4), work plan (#1.5), License allocations (#2.2), license registers (#2.3), state participation (#2.6), comprehensiveness (#4.1), barter agreements (#4.3), disaggregation (#4.7), data quality (#4.9), distribution of revenues (#5.1), mandatory social expenditures (#6.1), economic contribution (#6.3), outcomes and impact of implementation (7.4).

Accordingly, the EITI Board agreed that Liberia will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second validation commencing on 24 November 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, Liberia’s EITI multi-stakeholder group (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 2016. 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 Validation Report to the EITI Board. The NSC was invited to comment on the findings throughout the process. The national secretariat’s comments on the report were taken into consideration. The final decision was taken by the EITI Board.

Liberia's progress by requirement

The EITI Board agreed the following assessment card:

Corrective actions

The EITI Board agreed the following corrective actions to be undertaken by Liberia. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 24 November 2018:

  1. In accordance with Requirement 1.4a, the MSG needs to ensure that stakeholders are adequately represented. In accordance with Requirement 1.4b, MSG members should have the capacity to carry out their duties and 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. The multi-stakeholder group should also widely disseminate the public information that results from the EITI process such as the EITI Report. Members of the multi-stakeholder group should liaise with their constituency groups. The multi-stakeholder group needs to also agree and publish its procedures for nominating and changing multi-stakeholder group representatives.
     
  2. In accordance with Requirement 1.5, the MSG should maintain a current work plan that sets EITI implementation objectives that reflect national priorities for the extractive industries. In accordance with requirement 1.5.b, the work plan must reflect the results of consultations with key stakeholders. In accordance with requirement 1.5f, the MSG should ensure that the work plan is reviewed and updated annually.
     
  3. In accordance with Requirement 2.2, Liberia is required to disclose the following information related to the award or transfer of licenses pertaining to the companies covered in the EITI Report during the accounting period covered by the EITI Report: (i) a description of the process for transferring or awarding the license; (ii) the technical and financial criteria used; (iii) information about the recipient(s) of the license that has been transferred or awarded, including consortium members where applicable; and (iv) any non-trivial deviations from the applicable legal and regulatory framework governing license transfers and awards. This information should be disclosed for all license awards and transfers taking place during the accounting year covered by the EITI Report, including license allocations pertaining to companies that are not included in the EITI Report. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them. Where licenses are awarded through a bidding process during the accounting period covered by the EITI Report, Liberia is required to disclose the list of applicants and the bid criteria.
     
  4. In accordance with Requirement 2.3.b, Liberia is required to maintain a publically available register or cadastre system(s) with the following timely and comprehensive information regarding each of the licenses pertaining to companies covered in the EITI Report: (i) license holder(s), (ii) where collated, coordinates of the license area, (ii) date of application, date of award and duration of the license, (iv) in the case of production licenses, the commodity being produced. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them.
     
  5. In accordance with Requirement 2.6(a), Liberia’s EITI Report must include an explanation of the prevailing rules and practices regarding the financial relationship between the government and state-owned enterprises (SOEs), e.g., the rules and practices governing transfers of funds between the SOE(s) and the state, retained earnings, reinvestment and third-party financing. In accordance with Requirement 2.6(b), Liberia must provide disclosures from the government and SOE(s) of their level of ownership in mining, oil and gas companies operating within the country’s oil, gas and mining sector, including those held by SOE subsidiaries and joint ventures, and any changes in the level of ownership during the reporting period. This information should include details regarding the terms attached to their equity stake, including their level of responsibility to cover expenses at various phases of the project cycle, e.g., full-paid equity, free equity, carried interest. Where there have been changes in the level of government and SOE(s) ownership during the EITI reporting period, the government and SOE(s) are expected to disclose the terms of the transaction, including details regarding valuation and revenues. Where the government and SOE(s) have provided loans or loan guarantees to mining, oil and gas companies operating within the country, details on these transactions should be disclosed.
     
  6. In accordance with Requirement 4.1.a, the multi-stakeholder group is required to agree which payments and revenues are material and therefore must be disclosed, including appropriate materiality definitions and thresholds. The multi-stakeholder group should document the options considered and the rationale for establishing the definitions and thresholds. In accordance with Requirement 4.1.c, Liberia must provide a comprehensive reconciliation of government revenues and company payments, in accordance with the agreed scope. All companies making material payments to the government are required to comprehensively disclose these payments in accordance with the agreed scope.
     
  7. In accordance with Requirement 4.3, The multi-stakeholder group and the Independent Administrator are required to consider whether there are any agreements, or sets of agreements involving the provision of goods and services (including loans, grants and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. To be able to do so, the multi-stakeholder group and the Independent Administrator need to gain a full understanding of: the terms of the relevant agreements and contracts, the parties involved, the resources which have been pledged by the state, the value of the balancing benefit stream (e.g. infrastructure works), and the materiality of these agreements relative to conventional contracts. Where the multi-stakeholder group concludes that these agreements are material, the multi-stakeholder group and the Independent Administrator are required to ensure that the EITI Report addresses these agreements, providing a level of detail and transparency commensurate with the disclosure and reconciliation of other payments and revenues streams. Where reconciliation of key transactions is not feasible, the multi-stakeholder group should agree an approach for unilateral disclosure by the parties to the agreement(s) to be included in the EITI Report.
     
  8. In accordance with Requirement 4.7, Liberia is required to disaggregate disclosure of tax payments.
     
  9. In accordance with Requirement 4.9a, Liberia is required to provide an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. In accordance with Requirement 4.9b, Liberia should ensure that payments and revenues are reconciled by a credible, Independent Administrator, applying international auditing standards, and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified. The multi-stakeholder group and the Independent Administrator are required to agree a Terms of Reference for the EITI Report based on the standard Terms of Reference and the ‘agreed upon procedure for EITI Reports’ endorsed by the EITI Board.
     
  10. In accordance with Requirement 8.3.c, the MSG is required to disclose a time-bound action plan for addressing the deficiencies in data quality documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 24 August 2017.
     
  11. In accordance with Requirement 5.1, Liberia is required to disclose a description of the distribution of revenues from the extractive industries and indicate which extractive industry revenues, whether cash or in kind, are recorded in the national budget. Where revenues are not recorded in the national budget, the allocation of these revenues must be explained, with links provided to relevant financial reports as applicable.
     
  12. In accordance with Requirement 6.1.a, Liberia is required to disclose and, where possible, reconcile material social expenditures by companies that are mandated by law or the contract with the government that governs the extractive investment. Where such benefits are provided in kind, Liberia is required to disclose the nature and the deemed value of the in kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary be disclosed. Where reconciliation is not feasible, Liberia should provide unilateral company and/or government disclosures of these transactions.
     
  13. In accordance with Requirement 6.2, the MSG must include disclosures from NOCAL on its quasi-fiscal expenditures. The multi-stakeholder group is required to develop a reporting process with a view to achieving a level of transparency commensurate with other payments and revenue streams, and should include NOCAL’s subsidiaries and joint ventures.
     
  14. In accordance with Requirement 6.3, Liberia is required to disclose information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI, including the size of the extractive industries in absolute terms and as a percentage of Gross Domestic Product as well as an estimate of informal sector activity, including but not necessarily limited to artisanal and small scale mining (Requirement 6.3a) and total government revenues generated by the extractive industries (including taxes, royalties, bonuses, fees, and other payments) in absolute terms and as a percentage of total government revenues (Requirement 6.3b).
     
  15. In accordance with Requirement 7.4a, the multi-stakeholder group is required to publish annual progress reports that include a narrative account
    of efforts to strengthen the impact of EITI implementation on natural resource governance. In accordance with Requirement 7.4b, all stakeholders should be able to participate in the production of the annual progress report and reviewing the impact of EITI implementation. Civil society groups and industry involved in the EITI, particularly, but not only those serving on the multi-stakeholder group, should be able to provide feedback on the EITI process and have their views reflected in the annual progress report.

The MSG 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.

Next Validation date

A second Validation will commence on 24 November 2018.

Impact of the EITI in Liberia

This excerpt is taken from section 8 of Liberia's Report on initial data collection and stakeholder consultation by the EITI International Secretariat. Find the file here.​

The EITI process in Liberia has had some impact, even if stakeholders agree it has been more pronounced at the level of subnational debate than in policy-making circles at the national level. As part of the International Secretariat’s assessment of the impact of the EITI in Liberia in its eight years of implementation, all stakeholders were asked why Liberia was implementing the EITI. Several former MSG members and development partners considered that the primary impetus for Liberia originally implementing the EITI was external pressure, in the form of conditionality for eligibility for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Several government stakeholders considered that while the initial impetus may have come from external drivers, Liberia’s government was implementing the EITI as a means of reforming governance of its extractive industries and improve the environment for responsible foreign direct investment.

One of the most significant impacts of EITI implementation may have been in building relations between stakeholders with a history of confrontation. As President Ellen Johnson Sirleaf wrote in a foreword to a 2008 guide on EITI-related communications: “Trust is the greatest asset a country can have. (...) LEITI represents an important step in advancing our efforts to engage with stakeholders, to talk about our resources, and to build trust in our communities.” Several CSOs noted that before the EITI, no communities knew how much money the government was getting from the sector but that people now have access to this information. Avoiding conflict in local communities was seen by civil society representatives on the MSG as the principle goal they wished to achieve through their participation in the EITI. Several industry and CSO stakeholders highlighted the inclusion of forestry in the scope of EITI reporting from the start in 2009, considering that this proved LEITI’s responsiveness to local demands for information and accountability. Academic sources tend to confirm this impact of EITI implementation in Liberia, highlighting the role of the MSG in bringing together “previously hostile parties” in this first forum for discussion and reduce tensions.

While government representatives noted that EITI compliance status reflected their commitment to transparency and securing a social license to operate for companies, representatives from industry did not highlight a significant impact of implementation although welcomed the EITI as the first institutional medium for communicating with host communities. Several government, industry and CSO representatives noted that the most significant evidence of the impact of the EITI were the regional EITI roadshows in all counties hosting extractives activities, the high-profile LEITI maintained through billboard advertising and the 15 county focal persons in dissemination and outreach. Several CSOs emphasised the importance of the simplified contracts matrix published by LEITI in 2015 as a key tool for public outreach and awareness raising about terms of specific mining, agriculture and forestry contracts. A few CSOs noted that the EITI could yield more benefits to citizens by, in particular, disclosing more information on beneficial ownership, which could reduce the risk of conflict of interest and corruption.

Sustainability: The EITI process also faces significant risks to its sustainability, both financially and in terms of consistency of engagement. LEITI’s budgetary allocation from government has been reduced from USD 774,000 in 2014-15 to a budgeted USD 718,000 for 2015-16, although this was further cut to USD 664,000 in light of the government’s budgetary constraints. Support from donors including the World Bank, GiZ, AfDB and USAID reached USD 756,000 in 2015-16. However, delays in approval of the national budget for 2016-17 means the LEITI secretariat and MSG have been operating at a reduced capacity since the start of the fiscal year in July 2016. As a stop-gap measure, the government has been funding LEITI since July with emergency appropriations of one-twelfth of LEITI’s proposed annual budget. At the political level, the sustainability of the EITI process faces some risks given the potential impact of October 2017 general elections on government representation and chairing of MSG meetings.