Solomon Islands 2016 Validation

Solomon Islands' Validation commenced on 01 July 2016.

On 8 March 2017, Solomon Islands were 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 8 March 2017, the EITI Board came to the following decision on Solomon Islands’ status: 

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

The EITI Board agreed that Solomon Islands had not made satisfactory progress on requirements 1.1, 1.2, 1.3, 1.4, 1.5, 2.1, 2.2, 2.3, 2.4, 3.2, 3.3, 4.1, 4.6, 4.7, 4.9, 5.1, 5.2, 6.1, 6.3, 7.3 and 7.4. The major areas of concern relate to government engagement (#1.1), industry engagement (#1.2), civil society engagement (#1.3), MSG governance (#1.4), work plan (#1.5), legal framework (#2.1), license allocation (#2.2), license register (#2.3), contract disclosure (#2.4), production data (#3.2), export data (#3.3), comprehensiveness (#4.1), direct subnational payments (#4.6), disaggregation (#4.7), data quality (#4.9), revenue management and expenditures (#5.1), subnational transfers (#5.2), mandatory social expenditures (#6.1.a), economic contribution (#6.3), follow-up on recommendations (#7.3), outcomes and impact (#7.4).

In accordance with requirement 8.3.c.iii, the EITI Board agreed that Solomon Islands will be suspended and will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in the next Validation commencing on 8 March 2018. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in delisting in accordance with the EITI Standard. In accordance with the EITI Standard, The Solomon Islands’ multi-stakeholder group (SIENSG) 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. The SIENSG 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.

Solomon Islands' 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 Solomon Islands. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 8 March 2018:

  1. In accordance with Requirement 1.1, the government must be fully, actively and effectively engaged in the EITI process (Requirement 1.1.c). The government should must also ensure that senior government officials are represented on the SIENSG (Requirement 1.1.d). In accordance with Requirement 8.3.c, the government constituency is required to disclose a time-bound action plan for addressing the deficiencies in government engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.
     
  2. In accordance with Requirement 1.2, companies should demonstrate that they are fully, actively and effectively engaged in the EITI process (Requirement 1.2.a). The government must ensure that there is an enabling environment for company participation with regard to relevant laws, regulations, and administrative rules as well as actual practice in implementation of the EITI. The government must ensure that there are no obstacles to company participation in the EITI process (Requirement 1.2.c). In accordance with Requirement 8.3.c, the company constituency s required to disclose a time-bound action plan for addressing the deficiencies in company engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.
     
  3. In accordance with Requirement 1.3, the civil society must be fully, actively and effectively engaged in the EITI process. Requirement 1.3 e.ii further requires that stakeholders, including but not limited to members of the SIENSG must be substantially engaged in the design, implementation monitoring and evaluation of the EITI process, and ensure that it contributes to public debate.  In accordance with Requirement 8.3.c, civil society constituency is required to disclose a time-bound action plan for addressing the deficiencies in civil society engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.
     
  4. In accordance with Requirement 1.4.a, the government should ensure that all constituencies are adequately represented by including in the SIENSG all key government agencies and companies. Requirement 1.4.b.i, further requires that members of SIENSG should ensure that they have the capacity to carry out their duties. SIENSG members should ensure that they are able to perform their duties in accordance with their own Terms of Reference. In accordance with Requirement 1.4.vi, the SIENSG should agree and publish its procedures for nominating and changing representatives. This should include ensuring that there is a process for changing group members that respects the principles set out in Requirement 1.4.a.
     
  5. In accordance with Requirement 1.5, the SIENSG is required to maintain a current work plan, fully costed and aligned with the reporting and Validation deadlines established by the EITI Board. The work plan must set implementation objectives that are linked to the EITI principles and reflect national priorities for the extractive industries (Requirement 1.5a) and assess and outline plans to address any potential capacity constraints in government agencies, companies and civil society that may be an obstacle to effective EITI implementation (Requirement 1.5.c.i). It should also address the scope of EITI Reporting, including plans for addressing technical aspects of reporting such as comprehensiveness and data reliability (1.5.c.ii). It is also required that the work plan identify and outline plans to address any potential legal or regulatory obstacles to EITI implementation, including any plans to incorporate the EITI Requirements within national legislation or regulation. (Requirement 1.5.c.iii). Lastly, it should outline the SIESNG’s plans for implementing the recommendations from Validation and EITI Reporting (Requirement 1.5.c.iv).
     
  6. In accordance with Requirement 2.1.a, Solomon Islands must disclose a description of the legal framework and fiscal regime governing the extractive industries. This information must include a summary description of the fiscal devolution, an overview of the relevant laws and regulations, and information on the roles and responsibilities of the relevant government agencies.
     
  7. In accordance with Requirement 2.2, Solomon Islands is required to disclose the (i) the technical and financial criteria used  in awarding licenses, (ii) information about the recipient(s) of the license that has been transferred or awarded, including consortium members where applicable, and (iii) any non-trivial deviations from the applicable legal and regulatory framework governing license transfers and awards 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.
     
  8. In accordance with Requirement 2.3.b, Solomon Islands 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.
     
  9. In accordance with Requirement 2.4.b, EITI Report must document 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, actual disclosure practices and any reforms that are planned or underway. The EITI Report should provide an overview of the contracts and licenses that are publically available, and include a reference or link to the location where these are published.
     
  10. In accordance with Requirement 3.2, Solomon Islands must disclose production data for the fiscal year covered by the EITI Report, including total production volumes and the value of production by commodity, and, when relevant, by state/region. SIESNG should confirm all existing production for all commodities for the year covered by the report.
     
  11. In accordance with Requirement 3.3, Solomon Islands must disclose export data for the fiscal year covered by the EITI Report, including total export volumes and the value of exports by commodity, and, when relevant, by state/region of origin. SIESNG should confirm all existing exports for all commodities for the year covered by the report.
     
  12. In accordance with Requirement 4.1.c, Solomon Islands 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. All government entities including provincial governments receiving material revenues are required to comprehensively disclose these revenues in accordance with the agreed scope. In accordance with Requirement 8.3.c, SIENSG is required to disclose a time-bound action plan for addressing the deficiencies in data comprehensiveness documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.
     
  13. In accordance with Requirement 4.6, it is required that SIENSG establish whether direct payments, within the scope of the agreed benefit streams, from companies to subnational government entities are material. Where material, SIENSG is required to ensure that company payments to subnational government entities and the receipt of these payments are disclosed and reconciled in the EITI Report.
     
  14. In accordance with Requirement 4.7, SIENSG is required to agree the level of disaggregation for the publication of data. It is required that EITI data is presented by individual company, government entity and revenue stream.
     
  15. 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. SIESNG should comply with the following:
    1. Payments and revenues should be reconciled by a credible, independent administrator, applying international auditing standards, and with publication of the administrator’s opinion regarding the reconciliation including discrepancies, should any be identified (#4.9b)
    2. The reconciliation of company payments and government revenues must be undertaken by an Independent Administrator applying international professional standards (#4.9.b.1)

In accordance with Requirement 8.3.c, SIENSG 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 8 June 2017.

  1. In accordance with Requirement 5.1.a, Solomon Islands should 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, e.g., sovereign wealth and development funds, subnational governments, state-owned enterprises, and other extra-budgetary entities.
     
  2. In accordance with Requirement 5.2.a, Solomon Islands should disclose material transfers between national and subnational government entities, as well as any discrepancies between the transfer amount calculated in accordance with the relevant sharing formula and the actual amount transferred.  between the central government and each relevant subnational entity. Furthermore, SIESNG should disaggregate between payments made to landowners and provincial governments. 
     
  3. In accordance with Requirement 6.1.a, Solomon Islands must disclose and, where possible, reconcile social expenditures. Where such benefits are provided in-kind, it is required that Solomon Islands 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, SIESNG should provide unilateral company and/or government disclosures of these transactions.
     
  4. In accordance with Requirement 6.3, Solomon Islands must disclose information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI Report, particularly an estimate of informal sector activity (Requirement 6.3.a) and key regions/areas where production is concentrated (Requirement 6.3.e).
     
  5. In accordance with Requirement 7.3, the multi-stakeholder group is required to 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.
     
  6. In accordance with Requirement 7.4.a.iii, SIENSG’s annual activity reports (APR) should include an overview of their responses to and progress made in addressing the recommendations from reconciliation and Validation in accordance with Requirement 7.3. SIENSG is required to list each recommendation and the corresponding activities that have been undertaken to address the recommendations and the level of progress in implementing each recommendation. Where the government or SIENSG has decided not to implement a recommendation, it is required that the SIENSG documents the rationale in the annual progress report.  The APR should also include an assessment of progress with achieving the objectives set out in its work plan, including the impact and outcomes of the stated objectives (Requirement 7.4.a.iv).

The SIENSG 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 8 March 2018.

Impact of EITI in Solomon Islands

In terms of impact of the EITI to date, civil society representatives had different views on whether the EITI had achieved any impacts.  One civil society representative said that the government is learning to accept the principles of transparency and accountability, which was an achievement of the EITI, not least given that members of the government sometimes had business relations with companies. Another civil society representative said that she had identified conflicts of interest within her own organisation. The coming together of different stakeholders in the SIEINSG was also highlighted as an achievement, contributing to building trust and understanding and making voices heard. One civil society representative said that there was no impact yet. The CSOs also noted that the EITI has helped build their capacity, such that now, they are able to answer questions related to the mining sector when asked by their constituents.

Government representatives noted that the EITI had had an impact in starting to build trust amongst the three stakeholder groups. While requiring companies to disclose financial information was seen as a “no go” area, all stakeholders had built links through discussions of EITI documents such as the work plan and reporting templates. The SIEITI Secretariat noted that the main impact of the EITI had been that citizens were starting to understand the contribution of the mining industry to the national economy, when the popular notion had been that there was no contribution at all.

An industry member said that the EITI is relatively new in the Solomon Islands so not all people understand implementation. Even among industry members, there is very low level of appreciation of benefits from EITI implementation.  However, they claimed that EITI better facilitates their engagement with landowners and that EITI has helped build trust among stakeholders. There is a perception that the EITI is an independent body that provides unbiased and reliable information, which industry wants to capitalise on. In view of this, they think that outreach to landowners should be prioritized. Industry representatives admitted that they have not solicited feedback from other industry members regarding EITI’s impact on SI.

In terms of achieving the objectives of the EITI, one industry representative commented that these are not yet fulfilled. In particular, increasing awareness about the EITI was challenging because most EITI activities are carried out in urban areas due to lack of funds. One representative, however, considers the objectives of implementation to have been fulfilled because the necessary information from companies is now disclosed. There is also a sentiment that SIEITI has been able to fulfil its objectives in terms of showing to the public what the industry does and how much it pays to government.  

A representative from MMERE said that in the mining sector, the EITI has no effect or impact yet on regulations and governance.  He mentioned that there needs to be better awareness and EITI needs to be embedded in legislation.  He stated that limited people in the ministry know about the EITI apart from those who are actually involved in it. i.e., those that are responsible know.

Looking ahead, some suggested that the EITI could catalyse greater interest at the subnational level if they included information on expenditure information at the level of landowner groups and provincial governments. It was noted that companies would like to see more information on how landowner groups in particular used their revenues, given community criticisms of industry’s lack of social expenditures to such groups. Industry also suggested that the EITI could focus more on environmental aspects of mining, including supporting disclosure and explanation of Environmental Impact Assessments (which are statutorily required to be made public, although this is not the case in practice according to industry representatives consulted) and help address cases of double taxation.

Stakeholders outside of the SIEINSG recognize the potential of EITI to contribute to better sector governance especially in keeping discussions on transparency part of the government’s agenda and ensuring better access to information. They agree, however, that a lot of work still has to be done for the EITI to realize this potential. One stakeholder stated that some people see the EITI as the solution to issues in the extractive sector, specifically in empowering landowners to negotiate better deals with companies.

While it is clear that the EITI Reports produced by Solomon Islands have been useful in identifying gaps in government systems that need to be addressed, it can also be seen that minimal actions have been taken to utilize this information.  Although they have submitted  policy recommendations to MMRE there is no clarity how far they have gone in this process and specifically which policies do they want to pursue collectively.  In terms of stimulating public debate, it appears that the outreach activities conducted by SIEISNG have been useful in informing the public regarding the revenues collected by government from companies. In this regard, it can be said that there is evidence of impact in terms of creating public awareness on how much the country benefits from its extractive sector.  However, in terms of analysing data and making meaningful conclusions from these figures, there is not enough indicator to show how the EITI process in Solomon Islands has actually created impact.