The Extractive Industries Transparency Initiative: "No more hanky panky"

A global initiative requiring public reporting of revenues from extractive industries could go further.

Abbi Buxton's picture
Insight by 
Abbi Buxton
11 March 2011

Issues of transparency and anti-corruption are front and centre following recent events in the Middle East. The timing of the Extractive Industries Transparency Initiative 5th Global Conference last week could not have been better.

As Mo Ibrahim remarked at the conference, we live in a world of wikileaks and virulent democratic protest where there is little opportunity for "hanky panky".

Since 2002, the Extractive Industries Transparency Initiative (EITI) has been promoting public revenue reporting on oil, gas and mining revenues. It is now facing pressure to go further – to include informal revenues and transparency of contracts and exploration licences, among other things.

The importance of this initiative is more apparent now than ever.

What is the EITI?

The EITI is a global initiative that requires participating governments to publicly report the revenues they receive from extractive industry companies and for those companies to publicly report the revenues they pay to government – allowing for any discrepancies to be disclosed.

The initiative prides itself on being a tripartite partnership between government, the private sector and civil society (indeed, such a partnership is a prerequisite for a country to become ‘EITI compliant’).

EITI compliant countries hope that compliance equates to a clear demonstration of good governance and transparency and will encourage investment in their countries.

The initiative is now in its ninth year, with eleven countries now officially validated (six were added last week including the Central African Republic, the Kyrgyz Republic, Niger, Nigeria, Norway, and Yemen) and 35 countries implementing the process.

The political buy in and support for the initiative was clearly illustrated by the presence at the conference of the Presidents of Tanzania, Mozambique, the Kyrgyz Republic and Togo and the Prime Ministers of South Africa and Iraq, amongst others.

Benefits of EITI compliance

It successes can be simply stated as huge political buy in and eleven countries now compliant (just about all of which you would classify as ‘developing’).

EITI professes to ‘build trust and dialogue’, ‘improve governance’, ‘empower communities’ and ‘improve business climate’. Some of these benefits are clear:

  • The Zambian government explained how publication of the EITI report was the first time the Zambian population had seen details of any revenues disclosed openly by the Zambian government. These were widely communicated to the population through town hall meetings and radio programmes – empowering communities with improved information and providing the foundations for dialogue and trust.
  • The EITI process in Ghana has informed policy reform in the mining sector, including a review of the fiscal regime governing taxes and revenues and a review of the guidance on the use of mining royalties at the sub-national level.

However, Publish What You Pay, a global network of civil society organisations, conducted a survey on the benefits of the EITI. Though increasing dialogue between stakeholders came out strongly, ‘improving the investment climate’ (mentioned time and again by most of the speakers) was rated poorly, along with ‘greater economic and political stability’. The widely heralded benefits may not therefore be evident in reality.

And though EITI professes its tripartite partnership to be the foundation of its initiative, many civil society participants claimed that they were not empowered by the process (with frequent cases of intimidation and harassment reported) and they needed greater support to undertake their role effectively.

Where it is going?

The Initiative, and its board and staff are now being encouraged, primarily by civil society, to do more - including:

  • Moving beyond revenues to expenditure: Although transparency of revenues is important it does not, in itself, equal development. Increased democratic accountability on the government spending of revenues and reinvestment by companies in-country and in-community is crucial to prevent what Oxford Unviersity Professor Paul Collier calls, “unsustainable consumption” of natural resources. The tragedy that the greatest energy poverty exists in countries where there are the largest energy reserves needs to be urgently addressed.
  • Moving beyond revenues to contracts and licences: Publish What You Pay led the call for EITI not to rest on its laurels and to recognise that validation of revenues is just one step towards transparency. A major next step to consider is expanding the scope of the initiative to achieve transparency in contracts and licences for production and exploration.
  • Moving beyond formal to informal revenues: EITI currently looks only at those formal revenues, in most cases, reported by large and medium sized companies (a glaring inconsistency that the conference’s slogan photo (shown on page two of their progress report (pdf) ) clearly represented small scale miners which typically belong to the informal sector). This conference was the first time that the issue of informal revenues and, in particular, those from artisanal and small scale mining, was on the agenda (albeit on the ‘pre-conference day’). 
  • Moving beyond national to local: There is a need for greater ownership at the local level and understanding of the impacts of EITI on communities. This fits with the call for greater impact monitoring as well as the call for greater civil society empowerment in the EITI process. It also links with the suggestion (above) to consider monitoring reinvestment of revenues by the EITI.
  • Moving beyond ‘soft law’ to ‘hard law’: The hot topic of the opening sessions was the impact of section 15.04 of the United States Dodd Frank Act, which requires energy and mining companies registered in the US to disclose oil, gas and minerals payments to governments. Many of the speakers viewed this as reinforcement of the EITI voluntary standard using hard law. However, US companies view it as placing them at a competitive disadvantage in countries where other companies are not required to disclose their revenues. We wait to see whether the European Union and Canada will enact similar regulations.

The question I am sure the new EITI board, and its new chair Clare Short (former UK Secretary of State for International Development), are asking themselves is: should the EITI expand to meet these new demands or would this risk diminishing the clear success it has had to date? Is the Initiative best placed to focus on increasing the number of countries involved in EITI or expanding its remit?

Many civil society actors in the room suggested it should be doing more, and I would agree. Few initiatives have the same platform and political buy in to be able to promote issues as important as revenue transparency.