Study shows how to improve Extractive Industries Transparency Initiative

An international effort to ensure good governance of natural resources could do more to improve accountability and sustainability, according to research in the oil- and gas-rich Caspian Sea Region that IIED has published today.

The research relates to the Extractive Industries Transparency Initiative, which requires countries to declare the revenues they receive from companies in the oil, gas and mining sectors, and requires companies to declare what they pay.

In May, heads of state, government ministers and business leaders will gather in Sydney, Australia for the EITI’s biennial conference, where they will agree new rules that will shape the future of the initiative.

IIED’s research suggests several ways for these new rules to help reduce poverty, improve lives and ensure that extractive industries operate in a sustainable, environmentally responsible way.

The report focuses on three countries: Azerbaijan – the first country globally to become EITI Compliant; Kazakhstan – an EITI Candidate country that seeks to become compliant; and Turkmenistan, which has not signed up to the EITI, but has expressed an interest in learning more about this initiative, in the light of recent developments in its oil and gas sector.

"Countries in the Caspian region have considerable natural wealth in the form of oil and gas deposits that can provide the basis for great improvements in national development, so long as there are strong institutions, greater transparency and accountability, and enforcement mechanisms in place," says co-author of the report, Professor Ingilab Ahmadov of Azerbaijan’s Khazar University.

"Countries of the Caspian region have started to improve their governance of oil and gas through the EITI, though need to ensure that transparency leads to better governance, accountability and stronger institutions. Only this way can we achieve real societal change, such as reducing corruption and poverty," says co-author, Kazakhstani researcher, Saule Ospanova. "Our research in the region is relevant globally as it identifies several ways to improve the EITI rules for even greater impact."

The new report recommends that the new EITI rules:

  • Provide further strategic, administrative and technical support for disaggregated reporting of payments to governments (e.g. company-by-company and project-by-project).
  • Identify ways the EITI can contribute to accountability and sustainability in host countries and support relevant research on these linkages.
  • Develop guidance on good practice in subnational reporting, and support pilot initiatives, such as reporting on public monitoring of community development spending.
  • Prioritise capacity building as an essential part of the EITI agenda, especially for local government and civil society organisations.
  • Ensure new rules and procedures are clear, to strengthen minimum requirements and avoid any ambiguity that allows too much flexibility in implementation.
  • Develop self-evaluation criteria and processes for EITI, such as progress ranking among member countries, based on competitive and motivational indicators.

"Natural resource wealth should translate into tangible benefits for citizens," says IIED's project leader, Dr Emma Wilson. "The EITI is just one of a growing number of initiatives that aim to ensure greater transparency in how governments and companies share the wealth in sectors such as oil, gas and mining."

"The EITI has had a promising start,” says Wilson, ”But there is clear potential for it to move beyond transparency and push also for greater accountability and enable civil society to make use of the information it generates to hold governments and companies to account."

Later this year Wilson and colleagues will publish a related study based on a comparison of the Caspian region and sub-Saharan Africa (Uganda, Ghana and Nigeria).

Several heads of state will attend the EITI’s 23-24 May 2013 conference of the EITI, which is chaired by former UK minister for international development Clare Short.

Download the report The Extractive Industries Transparency Initiative and Sustainable Development: Lessons and new challenges for the Caspian Region

Contact

For interviews, contact

Dr Emma Wilson (emma.wilson@iied.org / (0)2034637399)

Professor Ingilab Ahmadov: ingilab.ahmadov@gmail.com

Saule Ospanova ospanovs@hotmail.com

Notes to editors

The Extractive Industries Transparency Initiative (EITI) is a voluntary global initiative to promote revenue transparency in the oil, gas and mining sectors, which became operational in 2006–07. The EITI is a coalition of governments, companies, civil society groups, investors and international organisations. Signatory governments are required to declare the revenues they receive from companies, and the companies operating in those countries are required to declare what they pay. Participation in EITI has grown significantly over recent years — 37 countries have now signed up; 20 are now Compliant. http://eiti.org/about

The authors would like to thank the Soros Foundation in Kazakhstan for funding the research in this report and for co-funding the series of dialogues on which it is based. We would also like to thank the UK Foreign and Commonwealth Office (FCO) for co-funding the dialogues, which were also supported by the Organisation for Security and Co-operation in Europe (OSCE).  This publication was funded by UK aid from the UK Government, however the views expressed do not necessarily reflect the views of the UK Government.

 

About the authors

Saule Ospanova is an independent researcher working closely with IIED, World Bank, UN and other institutions on sustainability and accountability initiatives in the extractive sector, as well as development of energy, water and climate change policies. Her doctorate studies at the University of Michigan- Ann Arbor focused on resource governance and environmental justice. Saule has over fourteen years of experience contributing to a number of multi-stakeholder initiatives, managing and implementing development projects in different parts of the world (including Kazakhstan/Central Asia, post-Soviet states, China, South Africa, Egypt, and Panama). Currently she is involved in green economy assessment, climate vulnerability analysis and sustainable energy projects.

Professor Ingilab Ahmadov obtained a Doctorate of Economics from Saint-Petersburg State University of Economics and Finance (Russia) in 2000. In 2008 he studied on the ‘Economics of Energy’ course in Reading University (UK) as a Chevening Fellow. His research interests are management of oil revenues and impact of oil revenues on the economy, Caspian energy resources, and economic bases of oil contracts. The author of more than 30 research papers and books, Ingilab joined the School of Economics and Management at Khazar University (Baku) in 2008. Between 2009 and 2011, he served on the International Board of the Extractive Industries Transparency Initiative (EITI). In 2010, he became director of the Eurasia Extractive Industries Knowledge Hub and Dean of the School of Economics and Management at Khazar University.

Dr Emma Wilson is a senior researcher at IIED and heads the institute’s Energy Team. Her research focuses on the ways that enterprise and investment can be directed towards sustainable use of energy, locally and globally. Emma has over 16 years’ experience of working on issues related to the oil and gas industry, community relations and corporate responsibility. Her current work ranges from analysis of decentralised energy systems and services to responsible practice in large-scale energy projects. Emma has worked in Russia, Nigeria, Kazakhstan, Azerbaijan, Ghana and Qatar.

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