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.
Cover image from EITI and sustainable development: Lessons and new challenges for the Caspian region
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.
