- Afghanistan possesses anywhere between US$ 1 trillion to 3 trillion in untapped mineral wealth, mostly iron ore, copper, gold, precious stones and rare earth minerals;
- Mining has traditionally represented less than 0.7% of Afghanistan’s GDP. This percentage is set to increase to 2-3% by the early 2020s. It could support up to 500,000 jobs and increase the country’s GDP by several billion dollars;
- Afghanistan critically needs infrastructure to support the extractive industries, such as roads, railways, airports, power plants, utilities, telecommunications and human capital;
- The security situation remains complex and could deter foreign investors from providing Afghanistan with the necessary capital to jump-start its mining industry;
- Corruption, as well as lack of overall transparency, remains a key problem that needs to be addressed;
- Afghanistan’s civil society is present, although is still nascent. Lack of telecommunications infrastructure could severely impede efforts made to improve transparency, as more remote zones are cut off from the rest of the world. The press is also not free by Canadian standards.
- Afghanistan is not EITI compliant yet. The country was granted an 18-month extension after failing to provide a validation report;
- To date, two reconciliation reports have been produced by AEITI and an independent reconciler. In the second one, a total of five out of six companies submitted their payments to the government. Some discrepancies were highlighted, such as a possible misappropriation of funds three years in a row. The reconciler made important recommendations. The overdue validation report is due in March 2014.
This paper seeks to identify why and how transparency, especially extractive industry revenue contribution of the country’s economic growth and social development in the mining sector of the country, matters for the economic development and poverty situation of the country.
Cameroon has a wealth of natural resources, including in the agricultural, mining, forestry, oil and gas sectors. The country’s extractive industries sector has been developing almost for three decades and it’s the commercial and economic leader in the Sub-region, Africa. Nevertheless, a benefit of wealth that comes from extractive industries and regional trades remains under-realized.
Cameroon joined the EITI in 2005. Based on EITI rules, the total revenues of the extractive industry are reported by companies and governments in the most recently published EITI Reports. The overall objectives of those reconciliation reports are for the Government of Cameroon and other stakeholders are joined to determine the contribution that benefits to the country and to improve transparency of the extractive sector’s value in the country. Since joining EITI, Cameroon has published three reconciliation reports, which were initiative to the public. The following observations are not essentially good in through such EITI report:
- Constructive debates on how revenues collected were used cannot be properly developed in Cameroon.
- Some extractive companies could not participate to the EITI report because of materiality threshold amount that was 50 million and 55 million respectively in 2009 and 2011.
- EITI report should be understandable, actively promoted, available to the public and contributing to the public debates, especially to local people who live in the region extracting mining resources.
- According to the critical view of the country, EITI reports in Cameroon are dedicated to elite classes living in capital cities. Moreover, the EITI reports are not published in English on the Ministry of Mines, Industry and Technological Development (MINMIDT)website. It’s not only selective classes that demand to get information of revenues information but also other civil societies, companies and countries are joint venturing with Cameroon.
- EITI report covers not all extractive sector companies.
Signing on in 2003, Ghana is designated as EITI compliant. The last report for the 2010/2011 fiscal year was published in 2013. According to the Validation Report, conducted by the IDL Group, consisting of national and international EITI experts and extractive industry specialists, Ghana EITI (GHEITI) has met all requirements and shown a strong commitment to implementing the various recommendations of the aggregator. Major findings and observations as well as recommendations were found based on small numbers of discrepancies recorded in the GHEITI report 2010/2011.
Apart from this, there are major concerns raised on whether GHEITI meets its initial goal to avoid the resource curse in the management of extractive industry revenues. Ghana economy is rapidly growing and is blessed with mineral resources including gold, industrial diamond, bauxite, manganese and oil. Critics of the GHEITI implementation are firstly, private sectors non-compliance with statutory requirements to pay what is due the state and passiveness/irresponsibility of institutions for ensuring completeness of required documents of revenue streams. Secondly, there is no legal stipulation on how local district funds should be spent at the local level. This means that although providing all details in revenue streams in extractive industry, the important part of community cannot get benefited. Thirdly, one of the main critics of EITI general, not only for Ghana, is that no ‘direct’ management to environmental damage, human rights abuses and rural under-development in mining communities.
Internally, there are also several points were found in GHEITI performance. Regarding to the skeptical views of many stakeholders, National Steering Committee, which is a governing body of GHEITI, is not completely seen as impartial organization due to that the composition of committee is skewed towards government regarding to its number. More importantly, there is a lack of awareness and weak communication among all the major stakeholders in GHEITI. Additionally, the media which are unavoidable partners when considering transparency were not aware of the Initiative except the few those with nationwide coverage. This simply means how low public awareness level of GHEITI is in the country.
Unless the fundamental issues are not solved, it is inefficient to move beyond the initiative. The main concerns raised from GHEITI are mainly same as addressed from resource curse issues. With the better understanding GHEITI we can possibly escape from the negative outcomes from resource curse and it is one of the primary goals of GHEITI. Doing something is better than doing nothing.
Indonesia is currently a candidate country for the Extractive Industry Transparency Initiative and is the largest country in terms of population, participating in the EITI. Indonesia has a diverse portfolio of natural resources with some of the largest deposits in the world. The EITI report for Indonesia analyzes revenues from coal, minerals, gas and oil. Their revenues account for about one-third of Indonesia’s national budget. Indonesia released their first EITI report in April of 2013, which analyzes the payments for the 2009 fiscal year.
The report provides a detailed breakdown of payments from each project and company (national and foreign) in the country. The EITI process in Indonesia is still in the early stages. There seems to be an overall acceptance and support of the report from international NGOs, mining companies and governments (Hardjapamekas, 2012; Soerjoatmodjo, 2012). It is a first step to increase accountability and transparency to minimize corruption from resource development. There are number of concerns that the report does not take into account or require the involvement of all stakeholders; such as the communities that surround the mines (Soerjoatmodjo, 2012). Furthermore, the EITI focuses on payments at a national level and therefore does not focus on accountability on the provincial or regional level (“Oxford Analytical Daily Brief Service”, 2013).
For the 2009 fiscal year the company payments were calculated to be $23,985 million and the government revenues were $24,227 million. There is a discrepancy of about $250 million. The largest discrepancies occurred in the coal sector, specifically in the area of coal royalties. With this, the EITI has already helped expose which sectors in Indonesia require better management practices. Further communication and educating the local population about the report will be essential going forward to help progress accountability of the industry using the EITI.
Kazakhstan is currently a compliant country of the Extractive Industry Transparency Initiative (EITI). The report was released in December 2012. The report found about $27,9 billion in revenue originates from resource extraction in the country. There was $76,3 million dollars discrepancy difference between what the government reported and what the companies reported. The report contains a summary data of Payers and Recipients of 170 companies. Some 233 mining enterprises produce a wide variety of commodities: coal, iron ore, chromates ores and ferroalloys, alumina, copper, lead, zinc, steel, titanium sponge, uranium, barites and others.Mining activities are currently being carried out at 2,000 mines in Kazakhstan, which consists of prospecting at 132 mines (7%), extraction at 1,213 (61%) and both activities at 641 (32%). According to the Agency of Statistics of the Republic of Kazakhstan, industrial production in Kazakhstan in 2009, compared to the results of 2008 increased by 1,7% due to higher volumes of 6,1% in the mining sector (www.kazembassy.org.uk, 2014).
Kazakhstan achieved compliance in October 2013. EITI compliance does not mean that the compliant country‘s natural resources are managed in a fully transparent manner, but it does mean that the country has a basic and functioning process to ensure regular disclosure of natural resource revenues (EITI news, Oct 2013). Kazakhstan has a diverse portfolio of natural resources with some of the largest deposits in the world such as oil and gas.
Kazakhstan has the largest recoverable crude oil reserves in the Caspian region. The hydrocarbon industry is estimated to account for roughly 50% of the government’s revenues (BP Statistical Review of World Energy 2011). Kazakhstan’s proven oil reserves are estimated at 30 billion barrels. Two giant fields, Tengiz and Karachaganak dominate current oil production, with approximately 1.6 million barrels/day in total output, making about half of Kazakhstan’s total output. Kazakhstan is the world’s largest uranium producer (33% of world output in 2010, USGS) and has extensive mineral resources such as chromium, coal, copper, gold, iron, lead, manganese, and zinc.
Kazakhstan released their first EITI report in November 2007,which analyzes the payments for the 2005 fiscal year. The report provides detailed breakdown of payments from 38 oil companies. The EITI process in Kazakhstan is improving year by year. Kazakhstan has published EITI reports for 7 consecutive years starting from 2005.Number of companies in those reports have increased from 38 to 170. From the very beginning of EITI implementation in Kazakhstan, the World Bank has provided advisory support to the Government of the Republic of Kazakhstan and the National EITI Council as part of the Joint Economic Research Program, along with financial support of the EITI-MDTF Civil Society Direct Support Program. (World Bank, Nov 1, 2013)
For the 2011 fiscal year the company payments were estimated to be $27,946,680,967,00 and the government revenues were $27,870,297,402,00. There is a discrepancy of about $76,383,565. The report covers Oil, Gas and Mining sectors and revenue streams covered Host government’s production entitlement, royalties, dividends, bonuses, other significant benefits to the government. The report does not covered payments made in-kind and disaggregated by revenue stream.
Final report on significant tax and non-tax Payments / Receipts from the Payers of oil and gas and mining sectors of the Kazakhstan for the year 2011 ending on 31 December, was prepared in accordance with the technical specification which includes the Terms of Reference for National reporting approved by National Stakeholders Council. The report contains a summary data of Payers and Recipients of 170 companies.
The list did not include Payers that are in the stage of exploration, as well as companies with total tax paid not exceeding the threshold of significance:
- For mining 15 million tenge or $0.1 million or above
- For oil and gas – 30 million tenge or $0.2 million or above
The level of significance was accepted by NSC by Protocol № 28 on 12th May 2011, and brought to the Company to reconciliation of Terms of Reference. The level of significance was also confirmed with feasibility study on the EITI project in Kazakhstan from 16.08.2012, which was commissioned by Adam Smith International (LLC?), World Bank.
Enduring the early and middle stages of economic transition from the Soviet Union, the Kyrgyz Republic has streamlined legislation and economic systems for extractive industry and has developed a portfolio predominantly around gold deposits. Having participated in the EITI since 2004, the nation is in its fifth year as a compliant member and is conducted by a working stakeholder group comprised of civil society, industry and government stakeholders (EITI, 2013).
Recently, the EITI has been called into question by civil society stakeholders demanding its tangible benefits society to not only hold mining development accountable but to ensure reciprocation for environmental impacts. While reconciliation report validations show minor room for accounting improvement, the success and of EITI implementation today rests in the ability to effectively engage local governments of mineral development regions in transparency efforts and revenue allocation planning.
The state of EITI implementation in the Kyrgyz Republic has been likened to a Janus state; a place of beginnings and transitions that can lead to either prosperity or destruction. Moving from 2010 ethnic conflicts and revisions to national legislature around land and tenure, implementation of the EITI in the Kyrgyz Republic has the potential to increase efforts towards accountability and transparency if EITI communications are improved and shared decision making around the purpose of the initiative and its revenue allocation are aligned at the local level. This report outlines this progress and some inherent opportunities for improvement.
- Mozambique is a country host to a wealth of natural resources. However, the majority of its mineral deposits are still not exploited.The mining industries only occupied 1.1% of GDP in 2011.
- Republic of Mozambique is one of the world’s least developed countries and heavily indebted poor country (HIPC). According to the latest Human Development Index (HDI) Report, Mozambique is third-worst country in the Africa.
- Illegal mining is a big problem in Mozambique. Government estimates the smuggled gold were on the order of 4,000 kg to 5,000 kg or about $50 million to $62 million. For gemstones, this number is up to $50 million per year.
- Mozambique beset by corruption and its economy is shaken by a number of corruption scandals. According to Corruption Perceptions Index 2013 published by TRANSPARENCY INTERNATIONAL, This country was ranked 119 of 177 in the world.
- The Mozambican government does not, at least in the short term, intend to use money from natural resources to set up a sovereign wealth fund.As a highly indebted country, the first prior thing of Mozambique was to clear the Value Added Tax (VAT) rebates which the government owes companies.
- The EITI report shows those companies presented contributions lower than 500.000,00 MT (materiality level defined by the Coordination Committee) will be eliminated. The participation proportion in mining section is as low as 26.77% and this number is, to some extent, lack of representation.
- According to the Press Freedom Index 2012, Mozambique ranked 73 of 179 in the world. People in this country can easily reach the report of EITI. However in today’s Mozambique, government is still not fully accountable for the people and supervised by the people. Mozambique finance highly depends on the international aids and donor. That makes government more focus on external advice than the voice from citizens.
The Nigeria Extractive Industries Transparency Initiative (NEITI) has been recognized as setting the gold standard for EITI audit reports, and Nigeria was named as the best EITI implementing country in 2013. However, there is little evidence that ten years of participation in EITI has led to better governance or more accountability to the Nigerian people. Does this indicate a flaw in NEITI’s strategy or in the basic assumptions on which EITI is based?
Since joining EITI in 2004, NEITI has been publishing comprehensive reports that include findings from financial, physical, and process audits of the oil and gas industry. The NEITI Act of 2007 made NEITI an agency under the presidency and legally mandates reporting from the government and extractive companies. While the audit reports show few discrepancies in payments, they reveal ongoing issues with the state-owned petroleum company that have not been remediated. NEITI disseminates its findings to the media and the public in all major regions of the country through radio, television, road show drama events, and town hall meetings. Nigerian people know more about the oil industry, but they haven’t been able to use the information effectively. In fact, it appears that government officials have been the primary consumers of NEITI reports and beneficiaries of participation in EITI.
If NEITI’s primary objective is to facilitate more transparency in the extractive industries, it has been successful and should go forward with plans to expand the scope of its audits to include licensing and bidding. However, if empowering civil society is equally important, NEITI should first determine why civic participation has been weak. It could consider directing more resources towards civil society outreach or partnering with advocacy-focused organizations that could help citizens understand audit information and use it to demand more accountability.
Norway is the first and currently only OECD nation to have implemented the criteria of the Extractive Industries Transparency Initiative (EITI). Designated as “EITI Compliant” since March 2011, Norway has submitted reports annually since 2009. Since then reported expenditures from companies operating in the country’s oil and gas sector have been successfully reconciled with revenue reported from governmental bodies.
Through the implementation and enforcement of strong laws as well as policies that prioritize the nation’s social welfare, Norway is regarded as an international exemplar of proper resource management. Even prior to submitting its first EITI report, the country has made use of its strong reputation for transparency to promote the EITI as a tool for improved resource wealth management practices throughout the world.
At home, the Norwegian government has placed “considerable importance” on the implementation of the EITI. In addition to providing political and financial support to EITI implementing countries, it has demonstrated its own commitment to the initiative through measures such as the codification of EITI regulations into its own laws, the adherence to international auditing and accounting standards in the EITI reconciliation process, and the development and implementation of progressively more comprehensive EITI reporting standards. In doing so, Norway has established important transparency benchmarks for developing and developed countries alike. Its implementation of the EITI has been instrumental in influencing other countries to take part in the initiative.
Via the national government and civil society groups, Norway has been very active in the promotion of EITI activities and has encouraged public participation in the EITI process. Despite these efforts however, domestic engagement with citizens on with Norway’s national EITI process has proven difficult. As the EITI focuses solely on financial transparency, it has generally been regarded as irrelevant in the Norwegian context. As a result, media coverage on issues related to the EITI has been minimal.
Peru presents countless opportunities for companies in the extracting sector but investors are at times wary due to risk posed by corruption. In 2004 the EITI invited Peru to join its rank which turned out to be an opportunity to display the country’s transparency. In 2012, Lima received the status of EITI compliant that demonstrates its fulfillment in transparency policies.
This report enlightens the EITI dynamics regarding:
- Stakeholders: Lima, the population of the country and of the mining regions;
- The companies participations that is on a voluntary basis but still represent 80% of the wealth created in mining activities;
- The industry’s wish to build trust with the population;
- The disseminations strategies: a failure due to the centralist tendencies of Lima and to a lack of comprehension of the local communities’ need.
- The inherent challenge that the canon minero poses for an honest assessment of the transparency level in Peru.
- The fact that achievement to the EITI standard does not mean that the resource curse is not currently a risk for some Peruvian administration.
This report stresses the progress made by Peru but also the problem embedded in the EITI structure. The results of the situation of transparency in Peru depict it as an example due to a strict focus on the central government. The regional governments do not have the same capacities which mean that their level of transparency needs to be improved.
Timor-Leste is a nation heavily reliant on the extractive industry sector for government funding. As such, corruption in the industry can be viewed as highly detrimental to economic growth and development in Timor-Leste. A primary driver behind the need for transparency is maintenance of good governance in order to escape the confines of the resource curse. In order to promote transparency, the government founded the TL-EITI Secreteriat in 2008, with Timor-Leste achieving the status of full EITI compliance in 2010. The following report will discus the EITI, extractive industry governance, and public accountability in the following contexts:
- Stakeholders: The Timor-Leste government, people, and corporations involved in extractive industries.
- How the EITI operates in Timor-Leste and the effectiveness of the report on improving transparency in the extractive industry, and consequences for governance.
- The need for improving company participation in the EITI. As the database of companies operating in the extractive sector is not comprehensive, there is room for improvement in the reporting process.
- The scope of the EITI report and improving reporting templates to facilitate reconciliation and auditing.
- The need for continued improvement in transparency in order to better governance with the goal of resisting the resource curse.
- The oversight and management of the Petroleum Fund of Timor-Leste.
- Continued international cooperation in developing large offshore oil reserves and governance of those reserves.
While the Timor-Leste government has clearly shown a continued commitment to implementing and improving the EITI report, it is just as clear that there are complex, interconnected factors that prevent better transparency. This report will highlight the areas that need most improvement, and how expanded transparency could enable better governance and accountability.
Yemen is a country with around 25 million people and a fragile economy due to years of civil unrest and declining oil production. The country is one of the poorest countries in the Middle East. The country needs more jobs and its economy must be diversified. For Yemen, natural resource transparency is more urgent than ever. The recently published EITI reports showed that oil production, which accounts for 70% of government revenues, is rapidly slowing down. It’s time to firmly establish a transparent and responsible management of natural resources before there are no resources left to manage. Most foreign oil companies operating in Yemen in recent years have moved their management operations offshore, mostly to Dubai due to civil unrest and declining oil production.
EITI reports will be playing its designated role if report will be not only looking for the numbers, the reconciled revenues and any differences but also analyze trends, help to develop better policies on the improvement of the sector so that current and future generation can benefit. Nearly 95% of all mining companies operating in country are exploratory and only 5% are in production. During peak periods of oil extraction, the country’s consumption increased. Now, as the country experiences a decrease in production, Yemen suffers from severe electricity cuts that can last up to 12 hours a day. Only 40% of population has access to electricity. Reports shows that substantial amounts of crude oil goes to internal consumption instead of remaining being used within the country. Yemen has started to export natural gas, however it cannot cover loses of oil production and partially offsetting the decline in oil revenues.
Disclosing revenues will not improve the situation as Yemen’s government requires serious structural changes. Despite Yemen’s income from crude oil alone averaging around $5 billion per year (2008 – 2010), the country remains in debt and looks for foreign aid. Implementing the EITI report will not bring quick remedies for Yemen economic problems. If the oil and gas industry of Yemen continues to display a systemic lack of transparency in distributing the revenue and poor governance policies, the country will soon become a falling state similar to Somalia.