Carlos da Costa, PhD Student in Mining Engineering // April 7, 2015
Companies see value in EITI because it creates a more broadly supportive and secure operating environment. The EITI country process allows for companies to build the bonds of trust with a variety of stakeholders, and increases recognition of corporate contributions to development. Companies make large contributions to domestic tax bases, but also offer indirect benefits through their operation including job creation, capacity built through local supply chains, and local philanthropy. Companies also want to see local tax systems that are fair, transparent and encourage investment. Above all, companies want to see the onus of a country’s development on the country not on companies.
Developing countries, conversely, see value in EITI because it enhances a country’s international standing as a more stable destination for foreign direct investment while promoting a positive international image. EITI boosts transparency and spreads awareness on how governments are utilizing resource related incomes. A number of multilateral development banks (i.e.: the World Bank, Inter-American Development Bank, IMF, African Development Bank, Asian Development Bank, the European Bank for Reconstruction and Development, and the European Investment Bank) provide assistance to facilitate EITI implementation in developing countries. The EITI has also been endorsed by the UN, G8, G20, and AU and is supported by governments including Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, the United Kingdom, and the United States.
One of the central criticisms of EITI effectiveness is that it hinges on the existing conditions within a given country. Countries with strong civil society and an interest in transparent extractive payments (i.e.: Norway) will find EITI a meaningful tool, whereas countries with weak institutions and less than sincere desire for change (i.e.: Ethiopia) may try to just “go through the motions” to gain acceptance into EITI.
In countries where civil society is being squeezed (i.e.: Azerbaijan), there is an understandable urge to “fail” the country to send a message to the government, yet local NGOs say that the EITI multi-stakeholder group is the only free space of expression currently available. In Myanmar, which was admitted as an EITI Candidate country in July 2014, civil society, government, and industry are working together for the first time as they jointly produce the national EITI report over the next nine months (deadline for next EITI report: Saturday, 2 January 2016). The EITI process will assist the various stakeholders in learning patterns of cooperation while navigating the inevitable disagreements and differences. Beyond the effects on political inclusion, Myanmar’s admission as an EITI Candidate country has real development implications for the country. This responsibility falls with its government and people, but EITI is an instrument which can assist in facilitating the reform and transparency needed for responsible resource management.
One thing that has not been addressed by EITI, and is beyond the purview of extractive companies paying the taxes, is the issue of what governments “do” with tax revenues? In some instances the subnational EITI process has started to report this as well this, but the hope is that the availability of detailed extractive revenue information will create a transformative conversation at the country level. The reality is that this process will take longer in some countries than in others.
EITI does serve another important function in developing countries as often it provides the first opportunity for constructive multi-stakeholder dialogue and this in itself can have a positive effect on effective governance. There is hope that EITI, along with other initiatives focused on accountability and data transparency in the extractive sector, can help developing countries overcome the “resource curse.”
EITI is not a “be-all and end-all” solution, but has prompted a momentum of change in extractive transparency and accountability and will continue to spur dialogue leading to progressive change.
Sources:
African Development Bank Group. Extractive Industries Transparency Initiative. April 2015.
< http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/extractive-industries-transparency-initiative/ >.
Compaoré, Nadège. South African Institute of International Affairs (SAIIA). Towards Understanding South Africa’s Differing Attitudes to the Extractive Industries Transparency Initiative and the Open Governance Partnership. South Africa, 2013.
EITI International Secretariat. EITI – Extractive Industries Transparency Initiative. April 2015.
< https://eiti.org/ >.
EITI International Secretariat. Impact of EITI in Africa: Stories from the ground. Norway, 2010.
Natural Resource Governance Institute. The Extractive Industries Transparency Initiative (EITI). April 2015.
< http://www.resourcegovernance.org/training/resource_center/backgrounders/extractive-industries-transparency-initiative-eiti >.