Category Archives: EITI Country Case Studies

“SUSPENDED”

Mario Ramirez, MASc Mining Engineering // Mar 7, 2015

Just before its first anniversary as a compliant country to the EITI initiative Guatemala got suspended for missing the next EITI report deadline.  I guess I‘m not surprised for such decision, especially after reading that the extension request by the multi-stakeholder group (MSG) to the EITI board was made only 7 days before the submission deadline[1]. However, what surprises me though is that there was actually a person on December 24th making this request to the EITI board.  Usually by that date, Guatemala is totally shut down due to Christmas festivities and so on. Sure it looks like a last minute resource to save face, however, I could be wrong.

Reading the agenda notes of the December 15, 2014 meeting held by the MSG group, it seems there was not a chance for the MSG to reach the EITI deadline.  One of the key attendants, Ms. Lopez de Barillas who represents the presidential transparency commission, mentioned that a request of extension needed to be agreed upon the attendants due to the pending selection and hiring of the company in charge of working on the next reconciliation report.  She also reported in that meeting that the acquisition specialist of the public finance department thought the hiring of the company was going to take place in the month of February 2015 (last month).  I tried to follow up looking at the 2015 meeting notes but only a pdf with a list of attendants for the February meeting was found[2]. I could not find further MSG information to the previous pending points of prior meetings.

It is quite impressive to read that the last multi-stakeholder group meeting was held in February 23rd, and that the suspension as an EITI compliant member took place only 3 days after that meeting.  However, the only information you can find on the reports of 2015 is the list of attendants I mentioned previously, and as I said, there is no evidence of critical discussion and communication regarding the suspension that was about to take place a few days later.  Reading further I found there were 17 MSG meetings in 2014 and there is also a detailed work plan to be carried out to accomplish the EITI deadlines.  However, even after all those meetings and a good work plan, it was no possible to achieve the desired results.

Hopefully, Guatemalan stakeholders are looking forward to become active members of the EITI initiative in the near future.

[1] https://eiti.org/Guatemala
[2] http://eitiguatemala.org.gt/ category/actas-de-sesiones- 2015/

NGOs in Kyrgyz Republic demands more focus on subnational reporting

Bulgan Batdorj, MASc candidate in Mining Engineering // Mar 6, 2015

Kyrgyzstan is not only beautiful but also rich with mineral resources. Development of the country through democracy and free market economics has faced many challenges since its independence in 1991. The economy is heavily dependent on gold mining, mainly from the production of the Kumtor Gold mine. However mining companies are confronted by violent protests from the local people on a regular basis and this is one of the key reasons why foreign investors draw back from investing in the country.

After adoption of a new constitution in 2010 the government promulgated aNational Sustainable Development Strategy to promote greater transparency in governance and especiallyresource governance. TheKyrgyz Republic became a compliant country of Extractive Industries Transparency Initiative (EITI) in 2011 (EITI Secretariat, Kyrgyz Republic 2014) with record of 95% extractive industry revenues covered. In 2012 the country legislated the EITI in its “Law on Subsoil”.

While it is easy to be comforted by the success of national reporting, unfortunately it does not reduce conflict between the local community and the companies.  This is why many researchers and NGO leaders emphasize the importance of sub-national reporting of EITI. Mr. Nurlan Djoldoshev of the Soros Foundation in Kyrgyzstan has said that “Improved engagement between the EITI process and local communities is a very urgent issue for Kyrgyzstan. Explaining the EITI rules to local communities through building local MSGs would help to improve the interactions between local citizens and companies. This kind of approach will give opportunity to make EITI really useful and useable tool for people”. Explaining the reasons for protests, he continued that “local citizens strike against any operations of the extractive companies using as a main argument the problem of their ecology and environment protection. They say that their communities do not need revenues from extractive industry because they benefit almost nothing from such business and they believe that the companies will leave them only environmental destruction. So now both government and companies do not know how to improve dialogue with local communities” (EITI SWG 2010).

In many cases, local people are unaware of how the revenues from such mining operations can better their livelihoods. For example, the Kumtor Operating Company pays one percent of revenues to the development fund of Issyk-Kul province yet lack of transparent management and spending of the fund creates hostility among stakeholders. The national government is not active in resolving conflicts between companies and communities. Because of a highly centralized governance structure, it is hard to figure out what comes back to local people after mining revenue is sent to Bishkek.

The government has promised to make many changes with regards to extractive industry governance. As one localization effort the government proposed to establish a “Regional Development Fund” to promote the improvement and maintenance of infrastructure, fund social and economic development and support local events at provincial and district level areas with mining activity (David Gullette 2014). But many are critical of the fund’s progress so far in bringing the much needed consolation and change.

The constant social unrest in Kyrgyzstan is triggered by many causes. The Kyrgyz Republic ranks on 150th out of 177 in the corruption perception index issued by Transparency International and poverty affects almost 40% of the population (World Bank Data 2014). So it is important for the government to focus on subnational reporting and educating the public concerning the mining industry and its contributions to the country’s development.

There are many similarities between Mongolia and Kyrgyzstan. Both countries are landlocked, nomadic, high altitude, post-Soviet democracies. The people in both countries love horses, drink kumis and live in yurts. Theirvalues and cultures are interconnected with the mountains and waterways. So, I pray that both countries succeed in successfully overcoming the challenges of transition, beating corruption, strengthening institutions and improving governance.

The Ongoing Journey to Good Governance in Africa

Carlos da Costa, PhD Student in Mining Engineering // Mar 6, 2015

Africa is a notoriously difficult place to do business. Many investors remain skeptical of their ability to navigate the continent’s often murky operational environments, where weak governance, regulatory failure and unstructured economies have created the conditions for corruption to thrive.

The scale of political graft (a form of political corruption, is the unscrupulous use of a politician’s authority for personal gains) has been particularly noteworthy in extractive industries. As a result, the citizens of many African countries rich in oil, gas and minerals are mired in poverty. Rather than investing resource revenues into infrastructure, health care and education, governments, often in collusion with the private sector, have diverted the proceeds into their own pockets.

Ghana, Angola and Nigeria, for example, are plagued by the resource curse. Combined they are the largest producers of oil in Africa, yet their citizens are among the world’s poorest, with over 50% of their respective populations living on less than $2 a day, according to World Bank figures.

Transparency International (TI), the Berlin-based watchdog, ranked Angola a dismal 161 out of 175 countries in its 2014 Corruption Perceptions Index. The Angolan government frequently commits itself to greater transparency, at least on paper. In 2010 it passed the Public Probity Law, which obliges all government officials to declare their wealth. This information, however, is not made public, a direct contradiction of the legislation’s title. As a result, this act has yielded few positive effects.

Transparency International has ranked Nigeria as the 27th most corrupt country in the world out of 100. The group disclosed this in its 2014 “Perception Corruption Index.” Nigeria was ranked 136 out of 175 countries surveyed in the report. Nigeria’s poor also suffer from the government’s mismanagement of the country’s oil revenues. Unlike Canada, which has used its resource wealth to develop and diversify its economy, Nigeria is still stuck in a mono-export economy. Oil accounted for approximately 95% of Nigerian exports between 1980 and 2010, according to a 2013 report by the United Nations Economic Commission on Africa. Accusations of corruption have plagued successive Nigerian governments and the Nigerian National Petroleum Company (NNPC), the state oil firm, continues to accused of stealing billions from federal accounts.

Ghanaian lawmakers reacted angrily to Transparency International’s latest Corruption Barometer Survey, which ranked Ghana’s Parliament among the most corrupt institutions in the country. In its 2014 “Perception Corruption Index,” TI has ranked Ghana as the 48th most corrupt country in the world. The country was ranked 61 out of 175 countries surveyed in the report. This latest survey, along with past ones, has drawn sharp condemnation from MPs, with some threatening to have the International Corruption Watchdog before the Privileges Committee. According to the MP, the allegations were very damning and Transparency International should produce evidence.

Transparency International has ranked the Ghanaian Legislature as the sixth most corrupt institution on a list made up of other public institutions like the Police Service, the Judiciary, and Political Parties amongst others.

One measure that mineral-rich countries can adopt is the Extractive Industries Transparency Initiative (EITI). This voluntary programme seeks to promote better use of mineral wealth through increased transparency and accountability. It encourages governments and companies to publish their revenues and payments and then submit them to independent auditing. Currently 48 countries, including 22 African nations, are implementing EITI requirements and 17 are compliant; 4 are implementing EITI, not yet compliant; and 1 possesses compliant/candidate status but is temporarily suspended according to the EITI website.

The African Development Bank endorsed the EITI in 2006, but governments and private companies still resort to inventive ways of hiding their buy-offs and kickbacks. While the initiative in itself is not sufficient to eradicate corruption in the extractive sectors, it is generating more information on revenues that was previously either not available or difficult to access.

In addition to the EITI, African governments and multinationals need to define clearly and publicly their rules of engagement. Transparent resource management with well-defined principles and neutral administration will discourage participants from rent-seeking behavior.

While corporate Africa’s reputation for clean business is unflattering, this is changing. As African companies strive to become world class, many are tightening up their governance, buttressing business codes of conduct and teaching their employees about ethics.

Government graft, often with the collaboration of private companies, is choking African economies and is a cancer that African governments need to remove. This requires fostering greater transparency in their dealings with mining, oil and gas companies; developing and enforcing stronger anti-corruption legislation; and creating economic policies that promote diversified, industrial economies and reduced dependency on resources.

Corruption is not simply about ethics. It is also about how a government is set up and managed. Critical elements in fighting the scourge include an active and engaged media and judiciary, and the use of information technology. The underlying causes of corruption (poor pay incentives, ineffective political processes, and a deep-seated acceptance of corruption) need to be expunged. Citizens should demand greater accountability and transparency from their governments.

 

 

Sources:

Compaoré, Nadège. Towards Understanding South Africa’s Differing Attitudes to the Extractive Industries Transparency Initiative and the Open Governance Partnership. Johannesburg, 2013.

EITI. Impact of EITI in Africa: Stories from the ground. Oslo, 2010.

EITI International Secretariat. EITI – Extractive Industries Transparency Initiative, Ghana. March 2015.

< https://eiti.org/Ghana/ >.

EITI International Secretariat. EITI – Extractive Industries Transparency Initiative, Nigeria. March 2015.

< https://eiti.org/Nigeria >.

Natural Resource Governance Institute. Natural Resource Governance, Angola.

< http://www.resourcegovernance.org/countries/africa/angola/overview >.

Natural Resource Governance Institute. Natural Resource Governance, Ghana.

< http://www.resourcegovernance.org/countries/africa/ghana/transparency-snapshot >.

Natural Resource Governance Institute. Natural Resource Governance, Nigeria.

< http://www.resourcegovernance.org/countries/africa/nigeria/transparency-snapshot >.

Ocheje, P. D. (2006). The Extractive Industries Transparency Initiative (EITI): Voluntary Codes of Conduct, Poverty and Accountability in Africa. Journal of Sustainable Development in Africa, 8(3), 222-239.

The World Bank Group. Worldwide Governance Indicators (WGI) Project. Country Data Report for Ghana, 1996-2013. Washington, 2014.

Transparency International. Corruption Perceptions Index, Overview. February 2015.

< http://www.transparency.org/research/cpi/overview >.

 

The EITI Journey in Indonesia – Part 2: Challenges to Subnational Reporting

Justin Kwan, MAAPPS // Feb 23, 2015

Despite the fact Indonesia only recently achieved EITI compliant status in October 2014, the country has actually implemented since 2010, laws which regulate the transparency of national and local extractive industry revenues.Subnational reporting in the case of Indonesia has been met with positive responses but has experienced difficulty in its practical implementation. ThePresidential Regulation Republic of Indonesia, Number 26, Year 2010guarantees the need for establishing the Transparency of National/Local Extractive Industry Revenues. For instance, it regulates the the creation of an Implementation Team (Tim Pelaksana), which is comprised of three seats for subnational government officials on the EITI Indonesia multi-stakeholder working group as well as three regional secretaries. The produced framework here shows strong a commitment to EITI transparency principles and the appropriate context for subnational reporting to operate.

Despite this, the practical implementation of subnational reporting has been met with unexpected results. One of the largest issues that has surfaced is the topic of district-licenced mining permits. Indonesia’s 2000 decentralization law allows for local districts to issue licence permits. Regional autonomy was seen as the next logical reform in Indonesia, which came about during the increasing democratic reforms that were being put into place after the end of the Suharto regime. While the Ministry of Energy and Minerals was aware that 10,500 district licences were issued in 2011, the government only had adequate levels of information for only 4000 of them. Given Indonesia’s population size and the geographical area of the archipelago, the decision to decentralize is logical, as more individualized attention could be given by local governments. The unintended consequence is that tracking at the national level is extremely difficult.

In conversation with Indonesian civil society organizations, I received responses from different groups which were located across the country. What appears to be evident is the increasingly strong push for civil society engagement in Jakarta, in which detailed plans for subnational reporting and beta testing are already occurring. Meanwhile, in the province of Riau, discussions of subnational reporting had been made at the local level, but were not being discussed at the national level, according to my correspondence with their civil society groups. With EITI compliance stronger in some areas more than others, there must become a way to identify which regions are priorities for subnational reporting. Then, EITI can have a strong impact on improving the transparency of the extractive industry.

So what are the next steps for Indonesia? The EITI Implementation Team Meeting on September 9, 2014 agreed upon the upcoming working plan for the 2014-2015 year. In regards to subnational reporting, the team is looking at three important areas: (1) regularly publishing the Revenue Sharing Fund (DBH) per District Per Company/Unit Production (2) involving Regional Governments in the extractive industries transparency process and (3) having Regional governments push companies to open up their tax data. The two largest obstacles cited in this implementation plan include the fact there are limited human resources needed to handle the revenue calculations as well as a lack of understanding by regional governments of the importance of EITI.

Clearly, Indonesian stakeholders and EITI must work together to identify the most lucrative extractive resource industry areas of the country and create a targeted plan to ensure that subnational reporting is operating in these target areas. While the “One Map Policy” appears to be one response to the problem, the government must also find a way to engage with local governments in a meaningful way to further the transparency process. In a large country like Indonesia, a targeted and refined plan is needed in priority areas before focusing on widespread implementation across the country.

 

Republic of Congo sub-national reporting, law reform, a valuable lesson for Mongolia

Harry Li, MAAPPS // Feb 21, 2015

Upon independence in 1960, ROC experimented with Marxism until 1990 and the democratically elected government took office in 1992.

The ROC is one of the countries in the Congo Basin where the abundance of natural resources has proved to be more of a curse than a blessing. Oil and minerals have not brought prosperity for all, instead, most people live below the poverty line in isolated rural areas and depend on forests for their livelihoods.

ROC EITI President, Mr. Okoko, said that Congo’s economy is highly dependent on the oil sector, accounting for 93% of total extractive exports. Overall, the extractive industries account for 76% of national GDP. Mr.Okoko says that the ROC Extractive industries represented on average 85% of state revenue and regulatory provisions do not allow extractive companies to send payments to anyone but the national Treasury. Thus currently, there is lack of sub-national reporting in the extractive industries. In addition, EITI Vice President, Mr. Mounzeo noted that it is true that some civil societies have been pressuring the government decentralization and transparency in the extractive industries, therefore law reform addressing these issues is expected to be drafted in the near future.

Lack of transparency and governmental corruption have always been problematic issues for ROC. According to the constitution, political and civil society organizations can form freely. However, the political system is shaped in favor of those organizations close to the regime. Thus most civil societies advocate for issues with low political profile.  However. The Observatoire congolais des droits de l’Homme (OCDH) and Transparency International have been particularly active in pushing for transparency and sub-national reporting in the ROC extractive industries.

Mr. Mounzeo argues that although there are lack of sub-national reporting, alternative initiatives have been developed. In the past three years,  the civil society organizations such as RPDH (Rencontre Pour la Paix et les Droits de l’Homme) and the PWYP(Pay What You Say)  started monitoring public investment in access to water, electricity, health, education and food. Although these are examples of civil society’s engaging in low political profile issues, they still set as an important precedent and a driving force for the push for sub-national reporting in the future on extractive industries.

In comparison to the mining industry in Mongolia, there are many comparable similarities with ROC. Both countries suffer from a substantive amount of corruption , both experimented with communist ideologies, both have very limited or no sub-national reporting and both countries are committed to reform laws that will increase transparency, decrease corruption and initiate sub-national reporting.

Transparency International reported on Mongolia that the “Key issues in legal framework is still corruption.”  There has been some progress in developing the legal anti-corruption framework, but the legislative framework is still largely deficient. Legal framework battle corruption improved dramatically when parliament passed in Jan 2012 the Law on Regulating Public and Private Interests in Public Services and Preventing Conflicts of Interest. Officeholders are required to declare their assets each year. There are controversies surrounding the arrest of former president due to corruption charge. Like China, The current president, Tsakhiagiin Elbegdorj, has openly endorsed the fight against corruption and made it its main priorities.

Like ROC, the Mongolian civil society participation is still weak. Even though civil rights are largely guaranteed in Mongolia, violations still occur. From the cruel and inhumane treatment of people in custody to discrimination of sexual minorities, these persistent violations call for more effective system in protecting civil rights. Civil society is weakened by corruption and weak management within NGOs. Funding from domestic or international donors is often difficult to trace while staff are underpaid.

However, Mongolia is introducing reform in laws to improve the situation. The Fiscal Stability Law (FSL) went fully into effect in January 2013 and has improved the fiscal discipline by enhancing transparency and accountability in government spending.

My colleague in the project, Stephanie Zimmerling, has done a great investigation on the sub-national reporting in Peru.  Peru is one of the only a few countries international that are reporting at the sub-national level. The integration of the sub-national reporting scheme was effective and adopted in the Cajamarca region of Peru. Given the decentralized nature of Peru’s political environment it is anticipated that other regions will be able to successfully adopt sub-national reporting.

As seen in the case of ROC, Mongolia and Peru, governmental reform in laws on extractive transparency, anti-corruption, civil society engagement, and decentralization are the key to promoting sub-national reporting.