Category Archives: EITI Country Case Studies

TRANSPARENCY: THE LONG AND WINDING ROAD

Jocelyn Fraser, Ph.D Student in Mining Engineering // Feb 21, 2015

The EITI has recently introduced requirements for disclosure of sub-national transfers – money collected at the local level from extractive companies or money transferred to local governments as a form of redistribution of mining and oil and gas revenues collected by the national government. It has been said that every EITI member country has its own unique approach to meeting EITI requirements and the situation seems ready to be replicated with the requirement for sub-national reporting. With no common nomenclature and no reporting templates, each country will grapple to develop its own methodology. Countries of conflict are likely to face quite different issues with sub-national reporting than established or emerging democracies. And countries with a long history of resource extraction may face different issues that regions, such as the Philippines or Mongolia, where the extractives sector is relatively new. Some EITI countries grapple with corruption yet have strong civil society watchdogs. Others operate under totalitarian regimes where dissenting views are seldom heard, and rarely tolerated.

Sub-national reporting is a positive step in that it requires government, companies embracing their social responsibility, and communities to work together. It will also be important to build linkages with other initiatives complementary to EITI to ensure greater accountability, promote better governance, and build stronger institutions – the keys to improving the lives of average citizens. Supply chain verification and traceability, mandated by UN Security Council Resolution 1896,[1] and conflict mineral certification as proposed under Dodd Frank are two such initiatives. New international disclosure requirements, such as those contained within the European Union’s Transparency Directive and the Government of Canada’s Extractive Sector Transparency Measures Act should also serve to drive enhanced transparency amongst extractives companies domiciled within these regions. Adherence to the principles of Free Prior and Informed Consent (FPIC) are needed to ensure indigenous peoples approval has been secured in advance of development. And many groups will need to be involved in the ongoing discussion about how countries ensure resource revenues create the greatest good for the greatest number of their citizens.
[1] The resolution calls upon companies to exercise due diligence on suppliers and origins of minerals purchased

Ghana Subnational EITI: A Good Start

Carlos da Costa, PhD Mining Engineering // Feb 21, 2015

The mining industry of Ghana in 2014 accounts for 9.1% of the country’s Gross Domestic Product (GDP), in current market prices, and gold made up 36% of total exports in 2013. Ghana is Africa’s 2nd largest gold producer and the eighth-biggest global producer, producing 107.9 metric tons of gold in 2013. Ghana became a petroleum producing country on November 28, 2010. The energy sector accounted for 6% of the GDP % in 2014. Despite the mining and energy industries, combined, in 2014 accounted for 15.1% of Ghana’s GDP poverty persists throughout much of the country.

Improving transparency and accountability to support economic and political development in a member country is the focus of the EITI. Ghana was one of countries which voluntarily joined EITI in 2003. It did so in respect of its mineral extractive sector only and extended its reporting requirements to the subnational level.

The discovery of oil in Ghana in 2007 only increases the relevance of extractive industries for Ghana’s economy. For all of its riches, Ghana still counts as a poor country with a Human Development Index (HDI) that barely reaches the “Medium Human Development” category. Its government apparently faces serious challenges to unlock its potential for self-sustained economic and social development by utilizing revenues from its growing extractive industries sector.

Since becoming EITI compliant in 2010, Ghana has published EITI reports, from 2004-2013, covering ten fiscal years. Among the many accomplishments of Ghana’s EITI is its leadership in rolling out a detailed subnational EITI component. Ghana has been tracking these subnational payments back to 2003. By implementing the EITI at the subnational level, the Ghana EITI (GHEITI) deliberately embeds the EITI practices in its national and subnational systems, thereby making the EITI relevant on all levels of government, and particularly to those who are affected most.

The Natural Resource Governance Institute and the Centre for Social Impact Studies have collaborated to analyze Ghana’s EITI reporting on subnational revenue disbursement, collection and spending. Their findings highlighted the need for timely sharing of resource revenues with subnational jurisdictions, and the need for national and local governments to have an economic vision beyond the life cycle of a mine.

Ghana’s first audited EITI report, covering mining revenue from January to June 2004, was published in September 2007 and included subnational reporting from district assemblies. Although no significant discrepancies were identified between company payments and government receipts, the report raised serious concerns over royalty computations and the transparency of subnational disbursements, as well as issues with contract transparency and the uses of royalties by authorities. Further reports published in 2008 and 2010 covered the second half of 2004 and all of 2005 through 2008. The reports reflected some improvements in the sector, for example in the tracking of disbursements to the subnational level, although the three-year time lapses diminished the relevance of the reports.

The 2010-2011 EITI reports were published in 2013. The 2011 EITI report confirmed that subnational (local and regional) governments continue to receive significant revenues in form of royalties and taxes from the mining sector. Roughly 40% of the budget of local governments comes from mining. These reports also highlighted a number of issues that required attention in order for Ghana to meet the requirements of the EITI Standard in its 2012 report. This included a more comprehensive coverage of subnational payment arrangements. The 2012-2013 EITI Ghana Report now shows the contribution of the extractives sector to the local economy, exploring how much revenue has been generated and its application; however, further effort is required to achieve greater subnational payments transparency.

In 2013 at a community fora organized by GHEITI it was agreed that at the subnational level there is a greater need for transparency in the extractive sector between both district assembly and community members regarding the level of contribution they make towards local development programmes. “We now know we need to keep an eye on how the District Assembly uses the money that comes in, especially the royalties”, said a community member. A traditional ruler said “EITI shone light on the hidden points” of the revenue receipts and allocation process (GHEITI 2013).

Little has been said regarding the state of Ghana’s oil revenue distribution at the local level. However, the mining sector experiences illustrate that it is not new to issues that border on the distribution of extractive industry revenues across the levels of government. It is worth stating that Ghana does so at her own risk if revenue assignments especially to the subnational entities are treated as prosaic.

The experience of Ghana with regard to the EITI may be considered successful and exemplary; however, over the years many citizens’ groups have expressed skepticism about the global EITI process with some objecting to civil society participating in the process. They contend that its scope does not address the core concerns of communities impacted by extractive industries. For instance, call for the inclusion of social and environmental audit of mining and energy companies as part of the EITI by some citizens’ groups have been ignored. So the GHEITI’s interest in subnational reporting is clear: to ensure that the impact of the EITI process is felt at the local level through accurate reporting of amounts received from companies and government, and that these payments are used for the intended purposes as determined by the communities themselves. For the companies, this level of reporting would help bridge the information gap and reassure them of a cordial business environment if communities are aware of the contributions they make.

Despite Ghana’s cumulative national and subnational accomplishments since voluntarily joining EITI such ongoing concerns suggests that there is still significant work to be done to institutionalize greater subnational transparency in the country.

We Need a Fact Finding Mission to Myanmar

Debbie Prasad, MAAPPS // Feb 20, 2o15

My country report was on Myanmar, and as they are new to the EITI, I was able to gather a lot of information regarding their progress in becoming a candidate country. It seems that they are very excited about the EITI and are working hard towards greater transparency in the extractive industry.

Along with finding about out Myanmar’s resources, an important part of the report was to focus on sub-national reporting. In the case of Myanmar, there is a lot of talk of local reporting, but to date, there is no real articulated plan for such reporting.

What is confusing to me as a researcher, is the fact that there are training sessions being currently held regarding sub-national reporting, but I have not been able to find evidence of what type of sub-national reporting procedures are being delivered to trainees. In addition to this, what is a little concerning in terms of transparency is the fact that, although may have been a reconciler appointed, I have not been able to identify who the reconciler is for the national reports.

The intriguing thing about Myanmar’s participation in the EITI is that although they (on the surface) are complying with the rules of transparency by producing reports, indicating work plans, and holding training sessions- important details are missing in the reports. Names of reconcilers are missing, articulated plans for sub-national plans are missing, and interestingly enough, on official MEITI published materials, indications civil society displeasure resulting in boycotting the EITI, are missing.

In the course of communicating with members of civil society and members of the MEITI, I was given conflicting opinions of the EITI. While the MEITI member claimed that there were sub-national reporting training sessions planned for February/March of 2015, at the same time, a civil society member voiced that they would be boycotting the MEITI because of human rights abuses in the extractive industry.

Until now, I believed that one was able to find a wealth of information through literature research, but with this experience, I truly feel that field work is valuable and necessary. I think that a site visit to Myanmar would be extremely helpful in assessing what is actually happening on the ground. So I end with saying….road trip to Myanmar anyone???

The EITI Journey in Indonesia – Part 1: Resource Extraction in the Jokowi Era

Justin Kwan, MAAPPS // Feb 20, 2015

On October 15, 2014, Indonesia completed a landmark achievement and became the first country within ASEAN to become an EITI compliant country. A mere five days later another landmark achievement was made when President Jokowi was sworn into office, one of the first leaders to originate from neither a military or political elite background. As part of his platform, Jokowi promised tomaximize the benefits that natural resource extraction has for Indonesian citizens, hoping to reduce some of the negative aspects associated with the oil and mining sectors. While these are extremely important milestones in the country’s journey to openness and transparency, the process of reform however has not been nearly as simple.

Prior to its EITI compliant status, the country nearly risked being delisted as an EITI candidate country for its inability to resolve many problems in its reporting which included: “accounting standards, access [to] corporate tax information, or in some cases document[ing] financial transactions” (Tantri and Bria, 2014). In the country’s second report, “40 percent of reporting companies (more than 100) missed the [reporting] deadline, delaying the coal and mineral section of the report and again calling into question the level of commitment from government and stakeholders” (Ibid). However, in October 2013, the EITI Board had granted the country an extension to reach compliance after stating it had made “meaningful progress.”

In the year 2015, Indonesia has much to accomplish now that it has become an EITI compliant country. The Natural Resource Governance Institute has called for stricter mechanisms to ensure that Indonesia maintains its EITI standard. They, along with other critics have cited the need for more transparency in the mining sector, especially in the licence approval process as well as in the way national and subnational governments coordinate resource management.

Despite this, the country has made great strides in transparency and open communication, especially after the dictatorship era of President Suharto from 1967 to 1998. Accordingly, the country has made an important transformation from a nation, which used to limit the free flow of information into a new era of reform and openness. This means that “a large amount of information on how Indonesia is benefitting from, and managing its resources is now in the public domain” (Bria and Heller, 2014). Slowly but surely, improvements are being made.

Resource management is a serious problem in Indonesia, and the country has put its hopes into its newest President. Many believe that Jokowi’s pragmatic style of governance will bring about reform in Indonesia, by “bringing change to a stagnating industry and breath[ing] fresh life into stalled negotiations with foreign mining companies” (Warburton, 2014). His message is simple: Reduce corruption! Raise up the people! Repair the economy! Since taking office nearly four months ago, Jokowi’s government has implemented a “One Map Policy”, a central map of Indonesia, which will be used by government agencies across the country to help track duplicate licences, resolve land disputes and unify the local government systems. Although it is too soon to tell whether or not this policy will be effective, or whether it will be subverted by the same local authorities and businesses that are making subnational tracking more difficult, the clear willingness towards reform by Jokowi represents a positive direction for the country.

Yemeni EITI Meta-data

Bérangère Maïa N. Parizeau, MAAPPS // Feb 17, 2015

To reflect on the potential sub-national reporting frameworks that could be recommended for EITI standards in Mongolia, my cohort and I began our work by researching EITI member countries and their sub-national reporting strategies. We looked at the socio-political context and the processes involved in the implementation of EITI standards in some of the current member countries. Each graduate student individually studied one EITI member country. I decided to look at Yemen, which has a special status as the first Middle Eastern country to become an EITI member. Yemen is a country rich in minerals, gas, and oil. Oil is predicted to be exhausted in 10 to 12 years. It is important for Yemeni’s positive economic development that oil be manage intelligently.

I found fascinating to learn that until the 1990s, the north of Yemen was not structured around governmental institutions. Rather, the numerous Yemeni tribes traded with each other. The network of tribes was interconnected thru countless friendships, and facilitated by the honouring of those friendships. This is called tribal law. The political structure was based on the network of tribal alliances with minimal use of violence. The unique tribal societal politico-economic structure is a good reminder that there are limitless ways in which society can choose to structure itself. Keeping this in mind, I want to underline the importance of creative problem solving when addressing major challenges, and fostering decision-making processes outside expected norms to find intelligent solutions.

Yemen is currently undergoing a security crisis, crippling violence, and the possibility of political collapse. The parliament was recently dismantled by the Houthis rebels. The UN Security Council is demanding Houthis rebels to cease their threats, and called for the reassignment of President Abdu Rabbu Mansour Hadi to his post. Instability in Yemen has caused the country to be suspended from EITI several times between 2011 and 2014 because of Yemen’s lack of timeliness in reporting. Corruption has reach critical levels in Yemen. In fact it is one of Yemen’s core challenges.

It has been eye opening to research the current state of extractive industry transparency and EITI initiatives in Yemen. Yemen is the poorest country in the Middle East. More than 40 percent of the population is food insecure living on less than $2 a day. Yemen is currently experiencing a water crisis. Yemen is the country with the most arable land in the arab world. In December 2011, Tawakkul Karman, a Yemeni politician, and senior member of the Al-Islah political party, mother of three, became the youngest-ever Nobel Peace Laureate for her work as a peace builder activist in Yemen. The country’s civil society is very active, as is exemplified by peace activist and Nobel Peace prize recipient Tawakkul Karman. The multi-stakeholder group overviewing the standardization reporting processes in Yemen is composed of parliamentary members. Yemen is one of the few countries which had parliamentarians involved in revenue reporting and EITI standards implementation processes.

The World Bank has facilitated a knowledge exchange program between Yemen and Kazakhstan. This is a fabulous way to build Yemen’s transparency and accountability capacity in the extractive sectors. The pairing of two countries to build knowledge can be a great tool for knowledge transfer if it is exercised properly. In my opinion, this kind of knowledge transfer could be used more. It is a great way to develop ties and friendships between countries as well. In Yemen, the emerging role of civil society, and Civil Society Organizations (CSOs), are becoming more and more engaged with the various stakeholders and working towards building consensus. Although, too much of a narrow focus on consensus can detract from creative problem solving ideas.