Category Archives: Weekly Reflections

Mongolia’s Pre-existing Bureaucratic Infrastructure and Sub-National Reporting

Jonathan Brasnett, MAAPPS // April 13, 2015

The Extractive Industry Transparency Initiative (EITI) issued an executive order in 2008 to begin implementing subnational reporting (SNR) in all member states. It seems that some states had pre-existing bureaucratic structures at the regional or subnational level that was more conducive to such a format of reporting than other states. Among these states are Indonesia, Peru, and most importantly for our own research purposes, Mongolia. While Mongolia’s central government in Ulan Bator is responsible for many governance jurisdictions and has done (and continues to do) an excellent job of legislating to promote EITI reporting (at the national level), there are also governments at the Aimag (province) and Sum (district) levels. At these levels, the bureaucratic structure may not compare to that of Canadian municipalities for obvious reasons like sparse population, vast uninhabitable territory, as well as a large percentage of the Mongolian population living a nomadic herder lifestyle, the institutions nevertheless exist that can facilitate SNR. Recent reforms and initiatives indicate the the accuracy of this last statement.

To begin with, a new budget transparency law (Law on Glass Accounts) came into force just this past January, which makes it obligatory for all government and legal agencies with any involvement in state affairs to make their budgetary and financial information accessible to its citizens. There is also a mandate to discuss and likely pass a law regarding the transparency of the extractive industry in Mongolia. These are actions which show that the Mongolian government is much further evolved than governments of many of the other countries we have studied throughout this course, all of which have made reference to the importance of transparency without taking action to mandate increased transparency. Another action which has been taken by the Mongolian EITI office has been to prepare twenty-five trainers, among which only four are government officials, three are industry representative while the remaining eighteen are “local and national level civil society representatives.” (www.eitimongolia.mn/en/node/ 4823)

So despite the fact that Mongolia is a sparsely populated, inhospitably landscaped country with a wealth in resources and a population that largely relies on a nomadic herding lifestyle for subsistence, the literacy rate of nearly 100% and recent democratic transition (1990) has proven conducive to a bureaucratic system capable of implementing the transparency initiative of the EITI, even at the sub-national level. It is impressive to see that understanding that civil society organizations obviously have in Mongolia to understand the need for such laws and training initiatives is indicative of the level of rapid development of democratic norms in Mongolian society. For civil societies to become active and start demanding accountability from government and industrial agencies shows that they understand their rights as citizens in a democratic country and have become determined to enforce these rights. By increasing the level of proliferation of lessons about EITI and sub-national reporting and the importance of demanding transparency from these actors to ensure adequate allocation of extractive industry revenue to the provision of social services, our team might be able to make a difference to the average Mongolian citizens.

EITI’s Continued Progression

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 >.

Extractive Sector Transparency Measures Act (ESTMA): Canada’s response to EITI

Stephanie Zimmerling, MASc Mining Engineering // April 6, 2015

The Canadian Government has introduced the Extractive Sector Transparency Measure Act (ESTMA) into parliament. The Act will have companies, subject to Canadian Law, annually report any payments larger than $100,000 made to any level of government in Canada or abroad. In developing this framework, the regulations and standards of the US, the EU and the EITI were reviewed to ensure ESTMA somewhat aligned. While Prime Minister Stephen Harper committed to transparency and the implementation of EITI at the last G8 summit, the EITI framework does not align appropriately with Canada’ unique mining industry regime. ESTMA is Canada’s response to transparency in the extractive industry in Canada.

Last week I sat in on a presentation by Borden Ladner Gervais held by the Management & Economics Society of the Canadian Institute of Mining. As part of the event a presentation on Reporting for Mining Companies under the new Extractive Sector Transparency Measures Act was delivered. The presentation was effective in explaining what the Act entails and the who, what, when, why of the reporting framework. As described in the presentation, ESTMA will come into effect on June 30, 2015. Reports will be published annual by companies reporting on one full-year of payments. ESTMA applies to entities that are engaged in commercial development of oil, gas or minerals in Canada or elsewhere that are either listed on the Canadian stock exchange, hold assets in Canada and hold at least 2 of the following criteria: $20 million CAD in assets; at least $40 million CAD in revenue or; employ an average of 250 employees.

Who must report is somewhat complicated. The presentation highlighted that parent companies may report on behalf of their subsidiaries that are required to report. Additionally, reporting entities must report on payments made by non-reporting entities that they control, if the company is participating in the extractive sector. In simpler terms, it depends who is on top. If a Canadian company is operating in Australia, the Canadian company must report on its operations overseas. If a non-Canadian company is operating in Canada and satisfies the criteria mentioned above, the company only needs to report on their Canadian operations.

What payments must be reported includes payments made to government “payees”, with payments being broken down on a project basis. Payees include Canadian and foreign governments, including subnational and local levels. This also includes boards, commissions, corporations, trusts or other authoritative bodies that perform duties on behalf of a government. It is important to note as well that payees include aboriginal and indigenous governments.

Companies will need to make their reports publically accessible by posting them on their website. Should a company not have a website, the Minister will specify an alternative approach. The Minister also has jurisdiction to determine whether other legislated reports from the US or EU can be submitted to satisfy the reporting requirements under ESTMA. This could be applied if a Canadian company is operating in the US or the EU.

With the launch of ESTMA approaching, it will be interesting to see how the transition plays out and the response from the Canadian extractive industry.

An example of an ESTMA report can be found here: http://www.statoil.com/no/InvestorCentre/AnnualReport/AnnualReport2014/Documents/DownloadCentreFiles/01_KeyDownloads/2014%20Payments%20to%20governments.pdf

U.S. Launches Interactive EITI Portal

Stephanie Zimmerling, MASc Mining Engineering // April 6, 2015

The United Stated has only recently (2014) become a candidate country with the EITI. The Multi-Stakeholder Group is required to produce their first report for 2014 by July 1, 2015 (EITI, n.d.). In anticipation of this report, the U.S.’s Interior Department’s Office of Natural Resources Revenue has launched an open data website, which tracks the revenue received by government for coal, natural gas and oil extracted from public lands. The portal can be found here: https://useiti.doi.gov/. It is an example of easily accessible information distribution for the citizens of the United States. At the launch of the portal US Secretary of the Interior Sally Jewels said (EITI, 2014):

“This interactive data portal offers a wealth of information to the public in a comprehensive and accessible fashion and is another step in our efforts to reform and modernize royalty revenue management by the Department. This new tool provides clarity and transparency on the revenues generated by energy development on public lands and waters – a significant source of financial support for local communities, states, tribes and the nation – and the Department’s implementation of USEITI upholds President Obama’s commitment to the principles of open government.”

The portal will gather information on how revenue is generated from resources on federal lands and show where that revenue is distributed. While the portal provides a high level overview, filters can also be applied to many of the data sets to sort by timeframe, location, commodity, company and revenue type.

The Head of the EITI Secretariat, Jonas Moberg, has expressed he is very impressed by the portal (EITI, 2014):

“The information generated by the EITI is much more useful when it can be easily accessed and understood. A growing number of EITI countries are making their data available in online portals. The US data portal is one of the most impressive examples to date, and we hope it will inspire other countries to follow the US example.”

With many other EITI countries wanting to engage civil society and citizens with EITI and its benefits, the online portal is great idea. If operating in a country where a large part of society has access to the internet, a portal set-up is an effective means of distributing relevant information. The US portal is made available under and ‘open-source license’ as shown here: https://github.com/18F/doi-extractives-data. This allows opportunities to replicate and build on the existing work.

Make sure to check it out!

Sources

EITI. (2014, December 12). US EITI launches natural resource revenues portal. Retrieved from EITI: https://eiti.org/news/us-eiti-launches-natural-resource-revenues-portal

EITI. (n.d.). United States of America. Retrieved from Extractive Industry Transparency Initiative: https://eiti.org/united-states-america

 

The Role of Civil Society Groups in Subnational Reporting

Justin Kwan, MAAPPS // April 2, 2015

The last few weeks have been dedicated towards two different projects our Asia Pacific Policy Project team has been working on. Our team of five students has selected to write a paper, which will address the prospects for sub-national reporting in the 13 countries we have selected as our case studies.

Our entire team has looked at a variety of factors that may influence the prospects of subnational reporting (SNR). Thus, our goal is to determine which political, economic and societal conditions are most conducive to effective sub-national reporting. Our preliminary findings suggest that countries that uphold the rule of law, have stronger democratic institutions, and predominantly operate in mineral-based extractive industries are more likely to produce effective outcomes through sub-national reporting.

To supplement our own research, we look at a variety of indicators to help us draw our conclusions. Some indices include: Global Democracy Ranking, World Justice Project Rule of Law score, BTI Civil Society Participation Score, Transparency International Corruption Perceptions Index and GDP per Capita.

In particular however, I would like to focus our analysis on the potential connection between civil society participation and the potential outcomes for subnational reporting. In Indonesia, several civil society groups have expressed interest in subnational reporting and have been a vital part of helping collect data for SNR trial testing. For instance, Publish What You Pay (PWYP) Indonesia has conducted training sessions on EITI reporting and revenue sharing calculations. These civil society groups have also teamed up with EITI during Indonesia’s Anti-Corruption Day. In further personal correspondence, Indonesia’s civil society groups have also indicated that they are helping beta-test subnational reporting in certain areas.

Given Indonesia’s robust civil society, the country ranked fairly high within our case study countries with a score of 7 on BTI’s civil society participation score. I have advocated for our team to examine each country’s civil society participation with regards subnational reporting. While I find the BTI civil society participation score useful, in some ways, it is also problematic for our research. This is mainly because the score does not reveal the direct linkage between a country’s civil society and its engagement in projects related to subnational reporting. As such, the BTI score can only capture a general relationship between society and how they may initiate or help create the potential for reforms. Since there are different levels of civil society participation based upon different interests, it is rather important to examine the linkages between SNR and civil society groups. Currently, each member of our team will be asked to evaluate the formal conditions for SNR in their researched country, looking for the presence of subnational reporting in the stated EITI working plan, training sessions and/or workshops as well as formal reports issued by the member/candidate countries. After much debate, we will further look at civil society participation as a surrogate indicator for successful subnational reporting. Since civil society groups have played a fairly large role in helping implement subnational reporting in Indonesia, it will be interesting to see what influences civil society has on subnational reporting in other countries and whether or not any general trends can be concluded from the data we collected. Perhaps Indonesia is a unique case study when it comes to the relationship between civil society groups and subnational reporting. However, it is this particular specificity that makes the Indonesian story an important case study for other countries to learn how to engage with resource-revenue transparency issues.