Category Archives: Weekly Reflections

Behavioural Patterns of Civil Engagement

Christina Toepell, MAAPPS // Feb 23, 2015

With all of us sharing best practices in sub-national reporting and trying to slowly find solutions for Mongolia, the issue of the needs and preferences of civil society in Mandal Soum still creates a big question mark. The past weeks have seen us researching on local and sub-national reporting in 13 different countries, slowly understanding the opportunities and pitfalls of new projects and getting more and more excited to implement best practices in Mongolia. But what about civil society in Northern Mongolia? Do they think corruption is an issue? Do they believe public participation can tackle this issue? Would they see a potential sub-national report even as relevant or needed? While not forgetting that one civil society never exists and individuals all have different desires, it is important to dive into behavioural patterns and take a closer look at perception of corruption and civil society involvement in Mongolia.

The major conclusion I draw from analyzing sub-national reporting in the Philippines is its inherent believe that civil groups and individuals can elicit change and can have an impact on society as a whole. Understandingly, this has not always been purely positive when examining the myriad of uprisings in the past years and decades. It is certainly important for our cause. My feelings are backed by reports from Transparency International Philippines. NGOs and the media are two of the three least corrupt bodies in public opinion and perception, implicating a stable acceptance of organized interest groups and a solid control mechanism through media reporting. With this proactive nature of a cultural group, sub-national reporting initiatives are easier accepted by stakeholders. This might certainly explain the relative ease with which sub-national reporting was implemented in Compostela Valley on the Southern island of Mindanao. But what behavioural challenges and opportunities would a sub-national reporting scheme face in Mongolia?

Civil society rights and transparency score relatively high in Mongolia. According to Freedom International, Mongolia enjoys high freedom of civil liberties. Freedom of expression and belief and organizational rights are both valued and cherished. Looking at Open Society Forum, a Mongolian public opinion and policy research think tank, transparency and disclosure of forms have increased in the past years. However, only by consulting Transparency International’s Corruption Perception Index, we understand the feelings and beliefs of civil society. Examining the corruption perception of Mongolian institutions, NGOs rank very high. With only 16% of Mongolian respondents believing that they are corrupt, NGOs are the second least corrupt institution, as perceived by civil society.

For us most relevant, however, is belief in the impact of public involvement. 46% of Mongolians agree or strongly agree that ordinary people cannot make a difference in the fight against corruption. This poses significant challenges on all initiatives working on transparency, and makes a potential implementation of sub-national reporting even harder. I fear that public society would miss the relevance of reporting initiatives and would dismiss them too soon. If we are to go through with a sub-national reporting initiative, the behavioural approach cannot be neglected. We need to put additional effort and care into how to approach civil society and how to nudge individuals into being involved in the project, into believing that their impact matters.

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.

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.