Subnational Reporting – Lessons from the Philippines

Christina Toepell, MAAPPS // Feb 11, 2015

When thinking of glorious mining countries in the world, the Philippines is most likely not amongst the first countries that come to mind. The archipelago, located in the Western Pacific and consisting of more than 7,000 small islands, is more known for its political instability in the 20th century, the comparatively good education system and the large Philippine diaspora living around the globe. Our perceptions on mining are not wrong – to date, only 1.28% of the country’s GDP is generated from the extractive sector, and only 0.58% comes from metallic mining.

Why are we even observing this country and its mining activities? According to numbers from the Mines and Geosciences Bureau of the Philippines (MGB), about 30% of its land is geologically promising, with the total estimated value of the country’s mineral reserves adding up to USD 1,387.1 billion. Thus, the work of EITI will become increasingly important in the future.

First engaging with the country in 2013, EITI is still in the initial stage, engaging with mining on a national sector. With its maiden report published in December 2014, it is expecting to gain full EITI membership in the upcoming years. Not surprisingly when looking at the strong level of civil society organizations, it has been warmly welcomed to the country and has been cooperating with national organizations such as Bantay Kita from the beginning.

Bantay Kita, which can be translated to English as “We Guard”, is a national NGO working on increasing transparency and accountability in the extractive industries. Established in 2009, it has had sufficient time to build a strong network across the country and start two subnational activities in the Southern island of Mindanao, the least developed of the three big islands. While the initiative in T’Boli, South Cotabato mainly focuses on empowerment of civil society and artisanal mining, the Compostela Valley transparency initiative was the first subnational organization in the country.

With most of the mineral land falling under special protection due to its Ancestral Domain status, Compostela Valley is one of the regions were subnational reporting is most urgently needed. Bantay Kita’s subnational multi-stakeholder group gained full legitimacy in 2012 and has been working on issuing a subnational report on mining activities ever since. In 2013, it issued a 72-pages handbook with background on the area and the initiative. The main part contains detailed reporting templates for all relevant entities, assisting these institutions in disclosing their revenues, payments and contracts according to the initiative’s standards. While still waiting for the final disclosures of some entities, the Compostela Valley transparency initiative expects to be able to publish the first subnational report in the Philippines later this year.

Starting to focus on our mandate for Mongolia, I am wondering how we could translate the excellent initiative in Compostela Valley to our work in Northern Mongolia. How can we adequately adapt a Philippine project that has put more than 3 years of effort into their subnational report? How can it fit the context of a small UBC graduate student project focusing on the Mongolian mountains with less than 3 months to go? I am more than excited to finally start with our work in Mandal Soum, but simultaneously understand that my expectations will probably need to bow to smaller projects with more realistic outcomes and higher feasibility.

The EITI Process in Plain English in the Context of Ghana – Part 1

Carlos da Costa, PhD Mining Engineering // Feb 11, 2015

The Ghana Extractive Industries Transparency Initiative (GHEITI) is a national domestication of a global Extractive Industries Transparency Initiative (EITI). Implemented in 48 countries across the world, the EITI has as its mandate the promotion of sustainable development in resource rich-countries. This is pursued through the introduction and institutionalization of a regime of good governance in the management of revenue derived from extractive industries. Central to such good governance regime, in this respect, is the dual process of transparent disclosures and the enhanced capacity of citizens to hold government to account. Ultimately, the overall aim is to maximize people’s welfare and drastically reduce poverty through a governance process that is robustly participatory.

EITI’s basic framework focuses on free and unstinted disclosure of taxes, royalties, etc. paid by extractive industries companies to public coffers in resource rich countries and honest acknowledgement in complete disclosure by government of such countries of what was actually received from the companies on behalf of the people. A reconciler is then engaged to verify and certify the figures disclosed from both sides and reconcile any discrepancies between them. A report of this exercise is then written by the reconciler, then published and disseminated widely, in a comprehensive manner by the multi-stakeholder group (MSG). The purpose of this process is to empower the citizens of resource-rich countries, with incontestable data and information, to hold their governments to account in the way the revenues are managed and expended. This aim cannot be realized without a full, equal and free participation of civil society organizations in the entire process.

EITI’s structure, from a top down perspective, can be viewed as a consortium of governments of supporting countries, private corporate bodies, producing companies, investors, and a coalition of international plus national civil society organizations operating under a single umbrella, known as “Publish What You Pay.” At the national level, when a country joins the EITI Standard which requires it to establish a MSG together with companies and civil society. In Ghana, for example, it is known as the National Steering Committee. While the composition of the national MSG, in terms of the balance among the stakeholders, may differ from country to country, a common feature is that companies, civil society organizations and government are represented on it, and participate as equal partners.

Through such groups civil society organizations play an important role in implementing EITI at both national and international levels. At the international level, it was civil society organizations that provided the initial impetus for the creation of the EITI. Today, it is the coalition of national and international civil society organizations that form the back bone of the maintenance of high standards in its implementation as well as the validation of the application of EITI principles and criteria to specific national situations.

At the national level, it is civil society organizations, not government, and not companies, that are best suited to organize the citizens, enlighten them, train them, source funding for them, inform them and help to protect them as they strive, and take action to hold government to account. At both levels, civil society organizations are confronted with a dilemma arising from their dual mandate. At one level, civil society organizations, as members of, and participants in MSGs, are policy makers and supervisors of policies made pursuant to the implementation of EITI at the national level. At another level, civil society organizations are free to monitor and evaluate independently, the implementation of the EITI principles and criteria. The dilemma arises from the necessity to strike a balance between the role of the participant with that of the observer, monitor, and evaluator. As participant, civil society organizations share equal collective responsibility for the policies and actions of the MSG. But as observer, monitor or assessor, they play the role of critics, distancing themselves from the policies and actions of the MSG, and detaching themselves from the process, in order to write and publish “shadow reports” on the process.

Thus, when success is achieved, all stakeholders, including civil society organizations, claim credit, when success is either slow in coming or is not so manifest, one stakeholder jumps ship, stands ashore and pronounces a verdict while the rest of the group is still on deck. How can an MSG resolve such a dilemma? Through sustained training on team building within the context of an MSG for the implementation of EITI. Without a functional team, no MSG can succeed in implementing EITI at either the national or subnational level. To achieve such harmony the first step should be to gain deeper knowledge and acquire the skills for team work in a multi-stakeholder environment.

Implementation of EITI in Mauritania

Jonathan Brasnett, MAAPPS // Feb 9, 2015

The Extractive Industry Transparency Initiative (EITI) has been implemented in the Islamic Republic of Mauritania since 2007 when it became a candidate country. It was officially named an EITI compliant country in 2012 and, despite a brief suspension in 2013 for failing to provide its 2010 report on time, it remains a compliant state today. What impact has this had on the mining industries of Mauritania? Furthermore, what impact has this initiative had on civil society and the government provision of social services to its citizens? These are the most important questions, but those that are most difficult to answer without flying to Nouakchott and seeing for ourselves.

Mauritania is a semi-presidential republic under the leadership of President Mohamed Ould Abdel Aziz, who first took power in the summer of 2008 through a military coup d’état. Although he was democratically elected in the summer of 2009 and is meant to work hand-in-hand with the Mauritanian government (Senate, National Assembly and Supreme Courts), the country is nevertheless ranked 172nd out of 187 countries on the United Nations Human Development Index, as well as ranked 124th out of 175 countries on Transparency International’s Corruption Perceptions Index. Therefore, the democratic nature of the country’s governance can legitimately be questioned. Furthermore, many social problems persist: unemployment, though much reduced in recent years, is still high (10.1% in 2012), per capita GDP is still among the lowest in the world ($1,224) and slavery still exists in large numbers (10-20% of the population).

A country that is still rife with problems is most definitely in need of greater transparency and greater civil society participation. Thus, the EITI initiative is undoubtedly a beneficial endeavour for Mauritania. As a country whose mining and petroleum extraction industries make up more than one third of its GDP (38% in 2011), it is important that the revenue from these industries finds its way into the provision of social services, not the pockets of corrupt government officials. In observing the EITI reports of the eight years for which they have been issued in Mauritania, one notes the strange phenomenon of greater sums declared by the government than was paid by extraction companies. This occurred from 2005-2008, then this trend reversed from 2009-2012. With the exception of 2011 when the discrepancy between the money paid by extraction companies and that received by the government was more than $23 Million USD, all other years featured much smaller discrepancies of just a few million USD.

For the 2014-2015 reporting years, the National Committee of EITI (CNITIE) in Mauritania plans to initiate subnational reporting at the Walaya (regional) level. To do this, they intend to host workshops for local officials and civil society organizations, as well as establish the bureaucratic structure (likely EITI offices) in each Walaya for reporting at this level. Furthermore, the CNITIE intends to make greater efforts to involve civil society organizations more in the EITI implementation and ensure that they are informed of all changes made, and capable of acting on the reports issued by EITI offices, both regionally and nationally. It will be interesting to see what kinds of changes will be observed in the coming years in Mauritania with regards to its resource extraction industries and the transparency therein. For the citizens of Mauritania, I certainly hope that the wealth in revenue that comes for their country’s natural resources will be put to the provision of social services that can help increase their quality of life for years to come.

How CIVIL SOCIETY ENGAGEMENT helps cope with corruption IN KAZAKSTAN

Lotus Ruan, MAAPPS // Feb 8, 2015

Kazakhstan is the 9th largest national territory in the world. Its oil reserves are ranked 12th in the world and its natural gas reserves are 19th. It is a global leader in the production of coal, copper, zinc, bauxite, uranium and chrome ore. The extractive industries contributed 33.4% to Kazakhstan’s GDP and because of its substantial amount of natural resources and a relatively open approach to economic reform and foreign investment, Kazakhstan has been enjoying more than two decades of impressive economic growth.

The annual volume of FDI has been increasing year by year since 1998 and the share of investments in the oil and gas industry in total volume of FDI remains high.  But over the last several years, state participation in the oil and gas industry has increased. The vertically integrated National KMG controls 20% of total oil and gas proved reserves of Kazakhstan and produces 27% of total oil and gas condensate and 14% of gas.

Under the leadership of President Nursultan Nazarbayev, Kazakhstan has been experiencing an impressive economic growth for the past two decades. With a GDP of US$ 201.7 billion and a population of less than 17 million, Kazakhstan aims to join the world’s top 30 economies by 2050.

However, Kazakhstan’s heavy reliance on natural resources has also made it more susceptible to external pressure. As I mentioned in my previous blog post, the slumping oil prices has taken its toll on the economic growth of this oil-rich country. At the same time, rising social problems such as shrinking job markets in some ageing oilfields and domestic security concerns, potential political instability because the successor of the 73-year-old President Nursultan Nazarbayev remains unknown, worrying Russia-Ukraine and other geopolitical crisis, as well as the global economic recession have all contributed to the slowdown of Kazakhstan’s economic growth.

Another issue facing Kazakhstan’s healthy development of its extractive industries and the country as a whole is corruption and a lack of public supervision in government spending. The level of corruption remains sufficiently high, especially in the spending of public funds. Kazakhstan ranked at the 126th out of 175 countries in the 2014 Corruption Perception Index. The International Crisis Group estimated that more than 50% of Kazakhstan’s GDP is controlled by a single sovereign-wealth fund, Samruk-Kazyna, which was once led by President Nazarbayev’s son-in-law.

Perhaps that’s why the EITI introduced new rules and requirements on the issue of sub-national reporting on resource revenues in July 2011. The rationale behind such is that a more accurate disclosure of corporate payments and government revenues at the local level in the extractive industries would help curtail corruption and other forms of mismanagement of funds.

Kazakhstan, despite its corruption problems and unlimited presidential authority, is worth studying and learning from in terms of civil society participation in the EITI process.

Sergey Gulyayev, General Director of Decenta Public Foundation (DPF) in Kazakhstan, introduced in my exchange of emails with him that local non-governmental organizations (NGOs) as well as civil society organizations (CSOs) initiated the discussion of sub-national reporting earlier than the EITI’s new standard was introduced. 

When it comes to civil society engagement, NGOs and CSOs in Kazakhstan have been working hard to push forward public participation. According to a report by DPF, there were a few attempts to develop communication strategy on EITI in Kazakhstan to help better engage the public. These attempts have been made by: Coalition of NGOs “Oil Revenues – Under Public Control”, Dialogue Platform of NGOs, National Stakeholders Council, Working Group of the National Stakeholders’ Council, and Ministry of Information and Culture with Ministry of Industry and New Technologies.

Despite the good progress in civil society engagement and all stakeholders’ awareness of sub-national reporting, Sergey Gulyayev remarked that few specific steps or plans have been taken so far to develop strategy of sub-national development for EITI reporting.

Still, civil society was still the most interested party to promote EITI in Kazakhstan. The experience and progress in EITI Kazakhstan can served as a learning model for other countries such as Mongolia. Advancements in transparency have been seen in Kazakhstan now but additional efforts will be needed to strengthen the accountability side of the equation.

Oil price drop, the potential impact on Republic of Congo and implications for Mongolia

Harry Li, MAAPPS // Feb 8, 2015

In 2014, Republic of Congo received $10.7 billion revenue from petroleum alone, equivalent to 74% of its total GDP. Petroleum export is the biggest resource export of the country, accounting for over 90% of all exports. With such heavy reliance on petro, the global oil price drop recently would potentially play a destructive force toward the national development of ROC.

Currently, ROC has $4.225 billion of growth external debt. Amadou Sy, the director of Africa Growth Initiative, argues that it will be more difficult to service debt as their oil revenues fall and the depreciation of their currencies makes U.S. dollar denominated debt more expensive.

According to the Financial Times, South Sudan is receiving the lowest oil price in the world at $20-$25 a barrel because of the combination of falling prices and unfavorable pipeline contracts. ROC’s government could face similar unpopularity. ROC’s government is currently running as an authoritarian regime controlling nation’s resources, suppressing the activeness of civil societies, such as Observatoire congolais des droits de l’Homme(OCDH). OCDH is the biggest Human Rights group in ROC and it constantly criticizes the government. However, ROC’s decreasing ranking in the Democracy Index, Human Development Index, Corruption Percentage Index and Economic Freedom Index would make its petroleum market less attractive for international investors, since more options are available. All of the impact above would result in national-budget cutting, thus negatively impacting the domestic economy.

In the aspect of export resources, Mongolia is similar to ROC. Although Mongolia is not oil major exporter, but mining export accounts for a large percentage of national’s GDP. Thus the price-drop scenario would apply if prices of coal, copper and gold (Mongolia’s top 3 major resource exports) drop significantly. Resource-export oriented countries like Mongolia is fragile to the fluctuation of global prices. That is why it is very important to find effective ways for sub-national reporting and engage civil society in the policy-making on the mining industries in Mongolia. If appropriate policies on mining are implemented, not only will Mongolia be better protected when the prices of coal, copper and gold suddenly decreases but also increase popularity among global investors.

Reference

Sy,Amadou. “Falling oil prices and the consequences for sub-haharan Africa.” The Brooking Institute, Dec.23, 2014.http://www.brookings.edu/blogs/africa-in-focus/posts/2014/12/23-oil-prices-exports-africa-sy