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

Before becoming part of this project I did not know much about EITI and the excellent initiative they have promoted to improve transparency in countries with extractive industries in place.  I am researching about the impact of EITI in Guatemala and the possible sub-national reporting initiatives in process of or being already implemented.  After exploring information about the impact of EITI in Guatemala I came across interesting readings about the structure of EITI in Guatemala and how the country has engaged itself in this initiative.  Guatemala has, so far, released two reports to the EITI, and is expecting to present the 2012 report in the forthcoming months.  I would say I am quite impressed at the communication approach the government has developed in order to ensure proper communication is done at all levels.  There is a well-rounded communication strategy and implementation methodology which focuses on making stakeholders of all levels aware of the purpose of EITI in the country, its benefits and how to understand the information that is presented in the reports.

In the following days I look forward to receive information from some of the people involved in this project in Guatemala and read their opinions on how well the communication at different levels is perceived.   For now, I can say that the experience of learning how Guatemala and other countries in the EITI initiative are working towards becoming transparent to the public in general gives me the drive and motivation to keep learning more.


When plunging oil prices hit Kazakhstan

Lotus Ruan, MAAPPS // Feb 5, 2015

International news headlines have been hooked by a volatile energy market for the past weeks. In fact, global economies have ben gripped by the unpredictable oil prices since last year. In the past two days alone, we saw crude oil prices going up and abruptly falling below $50—again. WTI oil prices, often used as a grade of crude oil used as a benchmark in oil pricing, dipped 9.6% to $47.95 a barrel whereas Brent crude prices tumbled 6.37% to $54.22.

While we, as common people, might cheer for the falling oil prices when we fill up our car with cheaper gas, most energy-abundant countries which rely their national economy on extractive industries just hate it. The reason is simple: oil deflation or failing prices are most frequently accompanied by economic stagnation or at the very least a loss of revenues. In our local Canada context, Suncor Energy Inc., Canada’s biggest crude-oil producer, reported an 81% drop in fourth-quarter profits yesterday as a result of plunging global crude prices. Kazakstan, my case study country in this year’s Asia Pacific Policy Project, might suffer worse.

To understand the possible impact of plugging oil prices on Kazakhstan, it is necessary to have an idea how important oil and gas industry is to this upper-middle income level country.

Kazakhstan is one of the world’s major oil producers. Its giant Tengiz, Karachaganak, and Kashagan oil fields produced petroleum and other liquids at 1.70 million barrels per day (bbl/d) in 2014. It is estimated that Kazakhstan had proved crude oil reserves of 30 billion barrels as of January 2014—the second largest endowment in Eurasia after Russia, and the 12th largest in the world, just behind the United States.

To Kazakhstan, the oil and gas industry is one of the main drivers of its GDP growth and it is a large tax source to its national budget revenue. The Ministry of Economy and Budget Planning of Kazakhstan announced in 2013 that its average annual growth from 2014 to 2018 will be 6.5%; of its GDP, the oil and gas industry shared 25.2% in 2012 and the figure is still on the rise. The state’s involvement and interests in the oil and gas industry are also reflected in its oil and gas industry structure. The vertically integrated national company KazMunayGas controls 20 percent of total oil and gas known reserves of the country.

The abundant natural resources now turn out to be both a blessing and a curse for Kazakhstan.

Due to its heavy reliance on the extractive industries—the oil and gas in particular, its national economy is more susceptible to external challenges. Analysts point out that the slumping oil prices might lead to the falling prices for other commodities such as gold, which is also one of the main extractive resources to Kazakhstan. Because of such, Kazakhstan’s government recently revised its budget for the period 2015-2017. The current budget is based on the price of oil average $80 per barrel. According to its Ministry of National Economy official, the new budget would be calculated on oil pricing on the level of $50 per barrel.

But challengers are still awaiting.

For Kazakhstan, as some has pointed out, the continuous fall of oil prices will result in serous negative macroeconomic consequences. Employment and the prospect for manufacturing industry might be the first to suffer. While Kazakstan has succeeded in creating job positions and keeping its unemployment rate roughly around 5%, 60% of the manufacturing contracts are for the oil industry. Exports will decrease as well, which leads to the slowdown of its GDP growth. According to the IMF, the oil price at which Kazakhstan can balance its budget is $65.5, but a price below $90.6 means the balance of payments dipping into the red. If the price of crude continues to plummet, Kazakhstan might face zero growth.

There is no doubt that EITI’s goals are important to the healthy and transparent development to a country’s extractive industries. But in face with the challenges brought by a volatile global energy market, Kazakhstan or any other resource-intensive countries might also want to consider how to effectively and reasonably structure their economy structure to make them less susceptible to external crisis.

Opaque Transparency When Seeing through a Corruption Lens

Carlos da Costa, PhD Mining Engineering // Jan 29, 2015

The objective of the Extractive Industries Transparency Initiative (EITI) is to encourage the better use of natural resources (such as oil, gas, metals and minerals revenues) for economic growth and poverty relief through increased accountability and transparency. It encourages governments and companies to independently publish their payments and revenues and then present them to independent auditing.

But over twelve years after its launch it is evident that the EITI initiative continues to lack a real bite. Demanding transparency from governments and corporations in the resources industry is inadequate to guarantee good governance, economic progress and more equitable distribution of wealth. Governments and corporate entities still resort to creative ways of masking their bribes.

Energy and mining companies are linked infamously to numerous human rights violations, kidnappings, conflict, murder and environmental abuse. Uncovering corrupt practices (bribery, fraud, money laundering, tax cheating, etc.) can also be difficult. The EITI certifies compliance on a country-by-country basis. This allows companies with operations in various countries, through their subsidiaries, to hide bribery payments, which are usually masked as fees for consultancy services, in other countries that at times serve as tax havens.

Inflated expenses, questionable accounting practices, exaggeration of overheads, and highly inflated invoice billing to subsidiaries can all have adverse impact to a nation’s tax revenues. Unfortunately, tax authorities and other government agencies in some countries frequently lack the technical knowledge needed to tackle such illegal misdoings.

Many developing countries also lack the capacity to evaluate and qualify the costs involved in these resource-based industries and surrender the responsibility to experts provided by the United Nations, the International Monetary Fund and the World Bank. Unfortunately, these external experts rarely prioritize the interests of the local communities, particularly during contract negotiations. Once the contracts are signed, these countries may not possess the necessary expertise to evaluate the exact quantities of the resources extracted and have to accept whatever values a company declares.

So if the EITI provides only a questionable clean bill of health, should this initiative be maintained? The answer is YES since until just over a decade ago the resources industries in some countries were viewed as an exclusive elite club where governments entered into undisclosed contracts with mining, exploration and energy companies without any involvement of the local communities where such projects impact and the national well-being its respective nations. At least there now is limited publication of information in place, in some cases, where civil societies and its citizens are better informed and thus are better able to challenge their government’s questionable actions and to contest undesirable contracts which they enter into. Also in place countries such as the United States of America and the United Kingdom have implemented anti-corruption laws, such as the Dodd-Frank act and the Bribery Act (respectively).


One of the pillars is EITI

Bulgan Batdorj, MASc Mining Engineering // Jan 27, 2015

I am Mongolian. This may seem like a simple statement. However this simple sentence makes me the owner of a great history, beautiful land, unique tradition and culture. It also means that speaking up and critiquing is part of our culture and is to be encouraged and celebrated rather than resented. Being Mongolian is a privilege and a source of prestige. But in order to maintain and protect that privilege and prestige I have to take responsibility. This is why I am excited to be taking part in the EITI Mongolia project at the University of British Columbia.

As many people know Mongolia is rich in mineral resources and since the transition to a democratic regime, Mongolia has begin fighting to build good governance and develop immunity in the face of a rush of money, and the prospect of misuse and abuse.Mongolia is an EITI compliant country that has achieved a lot of progress since its affiliation with the Initiative in 2006. The EITI Mongolia project at UBC this term will focus on what the new EITI initiative on local reporting would mean for Mongolia and potentially to other EITI compliant countries. This is of great importance because it provides insights and more specifically a toolbox enabling the community and local civil society to push for government accountability to better their lives.

The Mongolian ger(yurt)has two pillars (багана)to stay tall and strong.Extractive industry needs the EITI as one pillar, but without good governance of the industry as the second pillar, there will be no strong nor beautiful white ger under the eternal blue sky.

Civil Society Living in Fear? Well, Good Luck with Local Reporting….

Debbie Prasad, MAAPPSS // Jan 26, 2015

On my last blog post I discussed Myanmar’s candidacy in the EITI and how their participation in the organization was contrary to the argument that they joined the EITI as a means to attract foreign aid and a better world reputation through increased transparency. It’s been just a day since that post and I’m not so sure I can stand by what I said earlier…..

As I’ve been studying the extractive industry in Myanmar, I am seeing a hot mess. On the one hand, the government is passing new mining legislation and anti corruption laws, but on the other hand, they have passed the 2014 Electronic Transfers Law, which in essence limits public access to information. A key component of becoming an EITI member is transparency- as listed in the name! If there are laws which limit public access to information, coupled with only the Central Bank having the jurisdiction to publish annual fiscal reports, (which are not readily available, and unavailable online) how will Myanmar meet transparency goals?

In addition to all this, according to article 1.3 of the EITI Standard, Myanmar has pledged to refrain from obstructing freedom of expression in relation to the extraction of natural resources. This is not so much the case in Myanmar. The recent conflict in Letpadaungtaung has lacked government action on police and military brutality towards civil society in areas that are closely located to mining operations. To take this a step  further, Myanmar military-owned companies and holding groups such as UMEHL (Union of Myanmar Economic Holdings Limited) and MEC (Myanmar Economic Corporation) are heavily invested in the extractive sector. The recently established EITI goals of encouraging local reporting makes civil society an integral part of the picture, but in the case of Myanmar, this will prove difficult, when civil society is not given freedom to protest and express their concerns about extractive industries in the region. If the military is heavily invested in industry, how will civil society be able to express concerns without the fear of military coercion and violence? How will living in fear from the military allow civil society to work with other stakeholders to achieve goals to become an official EITI member? It’s high time for the government to mean what they say, and to take responsibility for allowing civil society to express their concerns freely.



Thet Aung Lynn and Mari Oye “Natural Resources and Subnational Governments in Myanmar: Key Considerations For Wealth Sharing. June, 2014”

“Whistle Blowers Report Myanmar to Global Mining Body” http://www.elevenmyanmar.com/index.php?option=com_content&view=article&id=8650:csos-report-govt-s-breach-of-intl-eiti-standard&catid=33&Itemid=356