What’s Next?

Harry Li, MAAPPS // Mar 11, 2015

Having discovered the news that the team will not have the chance to present our findings in Mongolia this year, the team felt a moment of pause and bewilderment, but soon back on track.

For the first half of term, each member picked an EITI country to investigate its level of sub-national reporting. The end goal is combine useful data and draw patterns in which potentially could be beneficial in promoting Mongolia’s sub-national reporting. For the last two weeks, the major discussions were on how to analyze the collective findings so that we can put it into a presentation for the EITI Mongolia coordinator.  We have decided to categorize countries in to the following factors:

  • Regional governance VS. Federal governance
  • Taxes collected federally VS. Taxes collected federal and regionally
  • Funding through government VS. Funding through companies
  • Evidence of sub-national initiatives
  • Oil dominant VS. Mining dominant
  • Level of artisanal and small-scale mining(ASM)
  • Population density
  • GDP percentage of extractive sector
  • Conflict VS. Stable zone

So far, 8 out of 13(including Mongolia)  countries has sub-national reporting legislation enabled. 5 out of 13 has no sub-national initiatives, 4 has started discussions and 4 countries have sub-national initiatives implemented.   Another interesting pattern we found was that oil dominant countries are less likely to embrace sub-national reporting than mining dominant countries.

Thanks to Christina’s idea, the team is brainstorming on the most effective ways to engage Mongolian citizens in learning about the importance of sub-national reporting. Interestingly, we thought of posters in gas stations, cooperation with Mongolian banks, citizen hall engagement and more.

On March 9, we were honored to be joined by Canada’s second resident Ambassador in Mongolia, Mr.Gregory Goldhawk. He provided us with great insights about Mongolia and we discussed our project with him. Mr.Goldhawk believes that what we are doing is new, innovative and valuable. We may not have everything figured out yet, but every great world initiative starts somewhere.  I, too, believe in this project.

Room for Optimism in Mongolian Resource Extraction Transparency

Jon Brasnett, MAAPPS // Mar 8, 2015

After researching the case of the Islamic Republic of Mauritania and its own implementation of the Extractive Industry Transparency Initiative (EITI) standards, I felt discouraged about the legitimacy of this initiative and its ability to bring transparency. Mauritania is a semi-presidential republic governed by a military leader who was “democratically” re-elected after initially coming to power through a coup d’état. It is a country characterized by poverty and inequality, where 40% of citizens live in conditions of extreme poverty (UN HDR) and approximately 10-20% of citizens live under conditions of slavery (CNN). Thus, I came to doubt the capacity of EITI reports to mobilize an educated civil society to lobby government institutions or extractive industries for increased transparency or efficient redistribution of resource wealth to the communities from where the resources were extracted. Instead, I got the impression that achieving compliant status in EITI was a way for the Mauritanian government to legitimize its rule by demonstrating a desire to be more transparent, for the extractive industries to show that they are making and recording their payments, and for the international EITI community to perceive Mauritania as a country that complies with international norms and encourages citizens to voice their opinions and interests. In a country where such large percentages of the citizenry live in poverty and suffer from repression, it is difficult to believe that EITI reports mobilize any civil society opposition to or regulation of the resource extraction industry.

On the other hand, upon looking into the case of Mongolia, my optimism has been restored with regards to the importance of EITI implementation. As a newly established democracy, it is important to publish all natural resource revenue information so that the citizenry (particularly civil society organizations) can hold the government accountable if this revenue happens to disappear and is never invested into the provision of social services. Mining makes up approximately 20% of Mongolia’s Gross Domestic Product (GDP), a number which continues to grow year after year. As a result, poverty levels are rapidly decreasing, down more than 11% just between 2010 and 2012 (European Commission MIP for Mongolia, 2014-2020). Even though EITI did not mention Mongolia as one of the countries in which subnational reporting might be relevant, it is difficult to ignore the fact that Mongolia would be a perfect pilot for such a project. This is owing to the fact that Mongolia has a literacy rate of 100%, a growing number of civil society organizations and NGOs, as well as an increasingly democratic identity among its citizenry. Considering the fact that many provinces (aimags) and far more districts (sums) have been transformed due to the resource extraction taking place there, these aimags and sums deserve the opportunity to see exactly how much wealth is being extracted from their land and in turn, to demand greater provision of important social services (like schools, hospitals, transit, etc.) to increase their quality of life and level of development. I strongly believe that Mongolia has the potential to lead the way in the implementation of subnational reporting in the EITI, and that this might truly benefit its citizens.

“SUSPENDED”

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

Just before its first anniversary as a compliant country to the EITI initiative Guatemala got suspended for missing the next EITI report deadline.  I guess I‘m not surprised for such decision, especially after reading that the extension request by the multi-stakeholder group (MSG) to the EITI board was made only 7 days before the submission deadline[1]. However, what surprises me though is that there was actually a person on December 24th making this request to the EITI board.  Usually by that date, Guatemala is totally shut down due to Christmas festivities and so on. Sure it looks like a last minute resource to save face, however, I could be wrong.

Reading the agenda notes of the December 15, 2014 meeting held by the MSG group, it seems there was not a chance for the MSG to reach the EITI deadline.  One of the key attendants, Ms. Lopez de Barillas who represents the presidential transparency commission, mentioned that a request of extension needed to be agreed upon the attendants due to the pending selection and hiring of the company in charge of working on the next reconciliation report.  She also reported in that meeting that the acquisition specialist of the public finance department thought the hiring of the company was going to take place in the month of February 2015 (last month).  I tried to follow up looking at the 2015 meeting notes but only a pdf with a list of attendants for the February meeting was found[2]. I could not find further MSG information to the previous pending points of prior meetings.

It is quite impressive to read that the last multi-stakeholder group meeting was held in February 23rd, and that the suspension as an EITI compliant member took place only 3 days after that meeting.  However, the only information you can find on the reports of 2015 is the list of attendants I mentioned previously, and as I said, there is no evidence of critical discussion and communication regarding the suspension that was about to take place a few days later.  Reading further I found there were 17 MSG meetings in 2014 and there is also a detailed work plan to be carried out to accomplish the EITI deadlines.  However, even after all those meetings and a good work plan, it was no possible to achieve the desired results.

Hopefully, Guatemalan stakeholders are looking forward to become active members of the EITI initiative in the near future.

[1] https://eiti.org/Guatemala
[2] http://eitiguatemala.org.gt/ category/actas-de-sesiones- 2015/

EITI at the Subnational Level in Mongolia: Challenges and Opportunities in Resource-Revenue Transparency

Bérangère Maïa N. Parizeau, MAAPPS // Mar 6, 2015

The information in this blog entry is synthesized from the article “Implementing EITI at the Subnational Level,” published by the World Bank in October 2011. This comprehensive report analyzes subnational resource-revenue reporting for extractive industries in Ghana, Indonesia, Mongolia, Nigeria, the Democratic Republic of Congo and Peru. The emerging understanding of the report is that subnational level EITI resource-revenues reporting will need an appropriate operational framework to function properly and provide benefits to the Mongolian population. In this report, I will focus on key information about subnational reporting in Mongolia synthesized from this report.

The Mongolian public believes that EITI subnational reporting may help control the country’s rampant corruption. Civil society activism and Civil Society Organizations focusing on mining activities in Mongolia are mushrooming. This is very exciting for a more dynamic social accountability process. The government of Mongolia passed Resolution No. 272 in 2006, which legally binds companies in Mongolia to report directly to subnational government agencies. Subnational resource-revenue reporting in Mongolia is funded by multi-donor trust fund (MDTF ). In Yemen, local training for subnational resource-revenue reporting was also done by MDTF, and more specifically by the World Bank funds.

“According to an International Monetary Fund report (IMF 2007), there appears to be a trend toward stepping up the use of SNG revenue sharing.”1 pp.7

The issues of tracking and managing mining company off record donations to intergovernmental tiers in Mongolia is complex. It is an important aspect of the recent discrepancies in subnational resource-revenue reporting. These donations are the main source of revenue for producing areas in Mongolia. In-kind donations are not recorded through the banking system, and therefore not included in official subnational EITI reports. There is a problem with the EITI subnational regulatory frameworks which does not create incentives to report the total amount of donation due to a possible reduction in statutory transfers from the central government tax pool to subnational governments. This is an administrative problem that has the potential of being addressed effectively.

Donations may take the form of the construction of infrastructure projects, like hospitals and schools for example. Although donations are key sources of revenue for EI producing localities in Mongolia, these donations have no legal basis, they are voluntary. Another important dimension of resource-revenue reporting at the subnational level in Mongolia is monetary flow from exploitation licences. Furthermore, in Mongolia, large distances between mining localities and the lack of internet access facilities in remote regions slows down the process of subnational reporting which has to be done by post.

The subnational reporting of mineral royalties varies from country to country because each country operates under different conditions, a unique geopolitical landscape, legal system, and revenue-sharing formula. In Ghana and the Cajamarca region of Peru, subnational reporting of extractive activities is accompanied with governmental expenditures. In my opinion, subnational reporting should not only include governmental expenditure, but should also include the socio-economic and environmental impacts of the mining industry on the local population and the environment. Reporting in a transparent way on environmental concerns and issues of human rights appears to be dialectical considering the threats associated with climate change.

[1]https://eiti.org/files/ Implementing%20EITI%20at% 20subnational%20level.pdf

NGOs in Kyrgyz Republic demands more focus on subnational reporting

Bulgan Batdorj, MASc candidate in Mining Engineering // Mar 6, 2015

Kyrgyzstan is not only beautiful but also rich with mineral resources. Development of the country through democracy and free market economics has faced many challenges since its independence in 1991. The economy is heavily dependent on gold mining, mainly from the production of the Kumtor Gold mine. However mining companies are confronted by violent protests from the local people on a regular basis and this is one of the key reasons why foreign investors draw back from investing in the country.

After adoption of a new constitution in 2010 the government promulgated aNational Sustainable Development Strategy to promote greater transparency in governance and especiallyresource governance. TheKyrgyz Republic became a compliant country of Extractive Industries Transparency Initiative (EITI) in 2011 (EITI Secretariat, Kyrgyz Republic 2014) with record of 95% extractive industry revenues covered. In 2012 the country legislated the EITI in its “Law on Subsoil”.

While it is easy to be comforted by the success of national reporting, unfortunately it does not reduce conflict between the local community and the companies.  This is why many researchers and NGO leaders emphasize the importance of sub-national reporting of EITI. Mr. Nurlan Djoldoshev of the Soros Foundation in Kyrgyzstan has said that “Improved engagement between the EITI process and local communities is a very urgent issue for Kyrgyzstan. Explaining the EITI rules to local communities through building local MSGs would help to improve the interactions between local citizens and companies. This kind of approach will give opportunity to make EITI really useful and useable tool for people”. Explaining the reasons for protests, he continued that “local citizens strike against any operations of the extractive companies using as a main argument the problem of their ecology and environment protection. They say that their communities do not need revenues from extractive industry because they benefit almost nothing from such business and they believe that the companies will leave them only environmental destruction. So now both government and companies do not know how to improve dialogue with local communities” (EITI SWG 2010).

In many cases, local people are unaware of how the revenues from such mining operations can better their livelihoods. For example, the Kumtor Operating Company pays one percent of revenues to the development fund of Issyk-Kul province yet lack of transparent management and spending of the fund creates hostility among stakeholders. The national government is not active in resolving conflicts between companies and communities. Because of a highly centralized governance structure, it is hard to figure out what comes back to local people after mining revenue is sent to Bishkek.

The government has promised to make many changes with regards to extractive industry governance. As one localization effort the government proposed to establish a “Regional Development Fund” to promote the improvement and maintenance of infrastructure, fund social and economic development and support local events at provincial and district level areas with mining activity (David Gullette 2014). But many are critical of the fund’s progress so far in bringing the much needed consolation and change.

The constant social unrest in Kyrgyzstan is triggered by many causes. The Kyrgyz Republic ranks on 150th out of 177 in the corruption perception index issued by Transparency International and poverty affects almost 40% of the population (World Bank Data 2014). So it is important for the government to focus on subnational reporting and educating the public concerning the mining industry and its contributions to the country’s development.

There are many similarities between Mongolia and Kyrgyzstan. Both countries are landlocked, nomadic, high altitude, post-Soviet democracies. The people in both countries love horses, drink kumis and live in yurts. Theirvalues and cultures are interconnected with the mountains and waterways. So, I pray that both countries succeed in successfully overcoming the challenges of transition, beating corruption, strengthening institutions and improving governance.