Extractive Industries Transparency Initiative (EITI) Workshop - Bonn

1
Extractive Industries Transparency Initiative
(EITI) Workshop - Bonn

• EITI Implementation
• Lessons Learned
• 31 August, 2006
• Peter van der Veen
• Manager
• Oil, Gas and Mining Policy Division
• The World Bank

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Framework for EITI ImplementationThe EITI
Criteria

• Regular publication of payments and revenues
  received by governments from oil, gas, and mining
  companies
• Payments and revenues are the subject of a
  credible, independent audit
• Payments and revenues are reconciled by a
  credible, independent administrator
• Approach is extended to all companies, including
  state-owned enterprises
• Civil society is actively engaged
• A public, financially sustainable work plan

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Basis for Our Experience EITI Countries
Angola, Bolivia, Chad, Trinidad Tobago have
had very limited EITI-related activity.
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EITI Implementation Models and Goals
EITI Models

• Core EITI
• Reconciliation of payments and revenues.
• Capacity building in govt and civil society.

• Sector Governance
• Program
• EITI Plus
• Broad sectoral reform
• program including
• Institutional /
• regulatory reform
• Strengthening of
• licensing systems
• Revenue management

• EITI Plus
• Reconciliation
• Capacity building
• Financial audits of companies and govt
• Process audits
• Public info campaigns

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Elements for SuccessPolitical Support Is
Essential

• Clear and direct support from country leadership
  (President / PM etc.)
• A dedicated champion at the ministerial level to
  drive the process
• The champion can
• Marshal resources
• Remove bureaucratic obstacles
• Act as the public face of the initiative

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Elements for SuccessA Sound Legal Basis

• Implementation is greatly aided by legislation
  which ensures
• The legitimacy of stakeholder and working groups.
• That all companies in a country participate and
  disclose data
• Access for auditors
• Sustainable financing for the Initiative

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Elements for SuccessBuilding Sound Partnerships

• Need to overcome mutual suspicions between
  stakeholder groups that have not worked together
  before
• The MOU model has proven effective
• Engagement of civil society works best if CSOs
  can self select their representatives
• Broad NGO Coalitions can greatly improve
  interaction
• Need to engage companies fully, particularly
  local firms, smaller firms, and state-owned
  companies
• State-owned companies may need TA

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Elements for SuccessSequencing and Sustainability

• Consultation, awareness raising, and capacity
  building for all stakeholders needs to happen
  both
• before the reconciliation / audit process and
• in parallel with it
• It is essential to address the issue of
  sustainable financing early on
• The lead time for new resources is often longA
  viable work plan is necessary at all stages

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Elements for SuccessFunding and Donor
Coordination

• The WB EITI Multi-Donor Trust Fund can play a
  central role in providing
• TA activities where the WB executes, and
• Funding for Recipient executed programs
• The Trust Fund needs to be complemented by
  coordinated bi-lateral assistance
• For small, rapid disbursing tasks, and
• To increase total funding
• The Implementing Government should devote
  significant funds / resources to EITI
• Essential for commitment and for sustainability

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Elements for SuccessIFI and Donor Mainstreaming

• In many countries the trigger for EITI has been
  the dialogue with WB, IMF, DFID, and other donors
• Integration into WB, IMF, and bilateral programs
  allows for thorough benchmarks and goals
• EITI can be integrated with other initiatives
  (e.g. IMF ROSCs, WB governance projects, G8
  Transparency Compacts)
• Mainstreaming creates rewards to governments
  for EITI implementation (e.g. improved donor
  relations)
• Mainstreaming helps EITI to lead to broader
  sector reforms

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Elements for SuccessViable National EITI
Governance Model

• Involvement of both revenue (e.g. finance,
  economy) and sector (e.g. mining, energy)
  ministries
• A dedicated secretariat in government led by a
  coordinator (reporting to the champion)
• An internal government working group to ensure
  coordinated government action
• A broad multi-stakeholder group (MSG) which is
  the ultimate decision making body for EITI
• Specialized sub-committees of the MSG
• For appointing the auditor / administrator
• For resolving specialized issues
• Inclusion of legislative branch (i.e. parliament)

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Key Implementation IssuesAudit and Reconciliation

• Different degrees of audit
• Reconciliation only Takes government and
  company statements and matches figures. Only
  investigates discrepancies in the data. Assumes
  data provided by companies and government is
  correct
• Reconciliation investigation 1 audits
  information not audited to international
  standards, or asks for more information from
  organizations not audited to international
  standards
• State oil and gas companies not fully audited to
  international standards
• Can be a major political issue,
• Often takes years to implement full IAS
• Trade-off between cost and credibility?
• Links to other audits (process, fiscal,
  production, etc.)

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Key Implementation IssuesAggregation vs.
Disaggregation

• Tax and royalty elements reported
• How much detail?
• What payments are included (e.g. voluntary
  social payments)?
• Valuation of production volumes (e.g. government
  share of oil)
• Reporting aggregate revenues and payments
• or revenues and payments by company?
• Nigeria (disaggregated), Azerbaijan (aggregated)

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Key Implementation IssuesSpecific Approaches for
Mining?

• Domestic and junior companies and artisanal
  miners account for significant production
• Sector is more fragmented by product (copper,
  gold, diamonds etc.), by companies, by mine
  technologies
• Contract and fiscal terms tend to be simpler and
  are often publicly available
• Mines are closely integrated into local
  communities so transparency is often not
  paramount for local priorities
• Payments to sub-national levels of government are
  substantial
• Issues often center on production volumes and the
  value chain more than on revenues

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EITI Is Still a Young Process

• There are many issues, which we are only now
  beginning to deal with
• The strong core standards need to be balanced
  with some flexibility on how they are implemented
• Before Validation has been established we do not
  know if any EITI country has fully implemented
  all six EITI criteria
• EITI policy and guidance continues to be
  developed through learning by doing"

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Thank you

• World Bank EITI Team Contacts
• Peter van der Veen pvanderveen_at_worldbank.org
• Michael Levitsky mlevitsky_at_worldbank.org
• Charles McPherson cmcpherson_at_worldbank.org