Last week, the EITI International Board met in Lima, Peru. Regrettably, the main headlines coming out of these meetings related to transgressions of EITI’s founding principles and procedures on independent, equal and full participation by civil society. Such principles are the glue that holds an initiative like EITI together. When these principles were brushed aside last week, things fell apart.
To rebuild, the EITI must swiftly and comprehensively address the governance problems that have plagued the initiative for the past year and reached a boiling point in Lima. Signals from the new EITI chair that he plans to do things differently are very promising. In addition to rebuilding this foundation, the EITI should refocus on its core objective—improving extractive sector transparency and accountability in implementing countries.
It is telling that even at the global level of an initiative focused on multistakeholder collaboration and transparency, civil society faced pressure in Lima to either self-silence or be ignored as EITI business was conducted without their full participation. These are the same types of struggles that civil society in EITI countries face on a daily basis, and with significantly more dire consequences. Paradoxically, improving mechanisms to assess civic space issues has been at the forefront of EITI board discussions over the past year. In fact, one of the most important headlines coming out of the meetings last week should have been the full incorporation of a strengthened EITI Civil Society Protocol into the EITI Standard. Instead, the protocol was breached by the EITI itself when civil society was not treated as an equal partner in Lima.
This makes painfully clear how much the EITI can improve on setting a global standard for multistakeholder transparency in the extractive sector – not just on civil society issues, but also on things like contract disclosure, project-level reporting and socioenvironmental information. But it’s time to start acting on the lessons learned in Lima and looking forward. This post outlines six promising new elements in EITI that should have been headlines last week and their potential for impact in the future.
In Lima, the EITI Board adopted a new 2016 EITI Standard. This represents a refinement of the 2013 standard, which significantly broadened the scope of reporting by implementing countries. Several improvements—including rearranging provisions to align with the extractives decision chain—should make the new standard a more useful tool for countries seeking to improve natural resource governance.
Most countries currently create standalone reports in order to disseminate the information required to be disclosed in EITI. The 2016 EITI Standard gives countries the flexibility to “mainstream” disclosures into government and company reporting systems. Stakeholders in a country will have to determine which elements of the EITI Standard are mainstreaming priorities, from improving government and company information systems on license allocations to social and economic spending. All disclosures will still be subject to the EITI requirements.
Potential for impact: Instead of focusing on producing EITI reports, stakeholders can focus on improving transparent government and company systems.
2. Governance reform
One of the biggest questions surrounding EITI is whether it can foster tangible improvements in extractive sector governance beyond transparency. EITI processes often remain isolated from national reform debates. A growing number of countries are including recommendations for concrete legal and fiscal policy reforms in their EITI reporting, but follow-up on such recommendations has been extremely limited. The 2016 EITI Standard requires stakeholders to at least considerrecommendations resulting from EITI reporting. Countries are required to list each recommendation, corresponding activities that have been undertaken to address each recommendation and the level of progress made in implementing each recommendation. The government must document the rationale behind any decision not to act on a recommendation.
Potential for impact: Improving the contribution of EITI processes to appropriate policy reforms can significantly increase the initiative’s role in improving governance.
3. Beneficial ownership
A complex and opaque ownership structure doesn’t necessarily mean that an extractives company is engaging in financial misconduct. However, secret ownership structures can enable some extractive companies to evade tax payments or hide improper relationships with government officials. The 2016 EITI Standard requires countries to request and companies to disclose beneficial ownership information by 1 January 2020. By 1 January 2017, stakeholders must develop a roadmap outlining how they will pursue such disclosures. Information about beneficial owners’ identities should include the name of the natural person who is a beneficial owner and his/her nationality, country of residence, level of ownership, details about how ownership or control is exerted, as well as identifying any politically exposed persons. Companies will have to assure the accuracy of the information they provide, and EITI reporting must name any companies that fail to submit all or part of the beneficial ownership information.
Potential for impact: The disclosure of information about beneficial ownership can help deter and detect corruption, conflicts of interest, and tax evasion.
4. Commodity trading
In many resource-rich countries, especially oil producers, the government and/or a state-owned enterprise sells oil, gas or minerals to various companies, and these sales generate large revenues. The 2013 Standard required reporting on these commodity trading transactions. The 2016 EITI Standard clarifies that the data on commodity sales should be broken down by buying company. However, it did not go further to clarify that the disclosure of data should be also broken down by individual sale.
Potential for impact: Improved commodity trading reporting can help guard against corruption, facilitate oversight and discourage self-dealing by public officials.
5. Civic space
The EITI requirements regarding an enabling environment for civil society had previously lacked detailed guidance on how to consistently evaluate a country’s civil society environment. As a result, treatment of civic space issues in the EITI had been discretionary and lacked rigor. As noted above, a revised Civil Society Protocol made the method for assessing civic space issues significantly more concrete. The 2016 EITI Standard incorporates the revised Civil Society Protocol and clarifies that requirements related to civil society engagement must be assessed in accordance with the protocol.
Potential for impact: Assessing the adequacy of civic space determines the EITI’s ability to accomplish its stated objective of increasing informed public debate.
6. Open data
The current lack of open data in EITI reports poses a significant barrier to the use and analysis of EITI information. This limits the initiative’s ability to meaningfully impact public debate and governance reform. The 2016 EITI Standard includes an Open Data Policy that encourages countries to release data under an open license and in formats that are interoperable with national and international standards. Data standards for EITI reporting will be further developed in the future.
Potential for impact: Increasing open data can make EITI information more usable and actionable for government decision makers, civil society, researchers and journalists.
Erica Westenberg is senior governance officer at NRGI.