For transparency in the extractive industries to lead to improved policy making in resource-rich countries, information must be relevant, timely and used constructively. New work at the Natural Resource Governance Institute (NRGI), supported by a core grant from Omidyar Network, is aimed at transforming transparency into open data, and in turn, developing new models of “open policy making” that harness newly available data.
Transparency for the oil, mining and gas industries is becoming a reality as a result of two global initiatives, one mandatory and one voluntary. Several major jurisdictions, such as the EU and Canada, have implemented “mandatory disclosure” legislation that requires extractive companies to report on their payments to governments. And the U.S. Securities and Exchange Commission has just adopted strong rules to implement the Dodd-Frank Act’s provision to require the same.
This spread of legislation has occurred alongside increasingly detailed reporting under the voluntary Extractive Industries Transparency Initiative (EITI). Now more than $1.8 trillion of extractive resource company tax payments and government revenues are on public view as part of EITI report summary data, with another $81 billion already released via the new mandatory disclosure laws in the EU and other OECD jurisdictions.
While these two developments have led to tremendous volumes of new information, until recently that information has come in various formats. NRGI and Omidyar Network, in collaboration with several partners, have consequently explored the role of “open data”--that which is released digitally, openly, timely and of high quality--as an enabler for good governance in the extractives sector. Over the past two years we’ve tested new approaches to transforming transparency into open data, and then used that open data to strengthen resource governance. As part of this work, new methods were tested in Ghana with different groups who are engaged in debates regarding the use of oil revenues for sustainable development.
After successfully piloting the approach in Ghana, NRGI is expanding its work in this field with a three-year grant of up to $2.8 million from Omidyar Network; programming will expand the application of data-driven approaches to improved policy making and policy scrutiny. The work will inform increasingly evidence-based debates around resource governance in NRGI’s priority countries, where NRGI experts will help partners build the capabilities to test, refine and deploy new approaches.
What does transparency entail?
What results when transparency is translated into open data? This might mean that a government official tasked with negotiating with an oil company is now able to look up all related contracts signed in neighboring countries to compare terms. Or to use tax payment data to evaluate performance of the tax regime compared to others.
The need for live project data and contextual information was made clear last year in Sierra Leone, where revenue predictions from iron ore had unrealistically raised public hopes for increased economic development. Official forecasts relied on an investor prospectus from a newly established company to anticipate an iron ore boom. But reality turned out to be much gloomier, with slow progress in developing the mine, at a much higher cost and with the iron ore sold at discounted prices. The limited available information on the economics of the project led to these overly optimistic projections and fueled heated expectations by government and citizens which further aggravated the crisis.
From data supply to data demand
Since 2004 over 250 EITI reports have been released, making transparent an unprecedented amount of information about the tax payments for resources around the world. But only since 2015 have these reports begun to include a digital data release, compiled using the new summary data template developed by the EITI international secretariat as part of a new open data policy. With the release of an application programming interface (API) of EITI summary data from across countries, it will become easier to make use of EITI data.
In parallel, many countries mandating payment disclosure--such as the U.S. and the U.K.--have ensured that information released by companies comes out in a consistent way, in accordance with open data standards.
But even with standardized data releases, additional steps are required to collate this information and thereby lower the barrier to analysis for anyone interested. For extractive contracts, NRGI, the World Bank and the Columbia Center on Sustainable Investment have built a comprehensive repository of all publicly released resource contracts, www.ResourceContracts.org, now with well over 1,000 documents from over 73 countries. Users can search through digitized text, identify key terms and clauses, and run custom queries. Growing contract disclosure is already leading to new research into, for example, the role of tax havens and company ownership of contract signatories in Kenya. Elsewhere users can search through millions of corporate filings by extractive companies.
We do not underestimate the challenges around turning data into insight to support policy making. Hurdles include data quality and comprehensiveness, a lack of accessible tools, and weak data analysis skills in and outside government. Furthermore, evidence-based policy making can often take a backseat in highly politicized debates, such as those around natural resource revenues.
Nonetheless, success stories are emerging. In Ghana, NRGI built an oil revenue forecasting model using only public data to help parliamentarians to better understand the effects of the oil price drop on the 2015 budget. This move to openness saw MPs calling upon governments to respond to insights yielded by these models. Furthermore, as the year went by, we noticed a significant shortfall in revenues stemming from a provision in the contract of Ghana`s main oil project regarding cost deduction associated with neighboring projects. The open forecasts we made allowed us to not only learn from our forecasting errors, but also convene a discussion between Ghanaian stakeholders on the reason for revenue shortfalls. This has spurred deeper understanding in Ghana around tax ringfencing rules, which the government is now revisiting.
In the Democratic Republic of the Congo, the government is grappling with reforms to its mining code. The political momentum had stalled, with stakeholders disagreeing over the right course. NRGI used open data and the IMF’s FARI model to analyze the country’s mining code and produce a clear understanding of the different options open to the government. NRGI opened the analysis to the critical stakeholders in the debate, not only inviting the government but bringing in the opinions of industry, aid donors and civil society. While such efforts are only one part of a much bigger puzzle, this open approach helps different stakeholders talk the same analytical language when discussing complex issues.
Work is underway to identify countries and policy debates where there is a strong unmet demand for data-driven policy analysis and discussion on key issues. This signal of demand can serve as a trigger for NRGI and others to mobilize targeted technical assistance, bespoke analysis, mentorship and capacity development for different stakeholder groups to begin to harness the power of data for open policy making.
Andrew Clarke is a principal at Omidyar Network (ON), and focuses on policy, advocacy strategy, and related investments for ON’s global governance and citizen engagement initiative. Jim Cust is the director of research and data at the Natural Resource Governance Institute.