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The EITI has evolved from its beginnings as a narrow set of rules focused on revenue collection into an international standard covering the wider governance of extractive resources. It now encompasses beneficial ownership disclosure, contract transparency, the integration of the EITI into government systems and transparency in commodity trading. The focus of EITI Reports has moved from compiling data to building systems for open data and making recommendations for reforms to improve the extractive sector governance more generally.
The impact of the EITI is most evident when governments decide to implement the recommendations that have emerged from EITI reporting. In some countries, EITI Reports have been a useful tool highlighting weaknesses in government systems. In other cases, the report recommendations have been aimed at addressing such weaknesses and improving sector management, thus making an important contribution to policy reform and change.
In the late 1990s and early 2000s, there was an expanding library of academic literature around the resource curse by such acolytes as Jeffrey Sachs, Joseph Stiglitz, Terry Lynn Karl and Paul Collier detailing how the huge potential benefits of oil, gas and mining were not being realised and were associated with increased poverty, conflict and corruption. The problem went beyond just the well-known economic phenomenon of 'Dutch Disease' by which natural resource wealth made other export sectors uncompetitive. Other common effects were around capturing the revenues by elites, stunting the development of tax systems to capture revenue from non-extractive sectors, exacerbated regional and community tensions. These writings outlined out the complexities of extractive resource governance: bidding, exploration, licenses, contracts, operations, revenues, supply chains, local content, transit, services, allocations, and spending. They noted environmental, social and political concerns, and each outlined remedies for addressing the curse, often noting that no single action would be capable of tackling all of these challenges. However, the literature was clear – transparency and dialogue had to be part of the starting point.
These academic analyses were followed by more and more journalistic pieces and a growing campaign by Global Witness, Human Rights Watch, Oxfam America, other civil society organisations. International financier George Soros established a “Revenue Watch” programme under his Open Society Initiative to investigate the flow of funds from oil companies to governments in the Caspian region. The NGOs were stepping up their enforcement of corporate social responsibility rhetoric and were looking for a law for companies to report their payments to developing countries.
The civil society campaign slogan of “Publish What You Pay” (PWYP) was drawn from a Global Witness report, “A Crude Awakening”. Launched in December 1999, it focused on the opaque mismanagement of oil in Angola. The report had concluded by calling on the operating companies to adopt “a policy of full transparency [in] Angola and in other countries with similar problems of lack of transparency and government accountability”.
Responding to the campaign in February 2001, oil behemoth BP published the signature bonus of USD 111 million it paid to the Angolan government for an offshore license. It committed to publish more. This sparked a strong reaction from Angola. In his 2010 memoir, “Beyond Business”, Lord John Browne, the then Chief Executive Officer of BP, recalled how he received a cold letter from the head of the Angolan national oil company, Sonangol, stating that, “[I]t was with great surprise, and some disbelief, that we found out through the press that your company has been disclosing information about oil-related activities in Angola”. The backlash and threats from the Angola government, led Lord Browne to conclude “clearly a unilateral approach, where one company or one country was under pressure to ‘publish what you pay’ was not workable”.
The oil companies argued for a shift away from company reporting, as sought by PWYP and others, to reporting by governments, in order to reduce conflict with host governments and put contracts at risk. If company reporting was to be required they wanted a global effort to level the playing field that required all companies in a country to disclose.
The Government of the United Kingdom – the Cabinet Office, the Department for International Development, the Treasury, the Foreign Office, and the Department of Trade and Industry - was listening both to the PWYP campaign and to the oil companies. They saw the opportunity to develop an initiative built on the notion of equal transparency from the governments and the companies.
The EITI is often thought to have been launched in 2002. It is true that the then UK Prime Minister, Tony Blair, outlined the idea of the EITI in a speech intended for the World Summit on Sustainable Development in Johannesburg in September 2002. However, the problematic relationship between Prime Minister Blair and President Robert Mugabe of Zimbabwe, meant that the British Prime Minister never actually delivered his prepared remarks as intended.
Following the publication of the Blair speech, the UK Department for International Development (DFID) convened a meeting of civil society, company, and government representatives. There was agreement that some kind of reporting standard should be jointly developed. At a conference in London in June 2003, a Statement of Principles to increase transparency of payments and revenues in the extractive sector was agreed. These 12 EITI Principles centred on the need for transparent management of natural resources. They affirmed a belief that “a workable approach to the disclosure of payments and revenues is required, which is simple to undertake and use”. Over 40 institutional investors signed on to a statement of support for the EITI which argued that information disclosure would improve corporate governance and reduce risk.
Following this meeting, a few countries, like Nigeria, Azerbaijan, Ghana, and the Kyrgyz Republic, explored how these principles might be applied. They were later joined by Peru, the Republic of Congo, Sao Tome e Principe, Timor Leste, and Trinidad and Tobago.
Transparency in natural resource development was championed at a series of G8 Summits. The G8 subsequently, called on the International Monetary Fund and the World Bank to provide technical support to governments wishing to adopt transparency policies. This led to the establishment of the World Bank-administered Multi-Donor Trust Fund (MDTF) for the EITI in 2004. The MDTF disbursed almost USD 60 million in technical and financial assistance to EITI programmes in over 40 countries before being replaced by the Extractives Governance Programmatic Support (EGPS) facility in 2016.
In March 2005, the EITI stakeholders and implementing countries again met in London for the Second Conference. UK Secretary of State for International Development, Hilary Benn, summarised:
Our experience in the four countries that have piloted EITI… is that while different countries have taken different approaches to implementation, this needs to be backed up by clear international rules of the game for the initiative to be effective and credible.
These different approaches to the principles were boiled down to six EITI Criteria, which sought to establish “the rules of the game”. Benn also announced the establishment of an International Advisory Group, which would include representatives of governments, companies, and civil society organisations, to take the EITI forward.
It became increasingly clear that the EITI was not evolving, as some had anticipated, into a voluntary corporate social responsibility standard for companies, but rather into a disclosure standard implemented by countries. The criteria focused on:
Regular publication of all material oil, gas and mining payments by companies to governments (“payments”) and all material revenues received by governments from oil, gas and mining companies (“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible manner.
They also recognised that civil society had to be actively engaged in the process to ensure accountability.
It quickly became clear that many issues had been left open, such as the maximum amount of time a country had before it was required to become EITI complaint and how regular and timely the reporting needed to be.
In 2009 (4th Global Conference in Doha) and 2011 (5th Global Conference in Paris), the EITI Board issued versions of the EITI Rules. Replacing the EITI Validation Guide, these included six “policy notes” that provided further clarification and guidance. The “indicators” became “requirements” and were addressed more as steps to be followed by implementers than as indicators to be assessed by external validators. In the 2011 edition of the EITI Rules, the requirements, previously embedded in the Validation Guide, were now more clearly articulated and a number of new requirements were added to ensure the quality and consistency of the EITI process. The 21 EITI Requirements were minimum requirements and countries were encouraged to go beyond them where stakeholders agreed appropriate. In addition, the 2011 edition of the EITI Rules, for the first time, crucially included the need for the data to be both timely and regular.
Shortly after the 2011 Paris Conference, at which the Rt Hon Clare Short was named EITI Chair, an evaluation of the EITI by Scanteam was published. The evaluation recognised exciting innovations from many of the implementing countries – e.g. Liberia had included forestry and agriculture; Nigeria’s reports included physical and process audits, as well as financial audits; Ghana and Peru’s reports included data on the amounts paid to subnational levels of government, etc. However, Scanteam concluded that “little impact at the societal level can be discerned … largely due to [EITI’s] lack of links with larger public sector reform processes and institutions”. It found that EITI’s narrow focus was not systematically delivering on the Principles established in 2003. Following this, the Board and other stakeholders recognised that the EITI needed to do more to encourage countries to use the EITI as a platform for wider improvement of natural resource management.
The Board undertook an extensive strategy review to address three main challenges:
- How to ensure that the EITI provided more intelligible, comprehensive and reliable information;
- How to ground the process in a national dialogue about natural resource governance i.e. linking the EITI with wider government processes around tax collection, extractive policy and budget arrangements;
- How to incentivise continuous progress beyond Compliance.
The resulting EITI Standard launched at the Global Conference in Sydney in May 2013 therefore sought to:
1) Make the EITI Reports more understandable
EITI Reports were required to contain contextual information such as the contribution of the extractive sector to the economy, production data, a description of the fiscal regime, an overview of relevant laws, a description of how extractive industry revenues are recorded in national budgets, an overview of licenses and license holders, and a description of the role of state-owned companies. Countries were encouraged to publish contracts and details of the beneficial owners of companies.
2) Making EITI more relevant in each country
Countries were required to agree a work plan with objectives that articulated what they wanted to achieve with the EITI and set out how they wanted to achieve it. The scope of EITI implementation and links to other reforms had to be tailored to contribute to these desired objectives.
3) Better and more accurate disclosure
The Standard required for the first time that EITI Reports disclose the payments broken down by each company, and by each revenue stream and, in due course, by each project. EITI reports were also be made available electronically and codified to allow for international comparisons.
4) Recognising countries that go beyond the minimum
The Standard introduced more frequent and nuanced validations to create incentives for more innovative use of EITI to the benefit of the country.
5) A clearer set of rules
The EITI Standard was restructured, in order to condense the previous 21 requirements and policy notes into a shorter and more concise seven requirements.
In addition, various international institutions routinely cited their association with the EITI as evidence of their own commitment to good governance. The EITI’s tenets were reflected and exceeded in US, European, Nigerian and Liberian legislation, the World Bank’s International Finance Corporation’s standards for extractive projects, and an increasing set of country-level policies such as the publication of contracts.
The EITI Standard 2016 was formally launched at the EITI Global Conference in Lima, Peru on 24-25 February 2016. It was at this conference that Fredrik Reinfeldt was named EITI Chair. The Standard encouraged countries to build on their existing reporting systems and practices for EITI data collection and sought to develop the EITI’s growing status as a platform for progress that was bringing greater transparency and accountability to all aspects of natural resource management, including tax transparency, commodity trading and licensing.
The 2016 Standard included ground-breaking disclosure requirements on beneficial ownership, ensuring that the identity of the real owners of the oil, gas and mining companies operating in EITI countries would be public by 2020.
The 2016 Standard introduced a new Validation system which aimed to better recognise efforts to exceed the EITI Requirements and set out fairer consequences for EITI countries that had not yet achieved compliance with the EITI Requirements.
EITI data was pulled out of paper reports or pdf files and uploaded on the country pages and, in summary form, on the EITI global database. The Standard encouraged countries to disclose “open data” online to enable users to make better use of EITI data to inform public debate about the extractive industries and to draw more from existing and emerging online sources than developing separate systems from collecting data for the EITI process.