Transparency in Extractive Industries: EITI and Beyond

Transparency in Extractive Industries: EITI and Beyond

Gary McMahon, Senior Mining Specialist, World BankPresentation for VII KazEnergy Eurasian Forum, Astana, KazakhstanOctober 2-3, 2012

Sign of the Times

Future agenda of EITI

• the need for all EITI stakeholders –governments, private sector, civil society and international organizations- to protect the gains of the EITI process to date;

• to further empower civil society so it becomes a demand-agent for accountability;

• to take bolder steps in implementing other reforms that will strengthen broader public financial management along the whole extractive industries value chain.

• opening remarks of the World Bank’s Managing Director Sri Mulyani Indrawati on EITI Global Conference in Paris

EITI in 2012EITI reports currently tell us:

•How much money is received by a government from its oil, gas and mining•The difference between what the government says it received and what the companies says it paid

The six outcomes of EITI reporting

•A functioning MSG, including active, independent civil society;•Timely data;•Comprehensive data;•Reliable data;•Investigated discrepancies;•Public debate.

Clarification of EITI requirements

Award of licenses

&contracts

Regulation&

monitoring of operations

Revenue Distribution

& Management

Expenditure Management:

Pursuit of Sustainable

Development Policies

Oversight by a Multi-stakeholder group

Reconciliationof Audited Payments /

Receipts(EITI Report)

1. Making sure that the MSG works

Clarification of EITI requirements

Award of licenses

&contracts

Regulation&

monitoring of operations

Revenue Distribution

& Management

Expenditure management:

pursuit of sustainable

development policies

Oversight by a Multi-Stakeholder

Group

Reconciliationof audited payments/

receipts(EITI Report)

2. Regular and timely reporting – relevant data?

Clarification of EITI requirements

Award of licenses

&contracts

Regulation&

monitoring of operations

Revenue Distribution

& Management

Expenditure management:

pursuit of sustainable

development policies

Oversight by a Multi-Stakeholder

Group

Reconciliationof audited payments/

receipts(EITI Report)

3. Comprehensive data ?

Clarification of EITI requirements

Companies Disclose

Paymentsto Government

Government Discloses

Receipts from Companies

Reconciliationof Audited Payments /

Receipts(EITI Report)

4. Reliable data?

(#12)4. Reliable data?

(#13)

Oversight by a Multi-Stakeholder

Group

Clarification of EITI requirements

Award of licenses

&contracts

Regulation&

monitoring of operations

Revenue Distribution

& Management

Expenditure Management:

Pursuit of Sustainable

Development Policies

Oversight by a Multi-Stakeholder

Group

Reconciliationof Audited Payments /

Receipts(EITI Report)

5. Discrepancies – investigation, remedial actions and improvements?

Clarification of EITI requirements

Award of licenses

&contracts

Regulation&

monitoring of operations

Revenue Distribution

& Management

Expenditure Management:

Pursuit of Sustainable

Development Policies

Oversight by a Multi-Stakeholder

Group

Reconciliationof Audited Payments /

Receipts(EITI Report)

6. Public debate – using the data

Some of the questions asked about the sector which are beyond the present core EITI• How much money should have been paid (contracts)? • How much was produced (physical audits)?• Was it a good deal (international comparisons)?• What is the tax regime, exemptions etc?• What was illegitimately paid?• What was the money spent on (PFM)?• What were the regional revenue breakdowns?• Is the sector well managed ?• What impact did it have?

International linkagesGlobal standards and initiatives

• AA1000SES – AccountAbility Stakeholders Relations Standard, the first international standard on stakeholder engagement: guidance on how design and implement stakeholder engagement to achieve an accountable and strategic response to sustainability (www.accountability.org)

• International Petroleum Industry Environmental Conservation Association (IPIECA): Oil and Gas Industry Guidance on Voluntary Sustainability Reporting includes Social Responsibility Performance Indicators (www.ipieca.org)

• Global Reporting Initiative (GRI) will present its Oil and Gas Sector Supplement in 2011 with reporting indicators, including Social Protocol (www.globalreporting.org)

• International Association for Public Participation (IAP2): http://www.iap2.org/- established in 1990 to share best practices on public participation in decision making process; more then 1050 members in 26 countries

• Focus is broadened to encompass other sustainable development issues such as environment protection

Future Directions of EITI

• Create a system that provides incentives to implementing countries to go beyond ‘minimum standard’;

• Encourage linkages with other governance reform processes;

• Maintain a minimum, albeit more nuanced, EITI standard;

• Address weaknesses of the current validation system;

• Strengthen the emphasis on country ownership.

Next steps