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Campaigners expect extractive transparency standard overhaul

Monday, 20 May 2013 10:50 GMT

Oil workers attend the inauguration of Rio Grande natural gas liquid separation plant in Rio Grande, some 70 km (43 miles) from Santa Cruz, May 10, 2013. REUTERS/David Mercado

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The EITI Global Conference in Sydney on May 23-24 is set to agree a stricter transparency standard but campaigners say changes do not go far enough

LONDON (Thomson Reuters Foundation) – Oil, gas and mining executives, transparency campaigners, investors and government officials will meet in Sydney this week at a conference that is expected to agree a stricter transparency standard for the extractive industries.

Since 2002, the Extractive Industry Transparency Initiative (EITI) has helped activists, investors and the media to hold companies and governments to account by promoting the publishing of resource revenues.

The EITI Global Conference in Sydney on May 23-24 is set to come up with a range of measures to bring the voluntary global standard in line with new legislation in the United States and Europe by requiring that companies break down by project the payments they make to governments for natural resources.

But many transparency campaigners say the changes are too timid and fail to keep the EITI at the forefront of reform.

“EITI is a very important part of the global solution, and this upcoming conference needs to advance the reform agenda in some key dimensions,” Daniel Kaufmann, president of the Revenue Watch Institute told Thomson Reuters Foundation.

About 3.5 billion people live in resource-rich countries and yet many of them remain in poverty. Greater accountability over how governments use natural resource revenues is seen as one way to change that.  

REFORMING TO STAY RELEVANT

Until now, a company operating in one of the 37 EITI-implementing countries has had to publish the payments it has made to a government and a government has had to publish the revenue it has received from a company. Those two sets of accounts are independently verified and published as a publicly available EITI report.

Since the EITI was conceived, the U.S. has passed a law that arguably goes further than the voluntary EITI standard. The Dodd-Frank Act mandates that all extractive companies listed on a U.S. stock exchange publish all payments to governments of more than $100,000 on a project-by-project basis. The European Union is expected to pass a similar law in June. In part due to those two laws, transparency campaigners are pushing for the EITI to enhance its standard.

“First, (there needs to be) consensus between governments, industry and civil society to fully disclose natural resource contracts between companies and governments; second, disclosure of the real owners of companies (beneficial ownership), and third, on the sorely needed transparency reforms in state-owned companies and natural resource funds,” Kaufmann said.

While not all transparency campaigners will be entirely happy with the expected new EITI standard, many of their demands are likely to be met.

EXPECTED CHANGES

In a blog post on the EITI website in May, Jonas Moberg, head of the EITI Secretariat in Oslo, outlined some of the changes to the standard that he expects to be ratified by the EITI board at the Sydney conference.

The changes include: disaggregated reporting – companies will be required to report their payments on a project-by-project basis (as they must if covered by the U.S. and European laws); state-owned enterprises (SOEs) will be required to report on the financial transfers they make to other government entities; and governments will be “encouraged” (though it won’t be mandatory) to ensure the data published by both the companies and the governments is machine-readable.

The sheer quantity of data that is expected to be produced by the new standard and the U.S. and European laws means that if it is not produced in a machine-readable and accessible format, it is likely to be far less useful to those looking to analyse and compare the data across different countries.

However, two of the big reforms that campaigners have pressed the EITI to enact – the disclosure of beneficial ownership and the disclosure of the extractive contracts – are not included as mandatory in the revised standard and are instead simply ‘encouraged’.

Moberg told Thomson Reuters Foundation in March that there was widespread support on the EITI board for the principle of disclosing the underlying owner. However, board members wanted to give countries more time to adapt to the tougher standards, which they see as an incremental process.

“It is a pretty significant step to say, ‘Yes, this is something we have to work towards and this is a good thing’,” Moberg said in a telephone interview from Oslo.

However, not all transparency campaigners are mollified.

“The new EITI rules are a step in the right direction but they do not go far enough,” anti-corruption watchdog Global Witness said in an emailed statement ahead of the conference.

“It is disappointing that the disclosure of extractive contracts is only encouraged, not required,” the statement added.

“The EITI’s influence rests on its being seen as a totemic reformers club which governments and companies want to be part of. This attraction will fade if the initiative is seen to be merely playing catch-up with more dynamic reforms taking place elsewhere,” the statement said.

 

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