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ANALYSIS - Has the EITI global transparency drive made a difference?

Sunday, 26 May 2013 22:09 GMT

Excavators and drillers work in an open pit at a copper and cobalt mine 110 km (70 miles) northwest of Lubumbashi in Congo's copper-producing south, January 29, 2013, REUTERS/Jonny Hogg

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“The EITI is like the doctor who arrives after the patient has died?” - the extractive industry transparency initiative has a mixed impact

SYDNEY (Thomson Reuters Foundation) – When world leaders set up a global initiative to bring transparency to the revenues of resource-rich countries the aim was noble - to tackle corruption and reduce poverty.

About 3.5 billion people live in countries with extensive oil, gas or mineral reserves, yet poor governance and corruption mean many do not benefit. The Extractive Industry Transparency Initiative (EITI) aims to change.

But not everyone has been by impressed by its efforts. “Your EITI is … like the doctor who arrives after the patient has died. What good is it?” campaigners quote one Congolese woman as telling them.

Her scathing comment, prompted by a report with revenue data that was three years old, illustrates one of the main problems the EITI has faced in its mission to translate revenue transparency into greater government accountability.

The EITI - established a decade ago - helps activists, investors and the media to shine a light on a country’s resource wealth by promoting the publishing of resource revenues.

But in many cases the information is not available until several years later, making it much harder to track a government’s spending and hold it to account.

GOVERNANCE IMPACT

The EITI adopted a stricter standard last week for countries wishing to sign up which included provisions on timely publication of EITI reports.

The move follows a critical report commissioned by the EITI which concluded that so far, the EITI had had little impact on governance, corruption or poverty reduction in resource-rich countries.

Until now, an extractive company operating in one of the 39 EITI-implementing countries has had to publish the payments it has made to the government and the government has had to publish the revenue it has received from the company. Those two sets of accounts are independently verified and published as a publicly available EITI report.

A number of speakers at last week’s biennial EITI Global Conference in Sydney said that while transparency was a key ingredient for improving governance, tackling corruption and reducing poverty, it alone could not solve those problems and therefore the EITI should not necessarily be faulted for not having made progress in those areas.

Transparency laws and initiatives can only go so far, there need to be legal frameworks which can be enforced and there needs to be an independent judiciary, Rebecca Grynspan, an administrator at the U.N. Development Programme said.

Erik Solheim, head of the OECD’s Development Assistance Committee, said that the mobilisation of political will was "more important than the (EITI) standard" for improving governance in resource-rich countries.

CHANGING THE NORMS

But speakers said the EITI had helped create a change in attitude towards extractive transparency and had also helped bring the disparate and sometimes confrontational sectors of government, the extractive industry and civil society to the negotiating table. This in turn, had helped to build trust and improve democracy, campaigners and politicians said.

Alfredo Pires, the minister of petroleum and mineral resources in East Timor, which receives over 75 percent of its GDP from oil revenues, praised the EITI for its impact on the Southeast Asian nation which gained independence in 2002.

"EITI is the essence of democracy, having to show the numbers, having to consult with your people; so it was good, as a young nation, to take on EITI ten years ago," Pires said.

Diarmid O’Sullivan, a researcher and former EITI board member, said the initiative had "changed the conversation about the extractive industries".

"It is fostering an expectation that governments and companies should explain themselves; it is fostering an expectation that people outside the governments, civil society organisations, concerned citizens, have a right to be an integral part of conversations about how resources are being managed," he told the Thomson Reuters Foundation.

"That in itself is extraordinary and it creates a potential for a lot of other things to happen."

DATA WITH CLOUT

But if the EITI is to have impact, the data produced by the country needs to be timely, accurate and widely disseminated among its citizens.

While the accuracy of EITI data can be difficult to ascertain, the communication of the data to affected communities is easier to measure.

Many of the people who need the information most – those living closest to the mines and wells - are in rural areas, far from their country’s capital where the EITI report is usually produced. Simply posting the report on the internet or publishing it in a local newspaper is, in many cases, insufficient.

For Faith Nwadishi, a Nigerian campaigner and EITI board member, discussions about publishing the EITI reports on the internet are largely irrelevant as far as rural Nigeria is concerned.

"We don’t have light! We don't have good networks," she said.

INVESTORS

The EITI has courted the investment community which it sees as a natural supporter of the initiative due to the importance placed by investors on transparency, predictability and stability.

It is aware that resource-rich developing countries are keen to attract investment and if investors push countries to adopt the EITI as a sign of their transparency and willingness to reform, that will be hugely advantageous to the growth of the initiative. But what impact has the EITI had on the investor community?

Robert Jenkins, a finance professor at the London Business School, addressed this question at the conference when he asked the audience of about 500 people to raise their hand if they worked in investment management, at a pension fund or at an investment management magazine. About six people put their hand up, indicating that the EITI had probably not made a significant impact.

"If the EITI is not yet sufficiently valued by the investment community, what must happen in order to raise their concern, interest and attention?" Jenkins asked.

"The rating agencies are exactly the area which may be the next step," he said.

"To my knowledge, at the moment, rating agencies are looking at it, they are aware of it but it is not yet a major factor in their assignment of a rating." 

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