The Extractive Industries Transparency Initiative (EITI) is a groundbreaking initiative that promotes public disclosure of revenue flows from the oil, gas and mining industries to governments in countries that depend on natural resources. Greater revenue transparency means that citizens can track revenues into national budgets, reducing the risk of corruption and promoting informed public debate about the best use of public money.
Today’s international EITI conference in Oslo shows how far the Initiative has come since its debut in 2002, with the creation of a Board drawn from governments, companies and civil society groups and an independent validation system to measure countries' progress. To date, some twenty resource-rich countries have signed up to EITI although only two, Nigeria and Azerbaijan, have published audited and reconciled reports, so it is clear that other countries need more assistance to make progress. Key donor governments like the UK, Germany, the Netherlands and Norway deserve recognition for their support for the process so far.
The Board and its Secretariat should make EITI more sustainable in the long term. The new validation mechanism should provide an objective test of whether countries that claim to implement EITI are making real progress towards transparency. This should bring an end to the pervasive problem of ‘free-riding’ countries that has threatened EITI’s credibility.
Although EITI has made significant progress, major challenges remain.
1. EITI needs to be mainstreamed
First, there is a need for major financial and political support from the international community so that EITI can be mainstreamed. Its criteria and principles should become the normal way of working in all the relevant extractive industries within three to five years (as recommended by its International Advisory Group).
EITI implementation in each country is a complex process involving many different stakeholders: to succeed, it will need considerable technical assistance, funds and diplomatic support. To achieve this, donor governments and international institutions need to ensure that EITI is properly integrated across their development assistance and foreign policies. The World Bank and the European Bank of Reconstruction and Development have already begun to adopt a more consistent approach, with clearer policies and dedicated staff to assist implementation on the ground. This approach needs to be broadened, and adopted by other institutions.
More can be done to give EITI the international weight it needs. One key action would be a UN General Assembly resolution supporting the Initiative. Another would be for the European Union to support EITI as part of its efforts to promote a common European energy policy. The EITI Secretariat must also be given adequate support and resources so that it can facilitate implementation of EITI on the ground. All-too-often, lack of co-ordination between governments, donors and other stakeholders has hindered effective and timely implementation.
The EITI also needs to engage with China, India, Russia, Brazil and other countries which play an increasingly important role in the world’s energy and minerals market. Their support must be sought for an emerging international consensus that transparency can prevent the corrupt practices that ultimately undermine the stability and security of energy supplies.
2. EITI candidate countries need to be validated yearly
There is now a welcome distinction between “candidate countries” – which have consulted with industry and civil society and drawn up a clear action plan to implement the EITI – and “compliant countries” which have published audited revenue data in accordance with EITI criteria. Independent validation should ensure that EITI criteria are being met, but it needs to be based on in-depth consultation with all stakeholders in a country, especially civil society.
It is suggested that EITI candidate countries might only be validated every two years, but this is too long. In two years, a country could make no meaningful progress yet still deem itself a candidate, undermining the EITI’s global credibility. Annual validation would be more effective. The Board also needs to agree a credible mechanism for putting countries on notice if they make no progress in implementing EITI and, if necessary, excluding such countries from the Initiative.
3. Companies must promote revenue transparency more actively
Extractive companies themselves can and should play a much bigger role in tackling corruption. They should promote EITI in countries where they operate, support efforts to enshrine revenue transparency in binding international norms, such as corporate accounting standards, and rigorously enforce their own safeguards against corrupt acts by staff or agents. Other commercial parties who provide finance to resource-rich countries with a history of corruption, notably banks and export credit agencies, must ensure their activities also enable transparency.
4. The scope of revenue transparency needs to be extended
The EITI, for all its strengths, does not cover all the aspects of the extractive industries where transparency is needed. The collaboration of EITI stakeholders in governments, industry and civil society, which has been very productive to date, should now be expanded to take in the transparency of contracts between companies and governments and transparency of access to oil and mineral concessions. Transparency of government spending is also vital.
5. Defend civil society participants
Finally, it is essential that candidate countries allow free and active participation by local civil society groups. Where civil society activists are threatened or sidelined by governments, as has already happened in Equatorial Guinea, the Democratic Republic of Congo and the Republic of Congo, then the international community must be ready to speak out unequivocally in their defence. Genuinely informed public debate in resource-rich countries is, after all, the over-arching goal of EITI, and civil society on the ground should have the most important voice here.
Press Release / Oct. 16, 2006