EITI and Oil for Development – complementary approaches
The Extractive Industries Transparency Initiative (EITI) is a global standard that helps countries improve the governance of the extractives sector. As such, both the Oil for Development (OfD) Programme and EITI seek to promote a transparent management of the petroleum sector in resource rich countries, where the public can hold the authorities accountable.
Transparency and accountability are key explanatory factors in the Norwegian success story, and therefore these objectives are an integral part of the theory of change in the OfD Programme. Norway is both an implementing country of the EITI Standard, and provides financial support to the EITI.
Out of 12 countries in the OfD Programme portfolio, four countries are EITI compliant: Ghana, Mozambique, Iraq and Tanzania. To be compliant, a country must fulfill the requirements set forth in the global standard (see further below for more details about these requirements). However, being compliant does not necessarily mean a country's extractive sector is fully transparent. What is required is that there are satisfactory levels of disclosure and openness in the management of the natural resources, as well as a functioning process to oversee and improve disclosure.
Highlighting how the OfD Programme and EITI may work to strengthen their common goals, two country cases are described below: the first from a country in the process of becoming an EITI country, and the second from a country not yet part of EITI.
Myanmar – time for reform is now
In June 2014, Myanmar acquired status as an EITI Candidate Country, thus committing to implementing the EITI Standard and becoming a compliant country within three years.
In December 2015, Myanmar was included in the OfD portfolio. With the two initiatives introduced in the country, there is opportunity for mutual support and knowledge sharing to help Myanmar move forward in managing its natural resources in a sustainable way and to the benefit of its population.
Myanmar’s first EITI report in January 2016 highlighted a number of challenges for the new government. One of these is enabling a climate of openness, where citizens can express their views and engage in debates about the use of the country's natural resources without fear of reprisals.
The report furthermore documents that state-owned companies retain considerable amounts of revenue from the extractive sector in “other accounts”. The report noted that there was insufficient transparency about these revenues to comply with the EITI Standard’s reporting requirements on state-owned enterprises and their relationship with the state.
As the process of formalizing an OfD Programme in Myanmar is ongoing, the report’s recommendations can guide the direction of the process. In line with the EITI report’s findings and recommendations, the OfD Programme will engage in dialogue with partner institutions in Myanmar, suggesting opportunities for transparency and inclusion in institutional frameworks and in their implementation. As parliament, civil society organizations and media are crucial in holding the government to account, the OfD Programme will also work to enhance such capacity.
Lebanon – a potential early adapter?
In countries that are not yet EITI compliant, there are still possibilities for the OfD Programme and EITI to work together. One example is Lebanon, a country at an early stage of petroleum sector development, and newly part of the OfD portfolio.
In January 2015, Lebanon and Norway signed an agreement for three-year institutional cooperation under the OfD Programme. Contributing to strengthening transparency and accountability in the petroleum sector is a key objective, including through improvements in the legal framework as well as capacity building of stakeholders such as decision makers, civil society and media.
Although Lebanon is formally not yet an EITI Candidate country, the Lebanese government (including the Lebanese Petroleum Administration, the sector regulator) has expressed interest in initiating the EITI process. Among others, the Lebanese Parliament’s energy committee recently issued a public joint recommendation to the government to join EITI.
The OfD Programme and EITI are jointly supporting the governments’ intent to use the EITI as a tool for integrating international best practice on transparency requirements into the systems, setting a high standard in the sector from the very start.
Furthermore, Lebanon may benefit from using the EITI as a platform for dialogue with key stakeholders, contributing to improving trust and confidence of the public at large. Once petroleum production starts, a well-functioning EITI would also be a low-cost, efficient way to regularly check and improve the suitability of the sector’s reporting systems and management tools.
As one example of working together, the OfD Programme and EITI have provided a joint training session on the EITI for relevant public institutions. Continuous coordination of each other’s initiatives towards the Lebanese government and civil society will remain important moving forwards.
What is the EITI?
The EITI (short for Extractive Industries Transparency Initiative) is a global standard that helps countries improve the governance of the extractives sector along all stages of the industry’s value chain.
It is based on the understanding that a transparent and well-managed extractives sector can contribute to social and economic development for citizens of resource-rich countries. To promote the good governance of the sector, governments, companies and civil society organisations work together to implement the EITI Standard in 51 countries around the world.
At its core, the EITI Standard requires that governments disclose what payments they receive from extractive companies operating in their country. Oil, gas and mining companies are also asked to disclose payments they make to the government, and an independent third-party reconciles the data to identify possible gaps.
The government also has to ensure disclose of additional information about the sector such as license holders and outcomes of license allocations, beneficial owners of extractive companies, production and export data, and how extractive revenues are allocated. The whole process is overseen by a national commission, known as a multi-stakeholder group (MSG), where civil society participates on an equal footing with government and industry.
The EITI process results in recommendations to improve the governance of the sector, which the government is supposed to follow up in order to comply with the Standard.
All EITI countries publish annual EITI Reports, which allow citizens to follow the value of the country's natural resources from production all the way into government accounts.