The Extractive Industries Transparency Initiative (EITI)

The Extractive Industries Transparency Initiative (EITI) is the most prominent norm of extractive industries transparency.  Established at the World Summit for Sustainable Development in Johannesburg in 2002 at the behest of British Prime Minister, Tony Blair, EITI seeks to assist resource rich countries transform their wealth into tangible development outcomes, through improved transparency.  Officially launched in 2003, the EITI is a coalition of governments, companies, civil society groups and international organizations. To its proponents, the EITI is targeted at mitigating the resource curse:

The EITI supports improved governance in resource-rich countries through the verification and full publication of company payments and government revenues from oil, gas, and mining … Good governance is a precondition for converting large revenues from extractive industries into economic growth and poverty reduction. When transparency and accountability are weak, the extractive industries may instead contribute to poverty, corruption, and conflict – the so-called ‘resource curse.’ The EITI is an important step in defeating this ‘curse.’" name="_ftnref1" title="">[1]

The EITI criteria require the regular publication of all material oil, gas and mining payments made by companies to governments (“payments”) and all revenues received by governments from these companies (“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible manner. The figures reported are then reconciled by an independent administrator using international auditing standards. Supporters of the EITI have emphasized the participation of civil society groups in the design, monitoring and evaluation of the EITI process as a key element to enhance transparency. 

Since its inception, the EITI has been supported by some 70 of the world’s largest oil, gas and mining companies who also work with EITI national groups.  At the same time, 25 compliant countries have undergone validation in accordance with EITI’s quality assurance mechanisms. Through the efforts of the EITI international board or the members of each national program, compliant countries also undergo more validation procedures in regular time intervals to make sure that they remain complaint. In addition, there are 16 candidate countries that are undergoing the initial validation steps. Of the 25 compliant countries, 14 are African:  Burkina Faso, Cameroon, Cote d’Ivoire, Ghana, Liberia, Mali, Mauritania, Mozambique, Niger, Nigeria, Republic of the Congo, Tanzania, Togo, and Zambia. By October 2013, four African countries that had initially met the criteria had their compliant status suspended because of formidable challenges they face in remaining compliant: Central African Republic, Democratic Republic of the Congo, Madagascar, and Sierra Leone." name="_ftnref2" title="">[2] In temporarily suspending the DRC, the EITI Board Chair, Clare Short, noted:

The DRC still receives shockingly little for its mineral resources. It is not surprising that there are great challenges for the DRC to produce reliable and comprehensive EITI reports, but it is making progress and generating important debate. As the data becomes more reliable and more comprehensive and the debate more widespread, the EITI will help identify areas for improvement in the government and company systems and create momentum for reform. Alongside government efforts on contract and license transparency and other reforms, the EITI in the DRC could be a powerful tool for a better governed sector." name="_ftnref3" title="">[3]

Supporters of the EITI have lauded its contribution to improving natural resource sector governance at three levels: the establishment of an internationally accepted standard for reporting resource revenues by both corporations and governments; the creation of a model framework of multi-stakeholder dialogues on critical public policy issues in signatory countries; and the creation of an international network of governments, NGOs, and corporate actors who share a commitment to revenue transparency." name="_ftnref4" title="">[4] Tanzania has been cited as an example where EITI compliance has improved information on revenue receipts.  In 2009, EITI reports showed a discrepancy of nearly $37 million between what companies said they had paid and what the government said it had earned. In 2010, that discrepancy had dropped to nearly $4 million; in December 2012, the EITI declared Tanzania a compliant country." name="_ftnref5" title="">[5]

Critics of the EITI have, however, pointed out that revenue transparency has neither improved resource governance nor overall development outcomes because the majority of compliant countries have long histories of corruption, civil violence, and dictatorships. Moreover, despite some improvements in the governance arena, most of them retain low levels of citizen participation in politics, weak accountability systems, and corruption." name="_ftnref6" title="">[6] In addition, the implementation of EITI policies depends largely on the very weak institutions that produced the resource curse. As Hilson and Maconachie observe:

For ordinary Africans, the call for host governments to take the lead on implementing the EITI certainly sends mixed signals. On the one hand, it signifies that oil companies and donors are aware that corruption is a problem that plagues mineral-and petroleum-rich sub-Saharan Africa and are demanding that host governments become more transparent and take greater responsibility for their actions. On the other hand, with no penalties in place for inappropriate behaviour, those driving the EITI indicate a willingness to work with people like Presidents Bongo, Obiang, and Deby, who have long siphoned mineral and /or petroleum revenues for personal gain. Why should they change their attitudes with the onset of a voluntary initiative if there is no evidence that corruption discourages foreign investment in the extractive industries?" name="_ftnref7" title="">[7]

Transparency International’s annual reports on corruption in most of these countries strongly support the view that EITI’s compliant countries do not in fact do better than their peers. Thus, although the EITI seeks to ensure transparency in revenue flows between companies and states, it is incapable of policing how officials eventually make use of payments made by corporate actors. As Kolstad and Wig note: “The EITI focuses on one facet of the value chain only; transparency in revenue collection. It does not address upstream activities, such as procurement, which constitute a significant part of the value chain in oil and gas, nor does it cover the distribution of income and public expenditure stemming from the extractive industry revenues.” " name="_ftnref8" title="">[8] The suspension of countries from EITI compliant status may probably be one of the means to deflect some of these criticisms, but it does not address the fundamental problem that without comprehensive institutional change, EITI as a policy mechanism cannot promote participation and accountability. 

To address some of these criticisms, the World Bank and other development actors launched new initiatives such as the EITI++ that have attempted to push for macroeconomic policies to complement EITI’s initial focus on transparency.  Launched in April 2008, the EITI++ goes further by providing member states with technical assistance on improving the management and spending of the resource revenues. The EITI++ technical assistance and capacity building also aim at improving the quality of contracts, the collection of taxes and royalties, economic decisions on resource extraction, managing price volatility and investment for national development." name="_ftnref9" title="">[9]

A potentially interesting policy development that could transform the EITI from a global regime of restraint targeted at poor countries to a global public goods regime is the suggestion by the French and British authorities to become members of EITI.  As part of the triple themes of Trade, Taxation, and Transparency at the G8 summit in June 2013 Prime Minister David Cameron and President Francois Hollande signalled interest to join the EITI and urged the rest of the G8 members to do the same; the United States also announced plans to join the initiative." name="_ftnref10" title="">[10] As more G8 countries come on board, this would make this regime more global and remove the negative connotations associated with restraining poorly-governed countries. Levelling the global playing field would help strengthen the efficacy of EITI in the long run.




" name="_ftn1" title="">[1]Extractive Industry Transparency Initiative Website,

" name="_ftn2" title="">[2]Extractive Industry Transparency Initiative Website, .

" name="_ftn3" title="">[3] “Democratic Republic of the Congo Temporarily ‘Suspended’,” EITI, April 18, 2013, .

" name="_ftn4" title="">[4] Peter Eigen, ”Is There Need for EITI Reloaded?  Building on its Successes,” In M. Roll and S. Sperling, eds., Fuelling the World --Failing the Region? Oil Governance and Development in Africa’s Gulf of Guinea. Abuja. Friedrich Ebert Stiftung, 2011, pp. 136-140; D. S.Garuba, “Is There Need for EITI Reloaded? An Assessment of the EITI Process,” in Michael Roll  and Sebastian Sperling, Fuelling the World – Failing the Region?, 2011, pp. 141-152; and D. Yates, “Enhancing the Governance of Africa’s oil Sector,” Johannesburg, South  African Institute of International Affairs (SAIIA), Occasional Paper, no. 51, 2009.

" name="_ftn5" title="">[5] “Enough Lessons: Time for Africa to benefit from its Oil, Gas and Mining,” The East African (Nairobi), February 2, 2013.

" name="_ftn6" title="">[6] M. L. Norman, “The Challenges of State Building in Resource Rich Nations,” Journal of International Human Rights, vol.10, no.3, 2012, pp. 173-190; M.H. McFerson, “Extractive Industry and African Democracy: Can the Resource Curse be exorcised?” International Studies Perspectives, vol. 11, 2010.

" name="_ftn7" title="">[7] Gavin Hilson and Roy Maconachie, “’Good Governance’ and the Extractive Industries in Sub-Saharan Africa,” Mineral Processing and Extractive Metal, vol. 30, 2009, pp. 70-71.

" name="_ftn8" title="">[8] Kolstad and Wiig, “Is Transparency the Key,” p. 521.

" name="_ftn9" title="">[9] E.M. Alba, An Integrated Approach for Improved Governance and Transparency in Oil, Gas, and Mining Sector. Washington DC: The World Bank, 2008.

" name="_ftn10" title="">[10] EITI, “France and the United Kingdom Commit to Global Transparency Standard,” May 22, 2013,

 

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