Many countries failing test of political will to implement oil and mining industry anti-corruption initiative

Extractive Industries Transparency Initiative deadline arrives with many governments falling short

Tuesday, March 9 marks the deadline for candidate countries to complete external “validation” of their implementation of the Extractive Industry Transparency Initiative (EITI), a voluntary initiative to increase transparent and accountable management of natural resource wealth. Of the 22 countries subject to the deadline, the fact that 20 have not completed validation will further test the credibility of the EITI process.
While these countries are at various stages of implementation – some making laudable progress – many have shown a lack of political will to fully open their books on oil, gas, and mining payments in these countries, says international aid agency Oxfam.
With more than half of the world’s poorest people living in countries rich in natural resources, the problems associated with oil, gas, and mining booms – increased corruption, conflict, and environmental degradation – are pressing concerns for Oxfam and its partners around the world. Transparency of financial flows is an important condition needed to unlock billions of dollars in oil and mining revenues to help fight poverty.

Transparency and accountability

“These industries generate billions of dollars per year in poor countries. The revenues amount to far more than official aid flows and could fund health, education, and other essential services, but are too often squandered or siphoned off by government officials,” said Raymond C. Offenheiser, president of Oxfam America. “The goal of EITI is to increase accountability and transparency in those countries where it is most needed. It’s disappointing that many countries haven’t yet cleared this hurdle, and it’s clear that other complementary measures focused on company and government disclosure are urgently needed.”
Only two countries – Liberia and Azerbaijan – met the deadline and were subsequently judged compliant by the EITI board. While several countries, such as Ghana, Nigeria, Mongolia, and Timor-Leste have completed draft validation reports, others, such as Mali, Mauritania, Niger, Equatorial Guinea, and Peru are further behind. According to EITI’s rules, countries that fail to meet the deadline will be “delisted” or dropped from EITI with the option to reapply for candidate status. Countries have been advised that they may apply for an extension if they provide evidence of “exceptional and unforeseen circumstances” outside the country’s control that prevented them from meeting the deadline.
“The validation deadline was an important test of political will for governments who say that they are implementing EITI. The EITI board must carry out a fair, transparent process for granting any possible extensions to ensure that the initiative maintains credibility. In addition, supporting countries such as Spain should more actively promote the implementation of EITI within their bilateral and multilateral relationships,” said Laura Ruiz Álvarez, extractive industries advocacy officer of Intermón Oxfam (Spain).
A lack of transparency in the oil, gas, and mining sectors – including secret payments, contracts, and opaque government budgets – is a major contributor to the problems in these countries. Oxfam affiliates and local partners around the world have pressed for greater disclosure of information on payments from companies to governments, contracts, and how revenues are spent.

Success where EITI is supported

Despite weak government capacity – as in many resource-rich countries – Liberia was able to be validated and achieve “compliant status” in 2009, proving that even very poor, post-conflict countries can meet the deadline when EITI is strongly supported and promoted at the highest levels of government. “For those governments truly interested in implementation, millions of dollars of technical assistance from donor governments are available. The board should not accept sluggish government implementation as sufficient reasons for extensions. If extensions are given, the board should explicitly disclose the reasons for the extension cited by the country in its request,” said Offenheiser.
Since October 2006, a strong governance structure has been in place for EITI, including a multi-stakeholder board including company, government, and civil society representatives as well as a clear process for implementation and validation. In 2008, the first 22 candidate countries were given the March 9, 2010 deadline to assess their progress as input into a board decision as to whether or not they are fully “compliant” with the rules of the initiative.
The EITI board will consider all extension requests received by the March 9 deadline at its meeting on April 15/16. Oxfam International believes that any extensions given should be based on the existing EITI rules and contain a hard deadline whereby a country failing to meet the new deadline would be automatically dropped from the initiative without any further board discussion.

Supporting civil society

Oxfam International has been supporting civil society partners – many part of the global Publish What You Pay coalition – in several EITI implementing countries who are working to ensure that their governments faithfully follow through on EITI commitments. In several EITI implementing countries, civil society activists promoting revenue transparency have faced harassment, criminal charges, and jail time merely for exercising their rights to freedom of expression as part of their anti-corruption campaigning. Unfettered and independent civil society participation at every step of the EITI process is non-negotiable. In addition, transparency is needed in other areas to ensure that citizens receive a fair deal from the development of extractive industries. This includes disclosure of contracts and easy access to government budget and expenditure information.
While the burden of implementation is on host governments, EITI does not require international oil and mining companies to act unless host governments decide to join the initiative. Given uneven EITI progress to date, additional disclosure rules for oil, gas and mining companies are needed.

US could lead the way

One such measure, The Energy Security through Transparency Act (ESTT), is a bi-partisan piece of legislation introduced in the United States Senate in September 2009 by Senators Lugar and Cardin. This legislation would require all oil, gas, and mining companies to disclose payments to host countries and extend transparency as a truly global standard for company operations. The ESTT Act would apply not only to US companies, but to all companies registered with the US Securities and Exchange Commission. This includes European companies, such as Shell and BP, as well as those in emerging markets like China, India, and Brazil. In addition to the US passage of this law, other financial jurisdictions in Europe and elsewhere should pass similar legislation.
“Those countries that are the headquarters for the global mining industry including Australia, Canada, and the US should also lead by example by committing to become EITI countries themselves. They should also emphasize the importance of EITI implementation in their bilateral relations with resource-rich countries” said Serena Lillywhite of Oxfam Australia.
“The decisions made by the EITI board following this deadline are crucial for real progress in the global movement for oil, gas, and mining industry transparency. Faithful implementation of the EITI, complemented by other disclosure requirements, such as the Energy Security through Transparency Act, will create a new global standard for transparency and help citizens hold their governments accountable for directing revenues to essential services like health and education,” said Offenheiser.