Press Release / March 16, 2005

EITI on the right track: let’s go further and faster

We would like to congratulate those countries that are starting to improve the transparency of their revenues from oil, gas and mining by implementing the EITI. Companies, citizen’s groups, international institutions and the hard-working DFID Secretariat have all played an important part in these efforts. We hope many more host governments will now follow suit, backed up by strong international support.

One of the most important outcomes from today should be that the EITI will secure what it has long needed: a clear set of minimum criteria for successful implementation. This will establish a common framework for diverse countries and help build trust in the public disclosure process.

We would emphasise three critically important principles that are embedded in the criteria.

First, payments by extractive companies, and receipts by governments, must be independently verified and published, and there must be a mechanism for identifying any discrepancies arising in the figures. If the information that EITI generates is not independent and credible, EITI implementation will fail: it might even become a diversionary process to avoid real reforms.

Second, EITI cannot be controlled by governments and companies without the active involvement and scrutiny from civil society. If citizens are not involved, and are unable to discuss the Initiative and its results freely, then the long-term benefits for governments - better governance and, hence, better development - and companies - a more stable long-term operating environment - will not emerge. Giving civil society groups the skills and knowledge to take part in EITI is a crucial part of the Initiative, but support often lags behind other activities.

Third, it should also be clear that, once a country decides to implement EITI, company participation is mandatory. The right of companies to protect commercial confidentiality should never include payments to the state: the public interest is simply too important. Transparency should also be embedded in laws at the earliest stage in these countries, and any legal or contractual obstacles to transparency overcome.

The EITI process is on the right track, but it needs to go further and faster. After two years, we are only starting to see the first few countries produce credible figures. There are still outstanding issues about the reporting templates, such as aggregation of payment information between companies: our February 2005 report Making it Add Up discusses these in detail.

In the past, EITI discussions have tended to concentrate purely on the role of developing country governments. But as the Africa Commission reminded us last week, the responsibility for fighting corruption and supporting good governance does not lie with these countries alone. That responsibility is shared with the companies that extract resources, the countries that import them, and the international institutions that lend to the developing world. All of them have made progress in promoting transparency, but they all need to do more.

Some major companies are now advancing the cause of revenue transparency and we congratulate them. A few still need to be reminded that endorsing the EITI is only the first step in the process, not the last: it means being less secretive, not using the Initiative as a cover for past failures. Companies need to send the same message to governments in private that they send in public: watchdogs like Global Witness will be observing closely.

International financial institutions, which provide finance to the extractive industries and to resource-dependent countries, are starting to recognise that transparency is one of the ingredients of good governance, which is a prerequisite for all their wider aims.

The IMF has taken a very important step forward in developing its Resource Revenue Transparency Guide, which we hope will codify best practice and become a key reference document for governments, donors, companies, investors and civil society organisations alike.

The Fund now needs to turn the Guide into a yardstick for deciding when to lend to resource-dependent countries. It makes little sense, and may even contravene the IMF’s own safeguard policies as a public institution, for the Fund to subsidise governments that earn revenues from the extractive industries but are unable or unwilling to use them properly.

The World Bank Group has taken steps in the right direction by beginning to require transparency from extractive projects that use its funding. This requirement should now be extended to all its lending to revenue-dependent governments. We expect to see other development institutions and export credit agencies following the Bank’s example and requiring transparency in return for finance.

Industrialised countries that play host to major extractive companies can play a greater part in the success of the EITI, not just by outreach to developing countries, but by passing legislation that requires their companies to disclose revenue payments to governments. A new analysis by Save the Children has revealed that the G8 member whose regulatory regime does the most to promote transparency is, in fact, Canada. It is ironic that its government is not yet participating in the EITI. We hope that Canada might now join the Initiative and share that experience, and that other governments will follow its legislative example.

Minimal investment in supporting transparency can bring significant benefits, so let’s see much more diplomatic support for the EITI from the OECD countries. Only the UK and France are really cheerleading so far. We particularly hope that Norway will join them in a leadership role given its own exemplary revenue management experience. Let’s also see more rewards for implementing countries, for example in the form of debt relief.

Above all, let’s see meaningful participation from the one government that arguably has the most interest in seeing the EITI succeed: the United States. Revenue transparency is a factor in good governance which, in turn, makes for political stability and the security of supply that should matter to such a huge energy importer.

Let’s also get OPEC countries, India and China on board.

EITI could also seek wider endorsement and legitimacy from the global community. Perhaps like the Kimberley Process, a UN General Assembly resolution may help to secure that legitimacy.

The basic model of EITI is getting established: it now needs the political will and resources to become universal.