Germany Bonn Aug 2006

Extractive Industries Transparency Initiative (EITI) Workshop - Bonn: 

Extractive Industries Transparency Initiative (EITI) Workshop - Bonn EITI Implementation: Lessons Learned 31 August, 2006 Peter van der Veen Manager Oil, Gas and Mining Policy Division The World Bank

Framework for EITI ImplementationThe EITI Criteria: 

Framework for EITI Implementation The EITI Criteria Regular publication of payments and revenues received by governments from oil, gas, and mining companies Payments and revenues are the subject of a credible, independent audit Payments and revenues are reconciled by a credible, independent “administrator” Approach is extended to all companies, including state-owned enterprises Civil society is actively engaged A public, financially sustainable work plan

Basis for Our Experience: EITI Countries*: 

Basis for Our Experience: EITI Countries* * Angola, Bolivia, Chad, Trinidad & Tobago have had very limited EITI-related activity.

EITI Implementation: Models and Goals: 

EITI Implementation: Models and Goals Core EITI: Reconciliation of payments and revenues. Capacity building in govt and civil society. EITI “Plus”: Reconciliation Capacity building Financial audits of companies and govt Process audits Public info campaigns Sector Governance Program: EITI Plus Broad sectoral reform program including Institutional / regulatory reform Strengthening of licensing systems Revenue management EITI Models

Elements for SuccessPolitical Support Is Essential: 

Elements for Success Political Support Is Essential Clear and direct support from country leadership (President / PM etc.) A dedicated champion at the ministerial level to drive the process The champion can: Marshal resources Remove bureaucratic obstacles Act as the public face of the initiative

Elements for SuccessA Sound Legal Basis: 

Elements for Success A Sound Legal Basis Implementation is greatly aided by legislation which ensures: The legitimacy of stakeholder and working groups. That all companies in a country participate and disclose data Access for auditors Sustainable financing for the Initiative

Elements for SuccessBuilding Sound Partnerships: 

Elements for Success Building Sound Partnerships Need to overcome mutual suspicions between stakeholder groups that have not worked together before The “MOU” model has proven effective Engagement of civil society works best if CSOs can “self select” their representatives Broad NGO Coalitions can greatly improve interaction Need to engage companies fully, particularly: local firms, smaller firms, and state-owned companies State-owned companies may need TA

Elements for SuccessSequencing and Sustainability: 

Elements for Success Sequencing and Sustainability Consultation, awareness raising, and capacity building for all stakeholders needs to happen both: before the reconciliation / audit process – and in parallel with it It is essential to address the issue of sustainable financing early on The lead time for new resources is often longA viable work plan is necessary at all stages

Elements for SuccessFunding and Donor Coordination: 

Elements for Success Funding and Donor Coordination The WB EITI Multi-Donor Trust Fund can play a central role in providing: TA activities where the WB executes, and Funding for Recipient executed programs The Trust Fund needs to be complemented by coordinated bi-lateral assistance: For small, rapid disbursing tasks, and To increase total funding The Implementing Government should devote significant funds / resources to EITI: Essential for commitment and for sustainability

Elements for SuccessIFI and Donor “Mainstreaming”: 

Elements for Success IFI and Donor “Mainstreaming” In many countries the trigger for EITI has been the dialogue with WB, IMF, DFID, and other donors Integration into WB, IMF, and bilateral programs allows for thorough benchmarks and goals EITI can be integrated with other initiatives (e.g. IMF “ROSCs”, WB governance projects, G8 Transparency Compacts) “Mainstreaming” creates rewards to governments for EITI implementation (e.g. improved donor relations) Mainstreaming helps EITI to lead to broader sector reforms

Elements for SuccessViable National EITI Governance Model: 

Elements for Success Viable National EITI Governance Model Involvement of both revenue (e.g. finance, economy) and sector (e.g. mining, energy) ministries A dedicated “secretariat” in government led by a coordinator (reporting to the “champion”) An internal government working group to ensure coordinated government action A broad multi-stakeholder group (MSG) which is the ultimate decision making body for EITI Specialized sub-committees of the MSG: For appointing the auditor / administrator For resolving specialized issues Inclusion of legislative branch (i.e. parliament)

Key Implementation IssuesAudit and Reconciliation: 

Key Implementation Issues Audit and Reconciliation Different degrees of “audit”: Reconciliation only: Takes government and company statements and matches figures. Only investigates discrepancies in the data. Assumes data provided by companies and government is correct Reconciliation + investigation: 1 + audits information not audited to international standards, or asks for more information from organizations not audited to international standards State oil and gas companies not fully audited to international standards: Can be a major political issue, Often takes years to implement full IAS Trade-off between cost and credibility? Links to other audits (process, fiscal, production, etc.)

Key Implementation IssuesAggregation vs. Disaggregation: 

Key Implementation Issues Aggregation vs. Disaggregation Tax and royalty elements reported: How much detail? What payments are included (e.g. “voluntary” & social payments)? Valuation of production volumes (e.g. government share of oil) Reporting aggregate revenues and payments or revenues and payments by company? Nigeria (disaggregated), Azerbaijan (aggregated)

Key Implementation IssuesSpecific Approaches for Mining?: 

Key Implementation Issues Specific Approaches for Mining? Domestic and junior companies and artisanal miners account for significant production Sector is more fragmented: by product (copper, gold, diamonds etc.), by companies, by mine technologies Contract and fiscal terms tend to be simpler and are often publicly available Mines are closely integrated into local communities – so transparency is often not paramount for local priorities Payments to sub-national levels of government are substantial Issues often center on production volumes and the value chain – more than on revenues

EITI Is Still a “Young” Process: 

EITI Is Still a “Young” Process There are many issues, which we are only now beginning to deal with The strong core standards need to be balanced with some flexibility on how they are implemented Before Validation has been established we do not know if any EITI country has fully implemented all six EITI criteria EITI policy and guidance continues to be developed through “learning by doing"

Thank you: 

Thank you World Bank EITI Team Contacts: Peter van der Veen – pvanderveen@worldbank.org Michael Levitsky – mlevitsky@worldbank.org Charles McPherson – cmcpherson@worldbank.org