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What is EITI?
The EITI is an international standard for transparency in extractive industry payments and receipts. In countries participating in the EITI, companies are required to publish what they pay to governments and governments are required to publish what they receive from companies. These figures are then reconciled by an independent administrator.
A multi-stakeholder group (MSG) that includes representatives from the government, industry and civil society oversees the EITI process in each country. The exact composition of the MSG varies by country, the EITI criteria requires that all stakeholders must be represented and able to operate free of "undue influence or coercion." Representatives on the MSG are responsible for liaising with their constituencies and acting as their spokesperson within the MSG.
Other groups may also be important to the EITI process. In some countries, for example, parliamentarians have played an important supporting role by passing legislation that formalizes the EITI as law. Civil society groups and media that are not directly involved in the MSG may also play an oversight role or assist in educating the general public on what the EITI is and why it is important.
The EITI International Board, which oversees the initiative, is comprised of representatives from EITI implementing and supporting country governments, extractive companies and investors, and local and international civil society groups. The EITI International Secretariat - based in Oslo, Norway - is responsible for turning the policy decisions of the International Board into action and coordinating worldwide efforts to support EITI implementation.
Why is EITI important?
In the effort to translate natural resource wealth into better development for the local population, the EITI sits in the center of the value-chain, focusing on revenue transparency. In resource rich economies, oil, gas and mining companies make payments directly to governments. Normal channels of public accountability are often missing in resource-dependent countries because the government has an autonomous source of revenue not dependent on taxing its citizens. Government reliance on extractive revenues can result in lower public service delivery, increased opportunities for corruption and higher dependency on the extractive sector. The EITI aims to address this problem by increasing public information, empowering the public to more effectively hold government accountable for resource revenues. Some other benefits of increased revenue transparency include:
- Improving revenue collection and management processes
- Creating a more attractive investment climate
- Building trust between governments, companies and citizens
- Providing a forum to discuss broader extractive industry governance issues such as physical and process audits, contracts transparency and sub-national revenues
How is EITI implemented?
Although the EITI is a national process that varies from country to country, the EITI International Board has established a set of rules outlining the basic criteria and guiding countries through the three stages of implementation: sign-up, candidacy and compliance.
Countries voluntarily commit to the EITI by signing up to the initiative –yet they are not recognized as implementing EITI at this stage. In order for a country to become an EITI Candidate, it must first complete the four sign-up requirements and submit a proposal to the EITI International Board. If the Board is satisfied that these indicators have been fulfilled, the country will be officially recognized as a Candidate country.
EITI Candidate countries have two years to complete the preparation, disclosure and dissemination phases. These phases include the establishment of the MSG which will oversee the various steps in the EITI process including: endorsement of the Country Work Plan; agreement on reporting templates; establishing terms of reference for and choosing an organization to undertake the reconciliation; and review, comment and dissemination of the EITI report.
Within two years, EITI Candidate countries must undergo the EITI Validation process, which determines whether or not a country has achieved Compliant status, may have its Candidate status extended beyond two years, or loses its Candidate status. The Validation is carried out by an independent Validator selected by the MSG who must follow the methodology outlined in the EITI Rules. Validation will only result in the granting of EITI Compliant status if the EITI International Board deems that a country has met all the indicators in the Validation Grid.
What are the key debates during national EITI adaptation?
Although the EITI Criteria and Validation Guide set the minimum standards for EITI implementation, the EITI process is designed to be country driven. Variations in interpretation of the EITI criteria, and adaptations to country needs, can produce different outcomes within basic EITI implementation. Key areas where the basic EITI process is often adapted to local contexts include:
- Determining "materiality" of the various extractive sectors, revenue streams and companies covered in the EITI Report. The EITI Rules stipulate that all material oil, gas, and mining payments and receipts must be reported and defines materiality as any revenue whose ‘omission or misstatement could materially affect the final EITI Report.’ Countries have to decide, however, where this threshold lies and how the result will impact the scope of the report.
- Reconciliation or re-audit of government and company figures. The EITI Rules require that all government and company reports are based on audited accounts to international standards. Even where reports are based on audited accounts, however, the MSG may decide to include further auditing in the EITI process. This may be the case particularly if there is significant public doubt about the underlying numbers.
- Aggregating or disaggregating revenue flows and/or company figures. While the EITI Rules do not require that reported data be published in aggregated or disaggregated form, a growing number of the EITI Reports are showing disaggregated revenue flows and this is widely recognized as best practice. Publishing company figures in a disaggregated form has been more controversial but the benefits are slowly gaining recognition and countries are increasingly adopting this as the norm.
Many countries have shown a desire to use the EITI forum to produce programs that go beyond the minimum EITI standards. For example, the MSG may decide to expand their work to include:
- Reporting on non-production related payments
- Inclusion of non-extractive industry companies and sectors such as timber or fisheries
- Use and distribution of revenues by the government
- Legislation backing EITI
- Publication of contracts and fiscal terms
- Information regarding volume and other industry processes
EITI Implementers and Supporters
As of January 2010, there are 30 EITI Implementing countries with Azerbaijan and Liberia being the only EITI Compliant Countries. The remaining 28 EITI Candidate countries are: Albania, Burkina Faso, Cameroon, Central African Republic, Democratic Republic of Congo, Republic of Congo, Cote d’Ivoire, Equatorial Guinea, Gabon, Ghana, Guinea, Kazakhstan, Kyrgyzstan, Mali, Mauritania, Madagascar, Mongolia, Mozambique, Niger, Nigeria, Peru, Sao Tome & Principe, Sierra Leone, Tanzania, Timor-Leste, Yemen, and Zambia. The EITI continues to grow, with many of these Candidate countries preparing to undergo the Validation process and several other countries signaling their intent to implement the EITI.
The EITI also enjoys support from a range of stakeholders. From the private sector, 40 major international oil, gas and mining companies support the initiative along with over 80 global investment institutions. Hundreds of local and international civil society organizations support the EITI either directly or through the Publish What You Pay (PWYP) coalition. International organizations supporting the EITI include the World Bank, IMF, African Development Bank, Asian Development Bank, the European Bank for Reconstruction and Development and the European Investment Bank. The EITI has also been endorsed by the UN, G8, G20 and AU and is supported by governments including Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, the United Kingdom, and the United States.
More Information?
For more information on EITI, visit: www.eiti.org.
You can also find more documents related to EITI throughout the Resource Center and the RWI website.
