Does EITI add up?

1
Global Witness

• Does EITI add up?
• A Global Witness perspective

2
Some good work so far

• Extensive international awareness of the
  importance of revenue transparency
• Broad acceptance that host and home country
  governments, companies, investors and civil
  society all have a role to play
• Countries volunteering to improve transparency
  including Azerbaijan, Ghana, Kyrgyz Republic,
  Nigeria, Sao Tome, Timor Leste, Trinidad all
  gain great credit from their leadership
• Complementary approaches elsewhere inc. G8, WBG
  EIR and IMF Guide to Resource Revenue
  Transparency

3
But must try harder.

• Needs wider international buy-in and support
  (Norwegians, US?)
• Integration of EITI approach into post-conflict
  construction/peace building efforts (eg Sudan)
• Critical failure to use this phase of learning
  by doing to develop a clear, objective and
  consistent approach
• Implementers what should we do?
• DFID what would you like to do?
• ? Hindering countries trying to do the right
  thing but needing advice
• Also urgent need for quality control and brand
  protection.
• ? Riggs Bank scandal EITI used to defend immoral
  activities
• Need some flexibility in implementation but its
  getting hard for NGOs to support an initiative
  with no clear overall approach

4
Generating transparency or confusion?

• Analysis of EITI sourcebook and guidelines
  reveals numerous discrepancies, oversights and
  flaws You can pick and choose
• Content of reporting templates
• Benefit streams
• Who reports and when and how
• Accounting policies used (clearance dates etc)
• Absence of clearly delineated responsibilities by
  parties
• (e.g. auditors may prepare books)
• Level of aggregation of data
• Auditing an option?
• Materiality levels for reporting
• Currency advice questionable (US)
• Involvement of civil society in process unclear
  (if any!)
• How discrepancies in data will be investigated

5
Transparency or confusion? (2)

• Lack of clarity means
• Host governments, EITI secretariat, companies and
  donors may reinvent the wheel in each country at
  great cost and considerable delay. Indeed,
  companies may face many different reporting
  regimes!
• Consistency problems between company and
  government data which will hinder reconciliation
• Bemused and frustrated local civil society and
  citizens
• These comments in no way criticise current
  efforts by countries like Nigeria to improve
  transparency of their revenues. Rather it shows
  they are not being properly assisted!
• Good to have some flexibility but other financial
  reporting initiatives - IMF SSDD, new IMF Guide,
  IAS etc. dont have this laissez faire approach
  because it fundamentally undermines the purpose
  of such initiatives.

6
Enough is enough

• Seven obvious requirements for viable
  country-specific initiative
• 1. companies publish what they pay to
  governments
• 2. governments publish what they receive    
• 3. data are independently audited and results
  published
• 4. data be readily and freely accessible to
  citizens
• 5. there is a transparent mechanism to resolving
  discrepancies
• 6. state fiscal agents (like national oil
  companies) are independently audited and the
  results published too
• 7.  citizens formally oversee all the above
• This model is in line with best practice from IMF
  interventions in Angola and Congo Nigeria and
  Sao Tomes attempts to implement EITI.

7
Improving and simplifying reporting

• Report provides nine areas to improve clarity and
  consistency of reporting efforts (like espousing
  principle of auditor independence). These will
  benefit
• EITI secretariat as one main model to follow
• Adopting countries who can adopt most of a system
  for immediate use with only minor modifications
• Private and public sector reporting entities as
  only have to use a single system that closely
  parallels accepted international standards
  elsewhere (IFRS etc)
• Auditors who value consistency and comparability
  as part of their work
• Civil society to whom the initiative is targeted

8
Where next?

• Will EITI become a key governance indicator for
  resource revenue dependent countries?
• A lot more could be done
• Urgent revision of existing guidelines and
  sourcebook to deliver coherent approach that
  meets principles of intelligibility, relevance,
  reliability, comparability and consistency
• Improve diplomatic outreach and legitimacy
• ? UN General Assembly resolution (like Kimberley
  Process)
• Bank and Fund and other donors integrate EITI
  into own policies more. IMF safeguards for
  lending etc.

9
Where next? (2)

• Need to involve civil society from start (and
  address their own limited capacity). Should
  create formal oversight panel.
• More links with other emerging standards like
  IFRS
• Proactively promoting transparency in new
  extractive countries or those undergoing
  reconstruction
• ? put transparency into law at earliest stage
  rather than vague administrative commitments
• More work on the link to accountability if
  money goes missing, what then?