by Heidi Feldt, Coordinator "Publish What You Pay" Germany

The third international conference of the Extractive Industries Transparency Initiative (EITI) took place in Oslo from 16 - 17 October. With this conference the Initiative made a qualitative leap forward. The central theme of the conference was the restructuring of the international management set-up and the introduction of a monitoring and validation system for the participating countries and companies. The EITI idea was launched by the Blair government during the Johannesburg conference in 2002. It was originally proposed by the NGO-supported "Publish what you pay" campaign, which demands disclosure of payments made by oil, gas, and mining companies to resource-rich countries. The aim is to bring about accountability over payment flows and curb corruption. Transparency in payments is regarded as a key prerequisite for a democratic debate on the utilization of revenues from resource extraction.

This third EITI conference was the largest so far with over 500 representatives from resource-rich and donor countries, as well as industry, NGOs, and international organizations. With Petrochina's participation, a public sector enterprise from Asia was represented for the first time.

International EITI management structure
After being based in DFID for several years, the Oslo conference heralded the creation of an independent structure for EITI consisting of a technical Secretariat and a Board. Five members each from the implementing countries, industry and NGOs as well as three representatives from the supporting industrial nations and one investor representative are elected to the Board under the supervision of an independent chairperson. Germany has assumed one of the seats. Where the secretariat is to be located next has yet to be decided. Both Bonn and Oslo have applied and the Board will take a decision on this in its next meeting scheduled in 2006.

Validation process
The implementation of EITI principles and criteria in the resource-rich member countries will be validated every two years by accredited firms or individuals. There will be two categories of EITI implementing countries - candidates, who declare a willingness to implement but have not yet published any figures, and countries (compliants), who have prepared and published the required EITI reports. This will protect the EITI "brand" against free riders and also extend positive support to countries for implementation. Oil and mining companies will also be included when implementation is validated at the country level. Companies that make commitments at the international level are expected to carry out an additional self-assessment on a voluntary basis.

Challenges for EITI
With the Oslo conference, EITI has taken a big qualitative leap forward in establishing itself as an international organization. Unfortunately, implementation within individual countries is not moving ahead as rapidly. Currently there are just two countries – Nigeria and Azerbaijan – that have fully implemented the EITI process and would receive a compliant status after validation. All other countries have had considerable difficulties in implementation or display a lack of political will in bringing about transparency in payments. Two participants from Congo, for instance, were detained at the airport in Brazzaville on their return from the conference for defaming the government abroad. Intimidation and threats against NGOs represent a grave breach of EITI principles and endanger the entire process. The EITI Board therefore intervened resolutely for the release of the imprisoned participants. This case nevertheless illustrates that a lot still needs to be done to ensure civil society participation in the EITI process in some countries.

In Oslo, Germany announced that it would support the EITI initiative during its G8 presidency. One of the proposals was to begin a dialogue with Brazil, Russia, China and India, and their public sector enterprises, through EITI. However, the concrete modalities for this are yet to be worked out.

Against this background, the main challenges that EITI needs to take up over the next two years include:

1) Integration of emerging economies, primarily China, India, Brazil and Russia and their public sector enterprises in the EITI process. A small step has already been taken by including representatives from Pemex (Mexico) and Petrobras (Brazil) on the EITI Board.

2) Inclusion of the mining sector in EITI. EITI is heavily focused towards the oil and gas sectors where profits are very high and revenue and payment flows are particularly complex. The problems in the mining sector are somewhat different since environmental and social issues usually predominate. None of these are on the EITI agenda. The lack of transparency in payments is usually an issue at the regional level, which has so far not been sufficiently addressed under the EITI framework.

3) Tabling a resolution in the UN General Assembly, as proposed by Great Britain, so as to reinforce EITI's international legitimacy. This initiative should also be supported by Germany.

Heidi Feldt is Coordinator of "Publish What You Pay" Germany and a consultant for development cooperation. For further information, please contact H.Feldt@T-Online.de

For more information on EITI, please see http://www.eitransparency.org

Published in:ECC-Newsletter, December 2006