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Campaigners welcome new extractive transparency standard

Source: Thomson Reuters Foundation - Thu, 23 May 2013 16:19 GMT
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SYDNEY (Thomson Reuters Foundation) – Campaigners say a new standard passed by the board of a global initiative to increase transparency in the oil, gas and mining sector will bring more transparency to the extractive industry and to resource-rich countries.

Since 2002, the Extractive Industries Transparency Initiative (EITI) has helped activists, investors and the media to hold companies and governments to account by promoting the publishing of resource revenues.

However, the EITI has come under pressure from campaigners to make countries do more than simply publish revenues and, on Wednesday, one day before the start of the biennial EITI Global Conference in Sydney, the EITI board signed off on an enhanced standard which it will require EITI-implementing countries to adopt.

One of the significant changes in the revised standard is that it will require that EITI-implementing countries to publish far more contextual data about their extractive industry including production figures, the registration of licenses and permits and the transfer of extractive revenue from federal to local government.

Until now, a company operating in one of the 39 EITI-implementing countries has had to publish the payments it has made to a government and a government has had to publish the revenue it has received from a company. Those two sets of accounts are independently verified and published as a publicly available EITI report.

“The new standard has opened the door for EITI to become much more relevant to meaningful policy reforms to improve resource governance,” Erica Westenberg, EITI policy officer at the Revenue Watch Institute said in a statement on Wednesday.

About 3.5 billion people live in resource-rich countries and yet many of them remain in poverty. Greater accountability over how governments use natural resource revenues is seen as one way to change that.  

Since the EITI was conceived, the United States has passed a law that arguably goes further than the voluntary EITI standard. The Dodd-Frank Act mandates that all extractive companies listed on a U.S. stock exchange publish all payments to governments of more than $100,000 on a project-by-project basis. The European Union is expected to pass a similar law in June. In part due to those two laws, transparency campaigners pushed for the EITI to enhance its standard.

“Transparency has momentum,” Robert Cekuta, a member of the EITI board and a senior official at the U.S. Department of State told the conference in Sydney on Thursday.

“We see this (standard) as an important way for countries to get an understanding of their political system (and) what is going on in their economy, we see transparency and accountability as basic to a sound investment climate,” Cekuta added.

The board of the EITI includes officials from EITI-implementing countries and designated supporting countries, transparency campaigners, extractive industry executives and members of the investor community.

CHANGES TO THE STANDARD

In addition to the changes outlined above, the new standard includes: disaggregated reporting – companies will be required to report their payments on a project-by-project basis, as they must if covered by the U.S. and European laws; state-owned enterprises will be required to report on the financial transfers they make to other government entities; and governments will be encouraged to ensure the data published by both the companies and the governments is machine-readable.

The sheer quantity of data that is expected to be produced by the new standard and the U.S. and European laws means that if it is not produced in a machine-readable and accessible format, it is likely to be far less useful to those looking to analyse and compare the data across different countries.

However, two of the big reforms that campaigners have pressed the EITI to enact – the disclosure of beneficial ownership and the disclosure of the extractive contracts – are not included as mandatory in the revised standard and are instead simply “encouraged”.

On the topic of the disclosure of beneficial ownership, Stuart Brooks, an EITI board member and manager of international relations at the oil company Chevron, said that while it is not currently mandatory in the new standard, it will be in the future.

“We have taken a pragmatic view on this, we have all agreed that this will happen but we first of all need to run a pilot scheme to see what the complexities are before we put this on countries that may not have the capacity to deal with it,” Brooks told the conference on Thursday.

The most contentious issue that the board faced when revising the standard was the issue of disclosing extractive contracts, Brooks said. Some people on the board said that it was an issue for national governments to decide for themselves and other board members said that it should be made a mandatory requirement in the standard, he added.

“We found consensus, we did not find unanimity ... we found a way through which was ‘this is now encouraged’. Governments that wish to do that, will do it and everybody will abide by that and those that don’t wish to do it, won’t have a question placed upon them,” Brooks said.

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