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The Extractive Industries Transparency Initiative: addressing resource curse?

31 Jul 2015

The Extractive Industries Transparency Initiative (EITI) has been criticised for failing to respond adequately to the needs of mining communities and economies. 

Mine in the Philippines, an EITI country. Source

Is the EITI fit for purpose, or is another approach to extractive industries governance needed?

The EITI is a voluntary global standard for disclosing company payments and government revenues made from extractive industries, overseen by in-country multi-stakeholder groups of civil society, government and companies. It was established partly due to NGO campaigning around transparency in natural resources, as part of the broader goal of addressing the 'resource curse'. The resource curse manifests itself not only in corruption and conflict over resources, but in inflated currencies which damage sectors outside of resource extraction.

The EITI operates on a voluntary basis – with countries committing to implementing the reporting guidelines. Countries apply the EITI Standard to ensure full disclosure of taxes and other payments made by producing oil, gas and mining companies. These payments are disclosed in an annual EITI Report. There are currently 29 compliant countries – meeting all EITI requirements and 17 ‘candidate’ countries – not yet meeting all requirements. To its proponents, the EITI process provides a level of transparency to mining economies which enables a more stable investment environment. Companies also see the benefits of transparency. Norwegian company Statoil's head of sustainability, Hege Marie Norheim, claims that while not disclosing project payments may appear attractive for short-term competitiveness, disclosing them is “better for the company’s long-term stability”.

Recent criticism

Sir Paul Collier, an Oxford academic, has recently criticised the EITI –which he had originally promoted. He argued that: “We thought the problem was overwhelmingly transparency and accountability. It just wasn’t”. Sir Paul argued that exposure of corrupt government practices led to administrations adopting wasteful spending of mining revenues. Clare Short, Chair of the EITI Board, countered that transparency was a building block, not a stumbling block. She argued: "Is he really suggesting that transparency about a country's earnings from oil and mining is a cause of failure to save at the peak of the commodity boom?”

Where to for the EITI?

How then, should we assess the EITI’s success? In observing its initial aims perhaps the key is to scrutinise whether it is tackling the resource curse. However, there are only a few countries such as Norway and Botswana that are using their resources revenues to diversify their economy and grow their public services. While 70% of Botswana’s current GDP is based upon diamond extraction, it is using revenues to invest in education and healthcare.

Part of the answer lies in greater emphasis on strengthening debates around using revenues with the broader participation of communities and civil society in these debates. For mechanisms like EITI to work, a strong civil society is required in order to pressure governments to act upon negative reports. However, this requires countries to act on issues of education and human rights reforms. IIED researchers revealed that civil society organisations in EITI countries like Azerbaijan are being oppressed outside of EITI processes, emphasising the need for broader good governance in a country.

Furthermore, the researchers argued that the transparency agenda should be made more relevant to local communities –not only through better dissemination of data and information but also greater support for implementation of the EITI at the local level. The EITI’s newest entrant, Myanmar, appears to be embracing localised implementation. There are plans for multi-stakeholder groups bringing together government, civil society and private sector actors to be set up in four regions; Magwe, Mandalay, Rakhine and Shan, ahead of full national implementation.  Officials involved in the Myanmar scheme argue that if used in tandem with good government policy, the EITI can help develop a more sustainable and diverse economy.  Zaw Oo, Myanmar’s National EITI Coordinator saw EITI as: “a useful tool to design our escape from the resource curse, and an important catalyst for ongoing reform”. Such a nuanced approach to the EITI, seeing it as a launch-pad for further reform accords with the recommendations of the IIED study.  They argued that linkages needed to be built between the EITI and other poverty reduction and sustainable development initiatives in resource-bearing regions. This means a greater emphasis on environmental protection, tax reform, community investment, as well as the traditional focus on corruption. It will be interesting to watch developments in Myanmar and possible lessons to be learnt for other developing countries.