23 February 2016

Africa: Oil, Gas and Mining Transparency Initiative Facing Crisis of Relevance and Legitimacy - Oxfam

press release

Oxfam raised the alarm today that a leading global transparency initiative for the oil, gas and mining sector faces a crisis of relevance and legitimacy. As the Extractive Industries Transparency Initiative (EITI) meets for its Global Conference in Lima, Peru this week, Oxfam calls on the EITI Board and stakeholders to regain its position as a leader in reforming the industry.

"More than ten years since it was founded, EITI is facing a crisis of relevance and legitimacy," said Oxfam spokesperson Ian Gary. "To bring its mission to life, EITI must stay at the cutting edge of extractive sector reform, empower citizen participation and walk the talk on good governance."

Founded in 2002 in an attempt to help address the corruption and mismanagement that plagues the oil, gas and mining sectors in many countries, the EITI is a voluntary initiative for governments wishing to increase transparency and public accountability. It is run by a global board that includes governments, civil society groups, and major oil and mining companies. Forty-nine countries currently say they are implementing the EITI Standard, which sets minimum disclosure rules for information critical for public oversight, such as how much companies pay governments for the right to extract oil and minerals, and how much governments receive.

"While EITI has raised minimum transparency standards for the oil and mining industries, it has struggled to remain at the cutting edge of reform. Some of its most innovative sunshine requirements adopted three years ago are still not in force and new citizen demands for transparency have not yet been met," continued Gary. "Most concerning is that in many countries, the EITI's lifeblood - a free and engaged citizenry that uses EITI reports to push for reform - is under grave threat from legal restrictions and intimidation that risk collapsing the basic theory of change of the initiative."

"After the groundbreaking adoption of oil and mining project-level financial disclosure laws by the US and the EU, the EITI adopted similar requirements in 2013," said Gary. "Citizens all over the world cheered since this would shine a light on how much governments were receiving from specific mines or oil projects. But the EITI has not yet delivered on the promise of timely and actionable project-level financial data and concerned citizens are still waiting."

The EITI Board also voted in 2013 to revise its Standard to include project-level reporting in line with new US and EU disclosure rules, as well as to require state-owned companies to disclose ownership stakes in other enterprises and encourage ownership disclosure by other companies by 2016. The revision also encouraged contract transparency. However, despite efforts by civil society over the past three years, the EITI has dragged its feet on enforcing these new requirements. Ownership disclosure -meant to address the negative impact of anonymous shell companies that facilitate corruption - has been delayed with countries now required to disclose this information as late as 2020.

And while a large number of EITI countries disclose contracts, the EITI remains not only behind the best practice of its members, but also major development institutions that provide it technical and financial support. The International Monetary Fund has endorsed and recommended oil and mining contract disclosure as a best practice for its client countries since 2007, and the World Bank's private sector lending arm, the International Finance Corporation, has required contract disclosure of oil and mining companies it finances since 2013.

In Latin America, the region hosting the EITI conference, social and environmental conflict plague the extractives sector, with little positive impact from EITI. The regional Publish What You Pay network, the Red Latinoamericana Sobre Industrias Extractivas, has called on the EITI to expand its standard to include social and environmental information disclosure.

Mining giant Peru, which is hosting the conference, emblemizes the challenge to EITI's relevance. Despite being compliant with the EITI Standard since 2012, the country is plagued by destabilizing conflict around oil and mining projects. While EITI has managed to bring sunshine to financial flows to national and local government, it has had no discernable impact in preventing the rollback of crucial laws and regulations that protect community rights and address environmental and social risk.

Oxfam did, however, praise EITI's 2015 adoption in 2015 of a Civil Society Protocol meant to begin to address the shrinking civic space and restrictions on civil society occurring in many EITI countries.

"It is crucial that the EITI immediately prioritizes the protection of citizen space," said Juliana Turqui, Oxfam's Program Coordinator for Extractive Industries in Central America. "The CSO Protocol offers an important opportunity for the EITI to ensure its national reports can be used not only by a narrow range of actors directly involved in EITI but also by citizens, journalists and others to hold governments and companies to account. Without this crucial link to accountability, the EITI's long-term impact will be severely limited."

Internal governance challenges within the EITI continue to hamper its ability to address these major challenges. An independent review found important weaknesses in the governance of the EITI Board and in the management of its Secretariat. Oxfam joins the Publish What You Pay coalition in calling for the implementation of the recommendations of this review as soon as possible.

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