tag:theconversation.com,2011:/global/topics/eiti-3434/articlesEITI – The Conversation2014-10-30T00:33:13Ztag:theconversation.com,2011:article/329542014-10-30T00:33:13Z2014-10-30T00:33:13ZWhy isn’t Australia signing up to mining revenue transparency?<p>It’s a far-from-perfect instrument of global governance. But as the <a href="https://eiti.org/">Extractive Industries Transparency Initiative</a> (EITI) coalition celebrates its 12th birthday, it can point to steadily increasing membership and dialogue between countries, mining companies and NGOs.</p>
<p>Regrettably, Australia, with one of the world’s largest mining economies, has still not committed to joining the 48 other nations working on EITI disclosure. This is despite the obvious benefits that greater transparency could deliver to all Australians as they confront deep-seated disputes about mining revenues, taxation, royalties and land use.</p>
<p>With the looming deadline of the <a href="https://theconversation.com/au/topics/g20-brisbane">Brisbane G20 meeting</a>, the Abbott government is considering a “hybrid” model of EITI implementation. This may – or may not – satisfy the stringent disclosure standards imposed by the global transparency movement. </p>
<h2>How does the EITI work?</h2>
<p>Transparency EITI-style involves a simple game of show-and-tell. In each country, private sector “extractive” industries (producers of oil, gas and minerals) voluntarily disclose their payments to governments. Governments reveal the taxes they have received from those companies. An external independent auditor validates and reconciles the two sets of numbers before they are published. </p>
<p>The EITI data gives the public an official glimpse of actual revenue flows from local resource projects. This is information that, in many cases, has never been made public before. Any inconsistencies between the two sets of data point to lax administration or perhaps corrupt skimming of resources. </p>
<p>The particular strength of the EITI model is the involvement of civil society as a full player, alongside governments and mining companies, in each country’s Multi-Stakeholder Group (MSG), which oversees EITI implementation. </p>
<h2>Success stories</h2>
<p>EITI was the brainchild of then-British prime minister Tony Blair. It was launched in 2002 as a new tool to help tackle the “resource curse”: the phenomenon of resource-rich societies that actually become poorer, more unstable and more corrupt as mining extraction takes place. Revenue transparency would, it was hoped, provide civil society with the financial data previously concealed within corporate boardrooms and government treasuries.</p>
<p>Since then, 31 <a href="https://eiti.org/countries">countries</a> have started publishing annual “compliant” EITI reports. Another 17 countries are “candidates”, trialling the process and awaiting formal compliance status granted by the EITI board. </p>
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<img alt="" src="https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=763&fit=crop&dpr=1 600w, https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=763&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=763&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=959&fit=crop&dpr=1 754w, https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=959&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/62856/original/5vcvthxm-1414386985.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=959&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Iron ore being transported in Liberia, one of EITI’s success stories.</span>
<span class="attribution"><span class="source">Flickr/jbdodane</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>One of EITI’s biggest success stories is Liberia. The tiny poor West African country, scene of a horrible 15-year civil war and now struggling against the devastation of Ebola, is an EITI giant. One of the first compliant countries in the world, Liberia has completed five successive years of EITI reporting. The latest round involved 80 companies disclosing payments of more than $US100 million.</p>
<p>EITI in Liberia has strengthened civil society, embedded transparency in the legal system, exposed improper awarding of contracts and used innovative infographics to combat illiteracy and promote wide public understanding of resource revenues.</p>
<h2>Australia lags behind</h2>
<p>This month’s EITI board meeting in Myanmar accepted Chad and Indonesia as compliant. The UK was accepted as a “candidate”. Its involvement is a watershed, as EITI membership now extends beyond the developing “south” to include the developed “north” alongside Norway and the United States.</p>
<p>However, Australia is lagging. When the Gillard government <a href="http://www.foreignminister.gov.au/releases/Pages/2011/kr_mr_111027.aspx?ministerid=2">announced</a> in 2011 that Australia would conduct an EITI “pilot”, this was <a href="https://eiti.org/news-events/australia-pilot-eiti">greeted</a> as a likely prelude to full implementation. But that pilot has only just been completed. </p>
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<img alt="" src="https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=801&fit=crop&dpr=1 600w, https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=801&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=801&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1006&fit=crop&dpr=1 754w, https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1006&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/62858/original/nmkbqs8n-1414387288.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1006&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Little progress has been made since Australia committed to piloting EITI at the 2011 Paris Conference.</span>
<span class="attribution"><a class="source" href="https://flic.kr/p/9nvPuj">Flickr/The EITI</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>During the past three years, EITI standards have become more stringent while Australian enthusiasm seems to have cooled.</p>
<p>The pilot was conducted under an <a href="http://www.industry.gov.au/resource/Programs/ExtractiveIndustriesTransparencyInitiative/Pages/MSGMembers.aspx">MSG</a> convened by the Department of Industry and with representatives of federal and state governments, major mining companies and civil society organisations. The MSG meetings were confidential, save for a grandly titled “communique” issued after each gathering. </p>
<p>The <a href="http://www.industry.gov.au/resource/Programs/EITI/Communique_%20Feb2014.pdf">final communique</a>, issued in February 2014, revealed what appears to be a convenient compromise. The MSG recommended Australia adopt a “hybrid” model: company payments would not be annually reconciled but would be subject to spot checking in a “statistically valid sample”.</p>
<h2>Will a ‘hybrid’ model compromise the EITI?</h2>
<p>The MSG hopes this will be acceptable under EITI rules, though this is not certain. The hybrid concept seems driven by confidence that Australia’s financial and governance arrangements are already so robust that further reporting would be unnecessary. </p>
<p>And, of course, as an Industry Department spokesman reminded me, “the Australian government remains committed to reducing the burden of regulation on Australian businesses”, as well as to open and transparent government.</p>
<p>A local coalition of NGOs under the banner Publish What You Pay has <a href="https://www.oxfam.org.au/media/2014/10/decision-time-for-government-on-mining-transparency/">called on</a> the government to “show leadership on extractive industry transparency” by committing to implement EITI.</p>
<p>One member of Australia’s MSG, Oxfam’s Serena Lilywhite, said Australian candidacy of EITI would:</p>
<blockquote>
<p>… not only send a strong signal to other governments that it is serious about transparency and accountability in the extractive industries, but it would also be better placed to assist with implementation by our neighbours in the Asia-Pacific.</p>
</blockquote>
<p>Beyond these foreign policy goals, Australian implementation would deliver significant domestic benefits. Another MSG member, CAER’s Julia Leske, said: </p>
<blockquote>
<p>Full implementation would help Australians better understand how we benefit from the extraction of our finite natural resources.</p>
</blockquote>
<p>Leske did not spell it out, but this point merits underlining. As the <a href="http://www.smh.com.au/business/mining-and-resources/wa-premier-colin-barnett-lashes-bhp-rio-over-iron-ore-price-squeeze-20141009-113ql7.html">spat</a> between Western Australian Premier Colin Barnett and mining giants BHP Billiton and Rio Tinto shows, disputes about the “right” levels of production, cost and taxation of mineral commodities are not confined to developing economies. </p>
<p>Many such issues confront Australian policy and politics. These include the Rudd government’s failed minerals “super tax”; the <a href="http://www.icac.nsw.gov.au/investigations/current-investigations/investigationdetail/192">allegedly corrupt dealings</a> in relation to Hunter Valley coal mines; WA’s <a href="http://www.drd.wa.gov.au/royalties/Pages/default.aspx">“royalties for regions”</a> program and its claims of <a href="http://www.abc.net.au/news/2014-08-09/west-australian-government-takes-another-swipe-at-tasmania/5660380">unfair distribution</a> of GST revenues; and land use disputes between farmers and coal seam gas producers.</p>
<p>Transparent disclosure of mining revenues and taxation receipts would greatly improve public debate on such issues.</p><img src="https://counter.theconversation.com/content/32954/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Mills lectures at the Graduate School of Government, University of Sydney, which receives funding from the Australian Government for teaching into the Australia Awards program.</span></em></p>It’s a far-from-perfect instrument of global governance. But as the Extractive Industries Transparency Initiative (EITI) coalition celebrates its 12th birthday, it can point to steadily increasing membership…Stephen Mills, Lecturer, Graduate School of Government, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/147572013-06-06T04:21:02Z2013-06-06T04:21:02ZBeyond the talk to action: When does transparency translate to accountability?<figure><img src="https://images.theconversation.com/files/25018/original/38937r75-1370335561.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While there has been an increasing amount of support for transparency initiatives by global resources giants, nations involved are impatient this has yet to translate to social good.</span> </figcaption></figure><p>Global miners are being asked to <a href="https://theconversation.com/australian-miners-disclose-what-you-pay-our-neighbours-14624">publish what they pay</a>, but is transparency enough? </p>
<p>This was the hard question being asked of governments, mining and extractive industry representatives, intergovernmental agencies and the Extractive Industries Transparency Initiative (EITI) Secretariat itself in <a href="http://eiti.org/sydney2013">Sydney recently</a>. </p>
<p>It’s been 10 years since the <a href="http://eiti.org">Extractive Industries Transparency Initiative</a> (EITI) Principles were agreed at the <a href="http://collections.europarchive.org/tna/20070701080507/http:/www.dfid.gov.uk/news/files/eitireportconference17june03.asp">Lancaster House Conference</a>. Those principles set out an agenda for financial transparency in the mining and extractives industries which aimed to promote disclosure of resources companies’ payments to governments and revenues received by those governments. </p>
<p>In six years, numbers attending EITI’s global conference have increased almost tenfold to 1,200 people from 96 different countries, reflecting the initiative’s growing stature and level of buy-in. </p>
<p>Delegates from non-profit organisations such as Oxfam rubbed shoulders with senior government figures and executives from global players such as BHP Billiton, Anglo American, Royal Dutch Shell and Chevron. </p>
<p>Yet, while the EITI has made considerable legitimacy gains and achieved widespread industry acceptance in the decade since the initial agreement, there is increasing debate and impatience from some nations that transparency reporting has not necessarily translated to “social good”. A <a href="http://eiti.org/files/2011-EITI-evaluation-report.pdf">2011 evaluation</a> found that “little impact at societal level can be discerned”.</p>
<p>This is a severe and significant critique. But it does not mean that the EITI should be shelved, or that there is no potential to transform the practices of both extractives companies and governments. </p>
<p>EITI is not “targeted transparency” like the restaurant hygiene labels which help you decide whether to eat at the local curry hut. And it’s not full-scale freedom of information. It’s somewhere in-between, and the reports of representatives from a variety of countries suggest more formalised accountability measures are necessary if EITI wants successfully to advance “financial democracy”.</p>
<p>Changes to the <a href="http://eiti.org/document/standard">EITI Standard</a>, formally launched during the conference, go some way towards addressing accountability concerns. The Standard will apply across the mining life cycle, allowing it to tackle a greater number and scope of issues, including early licensing, corporate social responsibility and issues related to value and supply-chains. </p>
<p>Mid-last year, EITI supporters were frustrated by certain companies pushing back against movements towards <a href="https://theconversation.com/show-me-the-money-should-big-miners-be-made-to-disclose-who-they-pay-8266">project-by-project reporting</a>. The new EITI Standard requires more rigorous and comprehensive reporting at least down to a company level, with some requirements for project-by-project reporting. It is likely these requirements will be the focus of future debates. </p>
<p>Difficulty engaging with and understanding EITI reports has also been a major criticism of the initiative. The recording of payments and revenues is important, but how meaningful is disclosure if the communities it seeks to help cannot understand it? As Open Society Fellow Diarmid O'Sullivan said, “When people hear that mining is coming to their community, they want to know two things: "What on earth has the government done with our money?” and “Are the foreigners cheating us?”</p>
<p>Partly in response to this type of critique, the Standard has been simplified down from 21 rules to seven. EITI reports will also now provide readers with contextual data, such as production data, licensing information, contract disclosures and concessions, to assist them to make sense of the figures presented. The new Standard also places greater emphasis on accessible and meaningful reports. </p>
<p>But to achieve societal impact, accountability beyond EITI is needed in conjunction with the Standard. In an impassioned speech to the conference plenary, OECD Chair of the Development Assistance Committee Erik Solheim declared that, “Unless we have political will, we will not have anything”. </p>
<p>Solheim went on to suggest that to overcome the “resources curse” faced by many of the developing nations in attendance, the international community
should look to his own home country, Norway, for the solution. </p>
<p>Citing Norway’s current 78% tax level for oil and gas, Solheim urged governments to be bolder in their application of tax to create a strong “social contract” between extractives companies and the countries from which they draw their wealth.</p>
<p>But perhaps the conference’s most prescient insight came from Dr Sixtus Mulenga, CEO at Tranter Zambia, when he used a colloquial metaphor to explain that the real solution lies in both accountability and close cooperation of companies, governments and communities. “If you want to understand the workings of the crocodile, you must ask the hippo,” he said, “For they all must live in the pond.”</p><img src="https://counter.theconversation.com/content/14757/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sara Bice is a Senior Associate of the Australian Centre for Corporate Social Responsibility. ACCSR has past and current clients in the mining industry. Details: <a href="http://www.accsr.com.au">www.accsr.com.au</a></span></em></p>Global miners are being asked to publish what they pay, but is transparency enough? This was the hard question being asked of governments, mining and extractive industry representatives, intergovernmental…Sara Bice, Research Fellow, Centre for Public Policy, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/83592012-07-24T04:16:45Z2012-07-24T04:16:45ZIs more transparency for big miners the answer for developing countries?<figure><img src="https://images.theconversation.com/files/13258/original/whd9vkq3-1343003638.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The goals of the Extractive Industries Transparency Initiative are laudable; but an excessive focus on transparency and accountability doesn't always benefit developing host countries.</span> </figcaption></figure><p>A developed country, rich in natural resources, with relatively open and accountable governance lends its support to a global transparency initiative – what does this mean for the world’s poor? </p>
<p>It depends on how you view private governance mechanisms such as the <a href="http://eiti.org/">Extractive Industries Transparency Initiative</a>. While Australia’s pilot of the EITI is an important step in promoting improved extractive industry governance throughout the region, <a href="https://theconversation.com/show-me-the-money-should-big-miners-be-made-to-disclose-who-they-pay-8266">Sara Bice</a> is correct to question the effectiveness of this initiative in developing states such as Papua New Guinea.</p>
<p>The Initiative is the foremost form of private governance in the extractive industries and was created not to help OECD states such as Australia monitor government revenues, but instead to assist developing states in managing resource incomes. The <a href="http://eiti.org/countries">Initiative has 14 compliant and 22 candidate countries</a>, the majority of which are developing states.</p>
<p>Australia’s pilot scheme, however, does not support the goals of the EITI by monitoring Australian mining companies operating overseas; the responsibility for this lies with the host countries. In many cases international extractive firms, operating in developing states, are more powerful than their host governments, an issue which the EITI seeks to redress. However, even the industry’s own governance institution has faced push-back from powerful miners in regards to project-by-project disclosure, as Bice notes.</p>
<p>Proponents of the EITI argue that private governance can supplement state institutions in improving resource sector management. However, as Bice and others have shown, the power of multinational mining firms is unlikely to be overcome that easily.</p>
<p>Zambia’s experience with global extractive firms is indicative of what developing states such as PNG can look forward to. In 2007, the Zambian government sought to increase mining royalty and corporate tax rates from 0.6% and 3% to 25% and 30% respectively, yet failed due to significant resistance from more powerful mining interests.</p>
<p>Under the direction of Western donors, the Zambian government engaged the EITI to effectively privatise resource sector management. However, as explained below, membership is unlikely to be a panacea to the problem of poor resource management in Zambia, or in other developing states.</p>
<p>The EITI’s goals are laudable, yet they alone are not sufficient to break the cycle of poverty in developing states. Firstly, EITI standards apply only to revenues, ignoring the important expenditure side of developing government budgets.</p>
<p>Secondly, an excessive focus on transparency and accountability makes significant assumptions about civil society in developing states. It assumes that a civil society does not exist, or that it is ignorant to rampant corruption. </p>
<p>Instead, the opposite is often true: citizens are aware of patronage, yet are unable to protest corruption within the confines of authoritarian states. Supporters of the EITI argue that such initiatives create a vibrant civil society; instead, they in fact rely on a vibrant civil society to succeed. Just ask the citizens of EITI compliant countries, such as the Democratic Republic of Congo and Chad, who are yet to benefit from increased transparency.</p>
<p>Lastly, companies which operate in an EITI country and sign up as EITI “supporters” are required to do no more than any other company operating within the implementing country. The <a href="http://eiti.org/supporters/companies/howto">EITI website</a> notes that “[b]eing a supporter of the EITI does not require any reporting or disclosure requirements in addition to those for all companies operating in the relevant sectors in countries implementing the EITI”. Instead, membership of the EITI can mean added legitimacy and authority for firms, which are now able to lay claim to being “responsible corporate citizens”.</p>
<p>On this last point, Bice highlights the improved contributions mining firms are making to development goals through the funding of schools and hospitals, a vast improvement on community disasters of the past. This, however, ignores the fact that community development is simpler and more cost effective than supporting greater governance through measures such as an improved taxation system or transparency in the allocation of mining rights.</p>
<p>Australia’s support of the EITI is important and will complement that of others in the region – specifically, the Solomon Islands and Timor-Leste. </p>
<p>However, Australia’s support does little to directly assist developing countries in which our many mining companies operate, such as PNG. These states continue to face issues of poor governance, exacerbated by strong international extractive firms which are able to push back on sector reform. </p>
<p>The implementation of the EITI’s accords, by developing states, should not be seen as a panacea - as outlined above the Institution faces significant challenges, foremost from its own members and supporters.</p><img src="https://counter.theconversation.com/content/8359/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ainsley Elbra does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A developed country, rich in natural resources, with relatively open and accountable governance lends its support to a global transparency initiative – what does this mean for the world’s poor? It depends…Ainsley Elbra, PhD candidate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.