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Extractive Industries Transparency Initiative (EITI)

GBS Annual ReviewKey Issue 4 – Challenges in Combating

CorruptionDar Es Salaam

November 26, 2008

Implementing EITI in Tanzania:The Pathway Ahead and Key Challenges

(including role of EITI Multi-donor Trust Fund)

Presentation by Vedasto Rwechungura

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Overview of Presentation - EITI in Tanzania

Recap of the purpose of this presentationTo inform participants in the Annual Review exercise

what the EITI concept is, its status in Tanzania, the process of assisting Tanzania to adopt and implement EITI principles and the role of the World Bank and other interested DPs in the process.

Why EITI? The EITI architecture globally

EITI process and criteria – and benefits to countries

Emerging results from EITI in other countries

Over the medium-term: “Beyond EITI …….”

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Underlying issue that EITI seeks to address: “managing natural resources sustainably”

Although Tanzania is not yet mineral-dependent, given the global experience of resource-rich countries, it is important to lay the foundation early for transparency and good governance in the sector

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Good governance can help mitigate the “resource curse” ….

Good governance has multiple features: Clear and stable laws and regulations Rule of law High level of capacity and skills in government Fiscal monetary and budget discipline Even and consistent application of laws and fiscal regimes to all Open dialogue between government and civil society Public sector/private sector balance Transparency

Transparency and good sector governance in the context of Tanzania policy goals

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The Multi-Stakeholder EITI Streering Group/Committee

National EITI Secretariat(to manage day-to-day EITI work)

The Government

Civil Society Companies

EITI – a global standard locally implemented to meet national goals

and requirements

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EITI Global Structure – EITI Board

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Sign up

Dissemination

Country undertakes external validation

Disclosure

Preparation

Validation is the end-objective for an EITI country

The EITI Process ..... in a nutshell(EITI partners’ goal is to help an EITI country to implement the EITI cycle)

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The EITI Process - part of a bigger picture

Award of licenses

&contracts

Regulation&

monitoring of operations

The EITI provides a forum for dialogue and a platform for broader reforms

RevenueDistribution

& Management

Implementation of Sustainable Development

Policies

Government Spending

Companies Disclose

Payments

Government Discloses Receipt

of Payments

Oversight by a Multi-Stakeholder Group

Independent Verification of Tax & Royalty

Payments

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Reconciler / Auditor

National StakeholderGroup (Government,

Companies, Civil Society)

All EI companies complete

individual data reporting templates

(and provide information as

required to Audit firm)

Govt agencies provide data

(and information as required)

-- produces EITI Report for Stakeholder Group

Data from

Companies

Data from

Govt agencies

-- investigates / getsmore data to reconcile any discrepancies

EITI Report to

public

Essence of EITI is disclosure – based on decisions of EITI scope taken by national

EITI stakeholder groups

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…. At country level: EITI Board has approved 23 countries as “EITI candidate” – 16 in Africa Of these, 10 have published one or more EITI Reports to date (Sept 2008) (Azerbaijan, Cameroon, Gabon, Ghana, Guinea, Mauritania, Mongolia,

Nigeria, Kazakhstan, Kyrgyz Republic) Norway is first among developed countries to announce EITI adoption Countries are able to align national goals with global EITI standard

…… Globally: Now established as the standard on transparency in resource areas with

consensus on EITI principles, objectives, criteria International EITI architecture fully in place (EITI Secretariat, Oslo) Range of supporting companies; civil society; agencies like World Bank,

African Development Bank, etc.

EITI has achieved strong momentum at national level

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What the EITI International Secretariat does

Overall oversight of EITI and policies globally candidacy process validation process (EITI compliance

Provide guidance on methodology

Provide advice on best practice

Link up an implementing country with other implementing countries and organisations

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What World Bank and EITI Multi-donor Trust Fund (MDTF) does to support EITI

implementation At country level, World Bank managed MDTF (and all partners) help to:

build 3-way consensus for EITI - at start of process and throughoutbuild multi-stakeholder structures to design and manage EITI provide technical and financial support for EITI implementationensure EITI process lead to EITI “compliant” status (validation)

At global level, World Bank managed MDTF activities designed to: support global EITI movementproactive knowledge dissemination and best practice sharingproactive support for sub-regional EITI collaboration and training

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Clear signal to all stakeholders and investors on national commitment to transparency

Membership of a well-known global standard … while also

Building collaboration and trust among government companies and civil society on mining / oil issues in Tanzania.

Brings together data on mining/oil financial flows in one place

Possibility for improving sovereign and corporate ratings, and hence foreign and domestic investment through lower risks

Benefits of adopting EITI as seen by countries

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In some cases, EITI has yielded additional revenues from extractive industry (from revisiting past corporate tax payments)

Possibility to expand to anti-corruption focus in oil gas and mining (although EITI is not a direct anti-corruption instrument)

Diagnostic for assessing effectiveness of EI revenue collection Platform for moving to wider governance reforms beyond EITI

BUT … EITI is not cost-free to governments. Needs:clear and sustained political commitment at senior level

assigned staff to the EITI effort – with the needed resources

budget funding for EITI process – especially EITI validation

Benefits of adopting EITI as seen by countries

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“Beyond EITI”: EITI Criteria is about a minimum standard - which does not aim to

cover everything

EITI CRITERIA Independent reconciliation /

audit of payments made and revenues received.

Publication and widespread dissemination of results.

Comprehensive coverage, i.e. all companies including state-owned and local companies.

Full engagement of civil society in the process.

Public, financially sustainable, time-bound plan of implementation.

BUT - WHAT ABOUT: Transparency of licensing? Were “fair” terms and conditions

negotiated? Are long-term revenue and

benefits for country optimal? What companies pay vs. what

they should pay? Revenue allocation e.g. to sub-

national level and communities Environment / social linkages?

… and the whole of the “expenditure side” (not in EITI)

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Licencing and Awarding

of Contracts

Monitoring of

Operations – compliance

Collection of Taxes- and Royalties

Distribution of

Revenues(and

spending side)

Utilization in Sustainable Projects –

social and environ.

EITI processEITI process• EITI is a key goal in itself – but is also a first step towards a broader extractive industry (EI) governance reform and sound EI management

“Beyond EITI”: EITI is narrowly-focused yet provides platform for further reforms and

good EI governance

• Beyond EITI, countries are seeking support on governance over the entire resource cycle (the “++” agenda) -- this is distinct from EITI

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Thank you!For information on EITI globally visit the website:

www.eitransparency.org

World Bank contact:Vedasto Rwechungura

World Bank Dar Es Salaam Office vrwechungura1@worldbank.org

Extractive Industries Transparency Initiative