The limits of voluntary transparency

The idea of the EITI is convincing: countries that produce oil, gas or minerals should publish how much they charge for licences, and the companies that take up the licences should publish what they pay to governments. Transparency would thus prevent money flows into murky channels when it should benefit a nation.

So far, the EITI has been fairly successful: 32 resource-rich countries are seeking membership, 17 more support the Initiative politically and financially, and even more countries have expressed interest. The EITI is backed by international organisations such as the World Bank. Its high international profile and the prospect of attracting investors have prompted many countries to become formally associated with the EITI.

But it is a long way from idea to practice. Since its inception in 2002, the Initiative has steadily refined its rules. In February 2008, the EITI International Board decided that any country applying for full membership must meet specific criteria within two years. The most important task is to get representatives of private-sector companies, government and civil-society organisations around the same table. They need to establish a multi-stakeholder group to monitor the national process. The government must agree to disclose its revenues at regular intervals and require companies to submit their data too. Once the multi-stakeholder group sees that the necessary structures are in place, a validator is appointed to study the progress the country has made. On the basis of that validation, the EITI Board decides whether a country is EITI compliant or not.

For the first 22 countries, the deadline expired in early March. So EITI would now have 22 full members if everything had gone according to plan. In actual fact, however, only two countries met the high standards on time: Liberia and Azerbaijan. Guinea had already backed out voluntarily. The main reason Liberia succeeded is the government’s commitment, says Tim Bittiger of EITI's Berlin office: “President Ellen Johnson Sirleaf recognised at an early stage that the EITI is a good means of combating the resource curse.” From 1989 to 2003, Liberia was in the grip of a civil war that was largely financed by illegal trade in diamonds. Azerbaijan too has been working hard on reporting structures.

As soon as countries apply to become EITI members, they have to present a yearly financial report on the extractive industries sector. In practice, this is the main stumbling block. Sierra Leone and Yemen, for example, were found to have made no serious effort, says Heidi Feldt, who has been studying extractive industries for around 20 years and is the German coordinator of the Publish What You Pay initiative, which collaborates closely with the EITI.

On the whole, however, the reasons for so many countries being behind schedule are quite diverse. Nigeria’s President Umaru Yar’Adua approved of the Initiative, Feldt says. But due to his illness and the ensuing chaos in recent months, transparency reports and the EITI application process were neglected.

Peru, on the other hand, has made great efforts to disclose payments from the natural resource sector. For several years the Ministry of Finance has been publishing numbers, Feldt says. “Even so, the EITI process is only slowly moving forward.” In some cases, those efforts have gone beyond what the EITI requires, Feldt points out. But the country has failed to document its achievements in reports. The governments of other countries simply missed the deadline, some lacked the political will, Axel Müller reckons. His job is to observe resource extraction in the Gulf of Guinea on behalf of Miserior, a Catholic charity in Germany. Feldt points out that other countries such as Cameroon submitted their validation reports before March and are now waiting for a reply; others, however, were unable to even agree on a validator.

Because so many governments let the deadline slip by or only submitted their validations just before the closing date, decisions on extending deadlines have a political dimension. In principle, the rules only allow countries to extend their status as candidates for membership in exceptional, unpredictable circumstances. So in strict terms, many of the countries that failed to hand in their documents in time ought to be excluded from the Initiative. All parties were made aware of the two-year deadline, after all.

The EITI is now at a crossroads. If it excludes all latecomers, it will lose influence. If it relaxes the criteria, it may put at risk the credibility it enjoys thanks to its clear rules. Moreover, a strategic decision needs to be made. Do applicants have to meet every single criterion or should progress as such be recognised too? Representatives of international NGOs tend to demand strict standards while the local representatives of civil society are pleased to see minor improvements. “A bit of transparency is better than none,” says Honoré Ndoumbe of the Cameroonian NGO Focarfe and a member of the national EITI committee. Thanks to the Initiative, he argues, more information has become available. He also reports that the standing and number of non-governmental organisations have increased. “The dialogue between NGOs, government and industry leads to greater democracy and more freedom of expression”, he says.

Heidi Feldt, however, believes the current situation shows the limits of voluntary commitment. She fears that only a few countries will become full members and others will simply be left out. That would undermine what all the experts agree is a major achievement of the Initiative: the fact that many countries have begun to publish data. The EITI management has announced it will publish decisions in mid-April.

Axel Müller reckons that extensions will be granted. Decisions on individual applications, however, are quite a different matter. Countries that have made efforts but still do not meet all criteria will probably have their candidate status extended, he says, but those who have shown no interest in the process in the past two years are likely to be struck from the list – with an option to start the process over again from scratch.

Claudia Isabel Rittel