EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE · 2016-02-20 · 1 Effective oversight by the multi-stakeholder group. 2 Timely publication of EITI Reports. 3 EITI Reports that include

EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE Using the EITI Standard for Reform

[Date] [Location]

INTRODUCTIONS:

• Name/organization/ country

• What would you like to learn from this training?

“We recognize that a public understanding of government revenues and expenditure over time could help public debate and inform choice of appropriate and realistic options for sustainable development.” EITI Principle 4

What’s the goal of EITI?

How can information drive change? •Creates neutral space for building trust and facilitating discussion

Multi-Stakeholder Dialogue (MSG)

• Links EITI to broader national policy priorities

Objective Setting

(Work plan)

• Useful in evaluating pressing questions & concerns

Disclose Relevant Information

(Reconciler TOR & EITI Report)

• Enables informed public understanding & policy debates

Analysis of Information

(CSO & Media Analysis)

• Increases accountability & development Links to Policymaking & Institution building

(Parl., Min., Reg.)

What has been then impact of EITI in your country so far?

EITI: IMPACT 2003-2011

Source: 2011 RWI Survey of PWYP Coalitions

Has the EITI Process led to reform?

ₓ Box Ticking and Deadlines

ₓ Public relations exercise

ₓ ‘Silo’ effect – not linked to reform

Have the reports had an impact on public understanding of the sector?

Data not useful ₓ Too Aggregate

ₓ Misses key streams

ₓ Does not cover important issues

Reports are not analyzed ₓ CSOs don’t understand how to use the data

ₓ Data is not in a form that is easy to assess

1 Effective oversight by the multi-stakeholder group.

2 Timely publication of EITI Reports.

3 EITI Reports that include contextual information about the extractive industries.

4 The production of comprehensive EITI Reports that include full government disclosure of extractive industry revenues, and disclosure of all material payments to government by oil, gas and mining companies.

5 A credible assurance process applying international standards.

6 Reports that are comprehensible, actively promoted, publicly accessible, and contribute to public debate.

7 The multi-stakeholder group to take steps to act on lessons learned and review the outcomes and impact of EITI implementation.

2013 EITI Requirements

Cross-cutting Concepts For Each Disclosure

Disaggregation: level of detailed reporting e.g. Project? Company? Region?

Cross-cutting Concepts For Each Disclosure: Materiality (Revenues): what level of payments to include?

Cross-cutting Concepts For Each Disclosure

Materiality: Licenses

Cross-cutting Concepts For Each Disclosure:

Reconciliation

Production? Contracts/Licenses?

Non-fiscal revenues

Local Government

Social Impact

Revenue Collection

Production Data

State Owned

Enterprises

Sub-National

Revenue Management

Allocation of Rights

Social Impact

What policies get us from resources to development?

How is value captured? Where do benefits go?


Production Data

Revenue Collection

How is value captured? What information does the EITI capture?

What the EITI requires: Register of licenses(§3.9) License award/transfer process & any deviations (§3.10) *Beneficial owners (§3.11) *Contract/license disclosure(§3.12)

What the EITI requires: Exploration activities (§3.3) Production volumes & values (§3.5(a) & §3.4(e)) Export volumes & values (§3.5(b))

What the EITI requires: Legal framework & fiscal regime (§3.2 ) Economic contribution (§3.4(a)-(c)) Taxes & primary revenues(§4.2(a)) In-kind revenues(§4.1(c)) Infrastructure/ barter provisions(§4.1(d)) Transportation Revenues(§4.1(f))

Sub-National

SI

What the EITI requires: Direct payments/receipts (§4.2(d)) Mandated sub-national transfers (§4.2(e))

What the EITI requires: Employment §3.4(d) Mandated social payments (§4.1(e))

What the EITI requires: Revenues recorded & not recorded in national budget (§3.7) *Earmarked revenues & budget/audit processes (§3.8)

Revenue Management

Where do benefits go? What information does the EITI capture?

SOE

What the EITI requires: SOE level of beneficial ownership (§3.6(c)) Government transfers by SOEs (§4.2(c)) SOE quasi-fiscal expenditures (§3.6(b))

What is the role of SOEs? What information does the EITI capture?

Register of licenses (§3.9)

Exploration activities (§3.3)

Legal framework & fiscal regime

(§3.2 )

SOE level of beneficial ownership (§3.6(c))

Direct payments/r

eceipts (§4.2(d))

Employment §3.4(d)

Revenues recorded &

not recorded in budget

(§3.7)

License award/ transfer

process & any deviations (§3.10)

Production volumes &

values (§3.5(a) & §3.4(e))

Economic contribution (§3.4(a)-(c)) __________

Taxes & Primary

Government transfers by

SOEs (§4.2(c))

Mandated national/subnational transfers (§4.2(e))

Social payments (§4.1(e))

Earmarked revenues & budget/audit processes

(§3.8)

Beneficial ownership (§3.11)

Export volumes &

values (§3.5(b))

Revenues (§4.2(a))

___________

In-kind revenues (§4.1(c))

SOE quasi-fiscal

expenditures (§3.6(b))

Contract/ license

disclosure (§3.12)

Infra./ barter provisions (§4.1(d))

Transport Revenues (§4.1(f)

Allocation of Rights Production

Data Revenue Collection

SOE Revenue Management

Sub-National

Social Impact

Register of licenses (§3.9)

Production volumes &

values (§3.5)

Taxes & Primary

Revenues (§4.2(a))

SOE level of beneficial ownership (§3.6(c))

Subnational payments/receipts (§4.2(d))

Mandated company social

expenditures (§4.1(e))

Revenues recorded &

not recorded in national

budget (§3.7)

License award/ transfer

process & any deviations (§3.10)

In-kind revenues (§4.1(c))

Government transfers by

SOEs (§4.2(c))

Mandated national

/subnational transfers (§4.2(e))

Earmarked revenues &

budget/audit processes

(§3.8)

Register of beneficial

owners (§3.11)

Infrastructure/ barter

provisions (§4.1(d))

SOE quasi-fiscal expenditures

(§3.6(b))

Contract/ license

disclosure (§3.12)

Transportation Revenues

Key Requirements for Policy Linkages


Production Data Revenue

Collection


Sub-National

Social Impact

EITI work plan objectives reflect national priorities (§1.4(a)) Annual MSG review of EITI impacts on natural resource governance (§7.2)

Transition Arrangements: IMPLEMENTING COUNTRIES required to implement the new EITI Standard as soon as possible, including :

(1) EITI workplans updated with necessary actions

(2) annual activity reports that document progress

[Insert applicable 2014 or 2015 reporting deadline(s)]

[Insert applicable country name(s)]

First Report under New Standard

RWI Guide to the EITI Standard

Online

www.revenuewatch.org/eitiguide






Group Exercise: What are the priority challenges in the

extractive sector?

Form Country Groups and discuss the following:

•What are the most pressing problems in extractive sector governance that need to be fixed in your country ?

Target concrete policy needs: ✓ Try: “ensure companies pay the taxes they owe” X Not: “increase accountability”

•Identify three priority problems in each group and write them on separate cards. These will be collected and discussed in the debrief.

Instructions

Identifying Policy Priorities using the Resource Governance Index & Natural Resource Charter

Natural Resource Charter

The NRC Framework

A framework to think through the governance and economic management of extractive resources.

Takes a comprehensive and inclusive approach.

Provides the framework and support. Implementation is locally driven.

The NRC & EITI

• Identify policy priorities that EITI should address

• Contextualize reporting topics (Guide)

• Turning EITI reports into a reform agenda

• Facilitate Charter benchmarking processes

– MSGs and the benchmarking process, some risks

– Map compliance with Standard against benchmarking

– Avenue for pursuing action plans

• EITI as entry point

How are the NRC & EITI being used in other countries?

Tanzania:

– A national process to learn from mistakes in mining so that they get natural Gas right. TEITI represented on the expert panel.

Sierra Leone:

– A national planning process housed in the Ministry of Mines, to help the country develop a new Core Mineral Policy and develop the post-EITI validation plan.

A measure of transparency and

accountability of the oil, gas and mining

sector in 58 countries.

– 2012 data

– 173 questions

– 50 indicators

– >100 researchers

http://www.revenuewatch.org/rgi

80% of countries do not meet satisfactory governance standards

Satisfactory (71-100) Partial (51-70) Weak (41-50) Failing (0-40)

[insert applicable region]

Asia-Pacific Regional Assessment

RGI Factsheet for the region at http://www.revenuewatch.org/rgi

Satisfactory Weak

Partial Failing

http://www.revenuewatch.org/rgi

Methodology

2013 Afghanistan RGI Assessment

http://www.revenuewatch.org/countries/eurasia/afghanistan/overview

49th/ 58

[insert applicable country RGI Assessment]


2013 Afghanistan RGI Assessment http://www.revenuewatch.org/countries/eurasia/afghanistan/overview

[insert applicable country RGI Assessment]


Comparing Regional Performance

The RGI & EITI

Using the RGI can help:

• Identify reporting gaps that EITI should address

• Highlight EITI as avenue to address poor RGI scores

• Incentivize advances

• Demonstrate feasibility and good practices

Independent, open and competitive

licensing process:

Production volumes

Clarity in roles and responsibilities revenue

collection

SOC financial reporting Subnational transfer rules defined in law

Requirements of environmental and

social impact assessments

Comprehensive public sector balance

- Including SOC balance, fund balance and non-

resource balance

Information on licensing process

Production value Exports, costs, prices

Primary sources of revenue:

production streams, royalties, special taxes

SOC production data Reserves ,Production

volumes ,Prices Value of resource

exports, Investment in exploration, Production costs,Production data by

company and/or block

Government follows subnational transfer

rules

Publication of environmental and


Publication of subsidies

Publication of contracts

Secondary sources of revenue:

Dividends, Bonuses ,License fees, acreage

fees, other

SOC revenue data Production streams,

Royalties ,Special taxes, Dividends, Bonuses,

License fees; Acreage fees, Other

Comprehensive subnational transfer

reports:- Understandable and

timely reports

Checks on budgetary process

- Legislative oversight - Review of revenue by

national audit institution

- Legislature reviews audit reports

Checks on licensing process

SOC quasi fiscal activities

- Comprehensive, timely and quantitative data

Publication of subnational transfer

rules

Comprehensive SOC reports

- Cash flow statements - Joint ventures

Subnational reporting of transfers

SOC reports audited - Reports are audited

and published including subsidiaries

Quality of subnational transfer reports

Understandable and timely reports

RGI x EITI 2013 Standard: What can the RGI tell us? Allocation of

Rights Production Data

Revenue Collection


Sub-National

Social Impact

Independent, open and competitive

licensing process:

Production volumes

Clarity in roles and responsibilities revenue

collection

SOC financial reporting Subnational transfer rules defined in law

Requirements of environmental and


Comprehensive public sector balance

- Including SOC balance, fund balance and non-

resource balance

Information on licensing process

Production value Exports, costs, prices

Primary sources of revenue:

production streams, royalties, special taxes

SOC production data Reserves ,Production

volumes ,Prices Value of resource

exports, Investment in exploration, Production costs,Production data by

company and/or block

Government follows subnational transfer

rules

Publication of environmental and


Publication of subsidies

Publication of contracts

Secondary sources of revenue:

Dividends, Bonuses ,License fees, acreage

fees, other

SOC revenue data Production streams,

Royalties ,Special taxes, Dividends, Bonuses,

License fees; Acreage fees, Other

Comprehensive subnational transfer

reports:- Understandable and

timely reports

Checks on budgetary process

- Legislative oversight - Review of revenue by

national audit institution

- Legislature reviews audit reports

Checks on licensing process

SOC quasi fiscal activities

- Comprehensive, timely and quantitative data

Publication of subnational transfer

rules

Comprehensive SOC reports

- Cash flow statements - Joint ventures

Subnational reporting of transfers

SOC reports audited - Reports are audited

and published including subsidiaries

Quality of subnational transfer reports

Understandable and timely reports

Afghanistan RGI x EITI 2013 Standard: What can the RGI tell us? Allocation of

Rights Production Data

Revenue Collection


Sub-National

Social Impact

100 100

78

100

50

33

44

33

50

67

0

0

0

0

0

0

0

0

0

67

Group Work

Form Country Groups and read the RGI assesment for your country. Be prepared to present your group’s assessment in a 5 minute presentation

•Where are the biggest transparency gaps?

•Which EITI policy areas do these gaps corresond to?

•How can the RGI support your advocacy in EITI or beyond?

Capturing the Value of

Our Natural Resources


Production Data

Revenue Collection

Is my country effectively capturing the value of our natural resources?

Capturing the Value: What explains these differences?

Comparing Oil Producers in 2010 (average of all EITI data years)

Exploration and Exploitation: The Production Cycle

Royalties

Production Peak

Tax

Time

Exploration/Capex

Monitoring revenues not enough – need to understand contracts and production data

AZB, KAZ

CAM,GAB, CON

Pro

ject

Rev

enu

es

Typical Fiscal Regime

Gross Revenue To Investor

Profit

After-Tax Profit

After-WPT Profit

Investor’s Dividend

W/H tax

Government Revenue

Revenue From Petroleum Sales

Royalty

Production Cost

Profit Tax

WPT

Govt. Equity

Dividend (minus W/H tax)

Investor Return

Bonus/ Rentals

[WPT = windfall profit tax or resource rent tax]

[W/H = withholding tax]

Allocation of Rights AR

Policy decisions regarding the allocation of rights to extract natural resources can either lay the foundation for successful sector management or set a path towards misuse. Governance challenges related to the allocation of rights include: Bribery

Politically-exposed persons

Poor negotiation Lack of oversight of the terms of the license

Governance Challenges

Allocation of Rights AR

Source: Radio Free Europe/ Radio Liberty http://www.rferl.org/content/azerbaijan_gold-field_contract_awarded_to_presidents_family/24569192.html

What will the EITI Report tell us?

Key Questions EITI Disclosure

How can you find license registries and key terms?

License Registry §3.9

What is the process for licenses to be given away?

License Allocation §3.10

Who owns extractive sector licenses? Beneficial Ownership §3.11 & §3.6(c)

*Where can you find the contracts that govern natural resource projects ?

Contract Disclosure §3.12

AR

License Registry: Why is it important?

AR

Color Key:

Blue = EITI Standard Requirement

Orange = RWI Recommendation

Teal + * = EITI Standard Encouragement

What can the EITI report tell us?

License Registry: Basic Requirements §3.9(a)/(b)/(c)

License Holder

Commodity Dates:

application/ award/duration

Coordinates of license

area

License Registry: RWI Recommendations

Level of Ownership/

Operator GIS

Beneficial Ownership, contract, production levels,

project level payments

What can the EITI report tell us?

AR

Example: Zambia’s Online License Database

License Allocation: Why is it important?

AR

License Allocation: Basic Requirements §3.10(a)-(c)

description of award/ transfer

process

recipient information

technical and financial criteria

list of applicants and the bid

criteria

License Allocation: RWI Recommendations

*efficiency & effectiveness

reasons for refusal

conflicts arising out

of bids

non-trivial deviations

key terms of winning bid

Special conditions

AR

Example: Afghanistan Aynak copper tender process

AR

POP Quiz!

Name one EITI requirement and one RWI recommendation for license registries

Why is it important to have information on the

technical or financial criteria for the license

allocation process?

What is the materiality level for license

registries?

Beneficial Ownership: Why is it important?

*Subject to successful piloting, the EITI Board will develop detailed provisions with a view to make this a requirement from 1 January 2016.

AR

Beneficial Ownership: Basic Requirements §3.11(a-b) & §3.6(c)

Gov’t, SOEs and their

subsidiaries

Beneficial Ownership: RWI Recommendations

*publicly available register

legal ownership and control

company name, proof of incorporation, address

legal form and status

shareholder register >5%

share

*identity and the level of ownership

*entities that bid for, operate or invest in

extractive assets

Politically Exposed Persons

AR

International push to crack down on tax avoidance (OGP, OECD, G20, G8)

Contract Disclosure: Why is it important?

AR

Contract/License Disclosure: Requirements §3.12

Contract/License Disclosure: RWI Recommendations

exploration & exploitation

un-redacted active contracts

& new contracts

public education & dialogue strategies

* publicly disclose all exploitation contracts and

licenses

online, free of charge & anonymous to

search

AR

Gov’t policy on contract/license

disclosure for exploration & exploitation

Legal provisions, actual disclosure

practices & planned reforms

Overview publicly available

contracts/licenses & reference/ link

Example: www.resourcecontracts.org

Example: www.contratsminiersguinee.org

Example: www.mom.gov.af

POP Quiz!

True or False: Disclosing beneficial ownership

information will continue to be

encouraged in EITI.

True or False: A country could chose to skip

including any information about

contracts in EITI reports because it’s just

encouraged.

Production Data PD

Production volumes and values can be an important factor in the level of government take that countries receive from extraction. Lack of information on production can result in underpayment. Governance challenges related to production include: Tax evasion/underpayment Poor revenue forecasting


Production Data PD

What can the EITI Report tell us?


What is the resource (and revenue) potential? – Implications for sustainability

EXPLORATION ACTIVITIES §3.3

What are the current levels of production? – implications for revenues, sustainability

TOTAL PRODUCTION §3.5(a) & §3.4(e)

What is the level of economic impact and resource dependency?

TOTAL EXPORTS §3.5(b)

PD

Exploration Data: Why is it important?

PD

Exploration: Basic Requirements §3.3

overview of exploration

activities

Exploration: RWI Recommendations

displayed with relevant info: exploration license

and any revenues

PD

Production: Why is it important?

PD

Production: Requirements §3.5(a) & §3.4(e)

Total production volumes for

covered fiscal year

Production: RWI Recommendations

Estimated proven

reserves

Value of production by commodity,

state/region

Stage of production of

commodities in each state

Figures for reporting year

+ prior year

Source for volume data & methodology

for valuation

PD

Contribution to the economy of EI in key producing regions for

covered year

Disaggregation by company, project & major commodity

sub-type

If challenges with measuring

production, then reconciliation

Exports: Why is it important?

PD

Exports: Basic Requirements §3.5(b)

total export volumes/values

Exports: RWI Recommendations

information on the destination market for

exports

purpose and buyer for non-exported commodities e.g. those that are processed domestically

Figures for reporting year + prior year

Source for volume data & methodology

for valuation

PD

POP QUIZ!

Why is it important to have exploration data?

Why is the stage of production of a project

important?

Burkina Faso Example: Contract + Production + Revenue data

Inputs

Royalty Formula (Contract, Art. 11.4): 3% of FOB value Production 2009 (EITI Report): 54,430.62 oz

Average global gold price, 2009 (London Fixing): $972.35/oz Average gold price in Burkina Faso, 2009 (EITI report): $936/oz

Average exchange rate, 2009 USD/fCFA (www.oanda.com): 481

Estimates and Results

(A) Rate (B) Estimated price (fCFA)

(C) Production Total (A X B X C)

Expected revenue using global price

3% 467 700 54,430.62 763,716,601

Expected revenue using Burkina price

3% 450 216 54,430.62 735,166,080

Actual revenue, according to EITI

845,162,117

http://www.oanda.com/

Revenue Collection RC

Policy decisions regarding revenue collection determine the wealth available from natural resources for financing national development. Governance challenges related to the revenue collection include: Weak tax administration

Lack of coordination across government / oversight bodies,

Weak oversight over non-financial revenues

Corporate tax evasion

Others already covered (e.g. poor negotiation)

Governance challenges

Revenue Collection RC

Typical Fiscal Regime

Gross Revenue To Investor

Profit

After-Tax Profit

After-WPT Profit

Investor’s Dividend

W/H tax

Government Revenue

Revenue From Petroleum Sales

Royalty

Production Cost

Profit Tax

WPT

Govt. Equity

Dividend (minus W/H tax)

Investor Return

Bonus/ Rentals

[WPT = windfall profit tax or resource rent tax]

[W/H = withholding tax]



What laws establish the economic contribution of the sector?

LEGAL FRAMEWORK & FISCAL REGIME §3.2

What is the economic impact of revenues? ECONOMIC CONTRIBUTION §3.4(a)-(c)

What is the value of taxes & primary revenues?

TAXES & PRIMARY REVENUES §4.1(a)/(b)

What is the value of in-kind revenues? IN-KIND REVENUES §4.1(c)

What is the value of barter deals? INFRASTRUCTURE/BARTER ARRANGEMENTS §4.1(d)

What is the value of transportation revenues?

TRANSPORTATION REVENUES §4.1(f)

What level of detail can the report provide?

DISAGGREGATION §5.2(e)

RC

Legal/Fiscal Framework & Economic Data: Why is it important?

RC

Legal Framework & Fiscal Regime: Requirements §3.2

Overview of laws &

regulations

Legal Framework: RWI Recommendations

Describe contract system and key features

Link to legislation & summarize

main provisions

Summary of fiscal regime,

including decentralization

Explain if core fiscal terms in legislation or

negotiated in contracts (describe)

Indicate authority(ies) collecting major payments;

division of roles

Describe method of subnational transfers

Roles/responsibilities of gov’t

agencies

*Document reforms

underway

RC

Example: Ghana EITI Report 2012

Economic Contribution : Basic Requirements §3.4(a)-(c)

size of EI (value , % GDP), incl. estimate of

informal sector

Economic Contribution : RWI Recommendations

total gov’t revenue from EI (number and %)

exports from EI (number and %)

tie to domestic economic

context informal sector

RC

Example: Kyrgyzstan EITI Report 2011

C RC

Taxes and Primary Revenues: What have been the reporting challenges in your country?

RC

Taxes and Primary Revenues : Basic Requirements

§4.1(a)/(b)

• The host government’s production entitlement (such as profit oil);

• National state-owned company production entitlement; • Profits taxes; • Royalties; • Dividends; • Bonuses, such as signature, discovery and production bonuses; • License fees, rental fees, entry fees and other considerations

for licenses and/or concessions; and • Any other significant payments and material benefit to

government.

RC

Taxes and Primary Revenues: Basic Requirements

§4.1(a)/(b)

description of each revenue stream, materiality definition

and thresholds

options / rationale for each revenue

stream

RC

Example: Liberia’s 2011 EITI Report sets materiality thresholds per sector.

Example: Tanzania’s 2011 EITI Report explains how materiality threshold

was set and indicates that threshold results cover 99 percent of the total

revenue

RC

http://eiti.org/files/Liberia-2011-EITI-Report.pdf

http://eiti.org/files/Tanzania-2011-EITI-Report.pdf

Example: Mozambique EITI Report 2010

RC

In-kind revenues: Why is it important?

RC

The Importance of In-Kind Revenues

% Revenue in ‘In-Kind Receipts’

Yemen 98% Cameroon

80% Nigeria

67%

Azerbaijan

88% GBN CG- BR

Azerbaijan EITI reports 2003-2010

In Kind receipts as a % of total Revenues RC

RC

In Kind Revenues: Basic Requirements §4.1(c)

where production share or other in-kind is material, disclose

volumes sold & revenue received

In Kind Revenues: RWI Recommendations

* Disaggregate product, price, market and sale

volume

*reconciliation of volumes & revenues

Reconciliation >10% of extractive revenue

reporting by company and by sale

list buyer, date, price, volume and grade

disaggregate as with other payments

(company, project)

SOEs should publish sales data

Registered traders should report payments

RC

Example: Nigeria EITI Report 2009-2011

Infrastructure/Barter: Why is it important?

RC

Infrastructure / Barter: Basic Requirements §4.1(c)/(d)

MSG review: agreements, parties, goods and services committed and resources

pledged

Infrastructure / Barter : Recommendations

Status of good/service and any audit

Full text disclosure of agreement

Estimated value of good/service (quality,

speed, budget estimates vs. actual spend) vs. evaluation

methodology for commodity

RC

DRC EITI 2010: list of infrastructure/loans and value

RC

Transportation Revenues: Why is it important?

RC

Cameroon EITI 2011: value & volumes / Chad-Cameroon Pipeline

Project by Project Reporting: Why is it important?

RC

Revenue Disaggregation: Basic Requirements §5.2(e)

Company Government

entity Revenue stream

RC

Project level, provided that it is consistent with the United States Securities and Exchange Commission rules and the forthcoming

European Union requirements

Disaggregation of Revenue Reporting:

Project by Project Reporting §5.2(e)

“The multi-stakeholder group is required to agree the level of disaggregation for the publication of data. It is required that EITI data is presented by individual company, government entity and revenue stream. Reporting at project levelis required, provided that it is consistent with the United States Securities and Exchange Commission rules and the forthcoming European Union requirements.”

RC

EU Accounting Directive (effective, Oct 2013)

Project definition: “the operational activities that are governed by a single contract, license, lease, concession or similar legal agreements and form the basis for payment liabilities with a government”

RC

POP QUIZ!

Does every country have to report transportation

revenues?

For in kind transactions, is it the volume sold or the revenues received

that gets disclosed?

Group Exercise: Role play

1. Review RWI’s Guide to the EITI Standard considering the disclosures that fall under that Policy Issue you have been assigned. Review the governance challenges, EITI requirements, RWI recommendations & country examples for each disclosure.

2. Agree on one EITI disclosure requirement or encouragement that you want to discuss further.

3. Plan out what a conversation would look like between one party who is advocating for this disclosure and one party who staunchly opposes it.

• Each side should express and counter 2 or 3 different arguments for/against such disclosure.

• Pick 2 members of the group to play the roles.

Instructions

SOE State Owned Enterprises

Dominant players in many countries

High governance risks: autonomous, often politicized, weak oversight,

multiple roles and conflicts of interest Examples of challenges from Angola, Nigeria, Cameroon, Congo-

Brazzaville, Ghana

Governance challenges State Owned Enterprises SOE

State-owned Enterprises

Fiscal Roles and Transactions

“Quasi –Fiscal Expenditures”


State Owned Enterprises


How exposed/involved are SOEs? LEVEL OF BENEFICIAL OWNERSHIP §3.6(c).

What is the value of SOE transfers and payments to treasury?

•TRANSFERS AND PAYMENTS

§3.6(a); 4.2(c)

What is the value of SOE spending? QUASI-FISCAL EXPENDITURES §3.6(b)

SOE

SOEs: Basic Requirements §3.6(a-c) & §4.2(c)

Level of beneficial ownership and any changes, transaction

details, equity, liabilities & loans

SOEs: RWI Recommendations Details of purchases/sales,

retention, dividends, operational costs including

selection of buyers

Structure of subsidiaries, activities, objectives, governance structures,

earning, identity/share level of other owners

Transfers and payments

QFE disaggregation/ reconciliation

Quasi-fiscal expenditures

Transfers from Gov’t to SOE (contributions to operating/capital

expenses, loans, in-kind transfers, fuel subsidies)

Annual Reports

SOE

Statoil transfers to CBoN in EITI

• Nigeria EITI: QFE Security Operations

• Cameroon (2006-8): SOE Transfers & Payments to Treasury

• Cote d’Ivoire (2007-8): Transfers between partners & with treasury

• DRC: disaggregated shareholding revenues of SOE

SOE reporting in EITI SOE

POP QUIZ!

What is the difference between an SOE and a

Company?

What are some typical forms of Quasi-Fiscal

Expenditures?

Sub-National

SI

Revenue Management Where do benefits go?

AR

Subnational Revenues SR

Governance challenges related to subnational revenues include:

• bribery of local officials to gain a social license to

operate; • low technical capacity of subnational governments to

negotiate and monitor company obligations; • poor coordination and information asymmetries with

national government; and • ineffective spending facilitated by opacity around the

receipt of extractive revenues at the local level.


SR

Subnational Revenues SR


Subnational Revenues


How much is transferred to SN and what is the formula for revenue sharing? And are there any differences between actual and expected transfers?

Mandated Transfers and Revenue Sharing Formulas §4.2(e)

How much do companies pay and SN govts receive? And are there any differences btn actual and expected transfers?

Direct Payments §4.2(d)

SR

Example: Peru’s Revenue Sharing Formula (minerals)

SR SR

Example: Indonesia’s Revenue Sharing Formula (Oil)

SR

Subnational Transfers: Basic Requirements §4.2(e)

Transfer amounts

Subnational Transfers: RWI Recommendations

Authorized assignments

Revenue sharing formula

Tax base, tax rate and price if useful and

timelines for transfers

Discrepancy between calculated

and transferred amount

Legislation and institutional

arrangements

*Disclosure and reconciliation of

discretionary and ad hoc transfers

SR

Example: Ghana (2010)

Subnational Direct Payments: Basic Requirements §4.2(d)

Material disclosure and reconciliation

Subnational Direct Payments: RWI Recommendations

Contract disclosure

Local MSG oversight

Subnational reporting on direct payments as % of budget and how it was

spent

SR

Must include: proceeds sharing; local tax raising; non-tax charges

e.g. fees, levees, fines

Example: Zambia EITI Report (2010)

Example: Peru’s National Government Website

POP QUIZ!

How would you monitor transfers from central

government to subnational entities?

What is the right level of materiality and disaggregation for

subnational payments?

AR

SR Social Impact SI

Economic inequality (distributional)

Community discontent with companies (unmet expectations) Use of funds to buy off local actors

Lack of coordination with local development plans


Social Impact SI


Social Impact


What are extractive industries contributing to employment?

Employment§3.4(d)

What are Companies social expenditures and who is receiving it? Reconciliation if possible.

Social Expenditures§4.1(e)

SI

Employment: Basic Requirements §3.4(d)

Total EI Employment and EI employment as % of national employment

Employment: Recommendations

National vs. Foreign

Template for employment and

procurement

Local Content policies

Indirect employment

Company spend

Suppliers/ chain

development

Expand MSG and reporting template

SI

Mineral and Petroleum Resources Development Regulation (2004)

• human resources development plan requires reporting on the number and education levels of the employees

• number of vacancies unfilled for more than 12 months

• report on the implementation of a career progression plan, a mentorship plan and an internship and scholarship plan in line with the skills development plan and the needs for the specified groups of workers

Example: South Africa

SI

Social Payments: Requirements §4.1(e)

Social Payments: RWI Recommendations Discretionary

social expenditures

Entity responsible for allocating and disbursing

benefits in community

Reconciliation, if possible

Actual cost of in-kind and valuation

methodology

Name & function of non-gov’t

beneficiaries

Contract disclosure

ESIAs Objective of the payment

SI

Reporting on material mandated (required by

law or contract) payments

Nature/ deemed value of in kind

payments

*Reporting on discretionary social

payments

• Stream and relative contribution

• Disaggregated

• Evolution from

previous year

Example: Brazil Social Expenditure reporting template

Report lists the value of company donations to nongovernmental organizations.

• cash and in-kind • objective • funds devoted to environmental protection.

Example: Mongolia’s 2010 EITI Report

In 2006 in lieu of a windfall profit tax, government signed a 5-year agreement with 30 mining companies to attract voluntary contributions to the Solidarity with the People Mining Program (PMSP)…Contributions are -disaggregated by participating companies -at regional and local level -by sector / function -funds for the Truth and Reconciliation Commission.

Example: Peru’s 2008-10 EITI Reports

POP QUIZ!

Why are contracts important to

understand social impact?

Should EITI reports contain information on

absolute EI employment or just its percentage of

total employment?

AR

SR Revenue Management RM

The Boom and Bust Cycle – how could it affect your economy?

(Source: Nigeria Federal Ministry of Finance)

Effect on Budget: Nigeria’s Budget Volatility (1971-2005)

Start Stop Public Spending

-30

-20

-10

0

10

20

30

40

50

60

70

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% c

han

ge

Kuwait and Norway: Expenditure volatility

Norway: %expenditure change(kroners)

Kuwait: %expenditure change(dinars)

Budget Sensitivity to Oil Prices

Exhaustibility

CONGO: $24 TRILLION IN MINERALS

USA: $15 TRILLION GDP

VS.

Sharing with generations

Policy decisions regarding management of oil, gas and mineral revenues determine whether natural resource wealth translates into sustainable development and poverty reduction. Governance challenges include: • Misappropriation of revenues before they reach the national or

subnational budget • Nepotism and patronage resulting in direct allocations of resource

revenues to special interests • At the macro level, lack of fiscal rules leading to expenditure volatility and

poor investment decisions • At the micro level, weak public financial management systems leading to

poor investment and wasteful spending

Governance Challenges Revenue Management RM


Revenue Management


Which revenues (cash or in kind) go to the national budget?

Distribution of Revenues §3.7(a)

What are the other places revenues go? E.g., sovereign wealth and development funds, sub-national governments, state-owned enterprises, and other extra-budgetary entities

Distribution of Revenues §3.7(a)

RM

RM Distribution of Revenues:

Requirements §3.7(a) §3.8

Describe Distribution

Distribution of Revenues: Recommendations Explain related

legislation

Natural Resource Fund info: • rules/governance • Deposits, withdrawals, principal and

returns • Disaggregate data on Investments • fund managers and external managers fees

Indicate recording in budget or explain off budget allocations, w/links to

financial reports

*IMF revenue

classification

*Description of revenues earmarked

for regions or programs

*Revenue projections + resource dependence

*Description of budget/ audit

practice w/ links

*Price assumptions, revenue forecasts

Assumptions behind revenue forecasts

Mainstream reporting into

budget process

Example: Timor Leste Petroleum Fund

Fund investments by assets

Fund investments by managers

Fund net return

Example: Alaska Petroleum Fund

Returns from Alaska’s Funds

Revenue Forecasts

POP QUIZ!

What are two key disclosures related to

natural resource funds?

Where could revenues go before getting to the

budget?

Common themes:

• Evaluating current EITI information

• Drawing on existing external information

• Engaging a broader range of actors

• Using electronic information

• Need customization to ensure relevance!

Group Exercise: Developing an Action Plan for Your Country Priorities

Form Groups based on priority policy areas and discuss the following questions. Use the RWI Online Guide for additional research. Be prepared to present in plenary.

•What information is most relevant to analyzing this policy area in your country? What information is required/encouraged by the Standard? What information is recommended by RWI?

•Based on the above, what important information is missing from your country’s latest EITI report?

•How would you recommend going about obtaining the missing information? (Who will gather the information? Are there already existing sources for this information that the EITI report could link to? What ministries and agencies need to be involved? What should the MSG/EITI Secretariat do as next steps?)

•How are your recommendations linked to the priority policy challenges in your country?

Instructions: Single country

Form Groups based on country and discuss the following questions. Use the RWI Online Guide for additional research. Be prepared to present in plenary.

•What information is most relevant to analyzing your priority policy area in your country? What information is required/encouraged by the Standard? What information is recommended by RWI?

•Based on the above, what important information is missing from your country’s latest EITI report?

•How would you recommend going about obtaining the missing information? (Who will gather the information? Are there already existing sources for this information that the EITI report could link to? What ministries and agencies need to be involved? What should the MSG/EITI Secretariat do as next steps?)

•How are your recommendations linked to the priority policy challenges in your country?

Instructions: Multiple countries

Group Presentations Is the recommendation relevant to the problem?

How will the information be attained?

Is there a clear plan for next steps?

Thank you!


Documents

EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE · 2016-02-20 · 1 Effective oversight by the multi-stakeholder group. 2 Timely publication of EITI Reports. 3 EITI Reports that include