The Extractive Industry Transparency Initiative (EITI) Presentation for the EITI Philippines National Planning Workshop 18-19 January 2013 Manila Philip Chan – pchan@worldbank.org www.eitransparency.org

The Extractive Industry Transparency Initiative (EITI) Overview Value of Transparency What is EITI? Why EITI? Which Countries are implementing EITI? How does EITI work? How is EITI implemented? What are the benefits of implementing EITI? What is the role of the WBG and the MDTF? www.eitransparency.org

Value of Transparency Reduce Opportunities for Corruption: by providing a public statement of payments and revenues, EITI makes significant non-payment (or leakage or non-receipt) of revenues easier to detect. Reducing Instability and risk of conflict - communities and civil society can clearly assess how the risks, benefits and responsibilities are allocated among the various stakeholders Tool for education: improve government officials outside the Ministries of Energy and Mineral Resources and civil organizations better understand the extractive sectors. www.eitransparency.org

Value of Transparency Access to capital and investment climate: improves sovereign and corporate credit ratings adds predictability as potential investors understand what they are expected to pay Help sustain development efforts: governments and investors can be held accountable for their commitments Assessing benefits: governments can assess whether their contracts and laws are fair and comparable in terms and benefits to those in other countries with similar endowments www.eitransparency.org

What is EITI? $ Paid = $ Received Global Standard: to promote revenue transparency and accountability $ Paid = $ Received Systematic Process: provides a platform to systematically report on, review, and assess what is being paid by companies and received by governments Government led: but implemented with active involvement of partners from industry and wider society www.eitransparency.org

What is EITI? EITI Board and International Secretariat sets and oversees the rules that govern the initiative globally 60 of the worlds largest oil, gas and mining companies support and actively participate in the EITI Process EITI has won the support of over 80 global investment institutions that collectively mange US16 trillion. www.eitransparency.org

Why EITI? A Response to the Paradox of Plenty: the Resource Curse Importance of Transparency for Informing Public Debate: Australians and Americans want to know if companies are paying their fair and reasonable level of taxes and royalties Global Corporate Responsibility: Europeans and Americans want to know if their companies are operating fairly in countries around the world www.eitransparency.org

Implementing EITI to date EITI: Global Implementation As of 14 January 2012 EITI Implementing Countries 37 Compliant 18 Candidate 19 Countries that have published EITI Reports 32 EITI Reports Published 119 Fiscal Years Covered in EITI Reports 154 Total Government Revenues Generated to date 842 Billion USD Validations Completed 28 Validations Scheduled for 2013 12 www.eitransparency.org

How does EITI Work? Government Discloses Receipt of Revenues Extractive Companies Disclose Payments Government Discloses Receipt of Revenues Independent Administrator Reconciles the Payments EITI Country Report Oversight by a EITI Multi-Stakeholder Group www.eitransparency.org

Functions of the EITI Multi-Stakeholder Group How does EITI Work? Functions of the EITI Multi-Stakeholder Group Ensure sustained political commitment and resource mobilization Overall strategic direction of the initiative Determines the scope of the EITI program Develops and fully consults an EITI work plan Assessing and removing barriers to implementation Oversees the audit / reconciliation process Raise public awareness of EITI www.eitransparency.org

EITI Implementation Process Sign up phase (candidacy) Issue government announcement Commit to work with all stakeholders Appoint implementation leader Establish multi-stakeholder committee Compose and publish workplan Disclosure Disclose payments and revenues to administrator Receive report from administrator Identify and explain discrepancies Recommend improvements Preparation Engage industry and civil society Remove obstacles to implementation Agree materiality definition/reporting template Select and approve neutral EITI administrator Ensure full industry participation Ensure company and government information submitted is based on properly audited accounts Dissemination Disseminate EITI report Review lessons learned and repeat Country undertakes external validation

What are benefits of implementing EITI? Demonstrates national commitment to revenue transparency and accountability domestically and internationally Demonstrates national benefits of extractive industry projects Improves revenue collection and promotes a culture of accountability Systematic framework for collaboration - > Reduces risk of conflict www.eitransparency.org

Potential Benefits of EITI the Philippines Help government and citizens better respond to challenges associated with the legacy of mining in the Philippines Mitigate potential future conflict related to arrival increased mining investment after regulatory and fiscal reforms in mining sector are in place Reconnect national government with provincial and local communities Complement and supports other government reform initiatives under EO 79 www.eitransparency.org

EITI improves governance Mongolia, Gabon, and Nigeria: Helped standardize tax and revenue reporting systems Improved collaboration among tax, regulatory and oversight agencies Allowed for better monitoring of EITI revenues from EI projects Improved Governance Capacity: Ability to produce more accurate data on revenue streams for budget planning Improved capacity to cross check figures provided from local to central levels of governments. Improved ability of government and civil society to monitoring performance of EI

EITI reduces opportunities for corruption EITI Reporting Process: establishes clear baseline for verification of revenue flows EITI Reconciliation / Verification Process: Clarify payment reporting requirements Establish a standard process for clarifying discrepancies Provides more accurate information on oil, gas, and mining revenues where none existed before Strengthened Audit Standards: Local audit standards are raised to international levels Opportunity for Public Scrutiny: Process provides reliable information for public scrutiny of revenue flows

Improving the Business Environment Benefits to Industry Establish a clean and predictable process of payments disclosure and reporting Reduce corporate and operational risks and cost of capital for companies Reduce reputation risk and conflict as companies are able to demonstrate payments are made according to law and how they contribute to national economy www.eitransparency.org

Transparency in disclosure of tax payments is associated with improved financial performance www.eitransparency.org

Transparency in Disclosure of tax payments is associated with improved financial performance www.eitransparency.org

EITI helps reduce risk of corruption Transparency Reduces Risk of Corruption www.eitransparency.org

EITI can help improve access to finance Transparency Improves Sovereign and Corporate Credit Ratings Lenders and credit rating Agencies have a strong interest in transparency Government commitments to transparency can improve access to commercial and concessional finance. www.eitransparency.org

EITI improves civil society capacities Improved CS capacity to engage responsibly and influence outcomes in the sector: Access to regular and reliable information helps improve the quality of engagement and debate Improved quality dialogue and engagement with other stakeholders helps enhance understanding and trust among all Improved ability to dialogue and represent its interests increases CS capacity to influence policy on EI issues and revenue allocation www.eitransparency.org

What is the role of the World Bank in EITI? Promoting the EITI as a global standard for EI revenue transparency and accountability Primary source of technical and financial assistance for implementing governments and civil society organizations. WBG sits as a non-voting member of the EITI Board. www.eitransparency.org

THANK YOU Philip Chan – pchan@worldbank.org www.eitransparency.org

The Natural Resource Revenue Value Chain www.eitransparency.org

Which Countries are Implementing EITI EITI Country Portfolio Summary – As of January 2012 EITI Compliant – Validated as Compliant and issued EITI Reports (14) EITI Candidates – published one or more EITI Reports and validation process done or underway (13) EITI Implementation in Progress – working towards first report (10) Endorsed EITI – some making progress towards candidate status (10) Pipeline Countries - WBG / other agencies are in contact with (16) Azerbaijan Cameroon Tanzania Botswana Angola Liberia Gabon Albanian Ethiopia Malawi Timor-Leste Sierra Leone Burkina Faso Ukraine Rwanda Mongolia Mozambique Colombia South Africa Ghana Republic of Congo Zambia Guyana Zimbabwe Norway Cote d’Ivoire Afghanistan Suriname Cambodia Kyrgyz Republic Kazakhstan Iraq Solomon Islands Tajikistan Nigeria Guatemala Chad United States Bulgaria Niger Trinidad and Tobago Indonesia Australia Senegal Yemen DRC Togo Philippines Sudan Central African Republic Madagascar Uganda Mali Guinea Lao PDR Peru Mauritania Vietnam Papua New Guinea Egypt 35 EITI Implementing Countries 9 Countries Endorsed EITI 16 Countries in Dialogue www.eitransparency.org