Q&A on the Extractive Industries Transparency Initiative

Materials World magazine
1 May 2016

Rhiannon Garth Jones talks to Clare Short about the Extractive Industries Transparency Initiative and the impact it might have on the mining industry and government systems.

Firstly, could you explain Extractive Industries TRansparency initiative (EITI) to those who aren’t familiar with it? 

In the 1990s, as the commodities boom was gaining pace, a number of academic studies showed that countries rich in natural resources did worse in development terms than those without, and tended to have grave problems of corruption and inequality. A Global Witness Report on Angola exposed gross misbehaviour. A campaign was launched by development NGOs calling for companies to ‘Publish What You Pay’. In response to this, John Browne, then CEO of BP, published the signature bonus paid by BP in Angola. This caused great anger from the Angolan Government and Browne concluded that a move to greater transparency could not be unilateral.

Following this, the UK’s Department for International Development brought together countries, companies and NGOs to see if agreement could be reached on a commitment to transparency. This led to the establishment of the Extractive Industries Transparency Initiative (EITI). All the stakeholders had an interest in cooperating – governments wanted inward investment and therefore wanted a reputation as a reformer, companies – who were facing much criticism – wanted to show that they were paying considerable sums to governments in the countries in which they operated, and NGOs wanted more money made available to spend on the poor. 

Together, they agreed some principles and then rules for reporting were drawn up and a secretariat established in Oslo, Norway. Countries began to join. The original model simply required companies to report what they paid the government, governments to report what they received, and an independent administrator to check that the figures were accurate and scrutinise incompatibilities. The theory was that transparency would lead to better accountability and better use of the proceeds of extractive industries for the benefit of the people.

What drew you to this project?

I was asked if I would take on the chair in 2010, not long after I'd stood down from the House of Commons. I was aware of the origins of the initiative but had not followed developments since then. I did some reading and had my doubts about the effectiveness of such limited reporting. But then I asked the advice of the friend with whom I had worked closely on development in Africa when I was in Government who had gone on to work for an oil company focused on Africa. Their firm advice was that EITI was very important and I should agree to become chair. I took over the chair in 2011.

How effective do you think EITI can be? 

I think the EITI – which now has 50 countries in membership – has been effective in bringing together companies, governments and civil society in many countries where they have never sat down together. This helps to build trust, dispel myths and focus on where real problems lie. In improving the management of the sector for the benefit of the people, the existence of the EITI has also helped to spread an expectation of transparency in a sector that has always been wrapped in opacity.

I do not think that the original reporting led to much change. Reports tended to contain reams of figures that were not always completely reliable and gave little detail of what the figures meant, so that local citizens could make little sense of the reports. But, in 2013, at the EITI conference in Sydney, the reporting standard was made much more comprehensive. It required reporting across the value chain from state-owned enterprises and licensing systems to production levels, etc. 

Reports now contain ‘contextual information’, which means that any interested citizen can read them and understand how big the sector is in their economy, what proportion of government revenues come from extractives, when the resources will be exhausted and so on. This can help to build a more informed national debate about the importance of the sector and how to manage it better. And openness helps to root out corrupt behaviour. There is no magic in transparency. It does not automatically lead to good governance but it helps the process of citizen scrutiny and exposes the dark corners where misbehaviour lies.

What would be a realistic timeframe for EITI’s aims?

I see signs that reform is gathering pace in the EITI member countries, but improvements in governance take time and all resource-rich countries are currently facing the shock of a massive depletion in their income from extractives. EITI is now placing much greater emphasis on countries reducing the burden of reporting by making their own government systems transparent and robust. In this way, EITI should work itself out of business and leave behind countries with much better reporting systems and more informed public debate. The timescale will vary from country to country but I would think within five years or so the majority of member countries should be graduating from annual EITI reporting.

What do you think about the concerns raised in countries such as the UK and the USA about the additional work required to conform? 

I said at the launch of the UK EITI process that countries like the UK, that have reliable government systems, have to face the challenge of using the EITI in a way that brings benefit to the country. For example, the UK never had a sensible debate about how best to use the resources of North Sea oil and now those resources have been depleted. Perhaps the EITI could help with the fracking debate or, even more sensitively, if oil were to be discovered off the Falklands, would transparency help manage the tensions that would then arise? 

Norway was the first OECD country to sign up to EITI reporting and that was because the secretariat was housed in Oslo and they wished to answer the accusations from developing countries that, yet again, the north was telling the south what to do, but not doing it itself. But very expensively compiled Norwegian EITI reports are hardly used or discussed in Norway. 

The USA has developed a wonderful website that has made accessible the information they have gathered on proceeds from the extractives on federal lands. Germany and France have signed up recently. It is, in my view, very important that they make the reporting process useful, demonstrating that robust and transparent government systems can ease the burden of annual reporting and that contextual information in EITI reports can be shaped to describe the challenges facing each country and help encourage informed debate about how best to meet those challenges.

What have you learned from your experience chairing EITI about the wider extractive industry? 

I have learned a lot about a sector of which I previously knew little – I have visited many copper mines and read books on oil. I have learned just how difficult it is to manage the sector well even when it is booming and then experienced the consequences for companies and countries of the sudden end to the commodities boom. The difficulties faced in developing countries parallel some of our own experiences with the terrible history of coal mining in Britain, and the suffering as well as enrichment it brought. But it is no use simply denouncing the sector – everyone is dependent on the resources it provides and if countries like Australia, Canada and Norway can manage these resources well for the benefit of their people then so can developing countries, and much remains to be done.

Do you think those challenges can be met by EITI and similar initiatives?

I think EITI can do some good but the emphasis needs to shift to using the results to leverage permanent reform in the government systems of developing countries. Streams of accusations led by northern campaigning NGOs, no matter how well based on reasonable criticisms, tend not to lead to governance reform. Well-informed debate amongst increasingly educated and informed local citizens, plus an absolute commitment to openness and transparency by all players can, I am sure, lead to real reform that will squeeze out corruption and lead to better use of these crucial, non-renewable resources.

Clare Short was MP for Birmingham Ladywood from 1983–2010 and the first Secretary of State for International Development from 1997–2003. She stood down from Parliament in 2010, and is now a trustee of Hope Projects (West Midlands) Ltd, Trade Out of Poverty, the Welfare Association, and Africa Humanitarian Action, among others. In March 2011, she was elected Chair of the Extractive Industries Transparency Initiative, a post she held until February 2016.