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Developmental Relevance of EITI. EITI Implementation Workshop Paris, February 2-3, 2005 Charles McPherson World Bank Group. Outline of Remarks. Paradox of Plenty Causal Factors Relevance of Transparency (EITI) Challenges Ahead Closing Observations. Paradox of Plenty.

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Developmental Relevance of EITI

EITI Implementation Workshop

Paris, February 2-3, 2005

Charles McPherson

World Bank Group


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Outline of Remarks

  • Paradox of Plenty

  • Causal Factors

  • Relevance of Transparency (EITI)

  • Challenges Ahead

  • Closing Observations


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Paradox of Plenty

  • Widespread EI resource wealth in developing countries:

    • 35 Petroleum-rich countries

    • 20 Minerals-rich countries

  • EI resource revenues account for high shares of GDP, export earnings and government revenues in these countries

  • Enormous potential for positive developmental impact…


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    Paradox of Plenty

    • Unfortunately, this potential has not been realized….

    • Resource-rich developing countries have experienced:

      • Low per capita growth rates

      • Slow progress measured against human development indicators

      • Social and political instability and violence


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    The Record in Oil-Rich Africa

    • Oil-rich countries include: Nigeria, Angola, Equatorial Guinea, Cameroon,Gabon, ROC, Sudan, Chad.

    • Significant resources: 4MMBD or 5% of world production

    • High oil dependency: 70% of government revenues

    • Below average per capita Africa income

    • Below average scores on infant mortality, life expectancy and literacy

    • Instability and violence: Nigeria, Angola, Chad, Sudan, ROC…


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    Causal Factors

    • Technical factors:

      • “Dutch Disease”: rapid exchange rate appreciation; escalation of costs of non-tradeables;dramatic decline in competitiveness of non-oil exports

      • Revenue volatility: boom-bust cycles; pro-cyclical expenditures; wasteful investments; rapid expansion of public sector.


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    Causal Factors

    • Political Factors:

      • Diminished accountability: easy oil or mineral revenues undermine incentives for political elites to be responsive to a larger public

      • Underinvestment in capacity: easy revenues also reduce the incentive to invest in institutional capacity


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    Good Governance

    • Good governance is critical to reform…

    • Features of good governance include:

      • Fiscal, monetary and budgetary discipline

      • Open dialogue between government and civil society

      • Balance between public and private sectors

      • High level of capacity and skills in government

      • Clear and stable laws and regulations

      • Rule of law, and…..

      • Transparency in public finances and administration


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    Governance Scores

    • EI resource-richdeveloping countries do not score well on governance:

      • Most are found in the bottom one-third of the World Bank’s composite governance indicator rankings

      • ….and in the bottom one-third of Transparency International’s annual ranking of countries by perceptions of corruption


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    Relevance of Transparency

    • Why transparency matters:

      • Key to good governance

      • Increases accountability and reduces the risk of waste and corruption

      • Fosters democratic debate

      • Improves macroeconomic management

      • Enhances access to finance


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    Dimensions of Transparency

    • Revenue transparency

    • Other dimensions of transparency:

      • Expenditures

      • Policies

      • Laws and regulations

      • Administration

      • Other non-EI sectors….

  • EITI focuses on EI revenue transparency as a manageable, meaningful starting point


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    Complementary Reform Initiatives

    • Ideally, EITI should be pursued in the context of a broader range of complementary reform initiatives:

      • Revenue management

      • Anti-corruption legislation

      • Judicial reform

      • Freedom of information and press

      • Civil liberties

  • EITI itself is supportive of these other initiatives


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    Challenges

    • EITI will face serious political challenges:

      • Different country contexts: EITI will have to adapt to widely differing country contexts defined in terms of political and social cultures, commitment to democracy, institutional capacity, development of civil society, etc.

      • Competing priorities: governments have priorities other than transparency, many of which may have greater urgency….


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    Challenges

    • And equally demanding technical challenges:

      • Identifying implementation criteria: selecting the key criteria for implementation of EITI.

      • Establishing credibility: defining and implementing credible revenue and payment audit schemes

      • Outreach: agreeing the extent and nature of information disclosure and dissemination

      • Building and sustaining capacity: identifying needs and personnel; engaging civil society


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    EITI as a Process

    • Up to now implementation of EITI has emphasized learning by doing….

    • Perhaps best to see EITI as more of a process than an absolute..

    • At this stage, attention has focused as much or more on putting a process and state of mind in place than on the numbers themselves..


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    EITI as a Partnership

    • A partnership approach has been and will continue to be central to the success of EITI:

      • Governments (donor and developing)

      • Industry

      • Civil society

      • Financial institutions

      • Development agencies



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