Extractive Industries Transparency Initiative (EITI)

1. Extractive Industries Transparency Initiative (EITI) GBS Annual Review Key Issue 4 – Challenges in Combating Corruption Dar Es Salaam November 26, 2008 Implementing EITI in Tanzania: The Pathway Ahead and Key Challenges (including role of EITI Multi-donor Trust Fund) Presentation by Vedasto Rwechungura

2. Overview of Presentation - EITI in Tanzania • Recap of the purpose of this presentation • To inform participants in the Annual Review exercise what the EITI concept is, its status in Tanzania, the process of assisting Tanzania to adopt and implement EITI principles and the role of the World Bank and other interested DPs in the process. • Why EITI? The EITI architecture globally • EITI process and criteria – and benefits to countries • Emerging results from EITI in other countries • Over the medium-term: “Beyond EITI …….”

3. Underlying issue that EITI seeks to address: “managing natural resources sustainably” Although Tanzania is not yet mineral-dependent, given the global experience of resource-rich countries, it is important to lay the foundation early for transparency and good governance in the sector

4. Transparency and good sector governance in the context of Tanzania policy goals • Good governance can help mitigate the “resource curse” …. • Good governance has multiple features: • Clear and stable laws and regulations • Rule of law • High level of capacity and skills in government • Fiscal monetary and budget discipline • Even and consistent application of laws and fiscal regimes to all • Open dialogue between government and civil society • Public sector/private sector balance • Transparency

5. EITI – a global standard locally implemented to meet national goals and requirements The Multi-Stakeholder EITI Streering Group/Committee The Government Civil Society Companies National EITISecretariat (to manage day-to-day EITI work)

6. EITI Global Structure – EITI Board

7. The EITI Process ..... in a nutshell (EITI partners’ goal is to help an EITI country to implement the EITI cycle) Sign up Disclosure Preparation • Dissemination Country undertakes external validation Validation is the end-objective for an EITI country

8. Companies Disclose Payments Government Discloses Receipt of Payments Government Spending Independent Verification of Tax & Royalty Payments Award of licenses & contracts Regulation & monitoring of operations Revenue Distribution & Management Implementation of Sustainable Development Policies Oversight by a Multi-Stakeholder Group The EITI Process - part of a bigger picture  The EITI provides a forum for dialogue and a platform for broader reforms

9. Essence of EITI is disclosure – based on decisions of EITI scope taken by national EITI stakeholder groups Data from Data from Reconciler / Auditor Govt agencies Companies All EI companies complete individual data reporting templates (and provide information as required to Audit firm) -- investigates / gets more data to reconcile any discrepancies Govt agencies provide data (and information as required) -- produces EITI Report for Stakeholder Group EITI Report to public National Stakeholder Group (Government, Companies, Civil Society)

10. EITI has achieved strong momentum at national level …. At country level: • EITI Board has approved 23 countries as “EITI candidate” – 16 in Africa • Of these, 10 have published one or more EITI Reports to date (Sept 2008) (Azerbaijan, Cameroon, Gabon, Ghana, Guinea, Mauritania, Mongolia, Nigeria, Kazakhstan, Kyrgyz Republic) • Norway is first among developed countries to announce EITI adoption • Countries are able to align national goals with global EITI standard …… Globally: • Now established as the standard on transparency in resource areas with consensus on EITI principles, objectives, criteria • International EITI architecture fully in place (EITI Secretariat, Oslo) • Range of supporting companies; civil society; agencies like World Bank, African Development Bank, etc.

11. What the EITI International Secretariat does • Overall oversight of EITI and policies globally • candidacy process • validation process (EITI compliance • Provide guidance on methodology • Provide adviceon best practice • Link up an implementing country with other implementing countries and organisations

12. What World Bank and EITI Multi-donor Trust Fund (MDTF) does to support EITI implementation • At country level, World Bank managed MDTF (and all partners) help to: • build 3-way consensus for EITI - at start of process and throughout • build multi-stakeholder structures to design and manage EITI • provide technical and financial support for EITI implementation • ensure EITI process lead to EITI “compliant” status (validation)  At global level, World Bank managed MDTF activities designed to: • support global EITI movement • proactive knowledge dissemination and best practice sharing • proactive support for sub-regional EITI collaboration and training

13. Benefits of adopting EITI as seen by countries • Clear signal to all stakeholders and investors on national commitment to transparency • Membership of a well-known global standard … while also • Building collaboration and trustamong government companies and civil society on mining / oil issues in Tanzania. • Brings together data on mining/oil financial flows in one place • Possibility for improving sovereign and corporate ratings, and hence foreign and domestic investment through lower risks

14. Benefits of adopting EITI as seen by countries • In some cases, EITI has yielded additional revenuesfrom extractive industry (from revisiting past corporate tax payments) • Possibility to expand to anti-corruptionfocus in oil gas and mining (although EITI is not a direct anti-corruption instrument) • Diagnostic for assessing effectivenessof EI revenue collection • Platform for moving to wider governance reformsbeyond EITI  BUT … EITI is not cost-free to governments. Needs: • clear and sustained political commitment at senior level • assigned staff to the EITI effort – with the needed resources • budget funding for EITI process – especially EITI validation

15. EITI CRITERIA Independent reconciliation / audit of payments made and revenues received. Publication and widespread dissemination of results. Comprehensive coverage, i.e. all companies including state-owned and local companies. Full engagement of civil society in the process. Public, financially sustainable, time-bound plan of implementation. BUT - WHAT ABOUT: Transparency of licensing? Were “fair” terms and conditions negotiated? Are long-term revenue and benefits for country optimal? What companies pay vs. what they should pay? Revenue allocation e.g. to sub-national level and communities Environment / social linkages? … and the whole of the “expenditure side” (not in EITI) “Beyond EITI”: EITI Criteria is about a minimum standard - which does not aim to cover everything

16. Licencing and Awarding of Contracts Monitoring of Operations – compliance Collection of Taxes - and Royalties Distribution of Revenues (and spending side) Utilization in Sustainable Projects – social and environ. EITI process “Beyond EITI”: EITI is narrowly-focused yet provides platform for further reforms and good EI governance • EITI is a key goal in itself – but is also a first steptowards a broader extractive industry (EI) governance reform and sound EI management • Beyond EITI, countries are seeking support on governance over the entire resource cycle (the “++” agenda) -- this is distinct from EITI

17. Extractive Industries Transparency Initiative Thank you! For information on EITI globally visit the website: www.eitransparency.org World Bank contact: Vedasto Rwechungura World Bank Dar Es Salaam Office vrwechungura1@worldbank.org