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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
Developmental Relevance of EITI

EITI Implementation Workshop

Paris, February 2-3, 2005

Charles McPherson

World Bank Group

outline of remarks
Outline of Remarks
  • Paradox of Plenty
  • Causal Factors
  • Relevance of Transparency (EITI)
  • Challenges Ahead
  • Closing Observations
paradox of plenty
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…
paradox of plenty4
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
the record in oil rich africa
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…
causal factors
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.
causal factors7
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
good governance
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
governance scores
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
relevance of transparency
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
dimensions of transparency
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
complementary reform initiatives
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
  • 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….
  • 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
eiti as a process
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..
eiti as a partnership
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