extractive industries transparency initiative · 2016-02-20 · 1 effective oversight by the...
TRANSCRIPT
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EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE Using the EITI Standard for Reform
[Date] [Location]
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INTRODUCTIONS:
• Name/organization/ country
• What would you like to learn from this training?
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“We recognize that a public understanding of government revenues and expenditure over time could help public debate and inform choice of appropriate and realistic options for sustainable development.” EITI Principle 4
What’s the goal of EITI?
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How can information drive change? •Creates neutral space for building trust and facilitating discussion
Multi-Stakeholder Dialogue (MSG)
• Links EITI to broader national policy priorities
Objective Setting
(Work plan)
• Useful in evaluating pressing questions & concerns
Disclose Relevant Information
(Reconciler TOR & EITI Report)
• Enables informed public understanding & policy debates
Analysis of Information
(CSO & Media Analysis)
• Increases accountability & development Links to Policymaking & Institution building
(Parl., Min., Reg.)
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What has been then impact of EITI in your country so far?
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EITI: IMPACT 2003-2011
Source: 2011 RWI Survey of PWYP Coalitions
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Has the EITI Process led to reform?
ₓ Box Ticking and Deadlines
ₓ Public relations exercise
ₓ ‘Silo’ effect – not linked to reform
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Have the reports had an impact on public understanding of the sector?
Data not useful ₓ Too Aggregate
ₓ Misses key streams
ₓ Does not cover important issues
Reports are not analyzed ₓ CSOs don’t understand how to use the data
ₓ Data is not in a form that is easy to assess
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1 Effective oversight by the multi-stakeholder group.
2 Timely publication of EITI Reports.
3 EITI Reports that include contextual information about the extractive industries.
4 The production of comprehensive EITI Reports that include full government disclosure of extractive industry revenues, and disclosure of all material payments to government by oil, gas and mining companies.
5 A credible assurance process applying international standards.
6 Reports that are comprehensible, actively promoted, publicly accessible, and contribute to public debate.
7 The multi-stakeholder group to take steps to act on lessons learned and review the outcomes and impact of EITI implementation.
2013 EITI Requirements
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Cross-cutting Concepts For Each Disclosure
Disaggregation: level of detailed reporting e.g. Project? Company? Region?
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Cross-cutting Concepts For Each Disclosure: Materiality (Revenues): what level of payments to include?
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Cross-cutting Concepts For Each Disclosure
Materiality: Licenses
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Cross-cutting Concepts For Each Disclosure:
Reconciliation
Production? Contracts/Licenses?
Non-fiscal revenues
Local Government
Social Impact
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Revenue Collection
Production Data
State Owned
Enterprises
Sub-National
Revenue Management
Allocation of Rights
Social Impact
What policies get us from resources to development?
How is value captured? Where do benefits go?
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Allocation of Rights
Production Data
Revenue Collection
How is value captured? What information does the EITI capture?
What the EITI requires: Register of licenses(§3.9) License award/transfer process & any deviations (§3.10) *Beneficial owners (§3.11) *Contract/license disclosure(§3.12)
What the EITI requires: Exploration activities (§3.3) Production volumes & values (§3.5(a) & §3.4(e)) Export volumes & values (§3.5(b))
What the EITI requires: Legal framework & fiscal regime (§3.2 ) Economic contribution (§3.4(a)-(c)) Taxes & primary revenues(§4.2(a)) In-kind revenues(§4.1(c)) Infrastructure/ barter provisions(§4.1(d)) Transportation Revenues(§4.1(f))
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Sub-National
SI
What the EITI requires: Direct payments/receipts (§4.2(d)) Mandated sub-national transfers (§4.2(e))
What the EITI requires: Employment §3.4(d) Mandated social payments (§4.1(e))
What the EITI requires: Revenues recorded & not recorded in national budget (§3.7) *Earmarked revenues & budget/audit processes (§3.8)
Revenue Management
Where do benefits go? What information does the EITI capture?
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SOE
What the EITI requires: SOE level of beneficial ownership (§3.6(c)) Government transfers by SOEs (§4.2(c)) SOE quasi-fiscal expenditures (§3.6(b))
What is the role of SOEs? What information does the EITI capture?
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Register of licenses (§3.9)
Exploration activities (§3.3)
Legal framework & fiscal regime
(§3.2 )
SOE level of beneficial ownership (§3.6(c))
Direct payments/r
eceipts (§4.2(d))
Employment §3.4(d)
Revenues recorded &
not recorded in budget
(§3.7)
License award/ transfer
process & any deviations (§3.10)
Production volumes &
values (§3.5(a) & §3.4(e))
Economic contribution (§3.4(a)-(c)) __________
Taxes & Primary
Government transfers by
SOEs (§4.2(c))
Mandated national/subnational transfers (§4.2(e))
Social payments (§4.1(e))
Earmarked revenues & budget/audit processes
(§3.8)
Beneficial ownership (§3.11)
Export volumes &
values (§3.5(b))
Revenues (§4.2(a))
___________
In-kind revenues (§4.1(c))
SOE quasi-fiscal
expenditures (§3.6(b))
Contract/ license
disclosure (§3.12)
Infra./ barter provisions (§4.1(d))
Transport Revenues (§4.1(f)
Allocation of Rights Production
Data Revenue Collection
SOE Revenue Management
Sub-National
Social Impact
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Register of licenses (§3.9)
Production volumes &
values (§3.5)
Taxes & Primary
Revenues (§4.2(a))
SOE level of beneficial ownership (§3.6(c))
Subnational payments/receipts (§4.2(d))
Mandated company social
expenditures (§4.1(e))
Revenues recorded &
not recorded in national
budget (§3.7)
License award/ transfer
process & any deviations (§3.10)
In-kind revenues (§4.1(c))
Government transfers by
SOEs (§4.2(c))
Mandated national
/subnational transfers (§4.2(e))
Earmarked revenues &
budget/audit processes
(§3.8)
Register of beneficial
owners (§3.11)
Infrastructure/ barter
provisions (§4.1(d))
SOE quasi-fiscal expenditures
(§3.6(b))
Contract/ license
disclosure (§3.12)
Transportation Revenues
Key Requirements for Policy Linkages
Allocation of Rights
Production Data Revenue
Collection
SOE Revenue Management
Sub-National
Social Impact
EITI work plan objectives reflect national priorities (§1.4(a)) Annual MSG review of EITI impacts on natural resource governance (§7.2)
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Transition Arrangements: IMPLEMENTING COUNTRIES required to implement the new EITI Standard as soon as possible, including :
(1) EITI workplans updated with necessary actions
(2) annual activity reports that document progress
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[Insert applicable 2014 or 2015 reporting deadline(s)]
[Insert applicable country name(s)]
First Report under New Standard
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RWI Guide to the EITI Standard
Online
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www.revenuewatch.org/eitiguide
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www.revenuewatch.org/eitiguide
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www.revenuewatch.org/eitiguide
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www.revenuewatch.org/eitiguide
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www.revenuewatch.org/eitiguide
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www.revenuewatch.org/eitiguide
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Group Exercise: What are the priority challenges in the
extractive sector?
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Form Country Groups and discuss the following:
•What are the most pressing problems in extractive sector governance that need to be fixed in your country ?
Target concrete policy needs: ✓ Try: “ensure companies pay the taxes they owe” X Not: “increase accountability”
•Identify three priority problems in each group and write them on separate cards. These will be collected and discussed in the debrief.
Instructions
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Identifying Policy Priorities using the Resource Governance Index & Natural Resource Charter
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Natural Resource Charter
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The NRC Framework
A framework to think through the governance and economic management of extractive resources.
Takes a comprehensive and inclusive approach.
Provides the framework and support. Implementation is locally driven.
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The NRC & EITI
• Identify policy priorities that EITI should address
• Contextualize reporting topics (Guide)
• Turning EITI reports into a reform agenda
• Facilitate Charter benchmarking processes
– MSGs and the benchmarking process, some risks
– Map compliance with Standard against benchmarking
– Avenue for pursuing action plans
• EITI as entry point
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How are the NRC & EITI being used in other countries?
Tanzania:
– A national process to learn from mistakes in mining so that they get natural Gas right. TEITI represented on the expert panel.
Sierra Leone:
– A national planning process housed in the Ministry of Mines, to help the country develop a new Core Mineral Policy and develop the post-EITI validation plan.
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A measure of transparency and
accountability of the oil, gas and mining
sector in 58 countries.
– 2012 data
– 173 questions
– 50 indicators
– >100 researchers
http://www.revenuewatch.org/rgi
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80% of countries do not meet satisfactory governance standards
Satisfactory (71-100) Partial (51-70) Weak (41-50) Failing (0-40)
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[insert applicable region]
Asia-Pacific Regional Assessment
RGI Factsheet for the region at http://www.revenuewatch.org/rgi
Satisfactory Weak
Partial Failing
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Methodology
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2013 Afghanistan RGI Assessment
http://www.revenuewatch.org/countries/eurasia/afghanistan/overview
49th/ 58
[insert applicable country RGI Assessment]
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2013 Afghanistan RGI Assessment http://www.revenuewatch.org/countries/eurasia/afghanistan/overview
[insert applicable country RGI Assessment]
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Comparing Regional Performance
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The RGI & EITI
Using the RGI can help:
• Identify reporting gaps that EITI should address
• Highlight EITI as avenue to address poor RGI scores
• Incentivize advances
• Demonstrate feasibility and good practices
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Independent, open and competitive
licensing process:
Production volumes
Clarity in roles and responsibilities revenue
collection
SOC financial reporting Subnational transfer rules defined in law
Requirements of environmental and
social impact assessments
Comprehensive public sector balance
- Including SOC balance, fund balance and non-
resource balance
Information on licensing process
Production value Exports, costs, prices
Primary sources of revenue:
production streams, royalties, special taxes
SOC production data Reserves ,Production
volumes ,Prices Value of resource
exports, Investment in exploration, Production costs,Production data by
company and/or block
Government follows subnational transfer
rules
Publication of environmental and
social impact assessments
Publication of subsidies
Publication of contracts
Secondary sources of revenue:
Dividends, Bonuses ,License fees, acreage
fees, other
SOC revenue data Production streams,
Royalties ,Special taxes, Dividends, Bonuses,
License fees; Acreage fees, Other
Comprehensive subnational transfer
reports:- Understandable and
timely reports
Checks on budgetary process
- Legislative oversight - Review of revenue by
national audit institution
- Legislature reviews audit reports
Checks on licensing process
SOC quasi fiscal activities
- Comprehensive, timely and quantitative data
Publication of subnational transfer
rules
Comprehensive SOC reports
- Cash flow statements - Joint ventures
Subnational reporting of transfers
SOC reports audited - Reports are audited
and published including subsidiaries
Quality of subnational transfer reports
Understandable and timely reports
RGI x EITI 2013 Standard: What can the RGI tell us? Allocation of
Rights Production Data
Revenue Collection
SOE Revenue Management
Sub-National
Social Impact
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Independent, open and competitive
licensing process:
Production volumes
Clarity in roles and responsibilities revenue
collection
SOC financial reporting Subnational transfer rules defined in law
Requirements of environmental and
social impact assessments
Comprehensive public sector balance
- Including SOC balance, fund balance and non-
resource balance
Information on licensing process
Production value Exports, costs, prices
Primary sources of revenue:
production streams, royalties, special taxes
SOC production data Reserves ,Production
volumes ,Prices Value of resource
exports, Investment in exploration, Production costs,Production data by
company and/or block
Government follows subnational transfer
rules
Publication of environmental and
social impact assessments
Publication of subsidies
Publication of contracts
Secondary sources of revenue:
Dividends, Bonuses ,License fees, acreage
fees, other
SOC revenue data Production streams,
Royalties ,Special taxes, Dividends, Bonuses,
License fees; Acreage fees, Other
Comprehensive subnational transfer
reports:- Understandable and
timely reports
Checks on budgetary process
- Legislative oversight - Review of revenue by
national audit institution
- Legislature reviews audit reports
Checks on licensing process
SOC quasi fiscal activities
- Comprehensive, timely and quantitative data
Publication of subnational transfer
rules
Comprehensive SOC reports
- Cash flow statements - Joint ventures
Subnational reporting of transfers
SOC reports audited - Reports are audited
and published including subsidiaries
Quality of subnational transfer reports
Understandable and timely reports
Afghanistan RGI x EITI 2013 Standard: What can the RGI tell us? Allocation of
Rights Production Data
Revenue Collection
SOE Revenue Management
Sub-National
Social Impact
100 100
78
100
50
33
44
33
50
67
0
0
0
0
0
0
0
0
0
67
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Group Work
Form Country Groups and read the RGI assesment for your country. Be prepared to present your group’s assessment in a 5 minute presentation
•Where are the biggest transparency gaps?
•Which EITI policy areas do these gaps corresond to?
•How can the RGI support your advocacy in EITI or beyond?
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Capturing the Value of
Our Natural Resources
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Allocation of Rights
Production Data
Revenue Collection
Is my country effectively capturing the value of our natural resources?
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Capturing the Value: What explains these differences?
Comparing Oil Producers in 2010 (average of all EITI data years)
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Exploration and Exploitation: The Production Cycle
Royalties
Production Peak
Tax
Time
Exploration/Capex
Monitoring revenues not enough – need to understand contracts and production data
AZB, KAZ
CAM,GAB, CON
Pro
ject
Rev
enu
es
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Typical Fiscal Regime
Gross Revenue To Investor
Profit
After-Tax Profit
After-WPT Profit
Investor’s Dividend
W/H tax
Government Revenue
Revenue From Petroleum Sales
Royalty
Production Cost
Profit Tax
WPT
Govt. Equity
Dividend (minus W/H tax)
Investor Return
Bonus/ Rentals
[WPT = windfall profit tax or resource rent tax]
[W/H = withholding tax]
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Allocation of Rights AR
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Policy decisions regarding the allocation of rights to extract natural resources can either lay the foundation for successful sector management or set a path towards misuse. Governance challenges related to the allocation of rights include: Bribery
Politically-exposed persons
Poor negotiation Lack of oversight of the terms of the license
Governance Challenges
Allocation of Rights AR
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Source: Radio Free Europe/ Radio Liberty http://www.rferl.org/content/azerbaijan_gold-field_contract_awarded_to_presidents_family/24569192.html
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What will the EITI Report tell us?
Key Questions EITI Disclosure
How can you find license registries and key terms?
License Registry §3.9
What is the process for licenses to be given away?
License Allocation §3.10
Who owns extractive sector licenses? Beneficial Ownership §3.11 & §3.6(c)
*Where can you find the contracts that govern natural resource projects ?
Contract Disclosure §3.12
AR
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License Registry: Why is it important?
AR
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Color Key:
Blue = EITI Standard Requirement
Orange = RWI Recommendation
Teal + * = EITI Standard Encouragement
What can the EITI report tell us?
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License Registry: Basic Requirements §3.9(a)/(b)/(c)
License Holder
Commodity Dates:
application/ award/duration
Coordinates of license
area
License Registry: RWI Recommendations
Level of Ownership/
Operator GIS
Beneficial Ownership, contract, production levels,
project level payments
What can the EITI report tell us?
AR
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Example: Zambia’s Online License Database
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License Allocation: Why is it important?
AR
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License Allocation: Basic Requirements §3.10(a)-(c)
description of award/ transfer
process
recipient information
technical and financial criteria
list of applicants and the bid
criteria
License Allocation: RWI Recommendations
*efficiency & effectiveness
reasons for refusal
conflicts arising out
of bids
non-trivial deviations
key terms of winning bid
Special conditions
AR
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Example: Afghanistan Aynak copper tender process
AR
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POP Quiz!
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Name one EITI requirement and one RWI recommendation for license registries
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Why is it important to have information on the
technical or financial criteria for the license
allocation process?
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What is the materiality level for license
registries?
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Beneficial Ownership: Why is it important?
*Subject to successful piloting, the EITI Board will develop detailed provisions with a view to make this a requirement from 1 January 2016.
AR
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Beneficial Ownership: Basic Requirements §3.11(a-b) & §3.6(c)
Gov’t, SOEs and their
subsidiaries
Beneficial Ownership: RWI Recommendations
*publicly available register
legal ownership and control
company name, proof of incorporation, address
legal form and status
shareholder register >5%
share
*identity and the level of ownership
*entities that bid for, operate or invest in
extractive assets
Politically Exposed Persons
AR
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International push to crack down on tax avoidance (OGP, OECD, G20, G8)
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Contract Disclosure: Why is it important?
AR
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Contract/License Disclosure: Requirements §3.12
Contract/License Disclosure: RWI Recommendations
exploration & exploitation
un-redacted active contracts
& new contracts
public education & dialogue strategies
* publicly disclose all exploitation contracts and
licenses
online, free of charge & anonymous to
search
AR
Gov’t policy on contract/license
disclosure for exploration & exploitation
Legal provisions, actual disclosure
practices & planned reforms
Overview publicly available
contracts/licenses & reference/ link
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Example: www.resourcecontracts.org
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Example: www.contratsminiersguinee.org
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Example: www.mom.gov.af
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POP Quiz!
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True or False: Disclosing beneficial ownership
information will continue to be
encouraged in EITI.
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True or False: A country could chose to skip
including any information about
contracts in EITI reports because it’s just
encouraged.
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Production Data PD
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Production volumes and values can be an important factor in the level of government take that countries receive from extraction. Lack of information on production can result in underpayment. Governance challenges related to production include: Tax evasion/underpayment Poor revenue forecasting
Governance Challenges
Production Data PD
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What can the EITI Report tell us?
Key Questions EITI Disclosure
What is the resource (and revenue) potential? – Implications for sustainability
EXPLORATION ACTIVITIES §3.3
What are the current levels of production? – implications for revenues, sustainability
TOTAL PRODUCTION §3.5(a) & §3.4(e)
What is the level of economic impact and resource dependency?
TOTAL EXPORTS §3.5(b)
PD
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Exploration Data: Why is it important?
PD
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Exploration: Basic Requirements §3.3
overview of exploration
activities
Exploration: RWI Recommendations
displayed with relevant info: exploration license
and any revenues
PD
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Production: Why is it important?
PD
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Production: Requirements §3.5(a) & §3.4(e)
Total production volumes for
covered fiscal year
Production: RWI Recommendations
Estimated proven
reserves
Value of production by commodity,
state/region
Stage of production of
commodities in each state
Figures for reporting year
+ prior year
Source for volume data & methodology
for valuation
PD
Contribution to the economy of EI in key producing regions for
covered year
Disaggregation by company, project & major commodity
sub-type
If challenges with measuring
production, then reconciliation
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Exports: Why is it important?
PD
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Exports: Basic Requirements §3.5(b)
total export volumes/values
Exports: RWI Recommendations
information on the destination market for
exports
purpose and buyer for non-exported commodities e.g. those that are processed domestically
Figures for reporting year + prior year
Source for volume data & methodology
for valuation
PD
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POP QUIZ!
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Why is it important to have exploration data?
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Why is the stage of production of a project
important?
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Burkina Faso Example: Contract + Production + Revenue data
Inputs
Royalty Formula (Contract, Art. 11.4): 3% of FOB value Production 2009 (EITI Report): 54,430.62 oz
Average global gold price, 2009 (London Fixing): $972.35/oz Average gold price in Burkina Faso, 2009 (EITI report): $936/oz
Average exchange rate, 2009 USD/fCFA (www.oanda.com): 481
Estimates and Results
(A) Rate (B) Estimated price (fCFA)
(C) Production Total (A X B X C)
Expected revenue using global price
3% 467 700 54,430.62 763,716,601
Expected revenue using Burkina price
3% 450 216 54,430.62 735,166,080
Actual revenue, according to EITI
845,162,117
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Revenue Collection RC
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Policy decisions regarding revenue collection determine the wealth available from natural resources for financing national development. Governance challenges related to the revenue collection include: Weak tax administration
Lack of coordination across government / oversight bodies,
Weak oversight over non-financial revenues
Corporate tax evasion
Others already covered (e.g. poor negotiation)
Governance challenges
Revenue Collection RC
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Typical Fiscal Regime
Gross Revenue To Investor
Profit
After-Tax Profit
After-WPT Profit
Investor’s Dividend
W/H tax
Government Revenue
Revenue From Petroleum Sales
Royalty
Production Cost
Profit Tax
WPT
Govt. Equity
Dividend (minus W/H tax)
Investor Return
Bonus/ Rentals
[WPT = windfall profit tax or resource rent tax]
[W/H = withholding tax]
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What will the EITI Report tell us?
Key Questions EITI Disclosure
What laws establish the economic contribution of the sector?
LEGAL FRAMEWORK & FISCAL REGIME §3.2
What is the economic impact of revenues? ECONOMIC CONTRIBUTION §3.4(a)-(c)
What is the value of taxes & primary revenues?
TAXES & PRIMARY REVENUES §4.1(a)/(b)
What is the value of in-kind revenues? IN-KIND REVENUES §4.1(c)
What is the value of barter deals? INFRASTRUCTURE/BARTER ARRANGEMENTS §4.1(d)
What is the value of transportation revenues?
TRANSPORTATION REVENUES §4.1(f)
What level of detail can the report provide?
DISAGGREGATION §5.2(e)
RC
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Legal/Fiscal Framework & Economic Data: Why is it important?
RC
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Legal Framework & Fiscal Regime: Requirements §3.2
Overview of laws &
regulations
Legal Framework: RWI Recommendations
Describe contract system and key features
Link to legislation & summarize
main provisions
Summary of fiscal regime,
including decentralization
Explain if core fiscal terms in legislation or
negotiated in contracts (describe)
Indicate authority(ies) collecting major payments;
division of roles
Describe method of subnational transfers
Roles/responsibilities of gov’t
agencies
*Document reforms
underway
RC
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Example: Ghana EITI Report 2012
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Economic Contribution : Basic Requirements §3.4(a)-(c)
size of EI (value , % GDP), incl. estimate of
informal sector
Economic Contribution : RWI Recommendations
total gov’t revenue from EI (number and %)
exports from EI (number and %)
tie to domestic economic
context informal sector
RC
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Example: Kyrgyzstan EITI Report 2011
C RC
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Taxes and Primary Revenues: What have been the reporting challenges in your country?
RC
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Taxes and Primary Revenues : Basic Requirements
§4.1(a)/(b)
• The host government’s production entitlement (such as profit oil);
• National state-owned company production entitlement; • Profits taxes; • Royalties; • Dividends; • Bonuses, such as signature, discovery and production bonuses; • License fees, rental fees, entry fees and other considerations
for licenses and/or concessions; and • Any other significant payments and material benefit to
government.
RC
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Taxes and Primary Revenues: Basic Requirements
§4.1(a)/(b)
description of each revenue stream, materiality definition
and thresholds
options / rationale for each revenue
stream
RC
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Example: Liberia’s 2011 EITI Report sets materiality thresholds per sector.
Example: Tanzania’s 2011 EITI Report explains how materiality threshold
was set and indicates that threshold results cover 99 percent of the total
revenue
RC
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Example: Mozambique EITI Report 2010
RC
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In-kind revenues: Why is it important?
RC
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The Importance of In-Kind Revenues
% Revenue in ‘In-Kind Receipts’
Yemen 98% Cameroon
80% Nigeria
67%
Azerbaijan
88% GBN CG- BR
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Azerbaijan EITI reports 2003-2010
In Kind receipts as a % of total Revenues RC
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RC
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In Kind Revenues: Basic Requirements §4.1(c)
where production share or other in-kind is material, disclose
volumes sold & revenue received
In Kind Revenues: RWI Recommendations
* Disaggregate product, price, market and sale
volume
*reconciliation of volumes & revenues
Reconciliation >10% of extractive revenue
reporting by company and by sale
list buyer, date, price, volume and grade
disaggregate as with other payments
(company, project)
SOEs should publish sales data
Registered traders should report payments
RC
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Example: Nigeria EITI Report 2009-2011
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Infrastructure/Barter: Why is it important?
RC
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Infrastructure / Barter: Basic Requirements §4.1(c)/(d)
MSG review: agreements, parties, goods and services committed and resources
pledged
Infrastructure / Barter : Recommendations
Status of good/service and any audit
Full text disclosure of agreement
Estimated value of good/service (quality,
speed, budget estimates vs. actual spend) vs. evaluation
methodology for commodity
RC
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DRC EITI 2010: list of infrastructure/loans and value
RC
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Transportation Revenues: Why is it important?
RC
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Cameroon EITI 2011: value & volumes / Chad-Cameroon Pipeline
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Project by Project Reporting: Why is it important?
RC
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Revenue Disaggregation: Basic Requirements §5.2(e)
Company Government
entity Revenue stream
RC
Project level, provided that it is consistent with the United States Securities and Exchange Commission rules and the forthcoming
European Union requirements
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Disaggregation of Revenue Reporting:
Project by Project Reporting §5.2(e)
“The multi-stakeholder group is required to agree the level of disaggregation for the publication of data. It is required that EITI data is presented by individual company, government entity and revenue stream. Reporting at project levelis required, provided that it is consistent with the United States Securities and Exchange Commission rules and the forthcoming European Union requirements.”
RC
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EU Accounting Directive (effective, Oct 2013)
Project definition: “the operational activities that are governed by a single contract, license, lease, concession or similar legal agreements and form the basis for payment liabilities with a government”
RC
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POP QUIZ!
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Does every country have to report transportation
revenues?
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For in kind transactions, is it the volume sold or the revenues received
that gets disclosed?
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Group Exercise: Role play
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1. Review RWI’s Guide to the EITI Standard considering the disclosures that fall under that Policy Issue you have been assigned. Review the governance challenges, EITI requirements, RWI recommendations & country examples for each disclosure.
2. Agree on one EITI disclosure requirement or encouragement that you want to discuss further.
3. Plan out what a conversation would look like between one party who is advocating for this disclosure and one party who staunchly opposes it.
• Each side should express and counter 2 or 3 different arguments for/against such disclosure.
• Pick 2 members of the group to play the roles.
Instructions
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SOE State Owned Enterprises
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Dominant players in many countries
High governance risks: autonomous, often politicized, weak oversight,
multiple roles and conflicts of interest Examples of challenges from Angola, Nigeria, Cameroon, Congo-
Brazzaville, Ghana
Governance challenges State Owned Enterprises SOE
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State-owned Enterprises
Fiscal Roles and Transactions
“Quasi –Fiscal Expenditures”
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What will the EITI Report tell us?
State Owned Enterprises
Key Questions EITI Disclosure
How exposed/involved are SOEs? LEVEL OF BENEFICIAL OWNERSHIP §3.6(c).
What is the value of SOE transfers and payments to treasury?
•TRANSFERS AND PAYMENTS
§3.6(a); 4.2(c)
What is the value of SOE spending? QUASI-FISCAL EXPENDITURES §3.6(b)
SOE
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SOEs: Basic Requirements §3.6(a-c) & §4.2(c)
Level of beneficial ownership and any changes, transaction
details, equity, liabilities & loans
SOEs: RWI Recommendations Details of purchases/sales,
retention, dividends, operational costs including
selection of buyers
Structure of subsidiaries, activities, objectives, governance structures,
earning, identity/share level of other owners
Transfers and payments
QFE disaggregation/ reconciliation
Quasi-fiscal expenditures
Transfers from Gov’t to SOE (contributions to operating/capital
expenses, loans, in-kind transfers, fuel subsidies)
Annual Reports
SOE
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Statoil transfers to CBoN in EITI
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• Nigeria EITI: QFE Security Operations
• Cameroon (2006-8): SOE Transfers & Payments to Treasury
• Cote d’Ivoire (2007-8): Transfers between partners & with treasury
• DRC: disaggregated shareholding revenues of SOE
SOE reporting in EITI SOE
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POP QUIZ!
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What is the difference between an SOE and a
Company?
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What are some typical forms of Quasi-Fiscal
Expenditures?
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Sub-National
SI
Revenue Management Where do benefits go?
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AR
Subnational Revenues SR
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Governance challenges related to subnational revenues include:
• bribery of local officials to gain a social license to
operate; • low technical capacity of subnational governments to
negotiate and monitor company obligations; • poor coordination and information asymmetries with
national government; and • ineffective spending facilitated by opacity around the
receipt of extractive revenues at the local level.
Governance Challenges
SR
Subnational Revenues SR
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What will the EITI Report tell us?
Subnational Revenues
Key Questions EITI Disclosure
How much is transferred to SN and what is the formula for revenue sharing? And are there any differences between actual and expected transfers?
Mandated Transfers and Revenue Sharing Formulas §4.2(e)
How much do companies pay and SN govts receive? And are there any differences btn actual and expected transfers?
Direct Payments §4.2(d)
SR
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Example: Peru’s Revenue Sharing Formula (minerals)
SR SR
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Example: Indonesia’s Revenue Sharing Formula (Oil)
SR
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Subnational Transfers: Basic Requirements §4.2(e)
Transfer amounts
Subnational Transfers: RWI Recommendations
Authorized assignments
Revenue sharing formula
Tax base, tax rate and price if useful and
timelines for transfers
Discrepancy between calculated
and transferred amount
Legislation and institutional
arrangements
*Disclosure and reconciliation of
discretionary and ad hoc transfers
SR
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Example: Ghana (2010)
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Subnational Direct Payments: Basic Requirements §4.2(d)
Material disclosure and reconciliation
Subnational Direct Payments: RWI Recommendations
Contract disclosure
Local MSG oversight
Subnational reporting on direct payments as % of budget and how it was
spent
SR
Must include: proceeds sharing; local tax raising; non-tax charges
e.g. fees, levees, fines
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Example: Zambia EITI Report (2010)
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Example: Peru’s National Government Website
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POP QUIZ!
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How would you monitor transfers from central
government to subnational entities?
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What is the right level of materiality and disaggregation for
subnational payments?
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AR
SR Social Impact SI
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Economic inequality (distributional)
Community discontent with companies (unmet expectations) Use of funds to buy off local actors
Lack of coordination with local development plans
Governance Challenges
Social Impact SI
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What will the EITI Report tell us?
Social Impact
Key Questions EITI Disclosure
What are extractive industries contributing to employment?
Employment§3.4(d)
What are Companies social expenditures and who is receiving it? Reconciliation if possible.
Social Expenditures§4.1(e)
SI
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Employment: Basic Requirements §3.4(d)
Total EI Employment and EI employment as % of national employment
Employment: Recommendations
National vs. Foreign
Template for employment and
procurement
Local Content policies
Indirect employment
Company spend
Suppliers/ chain
development
Expand MSG and reporting template
SI
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Mineral and Petroleum Resources Development Regulation (2004)
• human resources development plan requires reporting on the number and education levels of the employees
• number of vacancies unfilled for more than 12 months
• report on the implementation of a career progression plan, a mentorship plan and an internship and scholarship plan in line with the skills development plan and the needs for the specified groups of workers
Example: South Africa
SI
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Social Payments: Requirements §4.1(e)
Social Payments: RWI Recommendations Discretionary
social expenditures
Entity responsible for allocating and disbursing
benefits in community
Reconciliation, if possible
Actual cost of in-kind and valuation
methodology
Name & function of non-gov’t
beneficiaries
Contract disclosure
ESIAs Objective of the payment
SI
Reporting on material mandated (required by
law or contract) payments
Nature/ deemed value of in kind
payments
*Reporting on discretionary social
payments
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• Stream and relative contribution
• Disaggregated
• Evolution from
previous year
Example: Brazil Social Expenditure reporting template
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Report lists the value of company donations to nongovernmental organizations.
• cash and in-kind • objective • funds devoted to environmental protection.
Example: Mongolia’s 2010 EITI Report
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In 2006 in lieu of a windfall profit tax, government signed a 5-year agreement with 30 mining companies to attract voluntary contributions to the Solidarity with the People Mining Program (PMSP)…Contributions are -disaggregated by participating companies -at regional and local level -by sector / function -funds for the Truth and Reconciliation Commission.
Example: Peru’s 2008-10 EITI Reports
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POP QUIZ!
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Why are contracts important to
understand social impact?
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Should EITI reports contain information on
absolute EI employment or just its percentage of
total employment?
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AR
SR Revenue Management RM
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The Boom and Bust Cycle – how could it affect your economy?
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(Source: Nigeria Federal Ministry of Finance)
Effect on Budget: Nigeria’s Budget Volatility (1971-2005)
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Start Stop Public Spending
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-30
-20
-10
0
10
20
30
40
50
60
70
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% c
han
ge
Kuwait and Norway: Expenditure volatility
Norway: %expenditure change(kroners)
Kuwait: %expenditure change(dinars)
Budget Sensitivity to Oil Prices
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Exhaustibility
CONGO: $24 TRILLION IN MINERALS
USA: $15 TRILLION GDP
VS.
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Sharing with generations
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Policy decisions regarding management of oil, gas and mineral revenues determine whether natural resource wealth translates into sustainable development and poverty reduction. Governance challenges include: • Misappropriation of revenues before they reach the national or
subnational budget • Nepotism and patronage resulting in direct allocations of resource
revenues to special interests • At the macro level, lack of fiscal rules leading to expenditure volatility and
poor investment decisions • At the micro level, weak public financial management systems leading to
poor investment and wasteful spending
Governance Challenges Revenue Management RM
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What will the EITI Report tell us?
Revenue Management
Key Questions EITI Disclosure
Which revenues (cash or in kind) go to the national budget?
Distribution of Revenues §3.7(a)
What are the other places revenues go? E.g., sovereign wealth and development funds, sub-national governments, state-owned enterprises, and other extra-budgetary entities
Distribution of Revenues §3.7(a)
RM
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RM Distribution of Revenues:
Requirements §3.7(a) §3.8
Describe Distribution
Distribution of Revenues: Recommendations Explain related
legislation
Natural Resource Fund info: • rules/governance • Deposits, withdrawals, principal and
returns • Disaggregate data on Investments • fund managers and external managers fees
Indicate recording in budget or explain off budget allocations, w/links to
financial reports
*IMF revenue
classification
*Description of revenues earmarked
for regions or programs
*Revenue projections + resource dependence
*Description of budget/ audit
practice w/ links
*Price assumptions, revenue forecasts
Assumptions behind revenue forecasts
Mainstream reporting into
budget process
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Example: Timor Leste Petroleum Fund
Fund investments by assets
Fund investments by managers
Fund net return
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Example: Alaska Petroleum Fund
Returns from Alaska’s Funds
Revenue Forecasts
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POP QUIZ!
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What are two key disclosures related to
natural resource funds?
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Where could revenues go before getting to the
budget?
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Common themes:
• Evaluating current EITI information
• Drawing on existing external information
• Engaging a broader range of actors
• Using electronic information
• Need customization to ensure relevance!
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Group Exercise: Developing an Action Plan for Your Country Priorities
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Form Groups based on priority policy areas and discuss the following questions. Use the RWI Online Guide for additional research. Be prepared to present in plenary.
•What information is most relevant to analyzing this policy area in your country? What information is required/encouraged by the Standard? What information is recommended by RWI?
•Based on the above, what important information is missing from your country’s latest EITI report?
•How would you recommend going about obtaining the missing information? (Who will gather the information? Are there already existing sources for this information that the EITI report could link to? What ministries and agencies need to be involved? What should the MSG/EITI Secretariat do as next steps?)
•How are your recommendations linked to the priority policy challenges in your country?
Instructions: Single country
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Form Groups based on country and discuss the following questions. Use the RWI Online Guide for additional research. Be prepared to present in plenary.
•What information is most relevant to analyzing your priority policy area in your country? What information is required/encouraged by the Standard? What information is recommended by RWI?
•Based on the above, what important information is missing from your country’s latest EITI report?
•How would you recommend going about obtaining the missing information? (Who will gather the information? Are there already existing sources for this information that the EITI report could link to? What ministries and agencies need to be involved? What should the MSG/EITI Secretariat do as next steps?)
•How are your recommendations linked to the priority policy challenges in your country?
Instructions: Multiple countries
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Group Presentations Is the recommendation relevant to the problem?
How will the information be attained?
Is there a clear plan for next steps?
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Thank you!
www.revenuewatch.org/eitiguide