Frequently Asked Questions
- EITI Fundamentals
- Canada and the EITI
- Industry and the EITI
- Civil Society and the EITI
EITI Fundamentals
Q: What is the EITI?
A: The EITI is a globally developed, voluntary standard aimed at strengthening governance by improving transparency and accountability in the extractives sector. This is achieved through the verification and full publication of company payments and government revenues from oil, gas and mining
Q: What are “extractive industries”?
A: Extractive industries are companies that operate in the business of mining, oil and gas. Generally, this involves the development, or ‘extracting’ of resources from the earth.
Q: What are the origins of the EITI?
A: The EITI was created in 2002 in response to concerns about the “resource curse,” the phenomenon by which the development of resource wealth is associated with increased poverty, corruption, and armed conflict, instead of development and economic growth.
Since then, the EITI has been implemented by almost 30 developing countries and garners support from a range of governments, companies, NGOs and investors. It continues to gain international recognition at a variety of fora, including the UN and the G8.
Q: Why focus on the extractive sector?
A: Extractive industries are important in over 50 developing countries, home to over 3 billion people, or more than half the world’s population. With that many affected, it becomes increasingly important that responsible governance mechanisms exist.
Extractive industries operate just like any other company, but with the high-risk, high cost and uncertain nature of exploration, paired with an extended period before profits are realized and the finite nature of resources, stable management of the sector is rather difficult.
Knowing what governments receive, and what companies pay, is a critical first step in holding decision-makers accountable for the use of those revenues. In developing countries, transparency in the transfer of payments process can increase the amount of funds available for government spending on social development programs.
Q: How is Implementation of the EITI financed?
A: The EITI is financed in part through a Multi Donor Trust Fund, administered by the World Bank. Funds are disbursed to implementing countries to help develop the mechanisms to meet EITI criteria. Whenever possible, implementing countries also contribute their own resources.
The goal of the EITI Multi-Donor Trust Fund is to broaden support for the EITI principles and process through the establishment of initiatives in countries that have signed on to EITI through programs of cooperation among the government, the private sector, and civil society.
Operating between donor countries and the World Bank, the MDTF is a source of technical assistance funding for implementing countries. The MDTF provides grants to countries in order to implement the EITI mechanisms.
The work plan of the MDTF is set by a Management Committee consisting of the World Bank and governments who have contributed in excess of $500,000. Canada is one of ten countries and international organizations that have made this contribution.
Q: Who governs the EITI?
A: The EITI is governed by a Board of Directors that consists of five constituents groups involved in the initiative – implementing countries, supporting countries, civil society organizations, the extractive industry, and investment companies. The Board has responsibility for oversight of the overall development, strategic direction, and credibility of the EITI. It is supported by a Secretariat that is responsible for the day-to-day running of the EITI and communicating with stakeholders.
Canada currently sits on the EITI Board, represented by a Senior Official from Natural Resources Canada.
Q: Can the EITI help attract investment?
A: The EITI can assist implementing countries create a more attractive climate for foreign direct investment, but cannot claim that it is the sole cause for increased interest in domestic markets. Although, the multi-stakeholder nature of the process and the commitment of the host government to strengthening transparency and accountability provide an indication to investors and financial institutions that a more stable and predictable operating environment exists.
Participating in the EITI
Q: What’s the difference between an implementing country, a supporting country and a donor country?
A: While numerous countries are involved to some degree with the EITI, each is categorized into three areas that correspond with their involvement in the initiative.
Implementing Countries first must satisfy the four criteria to be recognized as a Candidate Country.
These criteria include: an indication to implement the EITI, a commitment to work with civil society and the private sector, the appointing of an individual to lead the implementation process, and finally, producing a work plan agreed with by stakeholders.
Once these four have been achieved, countries then move into the two year validation stage.
The validation process is an indicator of commitment and helps track the progress required for countries to move towards achieving compliant status.
In early 2009, Azerbaijan completed the steps towards validation, and was awarded the first EITI Compliant Country status.
Implementing countries currently include:
More than 15 other countries are either discussing their participation with EITI or have endorsed the Initiative and are currently preparing to implement it.
A supporting country provides political, technical and financial support to the initiative. Since the EITI is a voluntary initiative, the only requirement is that countries already have an existing level of transparency and make their commitment official through a public endorsement of the initiative. At present, supporting countries include:
However, there are a range of other ways in which countries can support the EITI, including the support and promotion of the EITI in international and multilateral forums, encouraging domestic companies to become supporters of the initiative, undertaking outreach events with companies and civil society or by financing the international management of the Multi Donor Trust Fund (MDTF). When a country provides financial contributions to the MDTF, they are categorized as a Donor Country.
Q: What is the process to move from the Candidate to Validated status?
A: To be deemed EITI compliant, countries are required to complete the validation process and meet all validation indicators.
To become a candidate country, countries must follow these steps towards EITI validation:
Sign-Up:
- Issue government announcement
- Commit to work with all stakeholders
- Appoint implementation leader
- Compose, agree and publish a work plan
Countries who achieve these four steps are now considered an Implementing Country. The process then continues with the following moves towards validation:
Preparation
- Establish multi-stakeholder committee
- Engage civil-society
- Engage companies
- Remove obstacles to implementation
- Agree reporting templates
- Approve EITI administrator
- Ensure full participation from companies
- Ensure that company accounts are properly audited
- Ensure that government accounts are properly audited
Disclosure:
- Disclose payments by companies to government to administrator
- Disclose revenues received by government to administrator
- Ensure that payment and revenue figures are reconciled
- Identify discrepancies and recommend improvements
Dissemination:
- Make EITI report publicly available
- Examine companies implementation support
- Review actions taken on lessons learned
Validation:
Country undertakes external validation
When countries undergo the final external validation processes, they are EITI Compliant, which indicated their commitment to the fair and accountable extraction of their natural resources. Azerbaijan completed this process in early 2009.