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Making Transparency Count

March 3, 2011

Transparency Counts. That is the title of the 5th Extractive Industries Transparency Initiative (EITI) Global Conference held on March 2-3 in Paris, where leaders from governments, companies and civil society organizations convened to take stock of progress made in various countries, and to shape the future agenda of the EITI so this process can count even more.

" Indeed the long-term test for EITI success will be the extent to which it meets expectations on its contribution to good management of natural resources for the benefit of all citizens, now and for future generations. "

Sri Mulyani Indrawati

Managing Director, The World Bank

Approximately 3.5 billion people live in countries rich in oil, gas, and minerals, but many of them suffer from poverty, corruption, and conflict stemming from weak governance. Over the past decade, however, this picture has been changing in some of these countries.

In 35 resource-rich countries, governments and some of the largest oil, gas and mining companies are now committed to publish what they pay and receive, through implementing the global standard that is the Extractive Industries Transparency Initiative. Citizens in these countries can now find out how much their governments receive from their natural resources, and hold them to account.

Since its launch in 2003, EITI has rapidly gained momentum. As of February 2011, eleven countries have become compliant with EITI principles while 14 others have made significant progress toward validation. (See table) To achieve “compliant status”, countries must complete a rigorous, independent assessment of their disclosure and reporting practices.

To support such efforts, the World Bank’s Oil, Gas, and Mining unit manages a multi-donor trust fund (MDTF). This fund provides countries with grants and technical assistance to implement EITI principles of revenue transparency and accountability, as well as support capacity building of civil society. Countries work closely with Bank teams and other development partners.

As of February 2011, donors to the MDTF included: Australia, Belgium, Canada, the European Commission, Finland, France, Germany, the Netherlands, Norway, Spain, Switzerland, the United Kingdom, and the United States.

At the EITI Conference, Clare Short (former UK Minister for International Development) succeeded Peter Eigen, founder of Transparency International, as the Chair of the EITI Board.

Future of EITI

The World Bank delegation at the conference was led by Sri Mulyani Indrawati, one of the managing directors. The delegation included Obiageli Ezekwesili, vice president for Africa, Hartwig Schafer, director for sustainable development’s strategy and operations, and Paulo de Sa, sector manager for oil, gas and mining.

In her opening remarks at the conference, Indrawati stressed that transparency was critical in allowing stakeholders to shine a light on revenue management problems, and stated that it should also translate into tangible benefits for resource rich countries and all their citizens.

The managing director also emphasized the need to: protect the gains of the EITI process to date; further empower civil society so it becomes a demand-agent for accountability; and take bolder steps to implement other reforms and strengthen broader public financial management along the whole value chain.

“Indeed the long-term test for EITI success will be the extent to which it meets expectations on its contribution to good management of natural resources for the benefit of all citizens, now and for future generations,” said Indrawati. “We must make sure that we can demonstrate real impact on the ground.”

And some of that impact is becoming more evident.

Impact on the ground

EITI reports have helped uncover certain financial irregularities and have provided a sound roadmap for meaningful reforms in the oil, gas and mining sectors in several countries. Here are some examples of EITI’s impact:

  • In Nigeria, the discrepancy between revenues paid and received from the petroleum industry was reduced from $250 to $16 million. This set the stage for wider sector reforms targeting improved public financial management, strengthened government institutions regulating extractive industries, and enhanced civil society capacity and participation.
  • In Liberia, EITI is incorporated into the national plan to develop the mining sector. The government also expanded the initiative to include the forestry sector and has reached out to help EITI implementation in neighboring Sierra Leone. Ratings for Liberia in Transparency International’s CPI index moved up from #137 (out of 158 countries) in 2005 to #97 (out of 180 countries) in 2009, which has improved the investment climate for the extractives sector.
  • In Mongolia, the country’s mining law has progressively mandated both companies and government institutions to report payments and revenues according to EITI principles since 2006. Reconciliation following the initial audit report reduced a discrepancy from Mongolia Tugriks 25 billion in February 2008 to 775 million in November 2009. The government is determined to include improvements along the full extractive industries value chain, from bidding for contracts to implementing sustainable development programs. An EITI law and strategy for 2010-2014 are currently being drafted and CSO capacity and participation has been enhanced.

“The last two years of progress demonstrate that strong and committed leadership makes a real difference. It is possible to build citizen trust in resource endowed nations; it is possible to build private sector confidence; and it is possible to deliver a tangible improvement in economic well-being,” said World Bank’s Vice President for Africa, Obiageli Ezekwesili. “Now is the time for all stakeholders —governments, the private sector, civil society, and international organizations—to accelerate our work to deliver faster and deeper benefits.”