Developing countries call for EITI reform after US exit

An Extractive Industries Transparency Initiative board meeting held in March 2017 in Bogota, Colombia. Photo by: EITI / CC BY-SA

LONDON — Developing country and civil society representatives have called for the Extractive Industries Transparency Initiative to be reformed to reduce the influence of the United States government and powerful U.S. oil companies after the country’s decision to withdraw from the program last week.

The calls come after the U.S. announced it was leaving the multistakeholder program that sets reporting standards for governments and companies and is designed to crack down on corruption in the oil, gas, and mining sectors. It currently has 52 implementing countries, including resource-rich nations in sub-Saharan Africa, Latin America, and Asia.

The U.S. has been a supporter of EITI since it was launched in 2003 and had been working toward becoming an implementing country for a number of years. It said it will remain a financial and political supporter of EITI despite pulling out of the program, and American companies will still have to declare payments made to the 52 governments that remain signed up. It will also continue as one of 16 “supporting countries,” mostly from the global north.

But it has led many to question whether the U.S. government and two U.S. oil companies — ExxonMobil and Chevron — should be able to retain their positions on the EITI board.

‘Weakened voice’

The U.S. decision to withdraw from EITI — “effective immediately” — was described as a “step backwards” for transparent governance by EITI staff and board members, as well as civil society. Many worried it would send a negative signal to countries that are already signed up to the program and to those considering joining, including resource-rich developing countries.

The U.S. said that “legal obstacles” prevented it from completing the process of becoming a full EITI implementing country, but civil society groups say it was opposition from American extractive companies — who did not want to disclose what they pay to the U.S. government for access to the country’s natural resources — that made it difficult to move forward.

What does the US exit from EITI mean for developing countries?

Insiders tell Devex that the United States' decision to withdraw from an international program to prevent corruption in the oil, gas, and mining sectors last week "sends the wrong signal" to other resource-rich countries — but some say it also offers an opportunity for developing countries to take ownership of the program.

Board member Moses Kulaba, who chairs the EITI finance committee and is also executive director of the Governance and Economic Policy Center in Tanzania, said the American “voice” had been “significantly weakened” by its decision to withdraw as an implementing country, and that it is not guaranteed the country will retain its seat on the board.  He also called for EITI to review the rules surrounding supporting countries in light of the move.

“I think with the U.S. decision, the board is now confronted with a reality that it will have to face and bring this issue as a formal agenda at the next board meetings,” Kulaba said.

Fallout from the U.S. exit has been heightened by the release of the “Paradise Papers” leak, which came out just days later and appeared to highlight the importance of transparency initiatives. Among other news, allegations emerged that the Swiss mining giant Glencore had made “undisclosed” loans in order to secure mining rights in the Democratic Republic of the Congo.

‘Supporting’ countries and companies

Cielo Magno, who represents civil society interests for southeast Asia and the Pacific on the EITI board, said the U.S. exit underscored the need for stronger EITI requirements on countries to ensure “consistency on the commitment to EITI principles.”  

“It is indeed an anomalous situation that we have board members who, at the global level, would express commitment to the principles of EITI and yet would oppose the implementation of EITI in their own countries,” said Magno.

More than 80 of the world’s largest oil, gas, and mining companies are designated EITI “supporting companies,” which involves making minimal financial contributions to the initiative. Among them are U.S. oil companies Chevron and ExxonMobil, both of which have seats on the EITI board.  

Their positions are now also facing scrutiny as the U.S. oil lobby has loudly opposed some forms of payment disclosure. The American Petroleum Institute (API) successfully lobbied the U.S. government in February to overturn a piece of legislation known as Dodd-Frank Section 1504. The legislation would have required extractive companies listed on U.S. stock exchanges to disclose payments made to governments around the world, rather than just the U.S. government — conditions API says would make U.S. companies less competitive.

Erica Westenberg, director of governance programs at the Natural Resource Governance Institute (NRGI), said: “It’s going to be increasingly a challenge for the initiative to explain how companies operating in one venue support anti-corruption and in other venue actively push against” the measures.

Another EITI board member, Faith Nwadishi, who represents Anglophone African civil society, said countries and companies that support EITI need to be global “standard holders” for the principles it stands for — something the U.S. has failed to do, she said.

“The EITI is so much about practicing what you preach in the transparency along the extractive industries value chain. You cannot oppose transparency and sit on a decision-making organ of a transparency organization,” Nwadishi said.

Board review likely

Speaking to Devex, EITI Technical Director Sam Bartlett said the requirements on supporting countries have already come under discussion in recent months, but that no changes have been made.  

Currently "the only formal requirement of a supporting country is to make a clear public endorsement," according to the EITI website. But some board members have argued they should be required to make financial contributions too.

The issue of whether supporting countries should also have to apply EITI standards at home, or at least not oppose them, has yet to come up. This is in part because many supporting countries are not resource rich, Bartlett said. 

However, this could now change as a result of the U.S.’s departure.

“The board has already been discussing the requirements for supporting countries,” said Bartlett.

“This case may lead to calls for the EITI board to look at the requirements for supporting companies.”

The next board meeting will be in Oslo in February 2018.

Update, Nov. 10: This story was amended to clarify that Cielo Magno represents civil society interests for southeast Asia and the Pacific on the EITI board

Read more Devex coverage on transparency in the extractive industry.

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    Sophie Edwards

    Sophie Edwards is a reporter for Devex based in London covering global development news including global education, water and sanitation, innovative financing, the environment along with other topics. She has previously worked for NGOs, the World Bank and spent a number of years as a journalist for a regional newspaper in the U.K. She has an MA from the Institute of Development Studies and a BA from Cambridge University.