EITI – An Essential Lubricant In PNG’S Resource Dependent Economy
The power of transparency cannot be undermined because transparency is a barometer for change that serves the interest of the majority as opposed to a tiny minority. In the words of the 7th United Nations Secretary General Kofi Annan, transparency is a powerful tool that can get Africa out of poverty. “By using transparency, suddenly everyone wakes up, the companies and the countries,” Kofi Annan recently quoted in the Süddeutsche Zeitung, discussing ways on how resource rich Africa can one day no longer need development aid.
The above sentiments in some ways hold true for the extractive industry dependent Papua New Guinea economy. We can follow a different path to that of Africa but the overall aim of making sure that everyone has a fair shake in the country’s mineral and petroleum wealth must be the ultimate aim of the government, development partners, corporations in the mining and petroleum space.
And the Government of Papua New Guinea is not naïve in this regard.
An ambitious National Executive Decision (NEC) in 2013 set the wheels on motion for Papua New Guinea to commit to the Extractive Industries Transparency Initiative (EITI), a global initiative implemented by more than fifty resource rich countries like Papua New Guinea, to promote transparency and accountability around the mining and petroleum value chain.
Implementing countries strive to meet EITI global standards by way of undertaking a number activities- the main one being the publication of an annual EITI country report with recommendations to improve further improvements in successive reports.
The EITI report shows information on how much proceeds along the mining and petroleum value chain, end up where. For example, in accordance with EITI International Standards, a report is expected to record various revenue streams and show how much of the proceeds end up in the government coffers and subsequently boils down to socio economic development. Other contextual information are also reported. For example, an update on the Sovereign Wealth Fund, (SFW) can be found in the PNGEITI 2016 Report and the information on the governments UBS loan can be found in the 2014 Report.
So what does EITI really mean for Papua New Guinea, when specifically looking at the economic benefits that this global standard that promotes transparency and accountability, in the mining and petroleum sectors? The answer is very obvious in that EITI, though without immediate punitive powers, acts as a diagnostics tool to measure the benefits of mining and petroleum activities- in strict compliance with the EITI standards that collectively hold the notion that the “wealth from a country’s natural resources should benefit all its citizens and this requires high standards of transparency and accountability,”.
Papua New Guinea has published four reports covering the fiscal years 2013, 2014, 2015 and 2016 and those reports have recommendations to improve EITI reporting. For example, the first EITI report, called for the Department of Petroleum and Energy to modernize its paper ledger license registry to an electronic registry to avoidimminent possibilities of data loss in the case of a fire. One other example, is that the Department of Finance has been directed to review trust accounts operated by mining and petroleum interest entities. These recommendations (2013) had been endorsed by the NEC in 2017 for respective government agencies to implement. Affected government departments and agencies include the Department of Treasury, Finance, National Planning and Monitoring, the Mineral Resource Authority, the Department of Petroleum and Energy, the Kumul SoEs, the Mineral Resource Development Company and the Department of Mineral Policy and Geohazards Management. Progress in implementing these recommendations are at various stages at the time of writing.
Head of PNG-EITI National Secretariat Mr Lucas Alkan, the man at the focal point of EITI coordination and implementation, says considerable progress is being made to advance EITI activities but he looks at both sides to the coin. He says work to advance EITI in this country is still big relative to the considerable progress made.
“We have made progress but we need to make more” Mr Alkan says.
Mr Alkan says his major task in 2018, with direction and help from the Multi Stakeholder Group, the EITI overseeing body, is to make sure that PNG undergoes the “validation” process by an independent validator to determine whether PNG had made meaningful progress in meeting the global best practice in managing its natural wealth to be admitted as a compliant EITI country.
“Validation is an essential feature of the EITI process. It is intended to provide all stakeholders with an impartial assessment of whether EITI implementation in a country is consistent with the requirements of the EITI Standard,” Mr Alkan says.
The EITI International Board confirmed at its meeting in October 2016 that PNG would undergo Validation under the EITI Standard beginning on 1 April 2018. This work will include a visit to PNG by EITI International based in Oslo, Norway. The visit is tentatively scheduled for April-May 2018.
PNG’s Validation report will, in addition, address the impact of the EITI, the implementation of activities encouraged by the EITI Standard, lessons learned in the EITI implementation, as well as any concerns stakeholders have expressed and recommendations for future implementation of the EITI.
This work will include initial consultations with stakeholders, who will be invited to submit any other documentation they consider relevant.
Without prejudice to the ability of the Board to exercise their discretion to consider all available evidence, the Secretariat should not take into account actions undertaken after the commencement of Validation.
Based on these consultations, the International Secretariat will prepare a report making an initial assessment of progress against requirements in accordance with the Validation Guide. The report will not include an overall assessment of compliance.
The EITI International Board will appoint an Independent Validator through an open, competitive tendering process. The Validator will report to the Board via the Validation Committee. The Validator would then assesses whether the
Secretariat’s initial assessment had been carried out in accordance with the Validation Guide. This will include: a detailed desk review of the relevant documentation for each requirement and the Secretariat’s initial assessment of each requirement, a risk-based approach for spot checks, and further consultations with stakeholders.
The final stage in the process is the review by the EITI Board. The Validation Committee will review the Final Validation Report and the supporting documentation (including the MSG’s comments). The Validation Committee will make a recommendation to the EITI Board on the country’s compliance with the EITI Requirements and, where applicable, any corrective actions required. The EITI Board will make the final determination of whether the requirements were met or not met, and on the country’s overall compliance in accordance with the requirements of the EITI Standard. The initial assessment, Validation Report and associated MSG comments are considered confidential until the Board has reached a decision.
“It’s all systems go-we look forward to that assessment and I am positive that PNG will be given a reasonable ranking” Mr Alkan says.