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Transparency as building block, not stumbling block

Response to Paul Collier's statements made at the NRGI conference on Thursday 25 June.

Clare Short, Chair of the EITI Board, said in response to some comments to Paul Collier:

I am very sorry to see that Paul Collier, who is an old friend, appears to have lost the plot! Is he really suggesting that transparency about a country's earnings from oil and mining is a cause of failure to save at the peak of the commodity boom? If that is so then logic suggests, he should consider calling for the abolition of democracy.

Sir Paul Collier told a distinguished gathering in Oxford yesterday that

We misdiagnosed the problem. We thought the problem was overwhelmingly transparency and accountability. It just wasn't. The EITI was the wrong focus. I did my bit to promote the EITI but...if you just have that and nothing else it in fact just makes things worse because in the country the message is held as 'your government are crooks'.

This creates an "explosion of expectations" as electorates learn that they are not reaping the full rewards of their natural resources, to which the government reacts by "spending on flashy stuff  that everyone can see”.

The result is higher wages, higher public spending and higher debt - precisely the opposite of the asset accumulation that successful resource-rich countries like Botswana and Norway adopted during boom-times.

The key institution for the future is not the EITI...what went wrong over the supercycle was the failure to accumulate assets."

It is predominantly about accumulating assets. We thought that the problem was transparency. EITI was the wrong focus. If you have that and nothing else, then, it makes the problem worse…key institution of the future is not EITI.

Jonas Moberg, Head of the EITI International Secretariat, adds, that as these statements appear ill informed, it was heartening to hear how speaker after speaker lined up to disagree. He continues:

  1. Transparency is the right place to start, even if it not the right place to finish. 
    If Paul’s point is that transparency is not enough, we agree. The Peruvian government and the EITI has just completed a regional conference in Lima where the theme was “Transparency, then what?”.  The EITI is not just about transparency.  The EITI is also about using the data and the EITI forums to identify reforms, improve the management of assets and otherwise improve governance, and become better at holding governments to account.  Flashy cars are not a consequence of transparency, any more than military spending is a consequence of democracy.
  2. EITI is largely about value creation.
    It focuses on allocation of licenses, on fiscal and legal terms, on production, on share ownership, and on sales of state’s share of commodities and assets. If you don’t have information on these aspects and good governance, you are most unlikely to amass significant assets. NRGI’s own research shows for example that sovereign wealth funds in poorly governed countries have a disturbingly high failure rate.  
  3. The EITI alone will not solve all the challenges of natural resource governance and bring development to all.
    A wide range of efforts are needed, of course. Advice on asset accumulation is also welcome as a complement, not a replacement.  As Edmund Burke said “Nobody made a greater mistake than he who did nothing because he could only a little.”
  4. It would be ill advised to conclude that in countries like the Democratic Republic of Congo, Nigeria, Philippines or the United States it is either transparency or accumulation of assets. It is clearly both. 

So, the EITI is an important platform for the very focus that Paul Collier is asking for.  

More importantly, the EITI is showing results.

  • In Nigeria the 52 staff at NEITI have on the back of their process and production audits developed detailed recommendations across government entities, not least the national oil company NNPC and the monitoring of spending of oil money at the State level. Vice president Osinbajo made clear last week that they provide an important value this information and are determined to implement the recommendations. If they do, it will transform the sector.
  • In the DRC, the EITI national commission has done much to bring transparency to the opaque arrangements behind the so-called ‘Chinese deal’ which was a barter arrangement for the sale of assets of one of the state-owned companies.
  • In the Philippines, the EITI maintains a website with contracts, cadastres and infographics on the sector. The EITI file repository currently catalogues around 40 mining and oil and gas contracts; detailed information on ancestral lands; and a detailed examination of current Memorandums of Agreement.
  • In Myanmar, EITI has become a core part of the government’s reform efforts. The national EITI commission has provided representatives of civic society rare opportunities to engage the government and discuss environmental concerns. The government has used the EITI to undertake consultations on issues such whether to create a sovereign wealth fund. Let us hope the will to change continues after the elections.

More stories from the countries can be found our latest Progress Report

The EITI is not perfect and faces many challenges, of course. Amongst the things that needs improving are that the term “compliant” sends a signal that the job is done; the EITI quality assurance system does not adequately acknowledge progress and innovations; and some member countries do not give civic society the space it needs.

Reforms and progress takes time and will only succeed if they are led from within. Across the world, in countries like the Democratic Republic of Congo, Ghana, Guinea, and Nigeria in Africa, in Colombia and Peru in Latin America, and Myanmar and the Philippines in Asia progress and innovations are made, using the EITI as a platform. We are proud of what EITI has achieved. Yet the job has hardly begun. Those committed to reform need our support, not knocking.