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The Lao Hamutuk Bulletin Vol. 9, No. 1: January 2008

English PDF Format   Bahasa Indonesia PDF Format

Table of contents:

Publish What You Pay: Consolidating the Asia-Pacific Movement

The Publish What You Pay (PWYP) coalition is a global civil society campaign for transparency in oil, gas and mining revenues. It has 300 coalition members from 50 countries who work on international development, human rights, environmental protection, media and other issues. PWYP was launched in 2002 by Global Witness, CAFOD, Save the Children, Transparency International and the Open Society Institute. PWYP calls for laws requiring companies and governments to disclose payments and revenues related to exploitation of mineral resources. PWYP's objectives are to get companies to report on all types of payments, to every level of government and in every country where the companies operate, and to get Government to report on all revenues from resources extraction, broken down by company and type of revenues (such as taxes, royalties, bonuses, revenue sharing agreements).

This article discusses the issues around transparency in non-renewable extractive resources, which were discussed in a five-day conference in Bali.

The Publish What You Pay Coalition, together with the Revenue Watch Institute, organized the first Asia Pacific Regional Workshop from 6-11 August 2007 in Denpasar, Bali, bringing together more than sixty civil society participants from Asia-Pacific countries which are rich in non-renewable resources. Participants came from Australia, Papua New Guinea, the Solomon Islands, Fiji, Philippines, Burma, Cambodia, China, Malaysia, Vietnam, Indonesia and Timor-Leste, as well as civil society members from Mongolia, Kazakhstan and Ghana.

The thirteen participants from Timor-Leste were selected by the workshop organizing committee, based on their organizations' field of work. They were mainly from the Core Group on Transparency which monitors the national budget including petroleum revenue management, as well as media representatives. Those participants were: Georginha Bianco from Mata Dalan Institute, Julino da Silva Ximenes from the HAK Association, Carlos Florindo from ETADEP, Maria Dias Ximenes from Rede Feto (a member of the Petroleum Fund Consultative Council), Jose Alves of NGO Forum, Jose da Costa Alves from Luta Hamutuk, Guteriano Nicolau from La'o Hamutuk, Mario de Arajo from Oxfam Australia, Rosalina Pires from the office of the Ombudsman for Human Rights and Justice, Jose Sarito from Timor-Post and Antonio Febu da Silva from Radio Timor-Leste. The Timor-Leste participation was coordinated by Santina Soares of La'o Hamutuk and Thomas Freitas of Luta Hamutuk, who also serves on the Petroleum Fund Consultative Council.

The Asia-Pacific workshop brought together civil society groups who work on transparency in the petroleum and mining sector, as well as those who have engaged with Publish What You Pay campaign for extractive industries transparency. Furthermore, the workshop helped enhance activists' ability to campaign more effectively in their countries, as well as expanding outreach and raising awareness.

Non-renewable natural resource deposits, the most valuable of which are oil, diamonds, gold, and uranium, can cause people to dream, hoping that the revenues they will provide for government can bring jobs, money and services to the communities, and that their extraction can serve as an engine to develop the local economy. However, the experiences of many countries rich in these resources have shown that this natural wealth often pushes them into the "resource curse," with rising prices, increased imports, and a neglect of agriculture and other sectors. Countries which depend on oil, gas and mining revenues are the most at risk, and they often experience corruption, conflict, instability environmental destruction and increased poverty.

Transparency in revenue management is an important means to help prevent the resource curse, and Publish What You Pay is campaigning for it. If citizens have access to adequate information, they have one tool to hold their government accountable in managing resource revenues. Transparency in revenue management in extractive industries is critical to ensure that natural resources revenues are managed properly, to benefit citizens by creating jobs, developing the economy and improving public services.

The following are some of the issues discussed in the workshop:

EITI and PWYP

The Extractive Industries Transparency Initiative (EITI) is a global effort to improve transparency and accountability in management of revenues from oil, gas and mining. EITI is a multi-stakeholder initiative established in September 2002 by the United Kingdom Government. Currently, 24 countries have endorsed, 15 more are candidates. Nine other countries, including Timor-Leste, are collecting further information. A number of oil and mining companies have expressed their willingness to use EITI as an international standard, although most say that they will implement it only when governments of resource-producing countries require them to do so.

Publish What You Pay is an international movement which campaigns to establish EITI as a mechanism to enforce people's right to information by passing laws requiring governments and companies to implement a limited degree of transparency. The secretariat of Publish What You Pay is based in the United Kingdom, and it is administered by an International Coordinator and a Communications Officer. The PWYP Strategic Advisory Group (SAG) provides strategic direction for the campaign, explores opportunities for PWYP to advance its advocacy, reviews progress on agreed goals and actions, mediates conflicts within its coalition, and supports members who have been threatened. Rizki Wibowo of Transparency International Indonesia and Santina Soares of La'o Hamutuk are the two Asia-Pacific representatives on the SAG, which had its first meeting in Oslo on 23-27 September 2007.

EITI and PWYP both call for transparency, but the difference between EITI and PWYP is that EITI is voluntary at the global level and depends on the participation of the governments, while PWYP grows from civil society and advocates a wider and deeper transparency. PWYP lobbies both governments and companies to establish mechanisms for public reporting of all types of payment activities, for each country and each government, breaking down the information by country, company and type of payment. In essence, PWYP advocates for more transparency than is currently established with EITI.

EITI is just a first step

The workshop discussed EITI as a mechanism that can help reduce the resource curse, and participants exchanged experiences in challenges, weaknesses, difficulties, and lessons learned from countries that already implement EITI measures. In the Asia-Pacific region, Timor-Leste's Government endorsed EITI principles in 2003 and is now in the process of implementing them. Because we are further along than other countries in the region, workshop participants from Papua New Guinea, Solomon Islands, Fiji, and Indonesia are interested to learn from Timor-Leste's experiences, to help them use EITI to improve transparency and increase natural resource benefits to their own people.

During this workshop, participants and resource people raised many issues, indicating that EITI is still being developed. We agreed that EITI alone is not enough to avoid the resource curse. This is because EITI only covers governments' management of money from extraction activities, but does not include actual management of the physical resources by either government or companies, which is called resource management. This important difference often confuses people in both civil society and government. Transparency in revenue management alone does not ensure a fair and just use of non-renewable resources, and transparency alone does not guarantee that the many problems faced by the citizens of a country, such as violations of community and human rights, environmental protection, and attention to vulnerable groups such as women and children are properly addressed.

Willy H. Olsen, who has worked in the Norwegian oil industry for many years, gave a presentation on the first day of the workshop. He said "natural resources [are] often seen as a symbol of wealth but they are merely a symbol." The sentence expresses a very significant message to resource rich countries: that having minerals and oil does not automatically mean that everybody is wealthy. People in these countries often have expectations which are far from reality; many of their people do not benefit significantly from such resources, and continue to live in poverty. For this reason, many organizations advocate that governments and companies stop exploring and exploiting non-renewable resources. They feel that this exploitation often harms local people, while enriching and empowering a small elite. That is why one Filipino participant argued that supporting EITI only gives permission to companies to extract more oil and minerals.

EITI is influenced by many

International Financial Institutions (IFIs) like the World Bank and IMF are deeply involved in extractive industries, and their roles are cause for concern. For example, the World Bank administers the EITI Multi-Donor Trust Fund, which finances technical assistance for EITI implementation. The IFIs have great power, and use their loans and financial leverage to pressure governments, companies and private investors. This is problematic because citizens, governments and IFIs sometimes have different views, such as whether resources should be exploited by public or private companies. Therefore, the IFIs' technical advice to government is sometimes inappropriate for the situation of the country.

EITI originated as a voluntary initiative based on the good will of the host governments and companies. Nevertheless, although EITI itself is not a legally binding mechanism, advocates can demand that governments enact legal requirements that information be published. For example, Nigeria has implemented EITI, strengthened with legal guarantees. This is a difficult process, and the workshop had lively discussions on whether the PWYP advocacy campaign should be broadened, as participants saw that the limitations of EITI are serious weaknesses.

However, many participants agreed that the PWYP campaign should remain focused on revenue management, and leave the broader natural resource-related issues to other organizations with more capacity. Around the world, many other organizations and networks efficiently advocate on human rights, local community rights, and land rights. For example, La'o Hamutuk described our experience linking with the Oilwatch network, an international movement strongest in South America and Africa, which works to prevent the damage caused by petroleum development. In the end, participants in the workshop agreed to establish a team to explore how to integrate the PWYP's mission with the other issues discussed in the workshop. This team will report to the PWYP international strategic planning process in 2008 for a thorough discussion.

Lessons from the workshop

All the delegations were very enthusiastic, actively discussing these issues and how to strengthen the network nationally, regionally and internationally. Its advocacy is important to influence social change in the Asia-Pacific region, which is rich in natural resources but inexperienced in transparency. Unfortunately, oil and minerals combined with corrupt governments and greedy companies often leads to suffering, poverty and underdevelopment. The participants from Pacific countries such as Papua New Guinea, Solomon Islands and Fiji are interested in learning more about how to engage their governments to adopt EITI.

They can learn from the experiences of Nigeria and Ghana in Africa, which have long suffered from poverty and other social injustices and are only now beginning to get back on their feet as they search for ways to control their governments. In West and Central Asia, Mongolia, Kazakhstan and Azerbaijan are also implementing EITI. Timor-Leste, a young country trying not to repeat the unhappy experiences of others, is developing laws and regulations to promote transparency in revenue management, including implementing EITI. The Timor-Leste delegation emphasized that "transparency requires the government and companies' goodwill in implementation." However, Timor-Leste still has a long way to go to guarantee that government is transparent, to hold the companies accountable, and to ensure that both follow through on their promises.

In conclusion, all participants agreed that international support is essential to strengthen each of our advocacy in our own countries, and that the international PWYP coalition should support its members' local campaigns.

Next Steps for Timor-Leste

At the end of the workshop, the participants from each country presented their national plan. The Timor-Leste participants plan for the Core Group for Transparency to continue to advocate for transparency in revenue management and other related issues and to serve as PWYP contact in Timor-Leste. The Mata Dalan Institute will facilitate the Core Group meetings. The Core Group will soon receive training from an experienced specialist on budget monitoring and other issues. We also hope to expand this campaign and invite those interested in joining or supporting it to contact Georginha Bianco of Mata Dalan Institute or Mario de Arajo of Oxfam Australia.


EITI in Timor-Leste

Disclaimer: the following article, Terms of Reference and Workplan were written by the EITI Working Group. They do not necessarily represent the views or opinions of La'o Hamutuk. See the above article for La'o Hamutuk's analysis of EITI, which highlights some limitations.

In 2003 the Government of Timor-Leste was one of the first developing countries in the world to promise that it would live by the transparency principles of the Extractive Industry Transparency Initiative (EITI). EITI is a global initiative that is supported by the major developed nations and a number of developing nations to promote openness in the payment and receipt of money between the extractive (oil, gas and mining) industries and host governments. They have funded a Secretariat to manage the program, to help developing countries understand EITI and to give recognition to them when they have shown that they live by the transparency principles.


Learn more about EITI at
http://www.eitransparency.org

To be recognized around the world as a country that lives by the EITI principles is a very good thing for Timor-Leste as it will help promote the country as a good place to invest and as a country that does not want to see any corruption in its extractive industries. Timor-Leste establishing its Petroleum Fund was a significant step forward in showing the world that it wants to manage its petroleum money sensibly, transparently and to invest for future generations. Being recognized as living to EITI principles is harmonious to the aims of the Petroleum Fund.

Setting up all of the arrangements to show the world that Timor-Leste lives by the EITI principles requires quite a lot of work and commitment by the Government, industry and civil society. To do this Timor-Leste has set up a national working group for EITI which has agreed a Terms of Reference about how it will operate and also set out a Work Plan, to guide what it will need to do over the The following documents are the Terms of Reference and the Work Plan, published in both this Bulletin and in a variety of other places, so that the public can see what the National EITI Working group is doing and know who to talk to if they wish to ask questions or to learn more about EITI.

Timor-Leste EITI Working Group: Terms of Reference

Preamble

The Government of Timor-Leste was one of the first to state its commitment to the Principles and Criteria of the Extractive Industries Transparency Initiative (EITI) on the occasion of the first international conference on EITI in London in June 2003. Adherence to EITI is aligned with the country's pursuit, from the outset, of transparency in the petroleum and mining sectors. Petroleum sector revenues are in the public sector domain (via quarterly reports on the status of Timor-Leste's Petroleum Fund) as are production sharing contracts. Measures of transparency are codified in the country's petroleum sector legislation. Mining sector activities have not yet started and laws are currently under preparation.

To guide the full implementation of EITI in Timor-Leste, a tripartite EITI Working Group -- comprised of representatives of relevant government ministries/agencies, extractive industry companies, and civil society -- is established.

Objectives

The objectives of TL's EITI Working Group include:

  • Develop a public and financially sustainable EITI work plan (endorsed by the Working Group following public review and commentary on the draft work plan).

  • Monitor implementation of the EITI work plan, reviewing and updating it periodically as necessary.

  • Determine and agree the scope of EITI audits/reports in Timor-Leste, develop EITI reporting templates to be used by companies and government that are easily comprehensible, determine terms of reference for and select an independent auditor to reconcile revenue and payment data, and ensure that EITI reports are published and disseminated.

  • Determine and agree the level of aggregation/disaggregation to be included in the reports that appropriately protects commercially sensitive information without compromising the public's right to information on both extractive industry payments and government receipts. The group will determine the frequency/cycle for EITI reports in Timor-Leste.

  • Help address weaknesses and capacity constraints in extractive industries transparency in Timor-Leste and raise public awareness (including civil society and NGO) of EITI and petroleum sector transparency.

  • Facilitate the design, monitoring, and evaluation of the EITI validation process in Timor-Leste.

  • Establish a program of work to include the mining industry under the EITI framework when the mining sector is established.

Membership

The EITI Working Group shall include the following members:

  • Secretary of State, Natural Resources/Public Servant EITI Focal Point (Chairperson)

  • Two senior representatives of the Ministry of Finance/the Tax Authorities.

  • Senior representative of the Banking and Payments Authority.

  • Two senior representatives of the Ministry of National Resources/Regulating Authorities.

  • Three representatives of civil society as determined/selected by a forum of civil society organizations involved in transparency and civil society oversight of extractive industries.

  • Three representatives of petroleum companies selected on the basis of largest share/interest of those companies currently operating in Timor-Leste associated areas: (i) the Timor-Leste exclusive petroleum development area, (ii) the Joint Petroleum Development Area, and (iii) future operators in JPDA as well as Timor-Leste associated areas.

Each member will name an Alternate who would attend Working Group meetings in case the primary member is unable to attend. Each member shall consult with and fairly represent interests of others within their stakeholder pillar.

The World Bank, IMF, NORAD petroleum sector advisers to the government are invited to participate as observers. The Working Group may invite other observers as it sees fit in accordance with the Decision Making/Voting provisions of this Terms of Reference. Observers will not be eligible to vote or take decisions on issues under consideration by the the Working Group. Observers will be subject to the same rules of conduct as full working group members.

Term of Membership

Members shall be appointed for an initial two year term and can be reappointed for a second two year term. While the tripartite nature of the group must be maintained (i.e., government, extractive industry companies, and civil society must always be represented), the group may agree at any time to change, add, or reduce number of members.

Meetings

The Working Group shall meet at a minimum once per month or as otherwise agreed until such time as work plan is released for public review and validation is achieved. Frequency of meetings shall be reviewed by the group after publication of the final work plan and validation is achieved to ensure full implementation of the work plan.

The Chairperson will call and set the agenda for meetings. The meeting announcement, agenda, and any background documents shall be circulated to Working Group members a minimum of one week before the meeting date. The Chairperson and Working Group shall be supported by a Secretariat. The Secretariat shall conduct all coordination and administrative functions necessary, including transport and communication, to support the Working Group and ensure the fulfillment of its specific responsibilities.

The Chatham House Rule will apply to meetings and to the minutes of meeting discussions to be kept by the EITI Coordinator. Minutes of meetings (respecting the Chatham House Rule) will be circulated to the Working Group and will be made publicly available after agreement among the Members. Members and observers should respect that differences of opinion may arise during the development of a final work plan and should refrain from engaging in public discourse which would be disruptive to the development of a draft Work Plan prior to release for public review and commentary.

All Working Group Members and Observers shall respect and not discuss outside of the Working Group meetings any commercially sensitive information that may become available at any point during the development and implementation of the Timor-Leste EITI Program. Violation of this trust would be reviewed by the Working Group and may result in dismissal from any further participation in Working Group meetings.

If there are any necessary or urgent issues which need to be discussed and decided, the Chairperson will call to have extraordinary meeting.

Decision Making/Voting

A quorum of the Working Group shall constitute majority (50 percent) attendance of members which must include at least one representative of each stakeholder pillar (i.e. the Government, Industry and Civil Society). The Working Group shall strive to decide all matters through consensus of all members present and representing a quorum. However, where consensus is not possible, then final decisions of the Working Group shall be taken by vote representing 60% of the quorum, including at least one member of each stakeholder pillar.

Summary of Timor-Leste EITI Work Plan 2007-2009

The Government of Timor-Leste was one of the first to state its commitment to the Principles and Criteria of the Extractive Industries Transparency Initiative (EITI) on the occasion of the first international conference on EITI in London in June 2003. Adherence to EITI is aligned with the country's pursuit, from the outset, of transparency in the petroleum and mining sectors. Petroleum sector revenues are in the public sector domain (via quarterly reports on the status of Timor-Leste's Petroleum Fund) as are production sharing contracts. Measures of transparency are codified in the country's petroleum sector legislation. Mining sector activities have not yet started and laws are currently under preparation.

To guide the full implementation of EITI in Timor-Leste, a tripartite EITI Working Group -- comprised of representatives of relevant government ministries/agencies, extractive industry companies, and civil society -- is established.

The following is a summary of the Work Plan of the EITI Working Group. A tabular version from September 2007 is available here.

Objective One: Establish Commitment to Implement EITI

1a. Unequivocal public statement of intention to implement EITI.

  • Government announces its commitment to EITI.

1b. Appointment of EITI focal point / coordinator in government.

  • Government announces/appoints an EITI coordinator.

1c. Government commits to work with all stakeholders (e.g., civil society, companies) on EITI.

  • Government statement at November 2006 petroleum revenue management workshop expressed commitment to work with civil society and companies on EITI.

  • Establishment of EITI multi-stakeholder working group also demonstrates government's commitment.

  • Identification of wider stakeholders can be undertaken as part of the EITI Working Group's agenda.

Objective Two: Establish an EITI Working Group, Develop and Publish an EITI Workplan

2a. Establishment of an EITI Multi-stakeholder Working Group.

  • Following on January 2007 invitation from government to stakeholder constituents (e.g., government agencies, petroleum companies and operators and civil society representatives).

  • Convene EITI Working Group to review obligations under EITI and establish terms of reference (TOR).

2b. Develop and publish an EITI work plan and implementation schedule.

  • Develop a publicly available EITI work plan that outlines activities for EITI implementation.

  • Work plan is dynamic and will be updated as necessary.

  • There will be a press release on the launch of EITI Work plan.

2c. Identify sustainable sources of financing for EITI implementation

Secure government budget and/or EITI Multi-Donor Trust Fund (MDTF) financing and investigate other sources of financing to support EITI implementation.

  • Prepare budget justifications and/or MDTF grant agreement proposal for submission.

2d. Establish local EITI Secretariat

  • Agree TORs for Secretariat staff person and recruit and appoint staff person to support EITI Working Group.

Objective Three: Remove Obstacles to Implementation of EITI/Capacity Building and Outreach

3a. Review of legal framework to identify potential obstacles to EITI implementation

  • Review legal framework to identify any possible obstacles to EITI implementation.

  • Determine procedures to promote EITI compliance.

3b. Capacity building/training for civil society (including media) on EITI and petroleum sector issues

  • Workshops and training sessions in Dili and the Districts on specific issues of interest, informational sessions, Model PSC explanation, Petroleum Regime, Petroleum Fund etc.

  • Assist Civil Society to identify specialist training courses and possible sources of funding to participate.

  • Recruit international specialists to deliver focus groups and training sessions on extracting industries related issues.

3c. Capacity building/training for and from industry on EITI and petroleum sector issues.

  • Workshops and training sessions in Dili (University and High School) on specific issues of interest, informational sessions, etc.

  • Information and discussion among industry in relation to EITI.

3d. Capacity building/training for government on EITI and petroleum sector issues

  • Lectures, workshops and training sessions for Civil Servants, Members of Parliament etc.

3e. Outreach/informational activities

  • Seminars, TV and radio talk show, and press release/newspaper articles, web site, mailing list, etc., workshops and film showing around the Districts.

  • Possible establishment of a publicly accessible Petroleum Resource Center.

3f. Build capacity to monitor the Estimated Sustainable Income (ESI)

  • As production projections already are available in the budget papers, the WG will consider the extent to which more detailed technical calculations can be available for relevant stakeholders.

  • Consider a review of accessibility of information provided to the Parliament.

Objective Four: Complete and Disseminate EITI Report

4a. Develop a reporting template for the EITI report

  • EITI Working Group to discuss and agree on the design of the reporting template for the EITI report, with a view to ensuring that it is simple and easily comprehensible, while at the same time capturing all the necessary information.

  • The group shall determine the data collection and reporting mechanisms by the government and companies to ensure that the independent consultant will receive the information needed.

  • Government and company information should be based on audited accounts to international standards.

4b. Determine and agree the level of aggregation / disaggregation

  • The EITI Working Group will discuss and agree the level of aggregation/disaggregation to be included in the reports that appropriately protects commercially sensitive information without compromising the public's right to information on both extractive industry payments and government receipts.

4c. Decide terms of reference and recruit a consultant to determine whether the process and scope of preparing the Petroleum Fund Annual Report is consistent with the reporting template, ref. activity 4a.

  • The EITI Working Group will determine the terms of reference for the independent EITI consultant, who shall be credible, technically capable, cost efficient and trustworthy.

4d. EITI compliance report completed by consultant and agreed (or rejected) by EITI Working Group

  • Consultant collects and analyzes processes, payment and revenue data for Timor-Leste associated areas as defined by the Terms of Reference of the Working Group.

  • The consultant submits the compliance report to the EITI Working Group for review; the EITI Working Group reviews the report and goes back to the consultant for any clarifications and, where necessary amends reporting format to meet requirements.

  • EITI Working Group formally accepts (or rejects) report.

4e. Publish and disseminate EITI compliance report and submit it to Government

  • EITI report posted on government, EITI, and other web sites; EITI report highlighted widely in local media.

  • EITI Working Group also to develop a wider dissemination strategy for the EITI report.

  • Stakeholders should be given the opportunity to discuss, evaluate, and interpret the results.

Objective Five: Validation of EITI Implementation

5a. EITI Validation

  • EITI Working Group to select validator from approved list provided by the international EITI Secretariat in Oslo.

  • Validator undertakes validation of EITI implementation in Timor-Leste in accordance with the EITI Validation Guide, and submits validation report to the EITI Working Group, government, and EITI Board for approval (or rejection).

5b. Publish and disseminate EITI validation report

  • EITI validation report posted on government, EITI, and other web sites; EITI validation report highlighted widely in local media.

  • EITI Working Group to develop a dissemination strategy for the EITI validation report.