The EITI: Nurturing Investments in the Extractive Industries?
Benjamin S. Austria, PhD
PAP Permanent Representative, Technical Working Group, Philippines EITI
Inasmuch as energy and minerals are essential to modern commercial, industrial and social activities as well as public welfare, nurturing investments in these extractive industries is a key ingredient in the pursuit of socioeconomic development and progress. In Executive Order 79 promulgated on 06 July 2012 to institutionalize and implement reforms in the mining sector, the Philippine Government declared support and committed participation in the Extractive Industries Transparency Initiative (EITI) in order to improve transparency, governance and accountability in the mining sector (Section 14 of the Order). Hence, it is essential for those involved in the development of the mining sector and other extractive industries to be familiar with this initiative. Furthermore, with the approval of the candidacy status of the Philippines by the EITI Board last 22 May 2013, it is necessary also to know what need to be fulfilled in order to join 25 other EITI Compliant Countries worldwide.
The EITI traces its beginning from the Lancaster House Conference hosted by the UK Government in London in June 2003 where a diverse group of countries, companies and civil society agreed on a Statement of Principles to increase transparency on the payments by companies and revenues by governments with respect to the extractive industries. The process of disclosure of payments and revenues, publication, validation and reconciliation conforms to the EITI Standard. A Multi-Stakeholder Group (MSG) oversees this process.
The structure and constituencies of the EITI Association, a non-profit association organized under Norwegian law, and the Philippines EITI will be presented. The key elements of the new EITI Standard approved in the EITI Members’ Meeting held in Sydney, Australia on 22 May 2013 will be reviewed. The Philippines EITI would have to validate a published report on the payments by companies and revenues of government from the extractive sector, conforming to the new EITI Standard, within 2.5 years from the approval of its Candidacy status.
Effective implementation of the EITI Standard could nurture investments in the extractive industries inasmuch as environmental, social and governance (ESG) issues have become important factors affecting investments. Transparency should normally lower ESG risks thereby lowering investment costs. It also provides a platform to build trust between various stakeholders in the extractive industries sector. However, transparency, by itself, is not enough. There should also be good governance and a stable fiscal environment. The EITI is not yet included as a factor by rating agencies and there might be a clash between transparency and competitiveness. The EITI process could also overturn the secrecy aspects of taxation. Hence, the Multi-Stakeholder Group of the Philippines EITI, comprised of representatives from government, companies in the extractive sector and civil society organizations, should be vigilant and join hands in ensuring that the path towards implementing EITI does not add to the difficulties faced by the extractive sector in the Philippines.