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Decisive Moment for Global Transparency Effort

Most Countries Miss Deadline to Demonstrate Openness on Petroleum, Mining Revenues

(Washington, DC) - An international initiative that seeks to promote more openness about how countries profit from their oil, gas, and mining resources should not weaken its modest membership standards because governments are unable or unwilling to meet them, Human Rights Watch said today.

Twenty of the 22 current candidates to join the Extractive Industries Transparency Initiative (EITI) have not fulfilled the basic requirements to have their candidacy assessed by today's deadline, raising serious doubts about their commitment to disclose their revenues from oil, gas, and mining, Human Rights Watch said.

"It's easy for governments to sign up for the initiative and claim they are open about the money they earn from lucrative natural resources," said Arvind Ganesan, director of the business and human rights program at Human Rights Watch. "But the proof is in whether they actually do what they promised, and so far the results have been dismal."

EITI is a voluntary initiative that aims to increase the transparency of natural resource revenues by developing standardized reporting requirements for companies and governments. It was created as a way to foster public scrutiny and greater accountability over the revenues received by governments. Today EITI is a multi-million dollar effort that has been embraced by governments, industry, civil society, and multilateral institutions such as the World Bank and International Monetary Fund. Countries that join may do so in order to attract investment, while companies may seek positive publicity. For civil society groups, the main benefit of enhanced disclosure and monitoring of government revenues is that it can help combat the large-scale corruption and mismanagement that fuel human rights abuses and undermine development in many resource-rich countries.

Under the initiative's rules, candidates for membership have two years to complete an external review of their compliance with the initiative's basic standards, a process known as "validation." Today's deadline applies to 22 countries that were accepted as candidates in 2008. Ten candidate countries that joined more recently, including Afghanistan and Iraq, face later validation deadlines.

To qualify to be considered "EITI compliant," countries must meet several requirements. For example, they must publish at least one national report disclosing company payments and government revenues from the extractives sector and have in place a functioning national multi-stakeholder group that includes civil society participation. The EITI board must also certify that the candidate countries have complied with requirements following an evaluation of a validation report prepared by an accredited third-party.  The validation process is designed to provide quality assurance for the initiative's global standards.   

Only two of the 22 countries that faced today's deadline completed EITI's validation process within the mandated two-year time frame. Following a review by EITI's board, both countries - Azerbaijan and Liberia - were found to be "compliant."  One country, Guinea, voluntarily suspended its candidacy.

Nineteen other candidate countries are at various stages of implementation, with some relatively advanced and others lagging far behind. For example, Sierra Leone, São Tomé e Príncipe, and some others have not even initiated the validation process. Equatorial Guinea, despite having signed up to join the initiative in 2008, only hired a firm to carry out its validation review on the eve of the deadline to complete the validation process.

In cases where validation is pending, the EITI board, which is composed of governments, companies, and civil society representatives, has the authority to grant additional time if the country demonstrates that its delays were due to "exceptional and unforeseen circumstances." Extension requests by candidate countries will be reviewed at the next board meeting, scheduled to take place in Berlin in mid-April 2010.

"The integrity of EITI is on the line," Ganesan said. "The EITI Board should only grant extensions for legitimate reasons. Lack of political commitment and willful neglect shouldn't be used as excuses to get more time."

Human Rights Watch also called on the board to disclose publicly the basis for any extensions, to insist that extensions be offered only once, and to provide that countries failing to meet the revised deadline be automatically dropped from the initiative, or "de-listed," without the need for further board action.

Even if the board approves requests for more time for some candidates to complete the national validation process, this provides no guarantee that they will ultimately be approved as "compliant." In cases where the validation review reveals that a candidate country falls short of EITI's minimum standards, the board may permit it to renew its candidacy if it is making meaningful progress to comply. A country that has not demonstrated sufficient progress is de-listed, although it may be allowed to reapply later.

Genuine civil society participation is one key criterion for membership. In February, EITI's board rebuffed Ethiopia's desire to become a candidate, citing a repressive law that in effect bars independent civil society groups from doing any work that touches on issues of human rights or governance.

A number of other current candidates also impose serious constraints on civil society, particularly independent organizations focused on human rights and on reducing corruption. For example, Equatorial Guinea's government has not permitted a single independent human rights group to obtain legal registration and it harshly suppresses any domestic criticism.

"EITI should insist on full participation of independent civil society as a non-negotiable membership condition," Ganesan said. "We are encouraged that the board rejected Ethiopia and strongly urge that decision to stand as a precedent for all governments involved in EITI."

Human Rights Watch supports the transparency initiative, but also recognizes its limitations as a voluntary effort that currently only enhances the transparency of government income. It does not address how governments spend the money and thus cannot track corruption or assess whether the funds from extractive industries are used to benefit the public.

In February, a US Senate report documented high-level corruption involving Angola, Equatorial Guinea, Gabon, and Nigeria. Three of the four countries - Angola is the exception - are current EITI candidates.

"EITI is at a crucial juncture," Ganesan said. "It should not lower its standards for governments that are really not interested in public scrutiny. EITI isn't credible if it does not lead to improvements in governance."

Together with other members of the Publish What You Pay coalition, Human Rights Watch also supports efforts to enact regulations requiring greater transparency by companies about their payments to governments. The Energy Security Through Transparency Act in the United States, for example, would mandate disclosure by all publicly listed companies, including non-US firms listed with the US Securities and Exchange Commission.

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