What is the importance of EITI data analysis?•Creates neutral space for building trust and facilitating discussion
Multi-Stakeholder Dialogue(MSG, CSOs)
• Links EITI to broader national policy priorities
Objective Setting(Work plan)
• Useful in evaluating pressing policy questions & challenges
Disclose Relevant Information(Scoping, Reconciler TOR &
EITI Report)
• Enables informed public understanding & policy debates
Analysis of Information
• Increases accountability & developmentLinks to Policymaking & Institution building
Legal framework & fiscal regime
(§3.2 )
Exploration activities
(§3.3)
Taxes & Primary
Revenues(§4.2(a))
SOE level of beneficial ownership (§3.6(c))
Direct payments/
receipts (§4.2(d))
Employment §3.4(d)
Revenues in & not recorded
in budget (§3.7)
License award/transfer
process & deviations(§3.1
0)
Production volumes &
values (§3.5(a) & §3.4(e))
In-kind revenues(§4.1(c))
Government transfers by
SOEs(§4.2(c))
Mandated national/
subnational transfers(§4.2(e))
Social payments(§4.1(e))
Earmarked revenues &
budget/audit processes
(§3.8)
Register of licenses(§3.9)
Export volumes &
values (§3.5(b))
Infrastructure/barter
provisions(§4.1(d))
SOE quasi-fiscal
expenditures(§3.6(b))
Beneficial ownership
(§3.11)
Economiccontribution(§3.4(a)-(c))
Transport Revenues
(§4.1(f)
Contract/license
disclosure(§3.12)
Allocation of Rights Production
Data Revenue Collection
SOERevenue Management
Sub-National
Social Impact
What is “EITI data”?
What questions to ask when analyzing?
EITI data, along with other information, can help answer questions posed by the Natural Resource Charter framework
The Natural Resource Charter framework offers a series of questions on natural resource governance as a way to assess government policies along the decision chain.
Limitations of Analysis
However, it is important to note the limitations of EITI report analysis. EITI reports usually do not provide all the information needed to fully analyze the costs and benefits of extractive policies.
But, EITI disclosures can raise important questions about natural resource revenue management and expose areas where greater transparency is needed.
Step A. Information Gathering: What are the relevant NRC framework questions and what information from EITI reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI information using the NRC framework questions indicate about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve policies and systems to better manage resource wealth?
Framework for Analysis
Three steps to using EITI information to analyze Natural Resource Charter framework questions:
Issue 2: State Owned Enterprises
Precept 6. Nationally owned resource companies should be accountable, with well-defined mandates and an objective of commercial and operational efficiency.
Step A. Information Gathering: What are the relevant NRC framework questions and what information from EITI reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI information using the NRC framework questions indicate about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises
Step A. Information Gathering: Primary QuestionsState Owned Enterprises
Primary Questions6.1 SOE Role. Do the extractive sector state-owned enterprises have clearly defined roles?
6.2 SOE Funding and Financing. Does the extractive sector state-owned enterprises have appropriate funding and financing models?6.3 Political Interference. Is there limited political interference in extractive sector state-owned enterprises technical decisions?6.4 SOE Accountability. Is the extractive sector state-owned enterprises transparent and subject to oversight?
6.5 Long-term outlook. What is the long-term outlook for governance of extractive state owned enterprises and institutions governing on extractive resources?
Secondary Questions• Transparency?• Audits?• Oversight?
What are the relevant NRC framework questions?
Precept 6. Nationally owned resource companies should be accountable, with well-defined mandates and an objective of commercial and operational efficiency.
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Audits. Is the SOE subjected to independent financial audits by skilled independent professionals, and are the results publicly disclosed?
Oversight. Is the SOE subject to an appropriate level of legislative oversight without unduly constraining decision-making?
6.4 SOE Accountability. Is the extractive sector state-owned enterprises transparent and subject to oversight?
Step A. Information Gathering: Secondary Questions
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Are SOE production,
plans, revenues and costs disclosed?
Is revenue flow between NOC and the
state disclosed?
Are results of oil trading
publicly available?
Step A. Information Gathering: Tertiary Questions
Is there full and comprehensive
information about SOE quasi-fiscal
activities disclosed?
Are the legal obligations to report?
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Are SOE production,
plans, revenues and costs disclosed?
Is revenue flow between NOC and the
state disclosed?
Are results of oil trading
publicly available?
Step A. Information Gathering: Tertiary Questions
Is full and comprehensive
information about SOE quasi-
fiscal activities disclosed?
EITI reportRGI
EITI reportRGI
EITI reportRGI
EITI reportRGI
Official website (Government Ministry, National Oil Company, Oil Fund etc.)
Are the legal obligations to report?
SOEs: EITI Standard §3.6 Where state participation in the extractive industries gives rise to material revenue payments, the EITI Report must include:
b) Disclosures from SOE(s) on their quasi-fiscal expenditures such as payments for social services, public infrastructure, fuel subsidies and national debt servicing. The multi-stakeholder group is required to develop a reporting process with a view to achieving a level of transparency commensurate with other payments and revenue streams, and should include SOE subsidiaries and joint ventures.
If this information is published on government
websites, the EITI report may simply
provide a link
EITI Report
Step A. Information Gathering: SourcesIs full and
comprehensive information
about SOE quasi-fiscal activities
disclosed?
QuestionIs full and
comprehensive information about SOE
quasi-fiscal activities disclosed?
EITI Report
EITI Standard §3.6b Disclosures from SOE(s) on their quasi-fiscal expenditures such as payments for social services, public infrastructure, fuel subsidies and national debt servicing
AzerbaijanSOCAR website
2013 EITI report, page 30
2013 SOCAR financial report, page 22
SOCAR website, Social
Responsibility
QuestionIs full and
comprehensive information about
SOE quasi-fiscal activities disclosed?
RGI: Azerbaijan
Step A. Information Gathering: What are the relevant NRC framework questions and what information from EITI reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI information using the NRC framework questions indicate about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Are SOE production,
plans, revenues and costs disclosed?
Is revenue flow between NOC and the
state disclosed?
Are results of oil trading
publicly available?
Step B. Policy Evaluation
Is there full and comprehensive
information about SOE quasi-
fiscal activities disclosed?
Resource Governance IndexNatural Resource Charter
EITI report recommendations
Are the legal obligations to report?
The national company should maintain public accounts in accordance with international standards and subject to independent audit, and clearly identify any private ownership interests and related transactions.
A system of checks and balances helps address the inevitable conflicts of interest
The national company should face at least the same standards of disclosure that private companies do.
Step B: Policy Evaluation: Natural Resource Charter
Precept 6. Nationally owned resource companies should be accountable, with well-defined mandates and an objective of commercial and operational efficiency.
QuestionWhat are the
safeguards that ensure publishing of information about
SOE quasi-fiscal activities disclosed?
Natural Resource Charter Azerbaijan government policy
A system of checks and balances helps address the inevitable conflicts of interest
Officials of the SOCAR are not required to disclose information about their financial interest in any extractive activities or projects
The national company should face at least the same standards of disclosure that private companies do.
According to the Charter of SOCAR on reporting, accounting and control in the Company, the SOCAR keeps accounts according to the law, and compiles a statistical report which it submits to the relevant state bodies.
The national company should maintain public accounts in accordance with international standards and subject to independent audit
SOCAR management is responsible for the preparation of consolidated financial statements in accordance with international financial reporting standards, such as IASB or GAAP accounting standards.
Step B: Policy Evaluation: Compare Azerbaijan’s transparency practices to the Charter’s recomendations
Step B: Policy Evaluation:
Question The 2013 Resource Governance Index (RGI) rates the competitiveness of the licensing process:
3.3.1.049: Does the SOC publish information about the rules governing decision making by the Board of Directors?
No publicly available rules of decision making
Azerbaijan’s full RGI questionnaire can be found at: https://www.indabaplatform.com/ids/widgets/vcardDisplay4RWI.html?horseId=1953&showscore=false
Resource Governance Index
Are there clearly defined rules
governing decision-making on quasi-fiscal
activities?
Azerbaijan
“The Company Board, which is an advisory structure within SOCAR, does not have an important role in practice. SOCAR's president has absolute powers in managing all sides of activities.”
Step B. Policy Evaluation: Azerbaijan
SOCAR is wholly owned by the government of Azerbaijan and takes part in all oil and gas activities. It publishes regular reports on production volumes, the value of exports, estimates of investments in exploration and development, production costs, the names of companies operating in the country, production data by company, quasi-fiscal activities, and the government’s portion of production-sharing contracts. SOCAR’s annual financial reports are audited by an independent external auditor and include the consolidated accounts of all SOCAR’s subsidiaries, however data is incomplete. Moreover there is no clear definition of rules governing non-commercial activities, namely quasi-fiscal activities. Additionally information about conducted quasi-fiscal activities is not fully available for public.
Rights Allocation Method. Does the government use an appropriate allocation method to allocate rights?
Step A. Information Gathering: What are the relevant NRC framework questions and what information from EITI reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI information using the NRC framework questions indicate about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises
“The national company should maintain public accounts in accordance with international standards and subject to independent audit, and clearly identify any private ownership interests and related transactions… legislature or appropriate oversight agency should conduct regular and systematic oversight of the national company.”
NATURAL RESOURCE CHARTER
6.4.1.Transparency
Step C. RecommendationsHow can government policies and systems be improved to meet the goals expressed in the Natural Resource Charter?
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
“When citizens, investors and even other public institutions lack basic knowledge of what these companies are doing and how they are making decisions, the likelihood of management in the long-term public interest decreases significantly. ”
3. RecommendationsThe most effective SOEs have carefully-defined commercial and non-commercial roles.
NRGI: 9 Recommendations
for NOCs
Ensuring Transparency and
Effective Oversight
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
“Public disclosure of key data on company finances and activities in a consistent and timely fashion is critical. Relevant information for publication includes expenditures by the company on quasi-fiscal activities”
3. RecommendationsThe most effective SOEs have carefully-defined commercial and non-commercial roles.
NRGI: 9 Recommendations
for NOCs
Ensuring Transparency and
Effective Oversight
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Recommendation 7.Maximize public reporting of key data.
“As is regularly demonstrated in the private sector, rigorous accounting standards that include independent audits are one of the most powerful tools creating incentives for strong performanceand corporate governance…”
3. RecommendationsThe most effective SOEs have carefully-defined commercial and non-commercial roles.
NRGI: 9 Recommendations
for NOCs
Ensuring Transparency and
Effective Oversight
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Recommendation 8.Secure independent financial audits, and publish them.
“Legislators should also take seriously their key role in policy-making, including via legislation that establishes major strategies for the petroleum sector, defines the roles of the NOC and other institutional actors, and sets reporting requirements. ”
3. RecommendationsThe most effective SOEs have carefully-defined commercial and non-commercial roles.
NRGI: 9 Recommendations
for NOCs
Ensuring Transparency and
Effective Oversight
Transparency. Does the SOE or Government publicly report key operational data and does it have a legal obligation to do so?
Recommendation 9.Choose an effective level of legislative oversight.
3. Recommendations: Azerbaijan
Actions for Azerbaijan’s government:
• Establish clear rules for SOCAR quasi-fiscal activities
• Require transparency in decision making on SOCAR quasi-fiscal activities
• Full disclose financial information on SOCAR quasi-fiscal activities
30
INSTRUCTIONS FOR GROUP WORK
Based on the proposed methodology take 3 STEPS of ANALYSIS on following issues:
Do the roles and responsibilities of KMG suit the national context (Ukraine)
Is there political interference in KMG technical decisions? (Kyrgyzstan)
Does KMG have an appropriate funding model? (Azerbaijan)
Is KMG transparent and subject to oversight? (Kazakhstan)
Does KMG have clearly defined roles? (Tadjikistan)