The EITI: Ex­tract­ing trans­parency

Le­banon’s oil in­dus­try must not be shrouded in se­crecy

Executive Magazine - - Contents - DIANA KAISSY is the Mid­dle East and North Africa co­or­di­na­tor for the Pub­lish What You Pay or­ga­ni­za­tion

In Oc­to­ber 2014, Le­banon hosted its first ever Petroleum Day. Much of the event’s fo­cus was on civil so­ci­ety’s role in mon­i­tor­ing the coun­try’s nat­u­ral re­sources. One of the pri­mary tools to aid this en­deavor will come through the adop­tion of the Ex­trac­tive In­dus­try Trans­parency Ini­tia­tive (EITI) — a global trans­parency ini­tia­tive led by gov­ern­ments, com­pa­nies and civil so­ci­ety. The Le­banese gov­ern­ment has in­di­cated its will­ing­ness to com­mit to the EITI. An­tic­i­pat­ing this com­mit­ment, Le­banon’s civil so­ci­ety needs to de­velop an in­ti­mate aware­ness of how to adapt this tool to the lo­cal con­text and en­sure all stake­hold­ers work to­wards a trans­par­ent ex­trac­tive sec­tor.

The EITI Stan­dard re­quires im­ple­ment­ing coun­tries to share and pub­lish in­for­ma­tion at the lo­cal level cov­er­ing such is­sues as: the al­lo­ca­tion of rights, pro­duc­tion data, as well rev­enue trans­fers to lo­cal ju­ris­dic­tions, the in­dus­try’s so­cial im­pact and rev­enue man­age­ment. How­ever, the EITI is not a magic bul­let to kill cor­rup­tion. In­stead, it of­fers a plat­form for stake­hold­ers to dis­cuss poli­cies, ac­cess in­for­ma­tion and gen­er­ate de­bate to help in­form reg­u­la­tory de­ci­sion mak­ers. Civil so­ci­ety plays a ma­jor role in the EITI, through which it can em­power cit­i­zens to act as watch­dogs over nat­u­ral re­sources that are right­fully theirs.

This is the case in coun­tries like Niger, In­done­sia and Mon­go­lia, where civil so­ci­ety has been able to un­lock the po­ten­tial of the EITI and push gov­ern­ments to share in­for­ma­tion on tax pay­ments, con­tracts and de­tailed pro­duc­tion data. Such data, for ex­am­ple, was used by civil so­ci­ety in Niger to en­shrine rev­enue and con­tract trans­parency in a new con­sti­tu­tion in 2010 — go­ing way be­yond EITI re­quire­ments. Niger is not alone. In a grow­ing num­ber of coun­tries, data made avail­able through the EITI is be­ing used to ef­fect devel­op­ment through bet­ter rev­enue man­age­ment. In Iraq, the Iraqi Trans­parency Al­liance for Ex­trac­tive In­dus­tries is cur­rently work­ing closely with com­mu­ni­ties to en­sure that re­source rev­enues are put to good use, in line with the EITI Stan­dards.

But can Le­banon ben­e­fit from such an ini­tia­tive when all its po­ten­tial nat­u­ral re­sources are still un­der­ground?

The an­swer is yes. Specif­i­cally, the EITI Stan­dards ad­dresses the al­lo­ca­tion of rights and dis­clo­sure of the li­cense reg­istry and li­cense al­lo­ca­tion process; and rec­om­mends that con­tracts — as well as the ben­e­fi­cial own­ers of each com­pany — be dis­closed. In Le­banon, where th­ese is­sues are con­stantly be­ing ques­tioned, the EITI will pro­vide civil so­ci­ety — and, equally im­por­tantly, gov­ern­ment de­part­ments and in­vestors — with de­tailed in­for­ma­tion that will help dis­perse un­nec­es­sary sus­pi­cion and en­hance the at­mos­phere of col­lab­o­ra­tion among all en­ti­ties in­volved in the fu­ture of Le­banon’s ex­trac­tive sec­tor. Spe­cific in­for­ma­tion re­gard­ing the li­cens­ing process, cri­te­ria adopted to award li­censes, the names of com­pa­nies awarded th­ese li­censes, as well as a de­scrip­tion of what a li­cense al­lows th­ese com­pa­nies to do, are com­piled into an EITI re­port, rec­on­ciled by an in­de­pen­dent in­ter­na­tional au­dit­ing firm and dis­sem­i­nated for public use.

A pri­mary weak­ness pre­vent­ing any real and sub­stan­tial progress in the Le­banese so­cioe­co­nomic and po­lit­i­cal sphere is the coun­try’s clien­telis­tic ap­proach to in­come gen­er­at­ing sec­tors such as tourism and in­dus­try — where il­le­gal sub­con­tract­ing, con­flicts of in­ter­est, and shady prac­tices in the ten­der­ing of con­tracts have be­come the norm, not the ex­cep­tion. The re­sult has, thus far, com­pounded mis­trust among the dif­fer­ent Le­banese stake­hold­ers — namely gov­ern­ment, civil so­ci­ety and the pri­vate sec­tor.

Con­sid­er­ing this chal­leng­ing en­vi­ron­ment and a bud­ding ex­trac­tive sec­tor, Le­banon is run­ning the risk of head­ing to­ward the so called re­source curse. Rev­enues from oil and gas might end up in the pock­ets of the priv­i­leged po­lit­i­cal elite, po­ten­tially de­priv­ing the ma­jor­ity of the pop­u­la­tion of any chance to ben­e­fit through shared pros­per­ity and in­clu­sive growth.

The EITI of­fers a means to ad­dress some of the afore­men­tioned chal­lenges fac­ing stake­hold­ers through open­ness and ac­cess to in­for­ma­tion — a needed step to­ward build­ing trust and trans­parency.

In light of the above, we can say that the Le­banese Petroleum Ad­min­is­tra­tion (LPA) needs to in­vest more of its time and en­ergy in reach­ing out to the public to share in­for­ma­tion re­gard­ing the steps and pro­cesses that Le­banon is un­der­tak­ing to reg­u­late the sec­tor. Ques­tions re­gard­ing the de­layed pub­li­ca­tion of the Strate­gic En­vi­ron­men­tal As­sess­ment, the process of award­ing li­censes and the is­sue re­gard­ing the two Le­banese oil com­pa­nies that passed through the pre­qual­i­fi­ca­tion round of li­cens­ing, are among the pri­mary is­sues that the LPA needs to ad­dress and re­spond to ur­gently.

Adopt­ing the EITI at this stage, along with ad­dress­ing the above and in­volv­ing all stake­hold­ers in the pol­icy plan­ning process, will also serve to en­hance the at­mos­phere of trust that is greatly needed for the proper func­tion­ing of such a vi­tal sec­tor. While grab­bing at this unique op­por­tu­nity to adopt a tool that can add more trans­parency to the sec­tor, civil so­ci­ety in Le­banon should in­vig­o­rate its role as a watch­dog and start de­mand­ing that it is given its proper place as an ac­tive par­tic­i­pant in the gov­er­nance of this cru­cial sec­tor.

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