EURASIA REGIONAL TRAINING HUB EITI Advanced Course KHAZAR UNIVERSITY ▫REVENUE WATCH INSTITUTE

1. EURASIA REGIONAL TRAINING HUBEITI Advanced CourseKHAZAR UNIVERSITY ▫REVENUE WATCH INSTITUTE 15-17 June 2012, Baku

2. xoş gəlmisiniz! ▪ Welcome!▫ ласкавопросимо▪გამარჯობა ▫ Добро пожаловать▪ Тавтай морилогтун ▫  Қош келдіңіз▪   Саламатсызбы ▫ Калимаخوش آمدید▪

3. Introductions:name, organization and… What is something about the extractive sector that most people in your country do not know? What is something nice about your country that most people do not know ?

4. Training Overview DAY 1 DAY2 DAY3 Report Analysis Innovations Value Chain Action Planning Exams/ Evaluations Report Quality Country Presentations Theory of Change

5. EXTRACTIVE SECTOR VALUE CHAIN EITI as a “stepping stone” to other reforms

6. Ensuring revenue transparency EITI a Step TowardSustainable Development

7. Deciding to extract Getting a good deal Ensuring revenue transparency Managing Volatile resources Investing in sustainable development EITI in the value chain

8. Step I: Theory of Change and The Problem Tree

9. The Metaphor of a Tree Problems Hint: be specific! NOT ‘Lack of Transparency‘ TRY‘State owned oil Co. does not publish a budget or sales figures’ NOT ‘Lack of Accountability’ TRY ‘ Parliament does not have the tools and knowledge to understand payments from the extractive sector and hold ministries accountable’ Causes (ref. value chain) Roots ( hard to see causes)

10. Step 1: Start with 3 problems with the extractive sector in your country Step 2: Identify the underlying causes based on the value chain – where do decisions go wrong?

11. Hint: Choose problems that are specifically related to the extractive sector. Question: what is special about the extractive sector and it’s impact on development?

12. Causes (refer to Value Chain) Step 3: Roots explain why poor decisions on the value chain–these are sometimes hidden and many! Roots ( hard to see causes)

13. Capacity Gaps • Technical expertise • Lack of international standards • Lack of clarity/ definitions • Adequate staff • Adequate financing • Necessary mandate/Authority • Monitoring and Enforcement • Information • Motivation/Political Will Hint: ‘supply side’ capacity gaps : Roots ( hard to see causes) … but don’t forget the problem includes lack of demand for change too! • No mobilization/organization of stakeholders • No international support • Lack of public awareness /pressure • Lack of political will • Lack of interest by media • Lack of awareness of oversight actors

14. Structural Barriers- Deep Roots • Hint: think about barriers such as • Structural (lack of strong legislative /judiciary/accountability mechanisms, No access to information) • Interests (status quo) e.g. • Elites (individuals, families) • Political (parties or politicians also branches e.g., executive) • Networks (factions) • Inter-ministerial rivalry • Norms (lack of demand for change, no culture of political participation, fatalism, competition rather than coalition networks) • Beliefs/ attitudes (short term: ‘oil will last my lifetime’; ‘gov. will take care of me’; lack of knowledge of rights; fear; perceptions of fairness; no faith in the state; no faith in the public; need to control the public) Roots ( hard to see causes)

16. Don’t Get Stuck!

17. PROBLEMS VALUE CHAIN POLICY CAUSES CAPACITY GAP/ STRUCTURAL BARRIER ROOT CAUSES

18. Instructions

19. Step II:Building a Theory of Change based on Transparency

20. Who is a stakeholder in your Problem Tree analysis ? • Hint: definition of a Stakeholder: • who is responsible for the action (implementation)? • who is responsible for decision-making? • who is affected by the decision? • Others: who have a oversight or monitoring role on the quality of decision-making or who have an enforcement role.

21. Stakeholder labeling Decision- maker Affected Stakeholder B A C

22. How can we transform the problem with more transparency and EITI? Decision- maker Affected Stakeholder B A C

23. Instructions

24. Present your Tree! (5 min each)

25. Characteristics of a Quality EITI report Purpose To present 10 indicators of a high quality EITI report and their application to <country>

26. http://data.revenuewatch.org/eiti/

27. EITI: a Model for Change HOW do we use it better? Better report analysis WHO should act? WHAT should be done? Advocacy: building support Is it good data?: quality and accessibility ACTION DATA (Reports) INFORMATION

28. Why do we care about report quality?

29. Report quality depends on local decisions and processes Global Standards EITI Rules Local Standards Independent Validation TORs Work plan MOU

30. 10 Indicators of Report Quality 1 • Regularity 2 • Timeliness 3 • Materiality 4 • Reliability of Data 5 • Coverage 6 • Discrepancy 7 • SOEs • Comparable, objective - NOT exhaustive • Focused on reports - NOT process • Based on requirements + Best practice (#s 8,9) 8 • Disaggregation 9 • Comprehensibility 10 • Accessibility

31. 1. Regularity Does the country produce reports every year? Measured as: #of reports / # of implementing years The closer the score gets to a 1, the closer the country is to producing reports every year E.g.: country X joined EITI in 2008 and has produced two reports Country X Score =2/4, or 0.5

32. 1. Regularity http://data.revenuewatch.org/eiti/indicators/regularity.php

33. 1. Regularity http://data.revenuewatch.org/eiti/indicators/regularity.php

34. 1. Regularity and the EITI Rules REQUIREMENT 5E First EITI Report within 18 months. • Thereafter, annually.

35. 2. Timeliness

36. 2. Timeliness http://data.revenuewatch.org/eiti/indicators/timeliness.php

37. 2. Timeliness http://data.revenuewatch.org/eiti/indicators/timeliness.php

38. 2. Timeliness and EITI rules REQUIREMENT 5E • Data no older than the second to last complete accounting period • e.g., an EITI Report published in 2010 based on data no later than year 2008 • Note: after 1st validation…

39. 3. Materiality (Requirement 9 +11) Is it clearly defined? Measured as: Is materiality defined in the report? (Y/N) Materiality thresholds should cover important revenue flows without overburdening the compilation of an EITI report

40. 3. Materiality –Country Thresholds

41. 3. Materiality – is it clearly defined?

42. 3. Materiality and EITI rules REQUIREMENTS 9 and 18 • agreed by MSG in templates • must be disclosed in EITI report!

43. 4. Data reliability Is the data provided by company and government audited? Measured as: Are EITI documents required to be based on audited financial statements? Y/N If only some companies or agencies did so, RWI provides details in the notes.

44. 4. Data reliability

45. 3. Country Practice on Data Reliability Weaker Stronger

46. If data are already audited, EITI only requires their reconciliation If not, EITI requires that the MSG is content with the agreed method of ensuring all data is audited in the future (e.g., a time-bound action plan). 4. Data Reliability and EITI rules REQUIREMENTS 12 and 13

47. 5. Coverage Does the report include all main revenue streams and all additional information necessary to assess the value of in-kind receipts and to calculate royalties? Main revenue streams measured by: Inclusion of all royalties, taxes, fees, bonuses and state-owned enterprise revenues (Y/N/NA) Additional info measured by: Payment data from all significant companies, commodity prices, production data (Y/N/NA)

48. 5. Coverage

49. Guidance on materiality List of revenue streams that should be disclosed (R9d); other payments may be material (R9 e to g) No mention of volumes and prices! Ultimately, materiality defined nationally (9c) 5. Coverage and EITI rules REQUIREMENTS 9, 11, 14 and 15

50. 6. Discrepancies