Presentation on theme: "The 2013 Resource Governance Index"— Presentation transcript:
1 The 2013 Resource Governance Index A measure of transparency and accountability in the oil, gas and mining sectorMarie LintzerAccra, August 2013
2 What’s at stake?Oil, gas and mining sector governance as a development challengeIn resource rich countries:Over 1 billion people live on less than $5 a day640 million live on $2 a day or less.In 2011, Nigeria’s oil revenues alone were 60 percent higher than international aid to all of sub-Saharan Africa.Governance is the challenge, but also the solution.The RGI aims to help advance this effort.Total Official Development Assistance flows to sub-Saharan Africa amounted to $42 billion in 2011 (OECD), while total Nigerian oil revenues reached $68 billion (Nigeria EITI).
3 Why is a measure of resource governance needed? Raise awareness about a major development challengeAttract investorsConcretize what may be seen as a vague challengeEnable evidence-based policymaking and advocacyA diagnostic tool to identify global and country reform priorities
4 What is the Resource Governance Index? A measure of transparency and accountability of the oil, gas and mining sector in 58 countries.2012 data173 questions50 indicators>100 researchers/experts- The RGI assesses data published between 2008 and The research was conducted between Jan-Oct 2012.- Together the countries produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper, generating trillions of dollars in annual profits.
5 How is the Index built: summary Resource Governance Index 2013Institutional & Legal SettingReporting PracticesSafeguards & Quality ControlsEnabling Environment10 Indicators; 16 Questions20 Indicators; 122 Questions15 Indicators; 35 Questions5 Indicators
6 Index structureInstitutional & Legal Setting (20%)Reporting Practices (40%)Safeguards & Quality Controls (20%)Enabling Environment (20%)10 Indicators20 Indicators15 indicators5 IndicatorsIndicator1Freedom of information lawLicensing processChecks on licensing processAccountability & democracy (EIU Democracy Index & WGI voice and accountability)2Comprehensive sector legislationContractsChecks on budgetary processOpen Budget (IBP Index)3EITI participationEnvironmental and social impact assessmentsQuality of government reportsGovernment effectiveness (WGI)4Independent licensing processExploration dataGovernment disclosure of conflicts of interestRule of law (WGI)5Environmental and social impact assessments requiredProduction volumesQuality of SOC reportsCorruption (TI Corruption Perceptions Index & WGI control of corruption)6Clarity in revenue collectionProduction valueSOC reports audited7Comprehensive public sector balancePrimary sources of revenueSOC use of international accounting standards8SOC financial reports requiredSecondary sources of revenueSOC disclosure of conflicts of interest9Fund rules defined in lawSubsidiesQuality of Fund reports10Subnational transfer rules defined in lawOperating company namesFund reports audited11Comprehensive SOC reportsChecks on Fund spending12SOC production dataGovernment follows Fund rules13SOC revenue dataFund disclosure of conflicts of interest14SOC quasi fiscal activitiesQuality of subnational transfer reports15SOC board of directorsGovernment follows subnational transfer rules16Comprehensive Fund reports17Fund rules18Comprehensive subnational transfer reports19Subnational transfer rules20Subnational reporting of transfersEach indicator provides information about an important aspect of the natural resource governance. Examples.
7 80% of countries do not meet satisfactory governance standards Satisfactory (71-100)Partial (51-70)Weak (41-50)Failing (0-40)Only 11 countries earn a satisfactory score (above 70). Satisfactory scores indicate that governments publish regular, comprehensive and timely reports on the oil, gas and mining sector operations and profits; disclose data about their decision-making process; are subject to oversight and accountability mechanisms; have legal frameworks with provisions for openness and accountability; and have in place controls of corruption, rule of law, democratic institutions and open budgets.More than half the sample countries -- does not meet even basic standards of resource governance, performing weakly or simply failing.
8 Regional performanceGreat diversity within the regions between various countries.MENA ranks the lowest of all regions, a serious concern given the region’s high degree of resource-dependency (on average, oil, gas and minerals generated 77 percent of total exports and almost 80 percent of total government revenue in ).Sub-Saharan Africa performs slightly better, receiving a partially satisfactory average scores on the Institutional and Legal Setting component, an indication of recent legislative reforms in Ghana, Guinea, Liberia and Zambia especially. Ghana leads the way, ranking in the top 15; Equatorial Guinea ranks third to last.East Asia and Pacific receives the same average composite score as Africa (44), performing better in the enabling environment than Africa. Myanmar is the ranks last.Eurasia scoring particularly low on the Enabling Environment component, the lowest of all regions.Some of the top performers are in Latin America, but there is room for improvement in these countries, e.g. contract disclosure in Brazil (80) and Chile (75). Venezuela and Bolivia have low scores on the Enabling Environment (18 and 32 respectively).
9 RGI Results for the 58 countries Outliers in specific aspect of governance: South Sudan, Guinea, Botswana, Timor leste, Qatar.
10 Transparency is missing where it is needed most Of the 58 countries, 41 are classified as resource-dependent by the IMF (see IMF list below*); only 5 of them (Norway, Mexico, Chile, Trinidad and Tobago and Peru) have satisfactory standards of resource governance.Nine of the 15 failing performers are resource-dependent. Oil, gas and mining contributed an average of 34 percent of GDP and 60 percent of total government revenues in these 9 countries. Resource wealth of this scale affects every aspect of economics and politics in these countries. Yet governments provide the public negligible, if any, information about the industry on which their economic future depends.*37 Countries considered resource-rich by the IMF in 2012:Algeria, Angola, Azerbaijan, Bahrain, Bolivia, Botswana, Cameroon, Chile, Congo, Dem. Rep., Ecuador, Equatorial Guinea, Gabon, Guinea, Indonesia, Iran, Iraq, Kazakhstan, Kuwait, Liberia, Libya, Malaysia, Mexico, Mongolia, Nigeria, Norway, Papua New Guinea, Peru, Qatar, Russia, Saudi Arabia, Timor-Leste, Trinidad and Tobago, Turkmenistan, Venezuela, Vietnam, Yemen, Zambia.4 countries considered prospective resource-rich by the IMF in 2012:Afghanistan, Mozambique, Sierra Leone, Tanzania.Resource dependent or resource-rich countries are those where oil, gas and minerals contribute at least a quarter (25%) of their GDP, total fiscal income or export earnings.
11 Satisfactory performance is possible in diverse contexts Silver lining:Six of the ten top performers are middle-income countries (Brazil, Mexico, Chile, Colombia, Trinidad and Peru), pointing to the fact that being wealthy is not a precondition for satisfactory natural resource governance.There are also examples of good practices in countries facing significant governance and economic challenges. Timor-Leste ranks 13th and scores an impressive 82 on the Reporting Practices component, illustrating the government’s leadership on extractive sector transparency issues. While ranking 33rd, Guinea scores an 86 in the Institutional & Legal Setting thanks to recent reforms in the country’s growing mining sector.
12 State-owned companies in 45 countries RGI scores and ranks 45 SOCs on levels of open governance – the first measure of its kind.SOCs bring in more than two-thirds of total government revenue in countries such as Azerbaijan, Iraq and Yemen. In the mining sector, Chile’s Codelco is the world’s largest producer of copper, while Botswana’s partially state-owned Debswana is a leading producer of diamonds.Transparency among SOCs is commercially feasible but has yet to be fully embraced by many companies. 18 of 45 SOCs are under no legal obligation to report information about their operations, 28 fail to provide comprehensive reports on their activities and finances, and 19 fail to disclose information on their quasi-fiscal activities, such as spending on social services or fuel subsidies.An interesting finding: The seven highlighted companies are only partially owned by the government, i.e. they have a mix of private and state ownership. These companies boast an average score of 80. On the other hand, the 38 SOCs which are fully owned by the state receive an average score of just 46.Six of the seven mixed-ownership companies are listed on international stock exchanges, and therefore subject to regulations that require publication of financial statements. Debswana (Botswana) is the only partially state-owned company not listed on an international exchange, and it ranks poorly – 32nd out of 45. Pemex (Mexico) is the only high performing SOC that is entirely state-owned. While fully owned by the government, Pemex seeks financing through bonds in financial markets in New York and Mexico, which comes with the legal requirement to report about its operations and finances. It appears that the path to good reporting practices, in selected cases, involved international listing and financing requirements.
13 Natural resource funds in 23 countries $1 trillionThe estimated collective assets of the 23 NRFs covered by the Index totaled more than $2 trillion in These funds serve as decisive tools in country efforts to manage revenue volatility, balance near-term expenditures with long-term savings, and utilize resource revenues to generate sustainable economic gains. However, governance risks are high because NRF financial flows can bypass the regular budget process and become vehicles for patronage and discretionary allocations.Limited information disclosure characterizes the majority of funds. In Kuwait, for example, it is against the law to disclose information about the Investment Authority. In 15 countries, including Azerbaijan and Russia, spending from the funds bypasses legislative approval.The total assets of the bottom 5 funds (Kuwait, Algeria, Qatar, Libya and EG) were $533 billion in 2012.
14 Recommendations to improve resource transparency and accountability Disclose contracts signed with extractive companies.Ensure that regulatory agencies publish timely, comprehensive reports on oil, gas and mining operations.Extend transparency and accountability standards to SOCs and natural resource funds.Concerted effort to control corruption, strengthen the rule of law and guarantee civil and political rights.Adopt international reporting standards for governments and companies.
15 RGI products on http://www.revenuewatch.org/rgi 58 printable country pages
16 RGI products58 detailed country questionnaires with sources for every indicator score
17 RGI productsAn interactive tool for comparing and visualizing resource governance
18 RGI products5 regional factsheets summarizing regional findings and recommendations, translated in regional languages.
19 Ghana’s mining sector overall performance on the RGI Ghana is the second-largest gold producer in Africa. While it also produces bauxite and manganese, the gold industry contributes more than 90 percent of total mineral revenues. The extractive sector accounted for 56 percent of exports in 2011, up from 12 percent in 2010 due to oil discoveries. However, its overall contribution to state revenues is relatively small, leading the government to reform the mining fiscal regime in 2011.Oil production began in Oil revenues are projected to surpass mining receipts in the near future, but it is too soon to assess transparency in the oil industry. Ghana's RGI scores apply only to the mining sector.Ghana received a "partial" score of 63, ranking 15th out of 58 countries, and 1st out the 17 sub Saharan African countries assessed. It scored particularly well on the Institutional & Legal Setting and Safeguards & Quality Controls components.
20 Institutional and legal setting Ghana earned a "satisfactory" score of 79, the product of substantial disclosure policies and an evolving legal framework.In 2012 the Ministry of Minerals, Lands and Natural Reserves announced reforms to introduce competitive auctions for mineral licenses. Environmental impact assessments are required prior to licensing, but the results are confidential.The Large Taxpayer Unit of the Ghana Revenue Authority collects all taxes from mining companies; taxes on dividends are collected by a separate unit of the Finance Ministry. The collecting agencies use some mining revenues in their own budgets rather than depositing them in the treasury.Ghana is a signatory to the Extractive Industries Transparency Initiative (EITI) and achieved compliant status in A Freedom of Information Bill has been dormant in Parliament since 2010.
21 Reporting practicesThe government does not publish comprehensive information on most key aspects of the mining industry, resulting in a "partial" score of 51.Information on applications for mining concessions is available for a fee, but there is no clear explanation of licensing criteria. Mining contracts are not published and it is difficult to evaluate the actual fiscal terms that apply to companies. However, many oil contracts are available on government websites. Some mining companies voluntarily publish their environmental impact assessments.The most comprehensive information on mining revenues is published in EITI reports, which include production volumes, mineral export values, the names of companies operating in the country, production data by company, production stream values, royalties, special taxes, dividends, license fees, and acreage fees.
22 Safeguards and quality controls Ghana received a "satisfactory" score of 73, the product of substantive anti-corruption policies but a lack of assertive government oversight.Inadequate resources mean that legislators rarely fulfill the requirement to ratify all mining contracts. Members of parliament from the ruling party are often appointed to the boards of mining companies, giving legislators a personal stake in the industry despite laws prohibiting conflicts of interest.The Ghana Audit Office reviews government agencies' financial statements and reports to parliament, but audit mechanisms are weak and no reports specific to extractive revenues are published.
23 Enabling environmentGhana received a "partial" score of 59, reflecting less-than-satisfactory rankings on measurements of government accountability, transparency, and the rule of law.
24 Ghana’s mining sector Institutional & Legal Setting (20%) Institutional & Legal Setting (20%)Reporting Practices (40%)Safeguards & Quality Controls (20%)Enabling Environment (20%)Indicator1Freedom of information lawLicensing processChecks on licensing processAccountability & democracy (EIU Democracy Index & WGI voice and accountability)2Comprehensive sector legislationContractsChecks on budgetary processOpen Budget (IBP Index)3EITI participationEnvironmental and social impact assessmentsQuality of government reportsGovernment effectiveness (WGI)4Independent licensing processExploration dataGovernment disclosure of conflicts of interestRule of law (WGI)5Environmental and social impact assessments requiredProduction volumesQuality of subnational transfer reportsCorruption (TI Corruption Perceptions Index & WGI control of corruption)6Clarity in revenue collectionProduction valueGovernment follows subnational transfer rules7Comprehensive public sector balancePrimary sources of revenue8Secondary sources of revenue9Subsidies10Operating company names11Subnational reporting of transfersFreedom of Information : can be addressed by national legislationESIA are considered confidential (even though sometimes published by companies)Subnational reporting: Traditional authorities and Stools do not provide information