8.2 Definition and Scope

Transparency is not an end in itself. To be effective, it must be combined with effective stakeholder dialogue in order to achieve accountability. Improving transparency and accountability requires multiple measures, both voluntary (among many stakeholders) and mandatory (regulatory). For several years, global norms and standards have been emerging, but wide differences exist in the weight given to them by particular players and in their manner of implementation. Voluntary initiatives led primarily by civil society or international agencies have forged ahead of mandatory measures for many reasons. In the case of both types of measures, questions that arise in the shaping of global norms and standards include the following (IMF 2007b):

■ What is an appropriate level of contract disclosure? ■ How can host-state and investor-state transparency requirements be balanced? ■ What is the best way to engage citizens more directly in policy formulation and monitoring processes and outcomes?

What does cross-cutting mean?

Transparency and accountability are cross-cutting topics because they apply to all segments along the EI Value Chain. They call for the following:

■ Transparency around the decision to extract ■ Transparent and competitive procedures for issuing licenses and allocating mineral or hydrocarbon exploration or production rights in the design of legal, contractual, and policy frameworks ■ Competent and noncorrupt institutions with clear and nonoverlapping mandates in the regulation and monitoring of operations ■ Publicly reported fiscal regimes that avoid nonpublished special deals and minimize tax avoidance and evasion in the collection of taxes ■ Transparent revenue management ■ Transparent and participatory budgeting based on development priorities

If there is a lack of transparency at any point in the EI Value Chain, a spread of misinformation may result, sowing mistrust in the management of the resources. In turn, this can lead to instability and, ultimately, to conflict. These topics are, therefore, dealt with in the individual chapters on the EI Value Chain as well as in the following material. Under a broad definition to encompass its many objectives, transparency refers to the degree to which information is available to outsiders that enables them to have an informed voice in decisions and to assess the decisions made by insiders. Transparency issues in the EI sector are diverse and relate to laws and regulations, policies, administration, revenues, expenditures, and other factors. While this list might apply to all economic sectors, its coverage is especially significant in the EI sectors of states with heavy dependence on EI revenues. Indeed, the International Monetary Fund (IMF) considered the differences to be so significant that, in 2007, it published a supplement to its Manual on Fiscal Transparency, setting out a more detailed set of guidelines specific to the EI sector (IMF 2007c), and in May 2016 it published a revised draft code for fiscal transparency in the natural resources sector. It adapts the entire code to the needs of natural resource producing countries.

The sheer size of natural resource rents for many states, combined with the technical complexity and the volatility of the transaction flows, means that transparency issues are especially important to the good governance of the EI sector (see chapter 2 and chapter 3). For example, Nigeria, Africa’s largest oil producer, experienced financial discrepancies in excess of US$8 billion between what companies reported paying and what governments reported receiving between 2009 and 2011, due largely to missing payments resulting from incorrect fuel subsidy deductions.3 These discrepancies were revealed following Nigeria’s effort to strengthen the management of its EI sector projects across the EI Value Chain by implementing an EI sector-specific transparency initiative, the EITI,4 through its own Nigeria Extractive Industries Transparency Initiative (NEITI), which was made law in 2007 by the National Assembly.5 NEITI focuses on promoting due process and transparency to remediate deficiencies revealed by EI sector audits. These efforts include continuing comprehensive audits of the EI sector, developing a revenue-flow interface among government agencies, improving oil and gas metering infrastructure, developing a uniform approach to cost determination, building capacity across Nigeria’s regulatory agencies and civil society, and improving overall governance of its EI sector.6 Nigeria was certified as EITI compliant in March 2011, demonstrating a successful move toward stronger, more transparent governance of its EI sector despite the unique challenges presented by EI projects.7 However, the recent revelations about missing payments confirm that local EITI legislation alone will not result in the benefits of transparency. The Nigerian

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