Methodology
[insert applicable country RGI Assessment] 2013 Afghanistan RGI Assessment 49th/ 58 http://www.revenuewatch.org/countries/eurasia/afghanistan/overview
[insert applicable country RGI Assessment] 2013 Afghanistan RGI Assessment http://www.revenuewatch.org/countries/eurasia/afghanistan/overview
Comparing Regional Performance
Using the RGI can help: • Identify reporting gaps that EITI should address • Highlight EITI as avenue to address poor RGI scores • Incentivize advances • Demonstrate feasibility and good practices The RGI & EITI
RGI x EITI 2013 Standard: What can the RGI tell us? SOE Allocation of Production Sub- Rights Revenue Social Revenue Data National Collection Management Impact Comprehensive public Independent, open Clarity in roles and Requirements of sector balance and competitive Production volumes responsibilities revenue Subnational transfer environmental and SOC financial reporting - Including SOC balance, licensing process: collection rules defined in law social impact fund balance and non- assessments resource balance SOC production data Reserves ,Production Primary sources of volumes ,Prices Publication of Information on Production value Government follows revenue : Value of resource environmental and licensing process Exports, costs, prices subnational transfer Publication of subsidies production streams, exports, Investment in social impact rules royalties, special taxes exploration, Production assessments costs,Production data by company and/or block Checks on budgetary SOC revenue data process Secondary sources of Comprehensive Production streams, - Legislative oversight Publication of revenue : subnational transfer Royalties ,Special taxes, - Review of revenue by contracts Dividends, Bonuses reports: - Dividends, Bonuses, national audit ,License fees, acreage Understandable and License fees; institution fees, other timely reports Acreage fees, Other - Legislature reviews audit reports SOC quasi fiscal Publication of Checks on licensing activities subnational transfer process - Comprehensive, timely rules and quantitative data Comprehensive SOC reports Subnational reporting - Cash flow statements of transfers - Joint ventures Quality of subnational SOC reports audited transfer reports - Reports are audited
Afghanistan RGI x EITI 2013 Standard: What can the RGI tell us? SOE Allocation of Production Sub- Rights Revenue Social Revenue Data National Collection Management Impact Comprehensive public Independent, open Clarity in roles and Requirements of 0 50 100 100 100 0 sector balance and competitive Production volumes responsibilities revenue Subnational transfer environmental and SOC financial reporting - Including SOC balance, licensing process: collection rules defined in law social impact fund balance and non- assessments resource balance SOC production data Reserves ,Production 78 0 50 33 Primary sources of volumes ,Prices Publication of 0 Information on Production value Government follows 0 revenue : Value of resource environmental and licensing process Exports, costs, prices subnational transfer Publication of subsidies production streams, exports, Investment in social impact rules royalties, special taxes exploration, Production assessments costs,Production data by company and/or block Checks on budgetary SOC revenue data process Secondary sources of Comprehensive Production streams, - Legislative oversight 67 0 67 Publication of revenue : subnational transfer Royalties ,Special taxes, - Review of revenue by 33 contracts Dividends, Bonuses reports: - Dividends, Bonuses, national audit ,License fees, acreage Understandable and License fees; institution fees, other timely reports Acreage fees, Other - Legislature reviews audit reports SOC quasi fiscal Publication of Checks on licensing activities 44 subnational transfer process 0 - Comprehensive, timely rules and quantitative data Comprehensive SOC reports Subnational reporting 0 - Cash flow statements of transfers - Joint ventures Quality of subnational SOC reports audited transfer reports 0 - Reports are audited
Form Country Groups and read the RGI assesment for your country. Be prepared to present your group’s assessment in a 5 minute presentation • Where are the biggest transparency gaps? • Which EITI policy areas do these gaps corresond to? • How can the RGI support your advocacy in EITI or beyond? Group Work
Capturing the Value of Our Natural Resources
Is my country effectively capturing the value of our natural resources? Revenue Collection Production Data Allocation of Rights
Comparing Oil Producers in 2010 (average of all EITI data years) Capturing the Value: What explains these differences?
Exploration and Exploitation: The Production Cycle Production Peak Project Revenues CAM, GAB, Tax CON Royalties Time AZB, KAZ Exploration/Capex Monitoring revenues not enough – need to understand contracts and production data
Bonus/ Revenue From Petroleum Sales Rentals Royalty Gross Revenue To Investor Profit Production Cost After-Tax Profit Profit Tax [WPT = After-WPT Profit WPT windfall profit tax Govt. Investor’s or resource Equity Dividend rent tax] Dividend W/H tax (minus W/H tax) [W/H = withholdin g tax] Government Revenue Investor Return Typical Fiscal Regime
Allocation of Rights AR
Allocation of Rights AR Governance Challenges Policy decisions regarding the allocation of rights to extract natural resources can either lay the foundation for successful sector management or set a path towards misuse. Governance challenges related to the allocation of rights include: Bribery Politically-exposed persons Poor negotiation Lack of oversight of the terms of the license
Source: Radio Free Europe/ Radio Liberty http://www.rferl.org/content/azerbaijan_gold-field_contract_awarded_to_presidents_family/24569192.html
AR Key Questions EITI Disclosure How can you find license registries and key License Registry § 3.9 terms? What is the process for licenses to be License Allocation § 3.10 given away? Who owns extractive sector licenses? Beneficial Ownership § 3.11 & § 3.6(c) *Where can you find the contracts that Contract Disclosure § 3.12 govern natural resource projects ? What will the EITI Report tell us?
AR License Registry: Why is it important?
Color Key: Blue = EITI Standard Requirement Teal + * = EITI Standard Encouragement Orange = RWI Recommendation What can the EITI report tell us?
AR License Registry: Basic Requirements § 3.9(a)/(b)/(c) Dates: Coordinates License Commodity application/ of license Holder award/duration area License Registry: RWI Recommendations Level of Beneficial Ownership, Ownership/ GIS contract, production levels, Operator project level payments What can the EITI report tell us?
Example: Zambia’s Online License Database
AR License Allocation: Why is it important?
AR License Allocation: Basic Requirements § 3.10(a)-(c) description of technical and list of applicants award/ transfer financial and the bid process criteria criteria non-trivial recipient *efficiency & deviations information effectiveness License Allocation: RWI Recommendations conflicts reasons for key terms of Special arising out refusal winning bid conditions of bids
AR Example: Afghanistan Aynak copper tender process
POP Quiz!
Name one EITI requirement and one RWI recommendation for license registries
Why is it important to have information on the technical or financial criteria for the license allocation process?
What is the materiality level for license registries?
AR Beneficial Ownership: Why is it important? *Subject to successful piloting, the EITI Board will develop detailed provisions with a view to make this a requirement from 1 January 2016.
AR Beneficial Ownership: Basic Requirements § 3.11(a-b) & § 3.6(c) Gov’t, SOEs *entities that bid for, *identity and *publicly and their operate or invest in the level of available subsidiaries extractive assets ownership register Beneficial Ownership: RWI Recommendations legal ownership company name, proof of legal form and control incorporation, address and status shareholder Politically register >5% Exposed share Persons
International push to crack down on tax avoidance (OGP, OECD, G20, G8)
AR Contract Disclosure: Why is it important?
AR Contract/License Disclosure: Requirements § 3.12 Gov’t policy on Legal provisions, Overview publicly contract/license actual disclosure available disclosure for exploration practices & planned contracts/licenses & & exploitation reforms reference/ link * publicly disclose all exploitation contracts and licenses Contract/License Disclosure: RWI Recommendations active contracts exploration & un-redacted & new exploitation contracts online, free of charge public education & & anonymous to dialogue strategies search
Example: www.resourcecontracts.org
Example: www.contratsminiersguinee.org
Example: www.mom.gov.af
POP Quiz!
True or False: Disclosing beneficial ownership information will continue to be encouraged in EITI.
True or False: A country could chose to skip including any information about contracts in EITI reports because it’s just encouraged.
Production Data PD
Production Data PD Governance Challenges Production volumes and values can be an important factor in the level of government take that countries receive from extraction. Lack of information on production can result in underpayment. Governance challenges related to production include: Tax evasion/underpayment Poor revenue forecasting
PD Key Questions EITI Disclosure What is the resource (and revenue) EXPLORATION ACTIVITIES potential? – Implications for sustainability § 3.3 What are the current levels of production? TOTAL PRODUCTION – implications for revenues, sustainability § 3.5(a) & § 3.4(e) What is the level of economic impact and TOTAL EXPORTS § 3.5(b) resource dependency? What can the EITI Report tell us?
PD Exploration Data: Why is it important?
PD Exploration: Basic Requirements § 3.3 overview of exploration activities Exploration: RWI Recommendations displayed with relevant info: exploration license and any revenues
PD Production: Why is it important?
PD Production: Requirements § 3.5(a) & § 3.4(e) Total production Contribution to the Value of production volumes for economy of EI in key by commodity, covered producing regions for state/region fiscal year covered year Production: RWI Recommendations Disaggregation by Estimated Figures for company, project & proven reporting year major commodity reserves + prior year sub-type Stage of If challenges with Source for volume production of measuring data & methodology commodities in production, then for valuation each state reconciliation
PD Exports: Why is it important?
PD Exports: Basic Requirements § 3.5(b) total export volumes/values Exports: RWI Recommendations information on the purpose and buyer for non- destination market for exported commodities e.g. those exports that are processed domestically Source for volume Figures for reporting data & methodology year + prior year for valuation
POP QUIZ!
Why is it important to have exploration data?
Why is the stage of production of a project important?
Burkina Faso Example: Contract + Production + Revenue data Inputs Royalty Formula (Contract, Art. 11.4): 3% of FOB value Production 2009 (EITI Report): 54,430.62 oz Average global gold price, 2009 (London Fixing): $972.35/oz Average gold price in Burkina Faso, 2009 (EITI report): $936/oz Average exchange rate, 2009 USD/fCFA (www.oanda.com): 481 Estimates and Results (A) Rate (B) Estimated (C) Production Total (A X B X C) price (fCFA) Expected revenue 3% 467 700 54,430.62 763,716,601 using global price Expected revenue 3% 450 216 54,430.62 735,166,080 using Burkina price Actual revenue, 845,162,117 according to EITI
Revenue Collection RC
Revenue Collection RC Governance challenges Policy decisions regarding revenue collection determine the wealth available from natural resources for financing national development. Governance challenges related to the revenue collection include: Weak tax administration Lack of coordination across government / oversight bodies, Weak oversight over non-financial revenues Corporate tax evasion Others already covered (e.g. poor negotiation)
Bonus/ Revenue From Petroleum Sales Rentals Royalty Gross Revenue To Investor Profit Production Cost After-Tax Profit Profit Tax [WPT = After-WPT Profit WPT windfall profit tax Govt. Investor’s or resource Equity Dividend rent tax] Dividend W/H tax (minus W/H tax) [W/H = withholdin g tax] Government Revenue Investor Return Typical Fiscal Regime
RC Key Questions EITI Disclosure What laws establish the economic LEGAL FRAMEWORK & contribution of the sector? FISCAL REGIME § 3.2 What is the economic impact of revenues? ECONOMIC CONTRIBUTION § 3.4(a)-(c) What is the value of taxes & primary TAXES & PRIMARY revenues? REVENUES § 4.1(a)/(b) What is the value of in-kind revenues? IN-KIND REVENUES § 4.1(c) What is the value of barter deals? INFRASTRUCTURE/BARTER ARRANGEMENTS § 4.1(d) What is the value of transportation TRANSPORTATION revenues? REVENUES § 4.1(f) What level of detail can the report DISAGGREGATION § 5.2(e) provide? What will the EITI Report tell us?
RC Legal/Fiscal Framework & Economic Data: Why is it important?
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