Kyrgyzstan|opinion & analysis|March 29, 2016 / 11:47 AM
EITI Secretariat Head on transparency in Kyrgyzstan's mining sector: Positive progress, but more to be done

AKIPRESS.COM - JonasMoberg_SpotlightStory The University of Central Asia’s Institute of Public Policy and Administration (UCA IPPA) organized Mining Policy in Kyrgyzstan: Prospects and Issues on 11 March 2016. Jonas Moberg, Head of the Secretariat at the Extractive Industries Transparency Initiative (EITI) and international expert, spoke to UCA on his perspectives on mining policy in the Kyrgyz Republic.

- Can you share with us EITI’s principles? How does your international experience inform your organization’s approach?

- EITI’s principles are as relevant and important today as when they were first agreed. The world’s finite natural resources belong to citizens. Governments have a duty to ensure that they bring benefits to the rightful owners. The experience of implementing these principles into practice is mixed and varies from country to country. In recent years, we have seen significant improvements in how natural resources are managed, and EITI has contributed to this. Practices are becoming more transparent and accountability is improving, however, there is still much to be accomplished.

- There is a range of perspectives on the relationship between extractive industries and development is historically complex. Describe the balance and rigour required between responsible development and economics of the extractive industry?

- I disagree that a balance needs to be struck between responsible development and the economics of extractive industries. If natural resources are governed and managed well, responsible development and economics become congruent. For this to happen, Government must have resources and competencies and be able to think long-term. Hopefully organizations such as EITI can provide leadership and drive reforms.

- EITI is dedicated to enhancing trust and informing public debate. Why is this so important for a country like the Kyrgyz Republic?

- Transparency is not an end in itself. Transparency is only of value if it results in reduced corruption, more accountability and building trust. And trust for how natural resources are managed cannot be built unless the government and operating companies are receptive. We have much to be done. A key challenge is to ensure we get better at using available information. For example, what are we demonstrating to the public when we show how the mining sector is governed and how much taxes are being paid? We must get better at understanding and making it relevant not just for those who live in capital cities, but also for those living in areas with mining activities.

- What is EITI’s experience in countries such as the Kyrgyz Republic and more broadly, in Central Asia? Are there key differences or similarities between countries in this region and globally?

- It is important to distinguish between countries that are more committed to reforms and democracy and those that are not. It makes a big difference if there is an enabling environment for civil society. EITI often seeks to be a platform for those engaged in reforms and improved governance. Many times it is a question of whether there are government officials and corporate executives prepared to show leadership.

- The Kyrgyz Republic has been an EITI compliant country since 2011. Describe the transparency this has brought to the extractive sector; what do you believe is yet to be done?

- Since joining EITI in 2007 as a candidate country, and designated EITI compliant in 2011, the Kyrgyz Republic has certainly made positive progress towards greater transparency and accountability in company payments and government revenues from the sector. The recent 2014 report reconciles 33 tax indicators by 136 extracting companies. In 2013, EITI Rules evolved into the EITI Standard which requires not only reconciliation of revenues but also detailed disclosures on issues such as license allocations and an accessible license registry/cadastre, the relationship between the government and state owned companies, transportation revenues, social payments, policy on contract transparency and beneficial ownership.

In contract transparency and beneficial ownership, the Kyrgyz Republic participated in a pilot to disclose real owners behind mining companies, and there is significant potential to do more in this area; the 2014 Subsoil Use Law requires disclosure of beneficial ownership in order to obtain a license. This information is currently not publicly disclosed, and EITI can serve as a reporting framework for beneficial ownership. The Kyrgyz Republic could also further use EITI to broaden its license allocation processes.

- How have past experience and discussions of revenue management distribution in other countries informed your understanding of these issues?

- In Central Asia, Kazakhstan has made good progress. The country publishes up-to-date information on revenues. In 2016, we can access data from the 2015 calendar year, the EITI reporting is integrated into the government’s online system and in 2014 they identified a separate budget code for social payments. Following the recommendations from an EITI report, the government allocated a budget classification code to ensure that companies transfer social payments to the budget. This leaves no room for closed decision-making on social projects. The EITI reporting process has provided a framework for the calculation of the social payments, which amounted to US$215 million in 2014.

- How do institutions like government, civil society, and education inform these discussions?

- EITI can be a helpful tool in building trust among companies, communities and the government and increase investor confidence. As you know, existing tensions between citizens and extracting companies is one of the factors restraining investment in the Kyrgyz Republic. Civil society with access to EITI can use data from reports to bust myths and therefore reduce tensions in extracting regions. There are about six local offices where local communities can come and consult on issues related to mining companies. Civil society also seeks opportunities to engage local governments into this dialogue.

Informed and comprehensive nationwide debates based on EITI disclosures can reduce tensions and conflicts at the local level. Similarly, institutions in the Kyrgyz Republic, and in particular the government, could make better use of EITI’s reporting framework to ensure it discloses information of relevance to on-going government reforms and local debates.

- An organizing concept around this forum was what is to be done, and what can be realistically accomplished? How does EITI approach this when working in the Kyrgyz Republic and more broadly, in Central Asia?

- There are numerous opportunities where EITI can offer impact and it depends greatly on government commitment and dedication from all stakeholders. Here are some examples:

Support implementation of a transparent licensing system. Despite some positive improvements to the licensing legal framework, the 2013/14 EITI Report highlights weaknesses in licensing procedures. The EITI requires disclosure of license allocations and maintenance of a publicly available register or cadastre system. This transparency can incentivise attracting responsible investors and build public trust when the government awards licenses to responsible companies.

Development funds. In 2014, development funds were established with revenues allocated from both mining companies and the budget to revitalise regions where extraction takes place. Despite a good legal basis for the development funds, the execution requires enhanced transparency and accountability. Ensuring greater scrutiny of regional development funds through EITI reports can bring transparency, responsible management, and improve social services in the regions.

Monitoring funds allocated for environment protection. Environmental degradation is a major concern among citizens and continues to fuel anti-mining sentiments. Mining companies pay for environmental restoration and EITI could help by monitoring how these resources are utilised, similar to what was implemented in Mongolia.

- Please share any key recommendations you would make to the Kyrgyz government and other important stakeholders in the region.

- It is important that EITI creates an impact and that is only possible when national priorities are tied to EITI implementation. The objective is not to produce additional complex reports, but rather to use EITI requirements as a transition to build an open, transparent and reliable governance system that is permanently available to the people in Kyrgyz Republic and other Central Asian countries. Without the involvement and strong commitment of the government, the EITI cannot make a meaningful and relevant contribution to resolving various conflicts and tensions in the mining sector.

Editor's Note: The University of Central Asia’s Mining Policy in Kyrgyzstan: Prospects and Issues forum was organized in partnership with the Kyrgyz Republic Ministry of Economy with support from the British Embassy. International experts presented their global extractive sector experience alongside national experts and representatives of State agencies, embassies, international organizations, academia, mining companies and non-governmental organisations.

The Extractive Industries Transparency Initiative (EITI) is a global standard to promote open and accountable management of natural resources, and maintains the EITI Standard where countries must disclose information on tax payments, licences, contracts, production and other key elements around resource extraction.

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