Highlights from "Assessment of the IMF and World Bank Extractive Industry Transparency Implementation," a new report from Bank Information Center (BIC) and Global Witness, were presented during a panel discussion on November 18, 2008 at the Woodrow Wilson Center. Hosted by Africa Program director Howard Wolpe, the event addressed the role of IMF and World Bank policies in the transparency of extractive industries in resource-rich countries. The panel featured four experts: Obiageli Ezekwesili, World Bank Vice President for Africa, Corinna Gilfillan from Global Witness, Heike Mainhardt-Gibbs, Bank Information Center and Charles McPherson, International Monetary Fund.

Concentrating on the role and purpose of transparency in extractive industries, Obiageli Ezekwesili stated that transparency should not be an end in itself. Addressing problems of transparency requires a comprehensive approach including the direct participation of civil society. By engaging in a dialogue from which they are often excluded, civil society groups lend a heightened credibility to transparency policies. Ezekwesili also noted the importance of country ownership. She emphasized that, working toward transparency as a part of a broader poverty reduction strategy, government and civil society actors should adopt an attitude of national ownership in order to effectively engage external partners in a dialogue on better business practices and sustainable development.

Ezekwesili gave examples of different civil society groups calling for better policies in extractive industries. The International Financial Corporation (IFC) promotes the ideals of best practices in interactions between investors and the extractive industry by obligating its clients to disclose any and all payments to the government and disclosing this information on the IFC website. In IFC extractive projects, consultation and engagement with civil society - especially within the community - is mandatory. It should be noted that in some resource-rich countries, engaging effectively with the population can be hindered because of tensions in fiscal relationships between members of civil society and the government. The Extract Industry Transparency Initiative (EITI), an initiative aimed at strengthening governing capacities by improving transparency is a comprehensive initiative which looks at how oil and mineral wealth can be translated into sustainable growth and development. Preliminary initiatives of the EITI++ approach, an extension of the original initiative, have already commenced in countries like Madagascar, Columbia, Mozambique, and Guinea.

Ezekwesili presented the World Bank Group with suggestions to improve their transparency policies in extractive industries. First, they could benefit from a better understanding of the complex political economy that underpins the extractive industry sector in a bid to support this sector more effectively. Second, partnerships with outside organizations need to be prioritized and broadened if substantial progress is to be made. The extractive industry sector should involve a wide range of actors - including civil society groups - both within the country and from among the international community.

Heike Mainhardt-Gibbs presented a joint study by the IMF and World Bank assessing their efficacy in addressing extractive industry transparency in their operations. Entitled "Assessment of the IMF and World Bank Extractive Industry Transparency Implementation," their report looks at fifty-seven resources-rich countries in both lending and non-lending operations, using all publicly available reports and project documents from the World Bank and the IMF from June 2003 to April 2008. The report evaluated and rated three aspects of transparency according to the level of assistance and priority given in both institutions: public disclosure of revenue payments, public disclosure of contracts and civil society. The report shows that transparency has been addressed at some level in a majority of the nations evaluated; nonetheless, overall use of transparency indicators is neither consistent nor comprehensive. Revenue disclosure as a performance indicator was more frequent with the IMF than with the World Bank: the IMF listed revenue disclosure as a performance indicator in 59 percent of countries' lending programs, whereas the World Bank listed the indicator for only 19 percent of the countries' lending programs. Contract disclosure is not frequently used as a performance indicator by either the IMF or the World Bank. The IFC requires contract disclosure for 'significant' extractive industry projects - those supported by 10 percent or more of government revenues.

Mainhardt-Gibbs emphasized the importance of developing a consistent approach across various institutions for evaluating the transparency of extractive industries, and suggested that more institutions use contract disclosure as an additional indicator to measure transparency.

Corinna Gilfillan from Global Witness highlighted the critical role of civil society in extractive industry processes and programs, an engagement which is vital to holding governments accountable for revenue expenditure. Civil society groups also play a very important role in boosting public engagement in resource management policies. Gilfillan's organization, Global Witness, is greatly disappointed by the lack of emphasis given to civil society's involvement in various programs and initiatives. The EITI, for example, labels civil society engagement as one of its minimum criteria. Civil society is reported to be engaged in about one quarter of World Bank programs, while only nine IFC bank operations are providing assistance to build civil society. Similar findings were reported about the IMF. In 86 percent of resource-rich countries in which it operates., the IMF never mentions the issue of civil society engagement in extractive industries. Gilfillan also expressed concern that, in some countries, members of civil society groups promoting transparency are often harassed, intimidated, and arrested.

Gilfillan put forth several key recommendations to address the problems of transparency in extractive industries. Transparency should comprise a core criterion in all resource-rich countries and extractive industry projects, and should be addressed in a very concrete and measurable way by consistently including program benchmarks and progress indicators, in both lending and non-lending operations. Both the IMF and the World Bank should require public disclosure of investment contracts. Institutions involved in the extractive industry need to implement additional activities that promote meaningful civil society engagement in designing, enforcing, and monitoring the extractive industry transparency processes. Finally, the IMF and World Bank need to increase the transparency of their own actions as well as to disclose good examples set by different country programs.

Charles McPherson from the International Monetary Fund addressed several concerns in the BIC and Global Witness report regarding the inconsistency of technical assistance reporting on transparency issues. McPherson argued that uniformity in revenue transparency will never be achieved, because of basic differences between IMF partner countries and a convoluted IMF-partner country relationship nuanced by a wide range of issues. McPherson pointed out that low transparency scores in the technical assistance reports are often a result of poor reporting in partner countries. Although the IMF technical assistance reports encourage transparent policies recommending how fiscal laws, tax laws and contracts should be amended or drafted to increase visibility for EITI revenue reporting, reports are essentially the property of IMF partner countries, which potentially compromises their efficacy. IMF staff nonetheless encourages publication of these reports and their release to the public.

McPherson also noted that standards for contract transparency are distinct from those for revenue transparency. While revenue transparency aims to address issues of accountability, contract transparency determines primarily whether or not the government received that to which it was lawfully entitled under contract and tax laws. Revenue transparency is often considered a more crucial target in achieving overall transparency and it is generally implicit that contract transparency should not be pursued at the expense of revenue transparency. Attaining complete contract transparency is a complex matter which requires the understanding of different fiscal provisions. The IMF understands that achieving transparency requires a learning curve, and attempts to contribute to this process to improve the monitoring of transparency processes over time. McPherson also emphasized the IMF's involvement in activities promoting civil society participation, although its full engagement is undermined by the relatively small size of the organization and is often not reported due in part to it's limited capacity.

Q&A

In response to a question about disclosure requirements for overseas investment companies, panelists discussed a US campaign pushing for legislation that would require American companies to disclose all payments made to foreign governments. Introduced by Representative Barney Frank (D-MA) and Senator Charles Schumer (D-NY), the Extractive Industry Transparency Disclosure Act would have powers of enforcement similar to those of the EITI. Ezekwesili argued that we need to introduce specialized committees to build capacity with regards to the data interpretation of different budget structures. She emphasized that transparency alone - the disclosure of numbers and data without any analysis - leads to frustration because it is not accompanied by policies which would improve the situation. Additional measures are needed if transparency is to be more than a perfunctory administrative exercise. In concluding the panel discussion, she remarked that we need to avoid the danger of singular solutions and build a broader base of options connected to everyone involved in this process.