Extractive industries transparency initiative

Speech by Jean Lemierre, President of the EBRD

Extractive Industries Transparency Initiative
London, United Kingdom
17 March 2005

The EBRD is a public institution, a regional development bank, with a mandate to promote democracy and market economy. The region in which the EBRD operates is the eastern part of Europe. Within this region, the countries mainly of interest with regard to extractive resource industries are the states of the former USSR. Some are oil- and gas-rich, others have significant mineral deposits. So while much of the discussion about extractive industries and transparency focuses on developing countries, it is also important for transition countries. Two of them, Azerbaijan and the Kyrgyz Republic, have been highly committed to this EITI initiative which the EBRD has warmly supported since the very beginning. I am very happy to see here Mr Otorbayev from the Kyrgyz Republic; he has been a key participant in promoting this initiative in his country. The fact that two countries from our region are at the forefront of the initiative, publishing EITI reports, being more open and moving forward beyond the first step, is a very good signal for us in terms of our own work. We have invested in oil, gas and mining projects in these two countries and we have worked very hard with them in transparency and anti-corruption initiatives with regard to those industries. We are very happy they have embarked on the promotion of greater transparency. I hope they will continue to progress in these regards, which will be rewarding for them because it promotes balance and fairness for everybody.

At the EBRD, we have always believed that transparency is a key element of sustainable development for both countries and companies. Last year, 80 percent of our deals were with the private sector. We do not believe investment can be sustainable for either the private or public sector without transparency. All the failures we have seen were due to a lack of transparency, so this commitment to transparency is built on the experience we have in the region, and it is a key issue for us. We have always promoted transparency in our operations.

We have warmly welcomed the EITI, we believe it is a good initiative, we share the principles and the technicalities of the initiative. We have been working a great deal with the British authorities on this and believe it is the right direction to take. We are holding consultations as part of drafting a new energy policy, and I can say here that the new policy will certainly reflect our view that transparency must be a condition for future transactions in the extractive industries. This is a very clear view that we hold.

There are, of course, many instruments and approaches useful in promoting openness and transparency. There is the EITI of which we’ve all been speaking. We also see good signals coming from the way the resource revenue stabilisation funds are operating in Russia and Kazakhstan. We see good progress in the Azerbaijan Oil Fund. We see many steps forward in the development and observance of corporate governance codes in many transition countries. These initiatives must be supported in the same way as the EITI and we need to embrace all of this activity and push forward hard on them as that is the best way to make progress. We see this in countries such as Azerbaijan and the Kyrgyz Republic, and we also see progress in countries like Romania where we have a strong input in the improvement of the management of the state-owned resources.

You have asked a question, Chairman, which is what are the next steps forward? Regarding the EITI itself, we should establish international standards for EITI reports. Today is the first step but there should be some minimum standards and we should elaborate on this to ensure that progress can be measured over time in an open way. Also, the reports should be audited. The credibility of the process will be in the auditing of the reports and, while I warmly welcome the reports made by the countries, they have to be audited in a transparent way. We see the beginning of this and through this process I am sure that lessons will be learned and improvements made. 

My second remarks will be about companies. The initiative has very much focused on, if I may use the term, “foreign” companies. For there to be a level playing field, we should not forget domestic companies, because in the region in which we operate, there are many domestic resource companies, and they should also be part of this EITI process as quickly as possibly. For instance, we have engaged quite a lot with some domestic companies in our countries of operation to promote these transparency principles and concepts.  The process should be pushed forward and reward must come from the markets.  So we need to make sure that the whole process is not focused on one group of companies but that the principles and their implementation are widespread across various categories of companies.

My last point is about the countries. We must understand that while improving transparency is crucial, it can be difficult. It is time-consuming and it consumes resources. In some cases, we have to work harder with donor countries -- and the EBRD is committed to doing so -- to make sure we support countries in building sound institutions able to implement these principles over time. I know of countries in which the political will is strong but there is still a need for more capacity to implement transparency measures.  All of us should be strongly committed to helping them achieve this. 

In conclusion, the EBRD is strongly committed to this process. We warmly welcome the initiative, we believe it is a good one but now we must all work hard to make sure it works efficiently, year after year, and to get strong results in the countries which need to be open and accountable. Increasing transparency is not only about fighting corruption; it sets the groundwork for the fight against poverty.