Georgia has a wide diversity of mineral deposits. Even though large deposits of mineral resources are not commonly found in Georgia, oil, coal, manganese, nonferrous and rare metals, chemical raw materials, and inert materials are of commercial significance. Despite being one of the key economic areas for Georgia, extractive industries generally lack sufficient levels of transparency and accountability. Wider public in any country, as well as local communities directly affected by extractive industries, are entitled to have full information on how the industry operates, what standards it complies with, how much it contributes to the economic welfare of the society and what are the benefits for local communities.
This policy brief examines Georgia’s capacity and prospects to join the Extractive Industries Transparency Initiative (EITI), a global standard, which promotes open and accountable management of natural resources. Natural resources can be important drivers of economic growth, at the same time, extractive industries is an area susceptible to corruption and mismanagement. Inefficiency in this sector can lead to dire consequences, can create negative economic, environmental and social impacts in the country.
The policy brief will initially describe the EITI standard, how it works and what the benefits of joining the initiative are. The brief will then focus on extractive industries in Georgia and history of EITI-Georgia interaction.
What is EITI?
The EITI is the global standard for the good governance of oil, gas and mineral resources. EITI ensures transparency and accountability of how a country's natural resources are governed. In 2002, at the World Summit on Sustainable Development in Johannesburg, UK Prime Minister Tony Blair announced the launch of a multilateral effort to increase productivity and transparency in the extractives sector. Leading countries endorsed EITI in the G8 format in 2004, and EITI was officially in motion. After several years of work, the standard and EITI procedural matters were agreed.
EITI is a tool that that requires its member countries to publish information on key aspects of their natural resource management in a timely and accurate manner, including how licenses are allocated, how much tax, royalties and social contributions companies are paying, and where this money ends up in the government at the national and local level. By doing so, the EITI seeks to promote understanding of natural resource management among the public, provide understandable data to inform citizens and curb corruption in the extractive sector.
One of the most important characteristics of EITI is its multi-stakeholder approach. In every implementing country, the EITI is supported by a coalition of government, companies and civil society, providing a platform to build trust and encourage multi-stakeholder dialogue. The multi-stakeholder group determines how EITI process should work in their respective country, ensuring total ownership. In this regard, it is reminiscent of another initiative that has had success over the 7 years, the Open Government Partnership (OGP).
Currently there are 52 participant countries in the EITI from different regions:
- Central and South America
- Central Asia
- South-East Asia
EITI is an international transparency standard that offers knowledge, experience and expertise to any country willing to make its extractive industries open and accountable. The standard ensures that every aspect of extractive industries is handled with transparency, accountability and is based on the principle of participation. EITI offers benefits to every stakeholder involved in the process (state, companies and public) and has the potential to make the sector more efficient.
Georgia’s extractive industries lack the levels of transparency prescribed by EITI. Such environment does not provide a fertile ground for increasing efficiency of the sector. Despite the fact that the extractives is a significant part of Georgian economy, the public does not have sufficient information on the companies, their revenues, how these revenues are allocated and what they are spent on.
Georgia has been discussing the use of EITI and the importance of the initiative for the country since 2012. Different CSOs have been advocating for Georgia’s accession to the initiative. However, progress has been slow, and tangible commitments to join EITI have not yet materialized. Georgia needs to join the EITI to increase its attractiveness for investors. More transparency may lead to more trust and direct investments in the sector, which will be beneficial economically and technologically for the extractive industries in the country. The EITI is a network of extractive industries specialists that can be used to enhance licensing practices, record keeping and improvement of tax collection systems. Besides the evident economic benefits of joining the EITI, it is important to bear in mind that the Georgian public has the right to know what one of the most important economic sectors yields and how that wealth is distributed.
Georgia already has experience of collaboration between different sectors, namely through initiatives such as OGP. Institutional mechanisms for CSO-business or CSO-government cooperation are not new. Therefore, Georgia has the potential to become a member of EITI and prove that the country remains loyal to principles of transparency, accountability and good governance.
The policy document was prepared in frames of the project - Empowering Watchdog Community for Government Accountability, funded by the Governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from International Visegrad Fund. The mission of the fund is to advance ideas for sustainable regional cooperation in Central Europe. The responsibility of the content of the document lies with the Institute for Development of Freedom of Information (IDFI). It does not necessarily reflect the opinions of International Visegrad Fund.
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