Extractive Industries (EI)
A large percentage of IFI project finance in the ECA region is devoted to the extractive industries (oil, gas and mining). As in other regions, investments in the extractive industries of Russia, Central Asia, and the Caucasus have been associated with adverse environmental, social and economic consequences. While the IFIs have addressed these questions in their country strategies and operational policies, they have done too little to ensure that their investments promote economic diversification and poverty reduction and avoid or mitigate adverse social and environmental effects on local populations. Civil society groups have criticized the development strategies of the IFIs in the region, which have encouraged over-dependence on extractive industries, as well as IFI operational policies, which have failed to obviate harmful social and environmental effects of projects.
BIC has conducted numerous studies of IFI-financing in the extractive sector. The document below provides a spreadsheet of IFI extractive industry projects in the region.
ECA Extractive and Energy Project Spreadsheet, BIC, March 2008 (MS Excel 292 KB)
BIC has also worked with other CSOs to improve operational policies related to extractive industries, such as the IFC’s Social and Environmental Sustainability Policy, the EBRD’s Energy Operations Policy and Environmental and Social Policy, and the ADB’s Energy Policy.
Although common themes exist in the ECA region, each country faces specific problems and extractive developments. More information on extractive industry issues can be obtained from individual country pages, as well as BIC’s Energy and Extractive Industries pages, which include a number of further resources.
Revenue and Contract Transparency
A precondition for responsible management of extractive industries is revenue and contract transparency. Increasing transparency opens up the decision making process and allows the public to make government officials and private operators more accountable. For example, public disclosure of payments made to the government and revenues received by the government reduce the opportunity for wasteful and corrupt use of extractive resources. Public disclosure of contracts signed between governments and private companies also lend to more equitable resource distribution policies and government accountability.
Recent progress in revenue transparency has centered on the Extractive Industry Transparency Initiative (EITI). EITI, a 2002 initiative of UK Prime Minister Tony Blair, aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government and issues a report on the findings.
The IFIs have become increasingly involved with EITI. Due to their financial leverage and their role as development policy advisors to governments of developing and transitioning countries, the IFIs have the capacity to positively influence the management of oil, gas and mining projects. In particular, they can ensure that revenues and contracts related to projects that they finance are transparent. Requiring such transparency discourages corruption and mismanagement of IFI projects and sets a standard for all extractive industry projects. In response to pressures from civil society, the IFIs have recently adopted new disclosure and natural resource policies that include commitments to promote transparency. Although the new commitments represent progress, they have significant gaps and weaknesses. In addition, the IFIs have, at best, a mixed record of implementing past commitments on revenue transparency.
Transparency of Extractive Industries Contracts - The Case for Public Disclosure, by Heike Mainhardt-Gibbs, Bank Information Center, October 2007 (Acrobat pdf, 73 KB)
Quick Reference Guide to Extractive Industries’ Revenue and Contract Transparency at the International Financial Institutions, Bank Information Center, February 2007 (Acrobat pdf, 76 KB)
World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat. It has approved projects in several countries, supporting the implementation of EITI. On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++), which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project, but it has yet to take hold or spur concrete action.
EITI Plus Plus (WB website)
As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government. The IFC began to publish these payments on its website in 2008.
IFC Extractive Industry Clients Government Payment Disclosure (IFC website)
The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles.
EBRD EITI Policy (EBRD website)
In February of 2008, the Asian Development Bank also officially endorsed EITI.
ADB Endorses EITI (ADB website)
BIC is working with other CSOs, including the Publish What You Pay coalition members to advocate that the IFIs require greater revenue and contract transparency as a condition to lending to extractive industry projects. For more information on EITI progress of specific countries, see the respective country websites.
Country-focused Initiatives
The IFIs prepare 3-5 year country strategies that define the levels of lending and thematic/sector priorities for each borrowing country. These documents guide the institutions' development programs in these countries and are supposed to be developed in consultation with government, civil society, and other stakeholders. To assist NGO involvement in the preparation of these important IFI master plans, the Bank Information Center has prepared a timeline with staff contacts:
IFI Country Strategies for Europe, Caucasus, and Central Asia: Overview, Schedule and Contacts, Bank Information Center, December 2007 (Acrobat pdf, 243 KB)
Страновые стратегии МФО в Европе, Центральной Азии и на Кавказе:Краткий обзор, график работ и контактная информация, 30 апреля 2008 г. (Acrobat pdf, 449 KB)
Individual country strategies can be found at the respective IFI websites and on BIC’s country-specific pages.