The EITI and the challenge of transparency

The Extractive Industries Transparency Initiative (EITI) has now been around for well over a decade (see here for more on the EITI’s history).  Formed as a response to the much vaunted ‘resource curse’, the EITI has developed a position for itself as an important and innovative actor in the fight against natural resource-focussed corruption.  Indeed, it leads the way in developing consultative processes for more openness in the oil, gas and mining sectors.

The EITI board met for the 31st time in Kiev from 7th– 10th December 2015.  And, there was important (internal) business to hand.  There are important changes happening within the EITI, one of which being the appointment of a new chair to continue the work of former UK politician Clair Short.

Fredrik Reinfeldt, the former Swedish Prime Minister (2006-2014), has now taken up his post as her successor.  On doing this he made an upbeat speech, claiming that he was “thrilled to be nominated as the next Chair of the EITI”.   He further added that “questions about openness, transparency and accountability have always been close to my heart” and that he was passionate about seeing natural resources “used in an equitable manner for the benefit of all citizens”.  

Reinfeldt will have plenty to keep him busy.  One of his first tasks will be to oversee the (s)election of new members to the EITI board in 2016 and shortly after that to co-ordinate and lead the EITI Global Conference in Peru (see here).

The challenges that led to the creation of the EITI remain every bit as significant now as they were back then.  The aim of improving transparency in the extractive industries is as important for developed countries as it is for less developed countries. In the USA, for example, big players such as Exxon Mobil Corp have not shared information about the taxes they pay at home, and that even though the company is a member of the EITI US Multi-Stakeholder Group (MSG). Indeed Exxon is one of several energy companies that has failed to share U.S. specific tax information for a recent report released by the EITI.

There is another potentially serious challenge facing the new chair, the board and the EITI secretariat in Oslo. Clare Short highlighted the issue in her November Newsletter before she handed over to Reinfeldt:

The issue for the EITI is whether we should make something compulsory and set up many countries to fail or whether we should continue to encourage all countries to make progress.  The real issue is how the EITI should build on the work so far to encourage continuing progress towards the EITI Principles in all countries” 

Civil society groups, one third of the voting members of the EITI board, have been uncompromising in pursuing this relatively hard-line aim at a time when the chair believed more diplomacy was needed. Some London based ‘transnational advocacy non-governmental groups’ (TANGOs) have regularly blocked pleas from the board and industries to allow more time for some countries, such as Azerbaijan, to provide company and tax information to the EITI.

For those not quite so familiar with the EITI’s procedures, membership is often critically important to less economically developed countries (even with natural resources) not least because membership is also a qualification for international aid from the World Bank.

On the other hand London based TANGOs set standards for other MSGs around the world. Recently, for example, they introduced new guidelines for the disclosure of Beneficial Ownership information in UK extractive industries. This was first accepted by members at the UK EITI MSG last year and it has now been accepted by the EITI board:

EITI civil society organisations are normally expected to affiliate to Publish What You Pay (PWYP), an offshoot of Global Witness (GW created PWYP in 2002). Some NGOs, one a former affiliate of PWYP in the Democratic Republic of Congo, are nonetheless now applying directly to Oslo for associate membership of the EITI. This may also lead to opportunities for them to apply independently of PWYP for EITI board membership (for more on PWYP’s selection criteria for EITI board membership see here).

The EITI, as is evident from the above, is evolving. It might subsequently be worth keeping a closer eye on it in years to come.


Martin Brown

University of Sussex

On collision course: anti-corruption in Tanzania under Magufuli

Nicknamed the ‘bulldozer’, Pombe Magufuli is fast becoming a proverbial knight in shining armour just weeks after he was sworn-in as the fifth president of Tanzania. His radical approach to public service reform, economic austerity and anti-corruption is being hailed across the African continent and has been a subject of viral memes on twitter.

A day after he was inaugurated, for example, the president took an unannounced and unguided tour of one of the national hospitals, and finding it in a shocking state – with patients sleeping on the hard floor and vital diagnosis machines broken – fired the board and acting director there and then (see here). In another surprise visit by Magufuli’s new Prime Minister, Kassim Majaliwa, to the port in Dar es Salaam, it was discovered that taxes amounting to 40 million USD had not been paid. The president immediately suspended the Tanzania Revenue Authority’s (TRA) Commissioner General and had him arrested together with five other top TRA officials.

Magufuli has also banned business class travels for all public officers except the President, Vice President and Prime Minister, introduced significant cuts in tax exemptions and replaced the often lavish national independence celebrations with a nation-wide clean-up campaign. He has promised zero-tolerance for corruption and ordered the creation of a special court for corruption cases (see here).

These unconventional methods raise some interesting issues concerning the fight against the endemic graft that has dogged the African continent in the past 40 years.

One argument is that when corruption is entrenched and normalised, as it is believed to be the case in Tanzania, such an abrupt intervention is critical. The radical approach can introduce ‘uncertainty’ in the corruption-prone environment, breaking the shared expectations and resulting predictability that sustain corrupt systems. The chain of corruption can be broken, albeit temporarily, when potential wrongdoers are unable to anticipate the type of response their actions will elicit from the top political echelons.

Additionally, the abrupt crackdown on corruption can instil fear among the ‘usual’ offenders working in cahoots that often straddle the private sector and government. This is already happening in Nigeria where the fear of the new president, Muhammadu Buhari, is said to ‘be whipping [the] Nigerian bureaucracy into shape’ (see here). Indeed, instilling fear was one of the important weapons in the anti-corruption arsenal of Singapore under the leadership of Lee Kuan Yew. When he was quizzed about his fear-instilling methods, Yew once remarked: “Between being loved and being feared, I have always believed Machiavelli was right. If nobody is afraid of me, I’m meaningless.”

But Yew seemed to understand that healing the cancer of corruption requires a careful combination of fear, voluntary compliance by public officials and broad-based community involvement. In addition to raising salaries of public officials, there were efforts to encourage the Singaporean public to be vigilant and to take full ownership of the war on corruption. Incidentally, the consistent show of political will and commitment to fight corruption is a decisive short-cut to winning the hearts and minds of the citizens to rally behind an anti-corruption campaign. A genuine commitment to tackling corruption by a country’s number 1 can inspire a badly needed citizens-led anticorruption movement and become the single most important bulwark for the islands of integrity or the so-called ‘positive-outliers’ in Tanzania.

The challenge is, however, that the political conditions that exist in Tanzania may not be conducive for the Singaporean approach to anti-corruption. Lee Kuan Yew could literally go after anyone suspected of corruption without risking his political career; he could afford to step on big toes and still remain in power. Being the most popular figure in his People’s Action Party (PAP), and in Singaporean politics in general, Lee was relatively unencumbered by political machinations, a luxury that Magufuli on the other hand can only dream of. Although he is credited with being one of the most consistently well performing ministers, is relatively young (55 years old) and has a chemistry PhD, Magufuli was not his party’s (Chama Cha Mapinduzi) first choice. He owes his nomination to the alleged fall-out between the party’s top brass and the former Prime Minister, Ngoyai Lowassa, who was more popular and viewed as the strongest contender.

While Magufuli’s impressively ‘clean’ record during his tenure as the minister of Public Works demonstrates his commitment to integrity, and lends credence to his anti-corruption drive, one wonders whether he has the political wherewithal to take on the big wigs of the Chama Cha Mapinduzi (CCM) when the need arises. He might be ‘clean’ but some influential members of the CCM may have put their hands in the cookie jar; can the president remain true to his word and crack the whip without fear and favour?

For someone who started so brightly, showing prejudice in an anti-corruption clampdown can cause more damage than was ever inflicted by all the former presidents combined. It has the potential to generate more cynicism among the ordinary Tanzanians who have pinned their hopes on him to take the country forward.

In the context of multi-party pluralism, the war on endemic corruption can never be a one man show. The new president needs to find strong allies within the CCM and the bureaucracy. The former is more urgent. Intra-party collective action against corruption will sustain the momentum and ensure that other arms of state, especially the judiciary, take anti-corruption much more seriously. But where the incentives for intra-party anticorruption collective action will come from is, so far, an enigma. Why should the CCM be more committed to the war on corruption now than ever before?

Moletsane Monyake, University of Sussex

German party finance; from the sublime to the ridiculous

Strange things have recently been afoot in the normally sanguine world of German party finance.   Back in October 2014 the Alternative for Germany (AfD), a new(ish) right-wing party, mutated in to a gold selling business so as to claim extra funds from the state (see here). This was quickly followed in December 2014 by ‘Die Partei’, a satirical party with one MEP (see here), deciding that it would take the oddness one step further. It began selling money to help it access public funds to which it otherwise wouldn’t have been entitled (see here for an English language summary of both cases).

By December 2015 the sublime was turning in to the ridiculous. The AfD was once again involved, although this time unwillingly. Despite a year marked by internal strife (see here), the AfD was flying high in the polls. Indeed, for the first time in its history it was registering around the ten per cent mark as it looked to make the most out of not only the Eurocrisis but also Europe’s summer of immigration trauma (see here for more on the AfD’s rise).

The AfD’s successes were clearly too much for some of its opponents. Members of ‘Die Partei’ (yes, them again) and a number of small, left-wing activists launched a campaign on the internet (see here) that had the potential to financially ruin the AfD. Not content with opposing the AfD’s policy package they called on the AfD’s opponents to donate money to the party.   How, one might ask, would donating money to a party potentially cause it problems? Surely the more money a party has, the easier it is for it to carry out its daily affairs? No, not always.

How was the ruse going to work? Anti-AfD Germans were asked to donate small amounts to the AfD – the numbers in play couldn’t get much smaller, in fact, with 10 cents being the amount mentioned. They were asked to do this online, by transferring money via companies such as PayPal or Sofort (simply a German version of PayPal). Every time a payment is made via one of these providers, the receiver (in this case the AfD) has to pay a commission. This varies from provider to provider, but Der Spiegel (Germany’s largest weekly newspaper) reported that the costs tend to be between 0.9 and 1.9 per cent of the value of the transaction (see here). On top of that every transaction comes with a flat fee – again this varies, but it’s generally between 25 and 35 cents.

So, in theory, a 10 cent donation could cost the AfD roughly 30 cents. The AfD would be able to claim back some of this via the system of state subsidies, but not enough to cover the transaction charges. For every Euro that the AfD raises it gets 38 cents from the state – it doesn’t take an expert in arithmetic to work out that that would still leave the party well short of being able to cover the costs that come with these donations.

On the one hand, the AfD reacted in a reasonably relaxed fashion to the threat of death by donations. It claimed, for example, that it had good relationships with the likes of PayPal and Sofort and that the contracts it signed forbad charges from being levied that were greater than the transactions involved. If that’s true, then the AfD is indeed covered and has nothing to worry about. Indeed, a few clever-dick activists trying to bring a party down can often help a party make itself look like it’s the victim of a campaign, and that can go down very well with potential supporters. A case of all attention being good attention, maybe.

On the other hand, if all really is that sanguine then one wonders why the AfD has threatened to take legal action against those pushing the initiative. The background to these concerns is quite complicated, but in essence the AfD is worried about hacking campaigns and data management. Come what may, the party made it clear that if any of these ‘campaigns’ are seen to help the AfD’s opponents undermine its online presence, then the AfD is clear about who it will be holding responsible.

Huffing and puffing to one side, all of this might ultimately be of little real relevance anyway.  By 11 December it was being claimed that the princely sum of Euro 167.23 had been donated in this fashion, hardly the stuff of which financial ruin is made.  But, for a party where money is very tight (see here for more on that), it’s clear that the insurgency is nonetheless an awkward distraction.

The sight of Germans ruthlessly applying rules in absurdum is in and of itself mildly amusing, but these cases also tell us a little more about what we should and shouldn’t expect from party-funding debates. The German party-funding regime is short on neither laws nor judicial attempts to interpret them, but that hasn’t saved it from parties and activists trying  to ‘play the game’. Party funding regimes never stand still as rational actors do their level best to get the most out of them – or indeed to attack their opponents via them if they can.

In and of itself it is unlikely that the AfD will fall apart at the seams on account of these donations, but it does show us that creative souls will use loopholes to further their own interests.  Sometimes in a decidedly comical way, but sometimes in potentially more serious ones.  One good reason to keep an eye on developments in funding regimes (in Germany and beyond) in the years to come.

Dan Hough

The thing about football is that it’s not just about FIFA…

Of late Sepp Blatter and his pals at FIFA have – quite understandably – been the centre of attention for anti-corruption scholars and football fans alike.  Indeed, an indictment from the US Department of Justice earlier this year has thrown world football’s governing body in to turmoil.

But as FIFA continues to buckle under the weight of its own scandals, the reputations of the 209 national associations that make up the organisation have largely remained intact. This is decidedly curious as FIFA is not the only organisation within football that suffers from governance problems.

A report recently published by Transparency International (TI) tries to redress this imbalance. The Transparency International Football Governance League Table looks at how transparent each of FIFA’s member football associations (FAs) are.  It unpacks whether they publish financial reports, activity reports, codes of ethics or conduct for their staff, and their organisational statutes on their websites.

By doing this TI are deliberately setting the bar very low. Good governance will involve much more than simply producing, and making publicly available, these documents.  Yet it might not be entirely surprising that even at this low level, the world’s FAs still do very badly. 81 per cent published no financial information, and 85 per cent publish no information on their activities. Russia, the hosts of the World Cup in 2018, do not publish any information on their finances or activities, and Qatar, the, to put it mildly, rather controversial host of the 2022 World Cup, publish precisely none of the documents listed above. In fact, only 14 out of 209 FAs publish all of the information that is listed above (Canada, Denmark, England, Hungary, Iceland, Italy, Japan, Latvia, New Zealand, Northern Ireland, Norway, Portugal, the Republic of Ireland and Sweden, in case you are interested).

But so what? Why does this actually matter?

Well, firstly, the FAs get a lot of money from FIFA. This money comes directly from fans of the game, either from direct ticket and merchandise sales, or because huge sponsors like Coca Cola and Adidas have invested money in order to piggy back on the huge audiences that football can attract. As well as getting millions from FIFA, many FAs also receive money directly from their national governments. If FAs don’t report how their money is spent, the opportunity for executives to potentially skim money into his/her own private yacht fund without being caught is much higher. Fans deserve to see how money that should be used to improve facilities and football in their country is spent, particularly when it comes directly from their own pockets.

Secondly, these FAs hold the power between them to elect FIFA’s president, and also vote to approve any potential reforms to FIFA’s internal dealings. These 209 organisations – who, as is illustrated here, are no great shakes when it comes to their own governance – have a vital role in helping to reform FIFA. That is a sobering thought, and makes one wonder if any change is likely to be achieved at all if it is left solely up to members of the ‘football family’.

Finally, whilst FIFA may be football’s top-dogs, each FA ultimately has control over how football is run in their own country. Can these organisations be trusted to hold the best interest of the game above their own self-interest? At the moment, they are so secretive that it is impossible to say for certain that they can. And this, ultimately, is the point. FAs take money from the people, and are supposed to act to benefit them by safeguarding and developing the sport in their territories. But without transparency, to allow for fans and the people to hold them to account, question marks will always remain about the work that they do.

Is there anything that can be done?

Well, frankly, that depends on how much faith one has. Another recent publication from TI discusses some of the things that FAs can do to improve their internal governance. These recommendations are similar to those being recommended to FIFA; term limits on leadership, some form of externally driven oversight, proper accountability, and, crucially, transparency.

At the moment, though, FAs are under little pressure to get their houses in order. At the same time as FIFA is coming under mounting pressure from groups like TI and NewFIFANow, the FAs receive much less attention. Reform at FIFA is of paramount importance, clearly, but in order to make sure that that change sticks, and that the game of football can continue to inspire millions around the world, comprehensive reform must also take place in each of the 209 football associations.

Ben Wheatland

Transparency International Secretariat