sharing in governance of extractive industries

The EITI and Zombie Transparency: what next for Azerbaijan?

One of my favourite catchphrases thrown around last week at the sixth EITI global conference was ‘zombie transparency’. Not a reference to jetlagged scenes over EITI Board meetings, as suggested by one Board member, but to the danger of implementing countries sleep-walking through the box-ticking exercises required by the standard, while contributing little to meaningful reform. The reformed standard finalised this week is a crucial attempt to keep the EITI at the avant-garde of the governance agenda and to remain relevant in the eyes of all of its stakeholders. So is Azerbaijan guilty of being a transparency ‘zombie’? And what do disappointing results for accountability in the country mean for its ongoing relationship with the initiative?

Azerbaijan has been involved with the EITI since the outset, taking part in a pilot in 2002 along with Ghana and Nigeria. Achieving compliant status in 2009, Azerbaijan has been seen as a ‘poster child’ for the initiative, despite little acknowledgment of the initiative beyond a small group of experts within the country.

Warning signals were sent last year when the country’s national EITI coalition released a statement pointing to the ‘stagnation’ of the EITI process in the country – frustrations abounded over unfulfilled promises on publishing of contracts and delays in decision-making processes. Alarm bells then rang in late 2012 when Revenue Watch Advisory Board Member Ilgar Mammadov was detained in Azerbaijan, marking the beginning of a spate of politically motivated arrests and harassments of civil society activists which has gathered pace over the last couple of months as September’s presidential elections draw nearer. More worryingly, speak to frustrated civil society leaders who have been involved in the process in Azerbaijan and it becomes clear that many believe that the EITI has been a lost battle for years.

The soul-searching over the last two years, battled over at (often heated) EITI Board meetings, have resulted in the reformed standard officially launched in Sydney last week at the sixth global conference. New inclusions include tighter reporting demands and stronger contextual information, license disclosure and encouragement of contract transparency and divulging beneficial ownership of assets.

The success of the new reforms in going ‘beyond transparency’, to borrow from the official conference theme, will make or break the EITI initiative. The initiative point in whether the mechanism remains ahead of the curve among a proliferation of other global governance initiatives, or whether it will have to settle with a legacy of kicking off the debate but not taking the next step. The crucial point is that this delicate balance relies on the legitimacy of the EITI in the eyes of all stakeholders.

It is on this count that Azerbaijan appears to have become a thorn in the side for the international Board.

Look carefully at the programme for this year’s event and you will see that Azerbaijan seems to play a far less prominent role than on past occasions. The one high-level government representative, head of the State Oil Fund, had to make do with moderating in one afternoon panel, and most references to one of the first implementing countries in the more high-profile panels were far from celebratory. Compare this to the Paris agenda in 2010, and we find Azerbaijan representation on high-profile panels throughout, celebrating progress to date. Of course this can be partly explained by the increasing geographical expansion as the EITI adds new member countries, which must be represented at the event. Or… was the country being hidden from sight?

All this is not to say that there are not courageous members of Azerbaijani civil society working to keep the initiative alive in a country where, despite assurances of economic diversification, oil still represents 95% of total exports. And among EITI member countries can be found plenty of countries going through complicated political transitions, not least new joiners such as Afghanistan and Iraq. But as a long-standing member, Azerbaijan should be getting some warning signals – one panel member this week rightly pointed out that ‘compliance does not mean complacency’. According to official EITI rules, any breaching of the EITI rules and criteria can be temporarily suspended until those breaches are corrected.

But what would the reaction be? While dress-downs in the international press over democratic shortcomings and heavy-handed dealing with peaceful protests this year have had frustratingly little impact on the Azerbaijani regime, the government would not take the loss of the EITI brand lightly. President Aliyev enjoys using the EITI badge to win over critics.

This is not an empty exercise of ‘NOC-bashing’, another term cropping up in Sydney. The $30 billion-strong state oil fund SOFAZ in fact broadly ticks the boxes, complies with the reporting criteria and produces neat brochures. It was ranked a middling 14th in RWI’s new governance index for sovereign wealth funds, and criticisms centre on lack of oversight of expenditures rather than the revenue collection covered by EITI.

But Azerbaijan’s score as a whole on the RWI index suffered from the introduction of a new component assessing the ‘enabling environment’. The importance of a satisfactory ‘enabling environment’ was a point repeated over and again in Sydney, as in its absence transparency is meaningless and can never reach ‘beyond transparency’ to genuine accountability. Few countries demonstrate this better than Azerbaijan. RWI’s new index assesses this environment based on over 30 measures of accountability, government effectiveness, rule of law, corruption and democracy, which places Azerbaijan in 40th place (of 58), keeping company with Sierra Leone and Iran.

The EITI Criteria require national governments to commit to work with civil society on implementation, without legal or regulatory impediments to civil society’s ability to participate freely and actively, enjoying internationally recognized rights outline in the Universal Declaration of Human Rights. Without going over old ground, concerns on this front have been raised here and here, and the chorus of concerned voices is getting louder.

Immediate de-listing on these grounds would not be in the spirit of an initiative that supports implementing countries, understanding the complicated political backdrops policy-makers have to work against. While the enabling environment is crucial to achieving genuine accountability, there is also recognition that it would be unrealistic to wait for every country to have the idea conditions in place before engagement begins. This would have meant abandoning those post-communist countries making transitions after 1990. But the suspension mechanism is there for a reason, as a last resort.

All the data in the world means nothing if that data cannot be harnessed to make the leap to increased accountability. If Azerbaijan were a new member of the initiative, we might be inclined to give a little more slack. But in order to remain legitimate in the eyes of a wide range of stakeholders (across government, civil society, the private sector and the investor community) the EITI, in the words of Bob Jenkins of the London Business School, needs to be seen as a “tough, hard-to-get standard”. Not a PR exercise. The pioneers of the EITI can quite rightly give themselves a pat on the back for making great leaps in any industry with a long tradition of obscurity. But length of service cannot be a criteria for ongoing acceptance and for the sake of the EITI’s long-term standing, any country that puts that in danger needs to be held to account.

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