What is PWYP’s ask?

Publish What You Pay (PWYP) calls for international financial institutions (IFIs) to require public disclosure of revenues and contracts for all extractive industry investment projects, development policy lending, and technical assistance programmes. In addition, PWYP requests IFIs to ensure the development, implementation and monitoring of the transparency program includes meaningful civil society participation.

What are international financial institutions (IFIs)?

IFIs can refer to any of the following:

• World Bank Group (WBG)
  • International Bank for Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC)
  • Multilateral Investment Guarantee Agency (MIGA)
  • International Centre for Settlement of Investment Disputes (ICSID)

• International Monetary Fund (IMF)
  • Regional development banks, such as:
  • African Development Bank (AfDB)
  • Asian Development Bank (ADB)
  • Inter-American Development Bank (IDB)
  • Bank of the South
  • European Bank for Reconstruction and Development (EBRD)

• Other regional financial institutions eg European Investment Bank (EIB)

• Export Credit Agencies of individual country governments, such as:
  • US Export Import Bank (EXIM)
  • Japan External Trade Organization
  • Hermes Kreditversicherungs (Germany)

IFIs offer loans, grants, and technical assistance to finance investment projects and policy reforms mainly in low-income and middle-income countries. The specific mission of each IFI varies, but typically includes elements ranging from poverty reduction, to economic development, to promotion of international trade.

For more information about the activities of IFIs, visit Bank Information Centre’s website

Why does PWYP focus on international financial institutions?

IFIs, particularly the World Bank Group and the IMF, have significant leverage over governments of resource-rich countries and over many extractive industry investments operated by the private sector. The World Bank Group and the major regional development banks directly finance, to varying degrees, extractive industry projects, investing a total of $2.2 billion in 2006 and $2.6 billion in 2007, according to Bank Information Center statistics. Two institutions, the International Finance Corporation (IFC) and the European Investment Bank (EIB), have dominated IFI financing of EI, together accounting for almost three-fourths of total financing for 2006-2007. The World Bank and IFC on average provide more than a billion dollars in funding to the extractive sectors annually. In addition to direct finance, IFI actions often play a catalytic role in spurring extractive industry investments in risky environments. Unfortunately, these investments often do not result in many benefits to local populations, poverty reduction, the environment, or the overall economic development of a country.

Ill-conceived IFI loans involving the extractive industries have often caused widespread environmental and social damage including irreversible impacts on natural habitats, displaced communities, and indigenous peoples. IFI activities are often carried out without the informed participation and consent of affected people, non-governmental organizations (NGOs), and-in many cases-even the legislatures of the banks’ borrowing countries. Moreover, despite some progress the IFIs still do not release comprehensive information in a timely manner during project design and implementation.

By requiring projects and governments that receive IFI assistance to implement transparency measures in the extractive sector, IFIs help countries open the decision making process and move towards more responsible and equitable management of extractive industry resources. IFI transparency activities represent a critical first step towards addressing the challenges of developing the extractive industries.
Specific measures should include:

• Companies and governments that benefit from any form of IFI support, such as project finance from the IFC and EBRD or guarantees from the MIGA, should be required to publish what they pay governments for the right to access and exploit oil, gas and mining resources. Disclosure should be at the most transparent level possible, i.e., project- or company-level, annually and should include taxes, fees, royalties and other payments, including signature bonuses.
• Public disclosure of extractive industry revenues should be a core condition for all development policy lending relevant to the oil, gas and mining sectors and for all non-humanitarian aid, as well as for all technical assistance and other non-investment activities relevant to the extractive industries, especially in resource-rich countries.
• IFIs should require all extractive industry projects to disclose investment contracts, e.g., production-sharing agreements, which are used to establish government revenues and critical to verifying entitled country benefits as well as social and environmental responsibilities.
• IFIs should ensure meaningful engagement with civil society regarding the disclosure of revenues from resource extraction and how they are to be spent should be an essential element of all EI projects and IFI country strategies for all resource-rich countries.

Specific IFI work relevant to PWYP is summarized below.

International Monetary Fund

The International Monetary Fund (IMF) has addressed the public financial implications of extractive industries in resource-rich countries by urging greater transparency and accountability for financial flows from EI projects to government budgets. For example, the IMF’s Guide on Resource Revenue Transparency, published in 2005 and updated in 2007, outlines best practice in four key areas: clarity of roles and responsibilities; public availability of information; open budget preparation, execution, and reporting; and assurances of integrity. Notably, the Guide argues for contract transparency in addition to revenue transparency.

The IMF’s Guide is not required of member governments; it represents what the IMF considers to be best practice and is only voluntary. The actual indicators used by the IMF to assess a country’s fiscal transparency remains the official Code of Good Practices on Fiscal Transparency. The Code was revised in 2007 to reflect more emphasis on transparency in resource-related activities, but it does not specifically incorporate the clear recommendations of the Guide.

PWYP members participated in consultations and provided comments on both the Guide and the revised Code. Since the release of the Guide, PWYP members, including Oxfam America, Bank Information Center, Global Witness, Pacific Environment and other groups have met with IMF officials to urge that the Guide be mainstreamed in IMF activities.

The IMF has also required more transparent management of oil and gas revenues as part of Staff Monitored Programs in, for example, Angola, or as part of Poverty Reduction and Growth Facility operations, for example in Congo-Brazzaville, as a pre-condition for debt relief. For more on the IMF’s implementation of EI transparency, please see the findings provided below of a joint assessment conducted by PWYP members, Global Witness and the Bank Information Center.

The IMF has conducted research and issued reports on many issues of concern to PWYP members and are available on the IMF website .

World Bank Group

In 2002 a two-year analysis called the Extractive Industry Review examined the World Bank Group’s policies, practices and interventions in the oil, gas and mining industries in support of its mandate of poverty reduction.

During the process, PWYP called on the WBG to make transparency and accountability in the extractive industries a requirement of all project lending, development and technical assistance programmes to extractive industries and to developing and transitional governments of countries where natural resources play a dominant role in the economy. Following the EIR and extensive lobbying by PWYP members and other civil society groups on subsequent policy review processes within the Bank, the WBG committed to take measures to increase transparency of revenues (and contracts) at the company-level and at the country-level:

Company-level

The IFC formalized its EIR transparency commitments for extractive industry project investments by incorporating them into its new Policy on Social and Environmental Sustainability (2006):

“The IFC promotes transparency of revenue payments from extractive industry projects to host governments. Accordingly, IFC requires that: (i) for significant new extractive industries projects, clients publicly disclose their material project payments to the host government (such as royalties, taxes, and profit sharing), and the relevant terms of key agreements that are of public concern, such as host government agreements (HGAs) and intergovernmental agreements (IGAs); and (ii) in addition, from January 1, 2007, clients of all IFC-financed extractive industry projects publicly disclose their material payments from those projects to the host government(s).”

During the formulating of the IFC’s Policy, PWYP members organized several meeting with IFC staff and Executive Board members and wrote multiple letters calling for stronger EI transparency requirements. Although, the IFC incorporated some of the suggestions on revenue transparency – unfortunately, the final Policy’s commitment to contract transparency only applies to “significant” projects – “those expected to account for 10 percent or more of government revenue” as defined by the IFC. Furthermore, although the revenue disclosure requirement for all EI projects did not start until January 2007, beginning in October 2004 the IFC asked all EI investments to voluntarily commit to revenue disclosure, which most projects did.

Country-level

The WBG endorsed EITI in June 2003 and pledged to work with developing nations and companies on ways to publish payments and revenues accruing from oil, gas, and mining sectors. It has subsequently provided technical and financial resources to more than twenty countries through country offices in EITI endorsed countries and through the Oil, Gas, Chemicals and Mining Department based in Washington DC to assist host countries with implementation of EITI. PWYP members meet regularly with the World Bank Group, including during the Annual Meetings, to express concerns with Bank implementation and ways to strengthen EI transparency activities of the Bank.

In April 2008 the WBG announced its plans for a new initiative, the Extractive Industries Transparency Initiative Plus Plus (EITI++), an expanded program intended to promote transparency along the entire value chain, including contracts and budgets. The current focus of EITI++ is on Africa, with Guinea and Mauritania as the two pilot countries. Although EITI++ is seen as a very positive initiative, it is not without concerns. To begin, EITI++ is aimed only at the “willing governments” and thus may not be applied widely or consistently across countries. Furthermore, although the Bank states that they will assemble an advisory committee of stakeholders to guide EITI++, it is unlikely that governments will be willing to discuss all the value chain issues in a multi-stakeholder setting, especially one that includes full CSO participation.

Even more reason for concern, in September 2008 the World Bank pulled out of the Chad-Cameroon oil pipeline after long-standing tensions with the government over failed promises to spend the oil profits on programs for the poor, instead funneling more oil profits for military expenditures. The pipeline was one of the Bank’s biggest investments in Africa ($140 million) and billed as a test case for how Africa’s oil wealth could benefit the poor if spent properly and transparently as conditioned by loan requirements.

Assessment of the World Bank Group and IMF

In September 2008, PWYP members, the Bank Information Center and Global Witness, produced a joint assessment of how the World Bank Group (i.e., IDA, IBRD, and IFC) and IMF are implementing EI transparency in their operations in over 55 resource-rich countries from January 2004 to April 2008. Overall, the assessment found that although both institutions frequently raise the concern of transparency in resource-rich countries, the approach is neither consistent across countries nor comprehensive. Furthermore, the institutions are mainly focusing on EITI and the disclosure of revenues and are largely not promoting contract transparency or ensuring meaningful civil society participation.

Specific findings include:

Transparency Emphasized in Majority of Resource-Rich Countries – The World Bank Group and IMF are involved in promoting EI transparency in one form or another over 65 percent of resource-rich countries with institution engagement. In many countries, the World Bank and IMF have played an important role in getting countries to endorse EITI and in building capacity for expected EITI implementation.

Revenue Transparency as a Condition Frequent for IMF, Infrequent for World Bank – The IMF used revenue transparency as a structural condition in 59% (10 out of 17) of countries with lending programs. Whereas, the World Bank designated it as a program benchmark in 19 percent (only 3 out of 16) of country lending programs and in 21 percent (8 out of 38) of country strategies in resource-rich countries.

Contract Disclosure Largely Not Promoted – The disclosure of contracts was not addressed by nearly 90 percent of World Bank and IMF operations in resource-rich countries. The IMF did make contract disclosure a structural condition in 12 percent (2 out of 17) of countries with IMF lending programs. The Bank never designated it as a program benchmark and the IFC did not require contract disclosure for any EI investment project.

Importance of Civil Society Engagement Often Absent – The issue of civil society engagement is present in only about a quarter of World Bank country programs, with nine operations providing assistance related to building capacity for civil society participation. Furthermore, governments and private sector projects are not held accountable for the adequacy of civil society engagement through any benchmarks. For the IMF, civil society is overwhelmingly absent. The IMF failed to even mention the issue of civil society engagement in over 80 percent of all resource-rich countries.

Inconsistent Application Across Country Operations – As the varied results in report illustrate, the application of EI revenue transparency as well as contract transparency and civil society engagement across World Bank and IMF operations in resource-rich countries is very inconsistent.

IFC Projects Require Revenue Disclosure, but Reporting Varies Greatly – The types of data reported by IFC EI projects vary greatly among companies and often are not clear or easy to find. For example, some companies only report company-level aggregated data and some aggregate across more than one year. These discrepancies among company data reflect a lack of clarity in IFC policy.

European Bank for Reconstruction and Development

In 2006, PWYP members have monitored the revision of the EBRD’s Energy Operations Policy, which sets out the guiding framework for the EBRD’s involvement in the natural resource sectors. During the course of the revision process, PWYP members sent a joint letter with over 56 member signatures to the EBRD staff and Executive Board demanding for improved transparency measures to be incorporated into the final Energy Operations Policy. In May 2006, PWYP also organized a meeting during the EBRD Annual Meetings to bring more attention to the issues. As a result of these efforts, the EBRD
agreed to:

• Require project sponsors to adhere to best international practice on revenue transparency in all EBRD member states, i.e. all references to project sponsors only adhering to “good” practice were deleted and the policy would not only apply in countries that have “endorsed” EITI;
• Support EITI implementation and adherence to EITI criteria in countries that have already signed up, and to encourage other countries to take part;
• Incorporate PWYP’s suggestions on the definition of payments to be disclosed by project sponsors.

For more information on the IFIs and extractive industries, please contact Heike Mainhardt-Gibbs from Bank Information Centre.