Extractive Industries Transparency Initiative

Speech by Anita Utseth, State Secretary,  EITI event on Caspian Oil and Gas Conference in Baku, 7 June 2007.

Your Excellencies, ladies and gentlemen

It is a great pleasure for me to be the key note speaker at this EITI event in connection with the Oil and Gas Conference here in Baku. I also want to thank the British ambassador for his kind introductory words, and to acknowledge the foresight of Prime Minister Blair in launching the EITI, and for the UK’s important contributions towards establishing a viable process.

The purpose of the Extractive Industries Transparency Initiative is to support anti-corruption efforts and improve governance in resource-rich countries. This is done through the full publication and verification of company payments and government revenues from oil, gas and mining. Such publication and verification alone will not in itself produce a sound management of resource revenues. The EITI is therefore not a cure for all ills. It is however important as a basis for sound revenue management and for social and economic development, political stability and an enhanced investment climate.

About one year ago, in April 2006, an international conference was held in Baku with the title “EITI: Experience of Pilot Countries”. Approximately 170 participants attended the

conference, including representatives from the Government of Azerbaijan, several foreign officials and ambassadors, as well as delegates from international organizations and financial institutions, oil companies, civil society and mass media. The conference

was organized in order to assist the adoption and implementation of the EITI in countries that are rich in natural resources, and to learn from Pilot Countries such as Azerbaijan.

The president of the Azerbaijan Republic, Ilham Aliyev declared at an early date that Azerbaijan would become a pilot country in the implementation of the EITI. From then on, Azerbaijan has been a pioneer in advancing the EITI process at the national level. Other countries are catching up, though, and Azerbaijan has scope for improvement, as I am sure its active and knowledgeable EITI coalition of NGOs will remind us of today.

It is therefore an honour for me to be here in 2007, and to acknowledge that further progress has been made - in Azerbaijan - but also internationally.

Our aim is to make EITI the globally accepted norm for transparency in the oil, gas and mining sectors. As you may know, the EITI Board has been established and has met twice. The Board, of which Executive Director for the State Oil Fund Azerbaijan and the co-chair here, Mr Shahmar Movsumov, is a prominent member, has made significant progress. It is working to make the EITI more robust, through an enhanced governance structure, a system of validation and setting priorities for the coming years. The Board has decided that the new EITI Secretariat is to be established in Oslo. The transition process is now underway, and the official opening of the new Secretariat will take place in Oslo in September, during the third meeting of the EITI Board. We look forward to welcoming Shahmar Movsumov, to this meeting.

Validation is critical to the credibility of EITI. The Secretariat is now working with the Board and its validation Sub-Committee to create an approved list of validators. This will allow implementing members, such as Azerbaijan, to initiate international validation. In this way, countries which take their EITI commitments seriously will get rewarded for doing so. The EITI label should be meaningful and it should also be easily understood by civil society what an EITI country stands for. For this to happen, validation is the key.

We continue to be pleased that the interest for the ETI is growing. As I mentioned, the initiative encompasses not only oil and gas, but mining as well. We are therefore pleased that the President of Botswana confirmed on 21 May that his government intends to join the Extractive Industries Transparency Initiative. Becoming an implementing country of the EITI is an important demonstration of good governance in Africa.

Azerbaijan has acknowledged the importance of the EITI.. She has chosen the alternative of transparency, and openness, of telling it like it is, of sharing information. Accurate information facilitates commerce, business and democratic values. So even though the EITI is limited to the extractive industries, is may provide a model for other industries. A model too, from which the public sector in all countries can learn.

Azerbaijan re-established its independence only about fifteen years ago. Your institutions are still growing; and with them, your political culture. We think the Extractive Industries Transparency Initiative can make an important contribution in this process. The EITI can enhance your work in tackling corruption and in helping to build public confidence in how revenues are being managed in Azerbaijan.

Still, the EITI is only a start. The principles of transparency and political accountability which are at its core should ideally be applied to the whole of the management of the petroleum economy. In this respect, Azerbaijan still has some way to go. Azerbaijan’s new petroleum age has now started in earnest. With the revenues from the PSAs it has been possible for the Azerbaijani government to increase its public spending and at the same time to establish a State Oil Fund along the lines of our own Petroleum Fund, the Government Pension Fund Global. The decision to establish such a fund in Norway was made to shield the Norwegian domestic economy from the adverse effects of spending oil money for short term domestic gains and to ensure a sound funding of future needs. All the while this decision has contributed to making the petroleum wealth in Norway more sustainable, and by exhanging wealth in the ground for financial assets, Norway’s petroleum wealth has become less exposed to risk.

Our decision was based on a long term view of what would be in Norway’s best interest. In Azerbaijan’s case you have through the establishment of your own fund taken a long step towards planning with such a view to the long term. This is positive. Although not all Norwegian experience is relevant, some of it is, and we stand ready to discuss these with Azerbaijan.

One of the core principles of the EITI is that it is a three party initiative; that is to say, it is not only governments and oil-, gas-, mining companies at the table but also representatives from civil society. This is true at the national level and at the international level. The multi-stakeholder composition holds much energy and credibility that can be derived from the EITI. The evolution of the relationship among the different stakeholders is however not always easy. The active civil society groups in Azerbaijan have been both constructive and effective in dependent voices pressing for transparency, and I am sure they will make their voices heard also today. The collaboration of civil society groups across the region can strengthen the whole initiative and strengthen the EITI process. We are therefore pleased to see representatives here from civil society groups from the region; from Georgia, Mongolia, Kazakhstan, and from Kyrgyzstan are present here today.

This event has hopefully brought together interested parties and enabled them to learn from each other. I look forward to learning more by listening and talking to you during my stay here in Azerbaijan.

Thank you very much.