Subnationalizing Extractives Transparency (PH0075)

Brief Description of the Commitment

The DOF commits to subnationalizing transparency, accountability, and participatory governance mechanisms in the extractives sector through the Philippine Extractive Industries Transparency Initiative (PH-EITI). This commitment is an important step towards promoting good governance and ensuring the responsible management of the country's natural resources. The PH-EITI is a global standard promoting transparency and accountability in the extractive industries, including mining, oil, and gas. By sub-nationalizing this initiative, the DOF aims to extend its reach and impact beyond the national level to the sub-national or regional levels where extractive activities take place. A report published by the World Bank in 2011 examines the subnational implementation of EITI in six countries. The study asserts that the subnational dimension of EITI holds significance in regions abundant with resources, particularly in countries with extensive oil, gas, and mining operations. This is because a significant portion of national revenues from extractive industries often originate from specific regions. The experiences of Ghana, Indonesia, Mongolia, Nigeria, the Democratic Republic of the Congo, and Peru can offer insights to other countries grappling with extending EITI to subnational levels. The foremost lesson is that each country's EITI subnational program will be distinct and shaped by its regulatory framework, priorities, and available resources. The effective subnationalization of the extractives sector involves empowering local communities and governments with information and resources. Sub-nationalizing the PH-EITI can bring several benefits. It can enhance the involvement of local communities and stakeholders in decision-making processes related to extractive industries. It can also help ensure that revenues generated from these sectors are properly managed and benefit the local communities affected by extractive activities. The PH-EITI’s subnationalization process involves three key elements: the strengthening of local special bodies on extractives, the digitalization of government transactions relating to extractives, and the mainstreaming of civic space in extractives sector issues. Through the implementation of participatory governance mechanisms, such as public consultations, disclosure of information, and engagement with local communities and civil society organizations, the PH-EITI can foster continued and greater trust and cooperation between government, industry, and communities. This can lead to more sustainable and responsible extractive practices, better management of revenues, and improved socio-economic development in the regions where these activities are taking place. Critical to the participatory governance strategy will be the mainstreaming of civic space in the implementation of the EITI process. Recognizing the significant impacts of extractive operations to society, especially at the local level, the subnationalization efforts will ensure strong civil society oversight and participation in the different facets of mining operations and their downstream impacts. One of these efforts includes enhancing the compliance and utilization of Beneficial Ownership information. By empowering local authorities through effective state capacity and governance, transparency is further promoted in the extractives sector, with proximity as leverage in its implementation. This will ultimately help expand the extractive BO registry. Overall, the sub-nationalization of transparency, accountability, and participatory governance mechanisms in the extractives sector through the PH-EITI demonstrates the commitment of the DOF and the Philippine government to promote good governance and responsible resource management at all levels of governance.

Problem Definition

1. What problem does the commitment aim to address? The commitment of the Department of Finance (DOF) to sub-nationalize transparency, accountability, and participatory governance mechanisms in the extractives sector through the Philippine Extractive Industries Transparency Initiative (PHEITI) aims to address several problems related to the management of natural resources and extractive activities. These problems include ● Data gap/data divide. There is often a gap between the data produced at the national level and the accessibility and capability of communities to use that data. This data divide hampers the ability of communities to monitor and hold local governments accountable for the management of extractive resources. The commitment aims to bridge this data gap by improving access to and the capability of communities to use extractives data. ● Limited data access and capability of local governments. Local governments often have limited access to and capability to utilize extractives data for policy formulation and revenue allocation from extractive operations. The commitment seeks to address this limitation by providing support and capacity-building to local governments to access and effectively use extractives data for decision-making processes. ● Limited capability of communities to use extractives data to identify issues affecting them. Communities may lack the capability to understand, analyze, and use extractives data, which limits their ability to demand transparency and accountability from local governments. The commitment aims to build the capacity of communities to use extractives data, enabling them to actively participate in governance mechanisms and provide substantial inputs to the participatory planning and budgeting activities of LGUs and NGAs. ● Limited tools to ensure appropriateness and responsiveness of EITI process and data. In its current form, the data and reports that PH-EITI has is stored and presented in a format that is not easily applicable to issues and concerns relevant to stakeholders. Likewise, EITI reporting processes are currently circuitous, requiring significant effort from industries and government agencies to comply with. The commitment seeks to apply ease-of-doingbusiness principles to improve stakeholder participation in the reporting and data utilization processes. ● Limited reach of PH-EITI implementation. The implementation of the Extractive Industries Transparency Initiative (EITI) has been limited primarily to the national level, leaving out the sub-national or regional levels where mining activities occur. The commitment aims to expand the reach of EITI implementation to the sub-national level, ensuring that transparency, accountability, and participatory governance mechanisms are established and practiced at all levels of governance.

2. What are the causes of the problem? To better understand the causes of the identified problems related to transparency, accountability, and participatory governance in the extractive sector, let's analyze them using the five whys technique:

Problem 1: Lack of Transparency Why is there a lack of transparency? Lack of disclosure of information related to licenses, contracts, revenues, and environmental impacts. Why is there a lack of disclosure of information? Lack of legal requirements or mechanisms mandating the disclosure of such information. Why are there no legal requirements or mechanisms for disclosure? Insufficient legislation or regulations are in place to ensure transparency in the extractive sector. Why is there insufficient legislation or regulation? Potential reasons could include political factors, a lack of awareness, or inadequate prioritization of transparency in the past. Root Cause: Insufficient legislation and regulations to ensure transparency in the extractive sector.

Problem 2: Limited Stakeholder Participation Why is there limited stakeholder participation? Insufficient mechanisms for involving local communities and other stakeholders in decision-making processes. A few mining companies are also not able to participate in the initiative because of being non-operational, uncontactable, or failure to comply with their respective templates. Why are there insufficient mechanisms for involvement? Limited awareness and understanding of the importance of stakeholder participation, power imbalances, and exclusionary practices. Why is there limited awareness and understanding? Lack of capacity-building initiatives, inadequate communication channels, and limited opportunities for dialogue and consultation. Root Cause: Limited awareness, capacity, and opportunities for stakeholder participation, which may have been affected by the political culture in local governments.

Problem 3: Limited Access and Capability in Data Usage Why do communities have limited access and capability to use extractives data? Limited availability and accessibility of data at the local level, as well as limited capacity to understand and analyze the data. Why is there limited availability and accessibility of data? Inadequate data management systems and practices, a lack of data sharing mechanisms, and limited resources for data collection and dissemination. Why are there inadequate data management systems and practices? Insufficient investment in data infrastructure, lack of standardized reporting requirements, and challenges in data collection and verification. Root Cause: Inadequate data management systems, practices, and resources.

Problem 4: Limited reach of PH-EITI Implementation Why is there inadequate implementation of PH-EITI at the sub-national level? Lack of awareness and understanding of the benefits of PH-EITI sub-national implementation among sub-national governments and stakeholders. Why is there a lack of awareness and understanding? Limited dissemination of information and insufficient communication efforts to promote PH-EITI sub-national implementation. Why are there limited dissemination and communication efforts? Inadequate resources and prioritization of activities related to PH-EITI sub-national implementation. Root Cause: Potential factors include competing priorities, limited budget allocation, and the absence of clear guidelines or mandates for sub-national implementation. The identified root causes highlight the need for legislative reforms, capacity-building initiatives, institutional strengthening, and improved coordination among relevant government agencies to ensure transparency, accountability, and participatory governance in the extractive sector.

Commitment description

1. What has been done so far to solve the problem? Efforts have been implemented in previous years to expand the reach of PH-EITI implementation, including the following: ● Sub-national workshops, roadshows, and capacity building. Previous efforts have included organizing workshops and capacity-building programs specifically targeted at sub-national governments and stakeholders. These initiatives aimed to enhance their understanding of PH-EITI and promote its implementation at the local level. The effectiveness of these workshops varied, with some regions showing improved awareness and engagement, while others faced challenges in sustaining the momentum and translating knowledge into concrete actions. ● Multi-stakeholder engagement. Previous initiatives have focused on fostering multi-stakeholder engagement by bringing together government agencies, civil society organizations, local communities, and extractive industry representatives. These platforms facilitated dialogue, knowledge exchange, and joint decision-making, aiming to enhance the reach and effectiveness of PH-EITI implementation. ● Information dissemination and awareness campaigns Various campaigns and information dissemination activities have been conducted annually to raise awareness about PH-EITI and its benefits. These initiatives included workshops, public consultations, and media campaigns to reach a wide range of stakeholders. While they have helped generate awareness, the effectiveness in driving sub-national implementation has been mixed, as awareness alone may not always translate into sustained action or the allocation of necessary resources.

2. What solution are you proposing? In developing our decentralization framework, we borrowed ideas from the 2003 UN Human Development Report, which states that there are three key preconditions for successful decentralization: effective state capacity, competent local authorities, and empowered private and civil society actors. Ensuring effective state capacity means that PH-EITI must have the power to start with if it plans to empower local authorities. PH-EITI plans to strengthen its mandate to improve transparency, accountability, and public participation in the extractives, as well as its technical and operational capabilities, in order to more effectively support and monitor subnational bodies. Ensuring competent local authorities means that subnational bodies such as local mining boards, councils, and teams, as well as the local government units, have enough technical, financial, operational, and policy capacity to handle extractives-related issues. This also means that these authorities are able to provide responsive programs, projects, and activities addressing mining issues or using mining revenues. The third peg in this subnationalization triangle is empowered private and civil society actors - who will hold local authorities accountable, articulate the needs and views of the community, and report grievances to PH-EITI and other national actors in case of inaction from local authorities. Understanding that any subnationalization project is a continuous, sustained, and efficient effort, we at PH-EITI have identified a list of actions that aim to strengthen the structures discussed in the previous slide. National. PH-EITI plans to digitize government transactions relating to extractives by establishing a one-stop shop for reporting, validating, and publishing extractives data. This effort will solve the concerns of industry regarding ease of doing business as well as simplify the monitoring processes for government agencies. Subnational. PH-EITI plans to strengthen the capacity of local special bodies governing extractives. The Provincial/City Mining Regulatory Boards (P/CMRB), Mining Monitoring Teams (MMT), Mine Rehabilitation Fund Committee (MRFC), and Local Development Councils (LDC) will be the first sectors to undergo orientation on EITI processes, especially regarding local revenues from mining, the extent of mining operations in the localities, and other related reports concerning mining in their jurisdictions. To reinforce the value of EITI for local governance, local authorities will also undergo training on participatory budgeting and policymaking guided by EITI data. Through consultation, CSOs may help in identifying LGUs that may be evasive to EITI implementation. The surrounding communities of such LGUs may be prioritized in subnationalization. Industry and civil society actors at the local level will be empowered to participate in EITI processes through various means, including training them to navigate the one-stop-shop, establishing feedback and grievance mechanisms to address miningrelated concerns, assessing the effectiveness of civil society participation through the development of an evaluation instrument, and capacitating them to participate in local development planning and budgeting.

3. What results do we want to achieve by implementing this commitment? - Improved capacity for reporting extractives data. - Strengthened stakeholder support for EITI initiatives. - Reinforced impact of EITI on extractives governance. - Established mechanisms for reporting. - Established system for monitoring and reporting.

Commitment Analysis

1. How will the commitment promote transparency ? PH-EITI subnationalization aims to improve citizens' access to information and data in the extractives sector and make the government more transparent. Here's how it can achieve these goals:

● Data disclosure. PH-EITI subnationalization encourages the disclosure of information and data related to the extractives sector at the local level. This includes information on licenses, contracts, revenue flows, and environmental impacts. By making this data available to citizens, it enhances their access to critical information, enabling them to understand the operations and impacts of extractive activities in their communities.

● Enhanced data accessibility. PH-EITI subnationalization promotes mechanisms to ensure that citizens can easily access and retrieve information and data. This involves the development of user-friendly platforms, public portals, and other channels that provide transparent and timely access to relevant information. By improving data accessibility, PHEITI enables citizens to make informed decisions, hold the government accountable, and participate effectively in extractives-related discussions and decision-making processes. PH-EITI intends to devise a centralized platform that integrates government agencies' databases to simplify reporting, data collection, validation, and data disclosure in the extractive sector. This represents a significant step towards digital transformation, service delivery improvement, data mainstreaming, and simplifying processes to foster ease of doing business.The platform will provide a user-friendly dashboard that offers data analytics, providing valuable insights and analysis to extractive stakeholders. Subnationalization does not end with providing data but also aims to capacitate stakeholders by giving them toolkits such as participatory budgeting tools, transfer pricing tools, and other learning materials to use as a guide to make informed decisions.

● Citizen engagement and participation. PH-EITI subnationalization emphasizes citizen engagement and participation in the governance of the extractives sector. It encourages the involvement of local communities, civil society organizations, and other stakeholders in monitoring extractive activities and influencing decision-making processes. This creates opportunities for citizens to provide input, voice their concerns, and contribute to the formulation of policies and practices, thereby ensuring that the government is more responsive and accountable to their needs and aspirations.

● Concentrated industry compliance and ease of participation. PH-EITI subnationalization will enjoin the mining industry to cooperate due to the issuance of DENR AO No. 2017-07, which directs mining contractors to participate in the initiative. Meanwhile, subnationalization incentivizes the oil, gas, and coal industries to participate in PH-EITI, especially with efforts to streamline data collection/submission through digitalization.

● Feedback and grievance mechanisms. PH-EITI subnationalization encourages the establishment of a grievance mechanism that allows citizens to raise concerns, provide feedback, and seek redress related to extractive activities. These mechanisms provide channels for citizens to voice their grievances, ensuring that their concerns are heard and addressed by the government. Meanwhile, the feedback mechanism is open to all sectors, giving the industry a chance to give suggestions for the efficient flow of information. By creating effective feedback loops, PH-EITI enhances the government's transparency and responsiveness to citizens' needs and concerns.’

2. How will the commitment help foster accountability? PH-EITI subnationalization plays a crucial role in enhancing public agencies' accountability to the public, facilitating citizens' ability to learn about implementation progress, and supporting transparent monitoring and evaluation systems. Here's how it accomplishes these objectives:

● Transparency in financial flows. PH-EITI subnationalization promotes the disclosure of financial flows from the extractives sector, including revenues generated, payments made by extractive companies, and how these revenues are allocated and utilized with respect to the fiscal regime, as well as other expenses that are mandated by the government, such as the Social Development and Management Program (SDMP) which is used to improve the living standards of host communities for mining projects. Providing this information to the public holds public agencies accountable for the management of extractive sector resources and ensures transparency in financial processes. Citizens can scrutinize the allocation of resources and monitor whether public agencies are using the revenues for public welfare and development.

● Participatory governance mechanisms. PH-EITI subnationalization emphasizes the inclusion of citizens and civil society organizations in governance processes related to the extractives sector. It establishes platforms for public consultations, stakeholder engagements, and participatory decision-making. Through these mechanisms, public agencies become more accountable as they are required to consider citizens' input, address concerns, and incorporate public feedback into policies and practices.

● Access to information and reporting. PH-EITI subnationalization promotes the availability of information and data related to extractive activities. This includes disclosure of contracts, licenses, environmental impact assessments, and other relevant documents. By ensuring public access to this information, citizens can learn how the implementation is progressing, evaluate whether public agencies are adhering to transparency and accountability standards, and hold them accountable for their actions or decisions.

● Grievance mechanisms. PH-EITI subnationalization promotes the establishment of grievance and redress mechanisms, enabling citizens to raise concerns and seek remedies regarding extractive sector activities. These mechanisms provide channels for citizens to voice grievances and hold public agencies accountable for any negative impacts or violations. By ensuring that citizens have avenues for seeking redress, PH-EITI strengthens accountability and reinforces the responsibility of public agencies to address citizens' concerns. Overall, PH-EITI subnationalization fosters a culture of accountability, facilitates public scrutiny, and supports transparent monitoring and evaluation systems. It empowers citizens to actively engage, learn about implementation progress, and contribute to the ongoing improvement of transparency and accountability practices in the extractives sector.

3. How will the commitment improve citizen participation in defining, implementing , and monitoring solutions? PH-EITI subnationalization aims to proactively engage citizens and citizen groups by creating opportunities for their active participation and involvement in the governance of the extractives sector. Here are some ways in which it facilitates proactive citizen engagement: 1) public consultations; 2) participatory decision-making; 3) capacity building; 4) information dissemination; 5) civil society engagement; and 6) grievance mechanisms.

See action plan for commitment milestones and expected outputs.