Electronic system for transparency in extractive industries (UA0094)

Stakeholders’ free access to information on payments and incomes in extractive industries is provided in pursuance of the Law of Ukraine “On Ensuring Transparency in Extractive Industries” and in accordance with the international standards of the Extractive Industries Transparency Initiative. The Cabinet of Ministers of Ukraine joined the Extractive Industries Transparency Initiative in 2009.In 2013, Ukraine was granted the status of a country implementing the aforementioned Initiative. In accordance with the requirements of the Extractive Industries Transparency Initiative, extractive industries prepared national reports under the Extractive Industries Transparency Initiative for the period from 2013 to 2017, which are published on the official website of the Extractive Industries Transparency Initiative in Ukraine (http://eiti.org.ua/). In June 2019, at the Global Conference of the Extractive Industries Transparency Initiative, a new Extractive Industries Transparency Initiative standard was adopted; the latter specifies the procedure for disclosure of information, and its extent, for the purpose of enhancing transparency and accountability in extractive industries. Starting from 2018, reports under the Extractive Industries Transparency Initiative must conform with the Law of Ukraine “On Ensuring Transparency in Extractive Industries”. The Cabinet of Ministers of Ukraine Resolution No. 858 of 23 September 2020 approved the form of reports on payments to be used by extractive enterprises and recipients of payments, and determined the extent of information to be provided by the information disclosure subjects. Currently, national reports for 2018 and 2019 under the Extractive Industries Transparency Initiative are being prepared. In December 2020, the Ministry of Energy renewed the composition of the Multi-Stakeholder Group for Implementing the Extractive Industries Transparency Initiative. In accordance with the Memorandum of Cooperation with the German Agency for International Cooperation (GIZ), an electronic system for submitting and operating the publicly-accessible part of the Extractive Industries Transparency Initiative’s national portal (online platform) was created. Implementing the electronic system requires a decision to be made to that effect by the Multi-Stakeholder Group for Implementing the Extractive Industries Transparency Initiative. The regulatory and legal framework must also be developed, and the staff of the central executive authorities and extractive enterprises must be trained. Implementing the electronic system for reporting and report analysis under the Extractive Industries Transparency Initiative will facilitate: growing public awareness of the activities of extractive sector companies and the payments the Cabinet of Ministers of Ukraine has received from such companies; 24 building a constructive dialogue between company representatives, the Cabinet of Ministers of Ukraine, and civil society institutions concerning the management of natural resources and the efficient use of mineral resources; the simplification of work involving data collection and analysis, and preparing national reports under the Extractive Industries Transparency Initiative.

Steps Responsible persons Time-frame Partners Performance indicator 1. Adopting the electronic reporting system (online platform) developed in accordance with the Memorandum of Cooperation with the German Agency for International Cooperation (GIZ). Ministry of Energy January–February 2021 German Agency for International Cooperation (GIZ) (by agreement), International Renaissance Foundation (by agreement) NGO Dixi Group (by agreement) Energy Transparency Association (by agreement) MultiStakeholder Group for Implementing the Extractive Industries Transparency Initiative (by agreement) other civil society institutions and international organizations (by agreement) order of the Ministry of Energy on the Ministry of Energy’s adoption of the electronic system has been issued 25 Steps Responsible persons Time-frame Partners Performance indicator 2. Testing and adjusting the operation of the online platform Ministry of Energy January–April 2021 German Agency for International Cooperation (GIZ) (by agreement), International Renaissance Foundation (by agreement) NGO Dixi Group (by agreement) Energy Transparency Association (by agreement) MultiStakeholder Group for Implementing the Extractive Industries Transparency Initiative (by agreement) other civil society institutions and international organizations (by agreement) The Multi-Stakeholder Group for Implementing the Extractive Industries Transparency Initiative has taken a decision on reporting via the online platform. 3. Training the staff of central executive authorities and enterprises on the operation of the online platform Ministry of Energy Ministry of Ecology and Natural Resources STSU State Service of Geology and Mineral Resources January–March 2021 German Agency for International Cooperation (GIZ) (by agreement), International Renaissance training workshops have been held 26 Steps Responsible persons Time-frame Partners Performance indicator Foundation (by agreement) NGO Dixi Group (by agreement) Energy Transparency Association (by agreement) MultiStakeholder Group for Implementing the Extractive Industries Transparency Initiative (by agreement) other civil society institutions and international organizations (by agreement) 4. Drafting legal and normative acts aimed at ensuring the reliable functioning of the online platform. Ministry of Energy Ministry of Ecology and Natural Resources STSU State Service of Geology and Mineral Resources April–September 2021 International Renaissance Foundation (by agreement) NGO Dixi Group (by agreement) German Agency for International Cooperation (GIZ) (by agreement) relevant legal and normative acts have been adopted 27 Steps Responsible persons Time-frame Partners Performance indicator Energy Transparency Association (by agreement) MultiStakeholder Group for Implementing the Extractive Industries Transparency Initiative (by agreement) other civil society institutions and international organizations (by agreement) 5. Involving representatives of extractive companies conducting mining activities in the respective areas, and civil society institutions, in implementing the Extractive Industries Transparency Initiative in the oblasts where mining of mineral resources subject to reporting under the Extractive Industries Ivano-Frankivsk, Lviv, Poltava, Sumy, Kharkiv, and Chernihiv oblast state administrations Ministry of Energy January–October 2021 International Renaissance Foundation (by agreement) NGO Dixi Group (by agreement) German Agency for International Cooperation (GIZ) (by agreement) Energy Transparency Association (by agreement) MultiStakeholder Group for involvement of the representatives of extractive companies carrying out mining activities in the respective areas, and civil society institutions, in implementing the Extractive Industries Transparency Initiative has been ensured in the mining regions of Ukraine. 28 Steps Responsible persons Time-frame Partners Performance indicator Transparency Initiative takes place. Implementing the Extractive Industries Transparency Initiative (by agreement) other civil society institutions and international organizations (by agreement)

Action Plan Review

Commitment 8: Introducing the electronic system for extractive industry reporting

(Ministry of Energy, Ministry of Ecology and Natural Resources, International Renaissance Foundation, German Agency for International Cooperation, Energy Transparency Association, Stakeholder Group for Implementing the Extractive Industries Transparency Initiative, and DiXi Group)

For a complete description, see Commitment 8 in Ukraine’s 2021–2022 action plan: https://www.opengovpartnership.org/documents/ukraine-action-plan-2021-2022/

Context and objectives:

Aiming to strengthen governance and reduce corruption in its extractive sector, Ukraine joined the Extractives Industry Transparency Initiative (EITI) in 2013. The country has produced four EITI reports analyzing the extractive sector, covering 2013–2017. The extractive sector makes up about 5.9% of GDP in Ukraine and contributes a large percentage of income for the state budget. The largest extractive companies are in gas, oil, and coal but there are companies that also extract numerous minerals and metals. [17]

Ukraine has included EITI commitments in its open government action plans. This commitment continues a previous commitment to develop an online portal for submitting primary information from companies for the drafting of national EITI reports. [18] Unlike previous EITI commitments that had outstanding impacts on opening government, this 2018–2020 commitment saw only limited implementation, with the online portal ready and tested but not fully published as promised. [19] This new commitment would finally launch the portal online, train staff, enable companies to make submissions, publish the submitted data, and ensure compliance with updated EITI standards by adopting legal acts to ensure the functioning of the online platform. It also includes a milestone to bring together extractive companies and local civil society organizations, in a similar fashion to the EITI multistakeholder forum format.

The commitment was developed from collaboration between the government and civil society groups like the International Renaissance Foundation. [20] This builds on partnerships that have continued since 2013 when the first EITI commitment was included in Ukraine’s open government action plan. It is also noted that in December 2020, the Ministry of Energy renewed the composition of the Multi-Stakeholder Group for Implementing the Extractive Industries Transparency Initiative, [21] an issue which had previously been deadlocked. [22]

Potential for results: Substantial

As explained in the design report for the 2018–2020 action plan, [23] this commitment anticipates multiple transparency-related results, including collecting data in real time, reducing the time for submitting and processing data within the EITI framework, disclosing relevant data in open data format, timely publication of EITI reports, and reducing the cost of report production.

The milestone adopting amendments to legal acts (such as the law ensuring extractive industry transparency) [24] would generate binding, institutionalized changes requiring the collection and publication of new information from extractive industries, including environment, gender, commodity sale, and contract data as required by the new EITI standards updated in 2019. [25] This would then require technical changes to the platform for submitting and publicly disclosing this data. Legislative amendments have been delayed multiple times since 2014, although civil society continues to advocate for them, supported by international donor organizations. [26]

A main result of the commitment would be the publication of new information in real time such as company audits or budgets disaggregated at the community level. Civil society representatives say this would give local communities access to financial information that is essential for budget planning, as a September 2018 law requires 5% of rent payments from extraction profits to go toward local self-government budgets. [27] The State Service of Geology and Mineral Resources has also emphasized the importance of tax earnings for local communities’ strategic development planning. [28] Finally, the 2019 changes to the EITI standard increases the scope of published information to include environmental, gender, commodity sales, and contract data. [29]

The platform did not launch by the end of the 2018–2020 action plan cycle, but it should go online early in the 2021–2022 implementation period. [30] This should allow demonstration of substantial results in disclosing extractive-sector data in Ukraine. Further results of this disclosure may include local citizens or journalists using the data to hold local or national governments accountable for money collected from the extractive industry. This is facilitated by the milestone that joins extractive industries with local communities to inform them about the impacts and financial benefits of extractive companies’ activities in their local area.

Opportunities, challenges, and recommendations during implementation

The data publication from this commitment would deliver new information into the public domain. This can facilitate holding local institutions accountable for how they spend money received from extractive industries. This may be achieved through activities that join extractive industries and local communities in a multistakeholder forum. Regardless, it is important to raise awareness about the publicly available information and how to access it.

While public participation may be strengthened, the local multistakeholder groups are supported and funded by donor and civil society organizations. The absence of government-secured funding limits the sustainability of these initiatives. [31] The government needs to explore how to ensure public oversight at the local and national level. Furthermore, the government should think about how to use sanctions for failed, inaccurate, or incomplete reporting by extractive companies. This may include amending existing legislation on extractive industry transparency.

Finally, it’s worth noting that any delay in parliament adopting necessary legal amendments could scupper implementation of this commitment. [32] The main change between previous attempts at amending the law and now is that there is a public commitment to introducing the necessary amendments. Legislative amendments need to be adopted in good time to ensure binding changes to the wider scope and accuracy of extractive industry reporting.

Given these challenges, the IRM recommends:

Thegovernment raises awareness and ensures the sustained engagement of local communities in the multistakeholder forums. These should enable civil society to hold local governments to account for funding received, as well as enable them to scrutinize the work of extractives and government in this policy area.

Results Report

Commitment 8. Introducing the electronic system for extractive industry reporting

Implementing agency: Ministry of Energy

Context and objectives

This commitment aimed to introduce an electronic system for financial reporting by extractive companies. The system would provide a single point of access for companies to submit primary information for drafting Ukraine’s national Extractive Industries Transparency Initiative (EITI) reports. It involved launching the portal (created during the 2018–2020 action plan), training government staff on using it, and adopting legal acts to ensure its utilization. The commitment also aimed to form regional EITI multistakeholder groups (MSGs).

Did it open government? Marginal

In February 2021, the Ministry of Energy adopted the EITI Electronic Reporting and Analysis System eiti.gov.ua (EITI portal), transferred from GIZ. New Energy, a civil society organization, drafted a terms of reference for improving the platform. The Ministry of Energy, with GIZ, developers, and partner NGOs prepared guidelines for companies on submitting their reports through the platform. The EITI MSG approved an action plan for the utilization of the portal for 2023–2025 at a meeting in December 2021. [61]

On 16 December 2021, the parliament adopted legal amendments to meet the requirements of the 2019 EITI Standard. [62] These amendments required extractive companies to fully disclose all their contracts with the government (along with annexes) and enforce transition to the EITI portal. With support from GIZ and the Ministry of Energy, New Energy organized five online trainings in 2021 and two in 2022 for employees of the Ministry of Energy and extractive companies on the system and the specifics of the reporting forms. [63] Instructions on reporting were posted on the portal [64] and online seminars were held on the portal’s new features. [65] Instructions on using the analytics dashboard were published on Ukraine’s EITI website. [66]

Following the introduction of martial law in February 2022, the government restricted access to the EITI portal after consulting the EITI MSG. The deadline for submitting 2021 reports was extended to 21 February 2023, and later to three months after the end of martial law. [67] In 2022, during martial law, 124 companies submitted reports for 2021 through the EITI portal. [68] Reporting has been especially challenging for companies operating in territories affected by the war. In June–September 2022, a team of researchers conducted a study on adapting EITI to the conditions of war. The study identified the state and problems facing mining enterprises during martial law in Ukraine and included recommendations on additional security measures and technical support to extractive companies on the information they publish. [69]

Ukraine’s EITI website has a draft regulation and materials on establishing regional MSGs. [70] However, during the war, EITI activities in regions have been minimized. There were plans for MSGs in the Lviv, Kharkiv, and Poltava regions, but it only materialized in Lviv during the implementation period. A civil society representative mentioned there are varying levels of interest among regional stakeholders in creating regional MSGs. [71]

This commitment has seen marginal results by the end of the implementation period, with the potential to bring greater results once the EITI portal is fully functional. The Ministry of Energy noted that the data received from companies were not analyzed by the Independent Administrator for preparation of the 2021 EITI report but will be available on the EITI portal for analysis by the public, journalists, and competent authorities. [72] The 2022 report will be prepared in full by reconciliation and analysis of payments. Once the EITI portal is fully operational (approximately in three to five years), all data will be analyzed using the analytical modules of the portal. [73] The possibility for easier collection and analysis of data will significantly reduce the time and effort required to produce Ukraine’s EITI reports. Previously, this information was collected via individual requests for information from different extractive companies. Despite the challenges of the war, Ukraine was recognized as a leader in transparency of extractive industries at the 2023 EITI Global Conference. [74]

Looking ahead

The EITI portal is currently being developed in accordance with the portal development action plan for 2023–2025. Ukraine’s draft sixth action plan also includes a commitment to continue developing the portal. This commitment will involve expanding the portal’s functions to monitor recovery and the progress of the energy transition, enlarging the business analytics tool to allow more comprehensive and flexible data analysis, and conducting trainings for representatives of central executive authorities, local self-government bodies, enterprises, and the public on working with the portal.

The IRM recommends amending the legislation on extractive industry transparency to ensure compliance of data disclosure requirements with the updated 2023 EITI Data Standards and adopting bylaw regulations to implement the amended legislation. [75] The new commitment will also entail amending the legal regulation around the function and composition of Ukraine’s national MSG and reconstituting Ukraine’s EITI National Secretariat—which paused its activities during the war due to limited human and financial resources. Upon the end of martial law and the start of recovery period, the IRM recommends continuing the creation of regional MSGs, with capacity building and awareness raising for effective operations of these groups.