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The Board agreed that Solomon Islands have made inadequate progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of the Solomon Islands.

Decision reference
2017-12 / BM-36
Decision basis
2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

Board decision

The Board came to the following decision regarding the Solomon Island's status:

The Board agrees that Solomon Islands has made inadequate progress overall in implementing the 2016 EITI Standard. The Board’s determination of Solomon Islands’ progress with the EITI’s requirements is outlined in the assessment card, below.

The EITI Board agreed that Solomon Islands had not made satisfactory progress on requirements 1.1, 1.2, 1.3, 1.4, 1.5, 2.1, 2.2, 2.3, 2.4, 3.2, 3.3, 4.1, 4.6, 4.7, 4.9, 5.1, 5.2, 6.1, 6.3, 7.3 and 7.4. The major areas of concern relate to government engagement (#1.1), industry engagement (#1.2), civil society engagement (#1.3), MSG governance (#1.4), work plan (#1.5), legal framework (#2.1), license allocation (#2.2), license register (#2.3), contract disclosure (#2.4), production data (#3.2), export data (#3.3), comprehensiveness (#4.1), direct subnational payments (#4.6), disaggregation (#4.7), data quality (#4.9), revenue management and expenditures (#5.1), subnational transfers (#5.2), mandatory social expenditures (#6.1.a), economic contribution (#6.3), follow-up on recommendations (#7.3), outcomes and impact (#7.4).

In accordance with requirement 8.3.c.iii, the EITI Board agreed that Solomon Islands will be suspended and will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in the next Validation commencing on 8 January 2018. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in delisting in accordance with the EITI Standard. In accordance with the EITI Standard, The Solomon Islands’ multi-stakeholder group (SIENSG) may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 July 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed an Independent Validator, who submitted a Validation Report to the EITI Board. The SIENSG was invited to comment on the findings throughout the process. The national secretariat’s comments on the report were taken into consideration. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Solomon Islands. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 8 January 2018:

  1. In accordance with Requirement 1.1, the government must be fully, actively and effectively engaged in the EITI process (Requirement 1.1.c). The government should must also ensure that senior government officials are represented on the SIENSG (Requirement 1.1.d). In accordance with Requirement 8.3.c, the government constituency is required to disclose a time-bound action plan for addressing the deficiencies in government engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.

  2. In accordance with Requirement 1.2, companies should demonstrate that they are fully, actively and effectively engaged in the EITI process (Requirement 1.2.a). The government must ensure that there is an enabling environment for company participation with regard to relevant laws, regulations, and administrative rules as well as actual practice in implementation of the EITI. The government must ensure that there are no obstacles to company participation in the EITI process (Requirement 1.2.c). In accordance with Requirement 8.3.c, the company constituency s required to disclose a time-bound action plan for addressing the deficiencies in company engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.

  3. In accordance with Requirement 1.3, the civil society must be fully, actively and effectively engaged in the EITI process. Requirement 1.3 e.ii further requires that stakeholders, including but not limited to members of the SIENSG must be substantially engaged in the design, implementation monitoring and evaluation of the EITI process, and ensure that it contributes to public debate.  In accordance with Requirement 8.3.c, civil society constituency is required to disclose a time-bound action plan for addressing the deficiencies in civil society engagement documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.

  4. In accordance with Requirement 1.4.a, the government should ensure that all constituencies are adequately represented by including in the SIENSG all key government agencies and companies. Requirement 1.4.b.i, further requires that members of SIENSG should ensure that they have the capacity to carry out their duties. SIENSG members should ensure that they are able to perform their duties in accordance with their own Terms of Reference. In accordance with Requirement 1.4.vi, the SIENSG should agree and publish its procedures for nominating and changing representatives. This should include ensuring that there is a process for changing group members that respects the principles set out in Requirement 1.4.a.

  5. In accordance with Requirement 1.5, the SIENSG is required to maintain a current work plan, fully costed and aligned with the reporting and Validation deadlines established by the EITI Board. The work plan must set implementation objectives that are linked to the EITI principles and reflect national priorities for the extractive industries (Requirement 1.5a) and assess and outline plans to address any potential capacity constraints in government agencies, companies and civil society that may be an obstacle to effective EITI implementation (Requirement 1.5.c.i). It should also address the scope of EITI Reporting, including plans for addressing technical aspects of reporting such as comprehensiveness and data reliability (1.5.c.ii). It is also required that the work plan identify and outline plans to address any potential legal or regulatory obstacles to EITI implementation, including any plans to incorporate the EITI Requirements within national legislation or regulation. (Requirement 1.5.c.iii). Lastly, it should outline the SIESNG’s plans for implementing the recommendations from Validation and EITI Reporting (Requirement 1.5.c.iv).

  6. In accordance with Requirement 2.1.a, Solomon Islands must disclose a description of the legal framework and fiscal regime governing the extractive industries. This information must include a summary description of the fiscal devolution, an overview of the relevant laws and regulations, and information on the roles and responsibilities of the relevant government agencies.

  7. In accordance with Requirement 2.2, Solomon Islands is required to disclose the (i) the technical and financial criteria used  in awarding licenses, (ii) information about the recipient(s) of the license that has been transferred or awarded, including consortium members where applicable, and (iii) any non-trivial deviations from the applicable legal and regulatory framework governing license transfers and awards related to the award or transfer of licenses pertaining to the companies covered in the EITI Report during the accounting period covered by the EITI Report.

  8. In accordance with Requirement 2.3.b, Solomon Islands is required to maintain a publically available register or cadastre system(s) with the following timely and comprehensive information regarding each of the licenses pertaining to companies covered in the EITI Report: (i) license holder(s), (ii) where collated, coordinates of the license area, (ii) date of application, date of award and duration of the license, (iv) in the case of production licenses, the commodity being produced. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them.

  9. In accordance with Requirement 2.4.b, EITI Report must document the government’s policy on disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals. This should include relevant legal provisions, actual disclosure practices and any reforms that are planned or underway. The EITI Report should provide an overview of the contracts and licenses that are publically available, and include a reference or link to the location where these are published.

  10. In accordance with Requirement 3.2, Solomon Islands must disclose production data for the fiscal year covered by the EITI Report, including total production volumes and the value of production by commodity, and, when relevant, by state/region. SIESNG should confirm all existing production for all commodities for the year covered by the report.

  11. In accordance with Requirement 3.3, Solomon Islands must disclose export data for the fiscal year covered by the EITI Report, including total export volumes and the value of exports by commodity, and, when relevant, by state/region of origin. SIESNG should confirm all existing exports for all commodities for the year covered by the report.

  12. In accordance with Requirement 4.1.c, Solomon Islands must provide a comprehensive reconciliation of government revenues and company payments, in accordance with the agreed scope. All companies making material payments to the government are required to comprehensively disclose these payments in accordance with the agreed scope. All government entities including provincial governments receiving material revenues are required to comprehensively disclose these revenues in accordance with the agreed scope. In accordance with Requirement 8.3.c, SIENSG is required to disclose a time-bound action plan for addressing the deficiencies in data comprehensiveness documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.

  13. In accordance with Requirement 4.6, it is required that SIENSG establish whether direct payments, within the scope of the agreed benefit streams, from companies to subnational government entities are material. Where material, SIENSG is required to ensure that company payments to subnational government entities and the receipt of these payments are disclosed and reconciled in the EITI Report.

  14. In accordance with Requirement 4.7, SIENSG is required to agree the level of disaggregation for the publication of data. It is required that EITI data is presented by individual company, government entity and revenue stream.

  15. In accordance with Requirement 4.9.a, the EITI requires an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. SIESNG should comply with the following:

    1. Payments and revenues should be reconciled by a credible, independent administrator, applying international auditing standards, and with publication of the administrator’s opinion regarding the reconciliation including discrepancies, should any be identified (#4.9b)

    2. The reconciliation of company payments and government revenues must be undertaken by an Independent Administrator applying international professional standards (#4.9.b.1)

In accordance with Requirement 8.3.c, SIENSG is required to disclose a time-bound action plan for addressing the deficiencies in data quality documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 8 June 2017.

  1. In accordance with Requirement 5.1.a, Solomon Islands should indicate which extractive industry revenues, whether cash or in kind, are recorded in the national budget. Where revenues are not recorded in the national budget, the allocation of these revenues must be explained, with links provided to relevant financial reports as applicable, e.g., sovereign wealth and development funds, subnational governments, state-owned enterprises, and other extra-budgetary entities.

  2. In accordance with Requirement 5.2.a, Solomon Islands should disclose material transfers between national and subnational government entities, as well as any discrepancies between the transfer amount calculated in accordance with the relevant sharing formula and the actual amount transferred.  between the central government and each relevant subnational entity. Furthermore, SIESNG should disaggregate between payments made to landowners and provincial governments. 

  3. In accordance with Requirement 6.1.a, Solomon Islands must disclose and, where possible, reconcile social expenditures. Where such benefits are provided in-kind, it is required that Solomon Islands disclose the nature and the deemed value of the in kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary be disclosed. Where reconciliation is not feasible, SIESNG should provide unilateral company and/or government disclosures of these transactions.

  4. In accordance with Requirement 6.3, Solomon Islands must disclose information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI Report, particularly an estimate of informal sector activity (Requirement 6.3.a) and key regions/areas where production is concentrated (Requirement 6.3.e).

  5. In accordance with Requirement 7.3, the multi-stakeholder group is required to take steps to act upon lessons learnt; to identify, investigate and address the causes of any discrepancies; and to consider the recommendations resulting from EITI reporting.

  6. In accordance with Requirement 7.4.a.iii, SIENSG’s annual activity reports (APR) should include an overview of their responses to and progress made in addressing the recommendations from reconciliation and Validation in accordance with Requirement 7.3. SIENSG is required to list each recommendation and the corresponding activities that have been undertaken to address the recommendations and the level of progress in implementing each recommendation. Where the government or SIENSG has decided not to implement a recommendation, it is required that the SIENSG documents the rationale in the annual progress report.  The APR should also include an assessment of progress with achieving the objectives set out in its work plan, including the impact and outcomes of the stated objectives (Requirement 7.4.a.iv).

The SIENSG is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

The Solomon Islands Government announced its commitment to implement the EITI in July 2011.

A multi-stakeholder group, the Solomon Islands Extractive Industries National Stakeholder Group (SIEINSG) was formed in January 2012 and the country was accepted as an EITI Candidate in July 2012. The Solomon Islands has subsequently produced three EITI Reports (2012 – 2014).

The Validation process commenced on 1 July 2016. In accordance with the Validation procedures, an initial assessment was prepared by the International Secretariat. The MSG were invited to comment. Comments were received from the national secretariat. The assessment was then reviewed by the Independent Validator, who prepared the Validation Report. The MSG were invited to comment on the Report. Again, comments were received from the national secretariat.The Validation Committee reviewed the case on 24 January 2017. Based on the findings above, the Validation Committee agreed to recommend the assessment card and corrective actions outlined below. As per Requirement 8.3.c. this includes a requirement that the MSG agrees and discloses a time-bound action plans for addressing weaknesses in data reliability and comprehensiveness within 3 months.

The Committee also agreed to recommend an overall assessment of “inadequate progress” in implementing the 2016 EITI Standard. Requirement 8.3.c. of the EITI Standard states that:

ii.    Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard.

iii (c) Inadequate progress. The country will be suspended and requested to undertake corrective actions until the second Validation. For the suspension to be lifted, the country must in its second Validation demonstrate at least meaningful progress.

The Validation Committee agreed to recommend a period of 10 months to undertake the corrective actions. This recommendation takes into account that the mining sector is small, and seeks to align the Validation deadline with the deadline for the next (2015) EITI Report.

Scorecard for Solomon Islands: 2017

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

In the initial stages of the EITI, there were several statements of support from the government. This support seems to have faded since the new government was appointed in late 2014. Several stakeholders expressed concern about the government’s commitment to implementation.

1.2Company engagement

Although company stakeholders are somewhat involved in implementation, mainly through attendance of multi-stakeholder group meetings, no company has yet submitted data for the EITI reports. Engagement is too limited to conclude that stakeholders are fully and actively engaged in the design, implementation, monitoring, and evaluation of the EITI. It also appears that barriers to company participation still need to be addressed.

1.3Civil society engagement

There is an enabling environment for civil society participation. However, although stakeholders are somewhat involved in implementation, mainly through attendance of multi-stakeholder meetings, engagement is too limited to conclude that stakeholders are fully and actively engaged in the design, implementation, monitoring, and evaluation of the EITI. There are significant capacity and funding constraints.

1.4MSG governance

The multi-stakeholder group includes relevant actors but membership has been unstable and there is a lack of clarity on stakeholder representation. There are also some discrepancies between the Memorandum of Understanding and actual practice including concerns about the ability of stakeholders to carry out their EITI duties and the lack of delivery against responsibilities of multi-stakeholder group members as outlined in the Memorandum of Understanding.

1.5Work plan

The 2016 work plan lacks details required by the EITI Standard such as timetable for implementation of activities, costing, funding, sources of funds and technical assistance, and activities related to the scope of EITI reporting. There is also no evidence that the work plan has been widely circulated. There is no evidence that the work plan objectives are linked to national priorities.

Licenses and contracts

2.2License allocations

Several licenses were allocated in 2013 and one license was granted in 2014. The latest EITI Report does not disclose the details of each license award as required by the EITI Standard, but highlights significant gaps in the licensing procedures.

2.3License register

There is no license holder information in the 2014 EITI Report and no information on coordinates, area and dates of application. A license register has been disclosed in the 2013 Report, but information about coordinates of the license area and date of application for the license is missing for all licenses.

2.4Policy on contract disclosure

There is no information about the government’s policy and actual practice related to contract disclosure in the 2014 EITI Report, nor any comments on reforms underway.

2.1Legal framework

The latest 2014 EITI Report lacks detail pertaining to fiscal devolution and regulatory framework. It does, however, contain a very brief discussion of relevant laws without further elaborating on how the sector is regulated. The roles of government agencies are also omitted.

2.5Beneficial ownership

Not assessed

There is no evidence that the multi-stakeholder group has discussed beneficial ownership disclosures yet.

2.6State participation

Not applicable

Both the 2014 and 2013 EITI Reports confirm that this requirement is not applicable in the Solomon Islands.

Monitoring production

3.1Exploration data

The 2014 EITI Report contains a comprehensive overview of extractive sector activities and exploration potential.

3.2Production data

The 2014 EITI Report has information on production volume for gold and silver but no production values. Bauxite production volumes and values are also missing.

3.3Export data

Export values are disclosed by commodity, but export volumes are not included. No data is provided on bauxite exports.

Revenue collection

4.3Barter agreements

Not applicable

The 2014 and 2013 EITI reports confirm that barter and infrastructure arrangements are not applicable in the Solomon Islands.

4.6Direct subnational payments

It has been confirmed that extractive companies do make direct payments to provinces in the Solomon Islands. The materiality of these payments has not been established although an aggregate figure for the four provinces is provided in the 2014 EITI Report. Given that multi-stakeholder group has started outreach and work to improve these disclosures in future reports including by visiting and collecting information from provincial government offices, the requirement is considered unmet with meaningful progress.

4.7Disaggregation

The 2014 EITI Report contains disclosures from each government agency disaggregated by company but it does not show how much each company paid for each revenue stream. It has government disclosures for each revenue stream. Company figures are not provided in the 2014 EITI Report.

4.9Data quality

The standard Terms of Reference for Independent Administrators has largely been followed, and the multi-stakeholder group has agreed reporting templates for the 2014 Report. However, the agreed procedures for data assurance were not followed and the Independent Administrator expressed concern about the quality of the data.

4.1Comprehensiveness

Although all material revenue streams appear to have been included in the scope of the 2014 EITI Report, two material companies and one government agency failed to report. In addition, the Independent Administrator expressed concern about the comprehensiveness of the report.

4.2In-kind revenues

Not applicable

The 2014 and 2013 EITI reports confirm that in-kind revenues are not applicable in the Solomon Islands.

4.4Transportation revenues

Not applicable

The 2014 and 2013 EITI reports include a reference to a “road access fee” but it appears that this not a material source of revenue.

4.5SOE transactions

Not applicable

The 2014 and 2013 EITI Reports confirm that transactions between SOEs and government are not applicable in the Solomon Islands.

4.8Data timeliness

Both the 2014 and 2013 Reports contain up to date data covering not more than two years prior to the publication of the report.

Revenue allocation

5.1Distribution of revenues

The 2014 EITI Report clarifies that revenues mandated by law become part of the budget, including the extractive industry revenues.

5.2Subnational transfers

In accordance with requirement 5.2, the EITI Report discloses the revenue sharing formula and the actual transfers for the 2014 and 2013 EITI Report. The 2013 Report explains, the discrepancies between the transfer amount calculated in accordance with the relevant revenue sharing formula and the actual amount that was transferred between CBSI, the Gold Ridge landowners and the provincial government, but the 2014 EITI Report does not disclose the discrepancy.

5.3Revenue management and expenditures

Not assessed

There is no evidence that the multi-stakeholder group has discussed opportunities for transparency in revenue management and expenditures. The royalty transfer to Gold Ridge landowners can be considered extractive revenues earmarked for specific programmes or geographic regions, and this has been disclosed.

Socio-economic contribution

6.1Mandatory social expenditures

None of the EITI Reports clarify whether mandatory social expenditures exist in the Solomon Islands. Even though stakeholder consultations confirm that these exist, there is no indication that the SIEINSG has agreed an approach to mandatory versus discretionary social expenditures.

6.2Quasi-fiscal expenditures

Not applicable

State-participation in the extractive sector is not applicable in the Solomon Islands.

6.3Economic contribution

Most of the data on the contribution to the economy has been provided, however estimates of informal sector activity is missing.

Outcomes and impact

7.2Data accessibility

Not assessed

The multi-stakeholder group does not yet provide EITI data in open data formats.

7.4Outcomes and impact of implementation

The multi-stakeholder group has reviewed progress and outcomes of implementation on a regular basis, including by publishing annual progress reports over the past two years. These reports provide a useful snapshot of last year’s activities, but minimal information regarding MSG’s plans to act on recommendations made by the Independent Administrator. It does not contain an assessment in terms of impact of the implementation of activities under the work plan. Neither the 2013 nor the 2014 annual progress report are published.

7.1Public debate

The multi-stakeholder group has taken steps to ensure that the EITI Report is comprehensible, actively promoted and publicly accessible. Through the organisation of dissemination events in the regions, the multi-stakeholder group has ensured that the EITI has also contributed to public debate even if the discussion of the findings of the EITI reports remains limited.

7.3Follow up on recommendations

The multi-stakeholder group has taken steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and to consider the recommendations for improvements from the Independent Administrator for the 2013 Report. However, after the publication of the 2014 Report and the pilot Validation, very few actions have been undertaken to address the recommendations.

Países
Solomon Islands