The Board concluded that the Philippines has made satisfactory progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of the Philippines

Decision reference: 2017-40 / BC-239
Decision basis: 2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

5 October 2017

Board decision

The Board came to the following decision regarding the Philippines' status:

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

The EITI Board agrees that the Philippines has gone beyond the requirements in the EITI Standard on Requirements 1.4, 1.5, 2.1, 2.4, 5.1, 6.1, 7.1, 7.3 and 7.4. The Board agrees that the Philippines has made satisfactory progress in meeting all other requirements.

The EITI Board disagrees with the Validator on requirement 4.1 related to comprehensiveness, considering that the broader objective of comprehensive revenue transparency was achieved despite relatively small gaps in reconciliation. However, the EITI Board strongly encourages the MSG to ensure comprehensive reconciliation of all material revenues from companies in the scope of reporting in future EITI Reports.

Accordingly, the EITI Board agrees that the Philippines will be designated as EITI Compliant and be revalidated in three year, with Validation commencing on 5 October 2020. In accordance with the EITI Standard, the Philippines’ MSG may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision follows a Validation that commenced on 1 January 2017. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed by an Independent Validator, who submitted a draft Validation Report to the MSG, who was invited to comment on the findings. The MSG’s comments on the report were taken into consideration by the Independent Validator, who responded to the MSG and finalised a Validation report. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The MSG is encouraged to consider the recommendations in the Validation Report and the International Secretariat’s initial assessment that could help the Philippines make even greater use of the EITI as an instrument to support reforms, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

The Philippines has been an EITI implementing country since 2013. The Philippines’ decision to implement the EITI was primarily intended to address public mistrust over mining and strengthen the government’s oversight of the extractive sector. The Philippines EITI MSG was formally established by Executive Order 79.

The Validation process commenced on 1 January 2017. In accordance with the Validation procedures, an initial assessment was prepared by the International Secretariat. The Independent Validator reviewed the findings and wrote a draft Validation report. Comments were received from the MSG. The Independent Validator reviewed the comments and responded to the MSG, before finalising the Validation Report.

The Validation Committee reviewed the case on 28 August 2017. Based on the findings above, the Validation Committee agreed to recommend the assessment card below.

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

b) Consequences of compliance

Where Validation verifies that a country has made satisfactory progress on all of the requirements, the EITI Board will designate that country as EITI Compliant.

EITI Compliant countries must maintain adherence to the EITI Principles and Requirements in order to retain Compliant status. Where a country has become EITI Compliant, but concerns are raised about whether its implementation of the EITI has subsequently fallen below the required standard, the EITI Board reserves the right to require the country to undergo a new Validation. Stakeholders may petition the EITI Board if they consider that Compliant status should be reviewed. This request may be mediated through a stakeholder’s constituency representative(s) on the EITI Board. The EITI Board will review the situation and exercise its discretion as to whether to require an earlier Validation or Secretariat Review. Subject to the findings of that assessment, the EITI Board will determine the country’s status.

Where a Compliant country is being re-validated and validation concludes that the country has not met all EITI requirements, the consequences set out in (c) below apply.

In accordance with Requirement 8.3.d.i, Philippines will be revalidated in three years:

d) Timeframes for achieving compliance.

(i) EITI Candidate countries are required to commence the first Validation within two and a half years of becoming an EITI Candidate. EITI Compliant countries are required to be re-validated every three years. In accordance with provision 8.5, a country may request an extension of this timeframe. A country may also request to commence Validation earlier than scheduled by the EITI Board.

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
There are regular, public statements of support from the government, a senior individual has been appointed to lead on the implementation of the EITI, and senior government officials are represented on the MSG.
1.2Company engagement
Mining, oil and gas companies are actively and effectively engaged in the EITI process, both as providers of information and in the design, implementation, monitoring and evaluation of the EITI process.
1.3Civil society engagement
There are no suggestions of any legal, regulatory or practical barriers to civil society’s ability to engage in the EITI. Civil society is fully, actively and effectively engaged in the design, implementation, monitoring and evaluation of the EITI process.
1.4MSG governance
The MSG has been formed and includes representatives from each stakeholder group with no suggestion of interference or coercion in the appointment process. Information on nominations procedures is publicly available. The MSG has also made efforts to go beyond the minimum requirement in ensuring broad consultations on an ongoing basis. Stakeholders consider their representation on the MSG as adequate and MSG members appear to have sufficient capacity to carry out their duties. Decision-making is inclusive and treats all stakeholder groups as a partner. The ToR for the MSG addresses the requirements of the EITI Standard and there are no significant deviations in practice.
1.5Work plan
The 2016 EITI work plan is in line with provisions of Requirement 1.5. The Philippines has made efforts to go beyond the minimum requirements through extensive consultations and regular assessments of work plan implementation. Delays in implementation appear reasonable in line with the political transition and funding constraints.
Licenses and contracts
2.2License allocations
The 2014 EITI Report describes the procedures for awarding and transferring licenses, including technical and financial criteria, bidding processes and non-trivial deviations in practice.
2.3License register
The 2014 EITI Report has some minor deficiencies in that the date of application for oil, gas and coal contracts are not disclosed. Given the explanation of the constraints in disclosing this data, the efforts undertaken to compile the missing data, and the reforms underway, the wider objective of the requirement has been fulfilled. The 2014 EITI Report is also transparent about the gaps related to the dates of application, and provides recommendations and timeframes for how and when the gaps should be addressed.
2.4Policy on contract disclosure
The 2014 EITI Report clarifies the government’s policy on contract disclosure and actual practice. In addition, the Philippines has gone beyond the minimum requirements by making contracts public as encouraged by the EITI Standard.
2.1Legal framework
The 2014 EITI Report describes the legal environment and fiscal framework. The Philippines has also gone beyond the minimum requirements by providing a detailed account of reform efforts.
2.5Beneficial ownership	Not assessed
EITI has produced a beneficial ownership roadmap and provided contextual information about beneficial ownership reporting requirements in the Philippines.
2.6State participation
The 2014 EITI Report has some minor deficiencies in disclosures by SOEs related to ownership held in extractive assets. However, given that state-participation arguably does not give rise to material revenues in the Philippines, these deficiencies have not affected the overall objective of the requirement.
Monitoring production
3.1Exploration data
The 2014 EITI Report provides a comprehensive overview of the extractive sector, including significant exploration activities.
3.2Production data
The 2014 EITI Report discloses production volumes and values disaggregated by commodity and region. There is a minor deficiency in that the coal production values pertain to 2012.
3.3Export data
The 2013 and 2014 EITI Reports together provide the required information regarding export volumes and values for financial year 2014. The data is disaggregated by commodity and region.
Revenue collection
4.3Barter agreements	Not applicable
The EITI Report has confirmed that there are no barter and infrastructure transactions in the Philippines.
4.6Direct subnational payments
The 2014 EITI Report discloses payments by companies and receipts by LGUs. Where possible, these flows are also reconciled. In some cases, reconciliation has been hampered by lack of LGU records. The non-reporting by 10 LGUs is not considered material given that the revenues collected by the 63 participating LGUs represent only 0.6% of total government revenues.
4.7Disaggregation
Data in EITI Reports is reported by individual company, revenue stream and recipient government entity.
4.9Data quality
The reconciliation of payments and revenues has been undertaken by an IA, appointed by the MSG, and applying international professional standards. The IA and the MSG agreed TORs for the production of the EITI Report consistent with the standard TOR and agreed upon procedures issued by the EITI Board, and applied this TOR and procedures in practice.
4.1Comprehensiveness
Although several material companies failed to submit reporting templates for the 2014 EITI Report, affecting the coverage of the reconciliation, these omissions should be considered alongside the government’s full disclosure of all revenues received, including from non-participating companies. The report is also transparent about the gaps in company reporting and the remedies. The objective of comprehensive disclosure of taxes and revenues has been achieved.
4.2In-kind revenues	Not applicable
The EITI Report and stakeholder views have confirmed that no company make payments of royalty, the government’s share of production or other payments in-kind. The contractual framework only allows cash payments.
4.4Transportation revenues	Not applicable
The EITI Report and stakeholder views have confirmed that no government agency or SOE collect material revenues for the transportation of oil, gas and minerals.
4.5SOE transactions
Despite not giving rise to material revenues, the EITI Report has disclosed information about relevant mandatory transactions between the government, SOEs and private companies, notably dividends, and royalty fees and commitment fees.
4.8Data timeliness
Data covering financial year 2014 was published by the end of 2016, in accordance with the EITI’s timeliness requirements.
Revenue allocation
5.1Distribution of revenues
The 2014 EITI Report explains how revenues are recorded in the national budget, as well as allocation of revenues recorded elsewhere such as subnational budgets and IP accounts. The Philippines has also gone beyond the minimum requirements by classifying EITI disclosures according to national classification systems as encouraged by the EITI Standard and disclosing details related to royalty flows to IPs.
5.2Subnational transfers
The 2014 EITI Report explains and discloses the revenue sharing formula, and the actual amount that was transferred between the central government and each relevant subnational entity. However, the report does not disclose any discrepancies between the transfer amount calculated in accordance with the relevant revenue sharing formula and the actual amount that was transferred, despite such calculations being available with DBM and the IA. It does not appear that the MSG has discussed this issue.
5.3Revenue management and expenditures
EITI has gone beyond the minimum requirements by providing additional information on revenue management and expenditures as encouraged by the EITI Standard.
Socio-economic contribution
6.1Mandatory social expenditures
The 2014 EITI Report discloses the nature and value of mandatory social expenditures, including identifying the beneficiaries. The Philippines has gone beyond the minimum requirements by providing additional information on discretionary social expenditures as encouraged by the EITI Standard.
6.2Quasi-fiscal expenditures	Not applicable
The EITI Report and stakeholder consultations have confirmed that quasi-fiscal expenditures do not occur in the extractive sector in the Philippines.
6.3Economic contribution
The 2014 EITI Report discloses details about the contribution of the extractive sector to the economy in terms of GDP, total government revenue, employment, exports and producing regions. The Philippines has also gone beyond the minimum requirements by providing additional information on the extractive sector’s contribution to the economy through studies on the significance of the large scale non-metallic mining sector, small-scale mining sector, tax incentive management etc.
Outcomes and impact
7.2Data accessibility	Not assessed
EITI has published data in machine readable format and summaries of EITI Reports in accessible infographic format.
7.4Outcomes and impact of implementation
The MSG has reviewed progress and outcomes of implementation on a regular basis, including by publishing annual progress reports following broad consultations. The Philippines has gone beyond the requirement given the MSG’s proactive outreach to give all stakeholders the opportunity to provide feedback on EITI implementation and its impact.
7.1Public debate
The EITI Reports are comprehensible, actively promoted through varied channels, publicly accessible and have tangibly contributed to public debate on the extractive industries. The Philippines has gone beyond the requirement by developing online interactive access to EITI information, through active subnational outreach and through each stakeholder group’s dissemination of EITI information.
7.3Follow up on recommendations
The MSG and the government have taken steps to act upon lessons learnt, to identify, investigate and address the causes of any discrepancies and weaknesses of the EITI process and to consider the recommendations for improvements from the IA. The Philippines has gone beyond the requirement given the MSG’s formulation of its own recommendations and implementation of reforms starting with the first EITI Report.