THE FUTURE OF EITI IN THE ASIA PACIFIC REGION
World Bank Managing Director, Sri Mulyani Indrawati
Heads of state and government, Excellencies, Chair and members of the EITI Board, Ladies and gentlemen:
On behalf of the World Bank Group, I want to thank all of you for the opportunity to be here today.
I also want to thank the stakeholders from many EITI-implementing countries who have gathered here for this important event, especially the distinguished speakers on this panel. Your presence signals the value you attach to the EITI principles and the contribution these can make to the future of our region.
We are gathering here at a time when historic change is sweeping across the world, and fighting corruption and strengthening governance are central demands in this popular momentum for reform.
At this moment, then, let me stress that EITI and the principles of transparency and accountability play a central role in the World Bank’s governance and anti-corruption strategy.
The World Bank has supported EITI from day one and will continue to do so.
Similarly, helping partner countries’ efforts to better manage the wealth from their natural resources is at the core of the investment and advisory work of the World Bank Group.
It is this common priority that drives the sustained policy dialogue and technical assistance work by the WB, and the funding that WB channels towards more than 45 countries we work with—both currently EITI-implementing and those interested in adopting EITI.
This WB effort has only been possible through the tremendous partnership with the thirteen contributors to the Multi-Donor Trust Fund administered by the World Bank’s Oil, Gas and Mining unit.
In East Asia and the Pacific, two countries have been particularly active in supporting EITI: Australia and the United Kingdom. On behalf of all EITI stakeholders, I wanted to expressly thank these donors for their continuing support.
So now let me turn to the topic at hand: The Future of the EITI in the Asia-Pacific Region. And in order to answer this I want to begin by asking a critical question:
why does the EITI matter for people living in the countries of Asia and the Pacific?
For many resource-rich countries, oil, gas, and minerals are a lifeline for the future security and wellbeing of their people.
It is therefore critical that oil revenues get used properly and sustainably; that people can see where the money from precious oil revenues is spent, and how it is managed.
This is what we mean when we talk about transparency.
I know from my own experiences that accountability and transparency are essential for establishing secure, economically viable nation-states, because it means we can build and strengthen institutions: institutions that people can believe in.
It means civil-society organizations, local communities, representatives of the poor and vulnerable, people in rural areas, people in urban areas, women, children and politicians can ask questions of their government, and find answers. In so doing, they can play a part in the future of their country, they can believe in their country, and their leaders, and have hopes for their children.
In Indonesia since reformasi 98/99, we signed more than a hundred laws, covering anti-corruption, media freedom, electoral protocol, new public-finance legislation, the independence of the central bank and establishing a strong anti-corruption commission.
This was because we knew that there was a need for reform, that corruption could undermine our democracy, corruption could delegitimize the state and take away this fundamental hope in the future of the country.
Accountability and transparency are really the essential value of the EITI, and it goes beyond supporting an attractive climate for investment.
It is also a milestone in building strong, vibrant and economically resilient countries that can provide opportunities for their populations: that can educate their children, provide sustainable employment for their people and ensure they lead healthy, satisfied lives.
When we talk about the future of the EITI, then, I think the ultimate vision we really need to keep in mind is one of vibrant economies, resilient states, and inclusive growth: a vision that will truly support the countries and people of the Asia-Pacific region.
For me, there is no greater illustration of what the EITI means and can mean than in Timor-Leste, a country that, in only a decade since independence, has developed a world-class revenue management system, and achieved compliance to the EITI.
This is thanks to committed efforts from government, civil society and its development partners and for this, the government deserves heartfelt congratulations.
And we see that Timor-Leste – only the third country in the world to achieve compliance to EITI and the first in the Asia-Pacific – is now in a position to share its expertise with other countries.
It has developed a multi-pronged Transparency Model that is an inspiration for developing and developed countries alike.
First, Timor-Leste was an early supporter of the EITI agenda, and Timor-Leste became an active member of the EITI Council.
Second, Timor-Leste established a Petroleum Fund, to manage petroleum revenues and ensure that revenues from non-renewables could be managed to provide the country with a sustainable income into the future, benefitting not only today’s population but also generations to come.
Third, Timor-Leste has undertaken several initiatives which contribute to transparency and accountability: including a Transparency Portal that provides information on Government spending; and public broadcasting of Parliament’s budget debate.
I think Timor-Leste deserves to be congratulated for introducing these initiatives so quickly. The public is quite rightly interested to see that the revenues from petroleum are invested wisely in pursuit of the country’s long term economic and social development.
Open Budget initiatives of this kind are being considered by many countries in the region. Civil society organizations are urging more democratic accountability, and international investors are welcoming the increased transparency.
And now I come to my next point: I think the future of EITI must mean going beyond the issue of validation.
EITI compliance is not an end in itself. It is the beginning of a process to mainstream the principles of transparency, accountability and good governance to provide security, prosperity and opportunity for the good of entire populations.
EITI has increasingly become an international “brand” that many countries aspire to. And transparency is critical in allowing us to shine a light on problems, but – it must also translate into tangible benefits for resource rich countries and their people.
Indeed the long-term test for the success of EITI will be the extent to which it meets expectations in contributing to good management of natural resources for the benefit of all citizens, today and generations to come.
We must make sure that we can demonstrate real impact on the ground.
So, how best to leverage EITI for both advancing sustainable growth, and achieving poverty reduction?
There is no single “formula” for this. But from working with policy-makers around the world, three fundamental objectives emerge.
First, we need to protect the gains of the EITI. EITI countries have to sustain their political commitment and ensure that the EITI is financially self-sufficient, therefore guaranteeing national ownership. This panel contains excellent examples of such national commitment.
Secondly, the “beyond EITI” agenda necessarily involves sound government policies and good governance, as well as civil society empowerment. This empowerment is nurtured and built on the participatory strengths of the EITI process.
And thirdly, experience has shown that EITI and revenue transparency provide an excellent platform for implementing further reforms and strengthening broader public financial management.
There are a number of other steps that may support further successes alongside and through the EITI.
We believe that transparent, fair, and credible contracts in the extractive industries are an important area for improvements.
Under initiatives such as that targeting Stolen Asset Recovery, the Bank has joined other partners to address the challenge of “looted” assets, many derived from extractive industries.
At a more local level, the World Bank along with the IMF must redouble efforts to strengthen public financial management, so that revenues can be translated into concrete development outcomes for people in developing countries: improved infrastructure, access to schools, health, and water.
We are starting to amplify our focus on the quality of investment spending in resource-rich countries.
We are ramping up support for civil society through direct capacity building activities related to EITI implementation and accountability.
And bold steps are needed in countries to build institutions and tackle the barriers—from corruption to illegitimate or weak institutions—which prevent continued reform: steps which mean the EITI can help realize a long-term vision for the Asia-Pacific, of vibrant economies, resilient states, and inclusive growth.
I want to conclude by saying that the EITI has come a long way in less than 10 years and is making very real progress in the Asia-Pacific.
In the last year Timor-Leste and Mongolia both achieved EITI compliant status; Indonesia became an EITI candidate country. Papua New Guinea and Solomon Islands made formal announcements to adopt EITI and dialogue on EITI is ongoing in many other countries, including the Philippines, Cambodia and Lao PDR.
But there is now the momentum and the opportunity to extend the reach of the EITI process and address a more ambitious agenda.
Transparency is about sound revenue management, but it is also about inclusive revenue sharing – revenue sharing to provide security, prosperity and opportunity for the benefit of whole populations.
We at the World Bank Group are confident that countries and stakeholders will seize this momentum and continue to build upon the successes of the EITI. The WB will support your efforts.
Resource-rich countries who have yet to join the EITI should do so as soon as possible – not only because transparency matters, but more importantly because the potential for transparency is always there, and only needs to be unlocked by our voices, and our actions.
The various voices supporting transparency, gathered in this conference and beyond are just a token of the efforts needed to consolidate and move the EITI forward, and represent an inspiration for others to follow.
We can then continue pushing for that vision: a vision of vibrant economies, resilient states, and inclusive growth.
Sunak gives British economy a boost to see out COVID crisis, tax rises ahead
By David Milliken, William Schomberg and Andy Bruce
LONDON (Reuters) – Finance minister Rishi Sunak gave more aid to Britain’s economy and offered companies a big incentive to start investing again, but also announced a future tax squeeze on people and businesses as he began to focus on the COVID-19 hit to the public finances.
Sunak said in an annual budget speech on Wednesday that the economy will return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, helped by Europe’s fastest coronavirus vaccination programme.
But it will be 3% smaller in five years’ time than it would have been without the health shock and extra support was needed as the country gradually lifts restrictions over the next few months, he said.
Sunak’s early warning that he will demand more money from companies and individual taxpayers in the coming years makes him one of the first policymakers from rich countries to address the state of public finances.
Britain’s first rise in corporation tax since 1974 will see big, profitable companies pay 25% from 2023 compared to 19% now.
But Sunak first offered firms an immediate two-year “super-deduction” tax break in a bid to snap them out of their pandemic deep-freeze and invest to boost short-term growth.
The government’s budget watchdog said the move was more than 10 times more generous than an equivalent incentive in 2009.
Sunak repeated his plan to do “whatever it takes to support the British people and businesses”.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances â€“ and I want to be honest today about our plans to do that,” he told parliament. “And, third, in today’s budget we begin the work of building our future economy.”
Among the support measures were a five-month extension of Britain’s huge jobs rescue plan, wider help for the self-employed and the continuation of an emergency increase in welfare payments.
A business rates exemption for retail, hospitality and leisure businesses will now run until the end of June, by when Prime Minister Boris Johnson hopes to have lifted most COVID-19 restrictions.
An existing tax break for home-buyers was extended by three months until June 30 and then for cheaper homes until the end of September.
Shares in housebuilders gained on the news, with Persimmon one of the top risers in the FTSE 100, up about 5%.
Pub firms JD Wetherspoon and Premier Inn owner Whitbread also rose about 5%, helped by an extended VAT cut for the hospitality sector.
But British government bond prices fell sharply after Sunak said overall borrowing will be much bigger next financial year than thought just a few months ago – 234 billion pounds, or 10.3% of gross domestic product, compared with a previous estimate of 164 billion pounds, or 7.4% of GDP.
The Debt Management Office said it planned to sell 296 billion pounds of gilts in the coming year, well above the 247 billion pounds expected in a Reuters poll.
“The UK’s fiscal stance has become much looser, and more focused on investment, more in line with its U.S. and euro area counterparts,” Morgan Stanley economist Jacob Nell said.
“This shift changes our view of the UK. Near term, we see a stronger and more investment-focused recovery bringing forward the return to pre-COVID-19 levels of output.”
To show he will get a grip on borrowing, Sunak’s future hikes will increase the tax burden to its highest since the 1960s, rising from 34% to 35% of GDP by the mid-2020s.
“The UK is thus to become the first major economy to consider such measures,” Valentin Marinov, head of G10 foreign exchange research at Credit Agricole, said.
Britain has suffered the biggest COVID-19 death toll in Europe and its economy shrank by 10% last year, its worst slump in three centuries.
Many companies are also under strain from Brexit after Britain left the European Union’s single market on Jan. 1, and the government faces the challenge of huge investment to meet its promise to create a net zero carbon economy by 2050.
UK EARLY MOVER ON TAX HIKES
Britain’s Office for Budgetary Responsibility (OBR) said the economy was likely to grow 4% in 2021, slower than the 5.5% it had forecast in November, due largely to the current lockdown which began in January.
But the OBR raised its forecast for growth in 2022 to 7.3% from 6.6%.
Sunak has already racked up Britain’s highest borrowing since World War Two, with the deficit reaching an estimated 17% of GDP in the 2020/21 financial year that ends in April and set to fall to a still historically high 10.3% in 2021/22.
Announcing the corporation tax rise, he said: “Even after this change the UK will still have the lowest corporation tax rate in the G7 â€“ lower than the United States, Canada, Italy, Japan, Germany and France.”
Rain Newton Smith, chief economist at the Confederation of British Industry, said the hike was “a huge jump” and that other G7 countries would be more competitive than Britain when state and federal level tax breaks were taken into account.
Businesses with profits of 50,000 pounds or less would pay a new Small Profits Rate at the current rate of 19%.
Sunak also said he would freeze the amount of money that people can earn tax-free and the threshold for the higher rate of income tax at the 2021/22 level until April 2026.
($1 = 0.7156 pounds)
(Additional reporting by Guy Faulconbridge, William James, Costas Pitas, James Davey, Estelle Shirbon, Elizabeth Piper, Paul Sandle, Alastair Smout and Sarah Young; Writing by William Schomberg; Editing by Catherine Evans)
UK’s Sunak extends COVID rescue plan but companies to pay more tax from 2023
By David Milliken and William Schomberg
LONDON (Reuters) – Finance minister Rishi Sunak announced a costly extension of his emergency aid programmes to see Britain’s economy through its current coronavirus lockdown, but announced a tax hike for many businesses as he began to focus on fixing the public finances.
Delivering an annual budget speech on Wednesday, Sunak said the economy will regain its pre-pandemic size in the middle of 2022, six months earlier than previously forecast, helped by Europe’s fastest COVID-19 vaccination programme.
But it will remain 3% smaller in five years’ time than it would have been without the damage wrought by the coronavirus crisis and extra support is needed now as the country remains under coronavirus restrictions, he said.
Among the new support measures was a five-month extension of his huge jobs rescue plan and more help for the self-employed, the continuation of an emergency increase in welfare payments, and an extension of a VAT cut for the hospitality sector.
A tax cut for home-buyers was also extended until the end of June.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” Sunak told parliament.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that. And, third, in today’s Budget we begin the work of building our future economy.”
Announcing forecasts by the Office for Budgetary Responsibility (OBR), Sunak said the economy was likely to grow by 4% in 2021, slower than a forecast of 5.5% made in November, reflecting the current lockdown which began in January.
Looking further ahead, the OBR forecast gross domestic product would grow 7.3%, 1.7% and 1.6% in 2022, 2023 and 2024 respectively. In November, the OBR had forecast growth in those years of 6.6%, 2.3% and 1.7%.
Sunak promised to do “whatever it takes” to steer the economy through what he hopes will be the final months of pandemic restrictions.
He has already racked up Britain’s highest borrowing since World War Two, which hit an estimated 17% of GDP in the 2020/21 financial year that is about to end and should fall to a still historically high 10.3% in 2021/22.
In a first move to raise taxes, Sunak announced he would raise corporation tax to 25% from 19% from 2023, by which time the economy should be past the pandemic crisis.
“Even after this change the UK will still have the lowest corporation tax rate in the G7 – lower than the United States, Canada, Italy, Japan, Germany and France,” he said.
Businesses with profits of 50,000 pounds or less would pay a new Small Profits Rate, maintained at the current rate of 19%.
Sunak also said he would freeze the amount of money that people can earn tax-free and the threshold for the higher rate of income tax until 2026.
(Writing by William Schomberg; Editing by Catherine Evans)
Renewable diesel boom highlights challenges in clean-energy transition
By Rod Nickel, Stephanie Kelly and Karl Plume
(Reuters) – For 17 years, trucker Colin Birch has been hitting the highways to collect used cooking oil from restaurants.
He works for Vancouver-based renderer West Coast Reduction Ltd, which processes the grease into a material to make renewable diesel, a clean-burning road fuel. That job has recently gotten much harder. Birch is caught between soaring demand for the fuel – driven by U.S. and Canadian government incentives – and scarce cooking oil supplies, because fewer people are eating out during the coronavirus pandemic.
“I just have to hustle more,” said Birch, who now sometimes travels twice as far across British Columbia to collect half as much grease as he once did.
His search is a microcosm of the challenges facing the renewable diesel industry, a niche corner of global road fuel production that refiners and others are betting on for growth in a lower-carbon world. Their main problem: a shortage of the ingredients needed to accelerate production of the fuel.
Unlike other green fuels such as biodiesel, renewable diesel can power conventional auto engines without being blended with diesel derived from crude oil, making it attractive for refiners aiming to produce low-pollution options. Refiners can produce renewable diesel from animal fats and plant oils, in addition to used cooking oil.
Production capacity is expected to nearly quintuple to about 2.65 billion gallons (63 million barrels) over the next three years, investment bank Goldman Sachs said in an October report.
Rising demand is creating both problems and opportunities across an emerging supply chain for the fuel, one small example of how the larger transition to green fuels is upending the energy economy. A renewable diesel boom could also have a profound impact on the agricultural sector by swelling demand for oilseeds like soybeans and canola that compete with other crops for finite planting area, and by driving up food prices.
Local and federal governments in the United States and Canada have created a mix of regulations, taxes or credits to stimulate more production of cleaner fuels. President Joe Biden has promised to move the United States toward net-zero emissions, and Canada’s Clean Fuel Standard requires lower carbon intensity starting in late 2022. California currently has a low-carbon standard that provides tradable credits to clean fuel producers.
But the feedstock supply squeeze is constraining the industry’s ability to comply with those efforts.
‘SPINNING FAT INTO GOLD’
Demand and prices for feedstocks from soybean oil to grease and animal fat is soaring. Used cooking oil is worth 51 cents per pound, up about half from last year’s price, according to pricing service The Jacobsen.
Tallow, made from cattle or sheep fat, sells for 47 cents per pound in Chicago, up more than 30% from a year ago. That’s boosting the fortunes of renderers such as Texas-based Darling Ingredients Inc and meat packers such as Tyson Foods Inc. Darling shares have about doubled in the last six months.
“They’re spinning fat into gold,” said Lonnie James, owner of South Carolina fats and oil brokerage Gersony-Strauss. “The appetite for it is amazing.”
Clean fuels could be a boon for North American refiners, among the pandemic’s hardest-hit businesses as grounded airlines and lockdowns hammered fuel demand. Refiners Valero Energy Corp, PBF Energy Inc and Marathon Petroleum Corp all lost billions in 2020.
Valero’s renewable diesel segment, however, posted a profit, and the company has announced plans to expand output. Marathon is seeking permits to convert a California refinery to produce renewable fuels, while PBF is considering a renewable diesel project at a Louisiana refinery.
The companies are among at least eight North American refineries that have announced plans to produce renewable fuels, including Phillips 66, which is reconfiguring a California refinery to produce 800 million gallons of green fuels annually.
Once new renewable diesel production capacity comes online, feedstocks are likely to become more scarce, said Todd Becker, chief executive of Green Plains Inc, a biorefining company that helps produce feedstocks.
Goldman Sachs estimates that an additional 1 billion gallons of total capacity could be added if not for issues with feedstock availability, permitting and financing.
“Everybody in North America and around the world are all trying to buy low carbon-intensity feedstocks,” said Barry Glotman, chief executive of West Coast Reduction.
His customers include the world’s biggest renewable diesel maker, Finland’s Neste. A spokesperson for Neste said the company sees more than enough feedstock supply to meet current demand and that development of new feedstocks can ensure supply in the future.
SOYBEAN, CANOLA BOOM
Renewable diesel producers are increasingly counting on soybean and canola oil to run new plants.
The U.S. Agriculture Department (USDA) is forecasting record-high soybean demand from domestic processors and exporters this season, largely because of soaring global demand for livestock and poultry feed.
Crushers who produce oil from the crops are also scouring Western Canada for canola, helping to drive prices in February to a record futures high of C$852.10 per tonne. Soybeans reached $14.45 per bushel in the United States last week, the highest level in more than six years.
Rising food prices are a concern if the predicted demand for crops to generate renewable diesel materializes, said USDA Chief Economist Seth Meyer. U.S. renewable diesel production could generate an extra 500 million pounds of demand for soyoil this year, Juan Luciano, chief executive of agricultural commodities trader Archer Daniels Midland Co, said in January. That would represent a 2% year-over-year increase in total consumption.
Greg Heckman, CEO of agribusiness giant Bunge Ltd, in February called the renewable diesel expansion a long-term “structural shift” in demand for edible oils that will further tighten global supplies this year.
By 2023, U.S. soybean oil demand could outstrip U.S. production by up to 8 billion pounds annually if half the proposed new renewable diesel capacity is constructed, according to BMO Capital Markets.
That same year, Canadian refiners and importers will face their first full year complying with new standards to lower the carbon intensity of fuel, accelerating demand for renewable diesel feedstocks, said Ian Thomson, president of industry group Advanced Biofuels Canada.
Manitoba canola grower Clayton Harder said it is hard to envision a vast expansion of canola plantings because farmers need to rotate crops to keep soils healthy. Farmers may instead have to raise yields by improving agronomic practices and sowing better seed varieties, he said.
British Columbia refiner Parkland Corp is hedging its bets on feedstock supplies. The company is securing canola oil through long-term contracts, but also exploring how to use forestry waste such as branches and foliage, said Senior Vice President Ryan Krogmeier.
The competition to find new and sustainable biofuel feedstocks will be fierce, said Randall Stuewe, chief executive at Darling, the largest renderer and collector of waste oils.
“If there is a feedstock war, so be it,” he said.
(Reporting by Rod Nickel in Winnipeg, Stephanie Kelly in New York and Karl Plume in Chicago; editing by David Gaffen, Simon Webb and Brian Thevenot)
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