• Natural Resources for Sustainable Development in Eurasia.


Inventory and assessment of information accessibility in extractive industries of Azerbaijan

03 Feb, 2020 20

Prepared by Eurasia Extractive Industries Knowledge Hub Expert Group

Summary :

The main goal of this report is to assess accountability and information disclosure in extractive industries. For the development of the Extractive Industry Database (EIB) the frameworks provided by the Natural Resource Governance Institute (NRGI), the Natural Resources Charter (NRC), the Resources Governance Index (RGI) and the Extractive Industries Transparency Initiative(EITI) were deployed. The report proposes assessment for each component of the value chain and improvements to the accessibility and quality of the data based on the requirements of international standards and operates within a four-level assessment scale (very good, good, weak, bad). Changes in access to information have also affected the production of information in extractive industries as well.

These changes are:

  1. In the context of stricter international requirements, information owners have to expand their database;

  2. At the same time, information owners are doing this to improve their own accountability, rather than improving access to information;

  3. For this reason, some information owners are not interested in the popularity of the new online platforms, as digitalization will significantly the demand towards them;

  4. Legislation on access to information was more progressive until 2010. Recent changes have made the environment of access to information even more difficult in some cases, and Russia's impact has played a significant role here.

  5. Access to information goes not only through the improvement of the legislative and technical capacity but also through effective education.

Currently, there are following barriers to unrestricted and easy access to information in the country:

Barriers within the legislation:

  1. In general, the legislative framework for access to information is weak. Given that the law doesn’t obligatory binding on disclosure, some information owners abuse this and often await a specific command from higher-level authorities.

  2. The law on access to information is outdated and some government entities continue to practice a collection of surveys and ask for special permits in the backdrop of the online revolution globally.

  3. The legal framework should enhance, the Land Law should be improved, the licensing process should be more transparent, the principles of transparency should be introduced, and the law should be up-to-date.

  4. Although the PSA has a legal status, it is not practiced as a law; many agreements are kept the secret under the pretext of commercial secrets. In the agreements, the principle of "all parties must agree" is a serious impediment to information disclosure.

  5. Although the Oil Fund is generally transparent and accountable, its legislative framework is weak. The management and activities of the Fund are not regulated by any law.

It should be noted that internationally traditional approaches to information disclosure, with information inquiries, periodical publications and etc. are losing its relevance. The fast-paced technological development doesn’t only demand accessibility of information also requires to transform it into a routine. This means that the information owner makes it an integral part of his/her day-to-day routine, while IT capabilities make it easier and user-friendly.

Although the extractive industries generally have a comprehensive database, it does not meet today’s requirements. The data are largely quantitative and comprised of indicators that characterize more traditional production and technical aspects of the industry. Using the value chain approach in evaluating transparency and accountability in the extractive industries, the level of information disclosure that individual divisions provide is more visible and useful for finding weak points. The requirements of international transparency and good governance reveal the need for serious reforms in the country's extractive industry database.

The strongest items in the extractive industry database in Azerbaijan are the continuous data on the production and export indicators, as well as the tax payments, the weakest points are the allocation of rights, absence of open database on potential investors, as well as the socio-economic and environmental impact assessment. Moreover, the research, discovered that the national oil company, the country's main revenue generator, still does not meet the requirements of the contemporary corporate governance, and lacks transparency in terms of accountability for social work that it implements in replacement of the state. Although the State Oil Fund performs better in disclosure and accountability, the fact that it’s not stipulated by law puts its sustainability at risk.

The existing legal framework for information is generally based on the principle of 'not prohibited by law', where executors substitute it for their benefit with the principle 'I need to receive a special command', which results in the delayed disclosure of some important information.

And, finally, in the backdrop of a paradigm shift on disclosure of information globally, it should become routine and compulsory work for all decision-makers. The precondition for this is the transformation of the database into an online system.

Recommendations:

Recommendations on legislation:

  • Since the law on access to information does not meet modern requirements, it needs to be updated and the newly adopted law should be more imperative.

  • The Law on State Registration and State Register of Legal Entities prevents access to beneficiary ownership information so that a particular clause must be eliminated.

  • Conflicts between the “Law of the earth” and the existing practice should be eliminated, and the optimal model for attracting investors should be stipulated in the law.

    Recommendations for Government Agencies:

    • Key players in the extractive industries - the Ministry of Energy, the Ministry of Ecology and Natural Resources, the State Oil Fund - should accelerate the transition from informing the beneficiary based on a request to online data-sharing.

    Recommendations for SOCAR:

    • The information policy of the company should change and a moderns website should be created, the quantitative and qualitative data should be in line with international standards (EITI).

    Recommendations to the Commission on Transparency in Extractive Industries:

    • As the main responsible body for transparency in extractive industries, it should take the initiative in pushing the accessibility of information, its timely and complete representation in reports;

• The Commission should consider information disclosure as the main priority in the nearest future by putting more effort into the creation of an online platform and collaborating with the Civil Society.

 

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