The Future of Global Resource Governance: EITI and The China problem

The rising expansion of Chinese companies’ investments in many Asian and African states has left challenges for the Extractive Industries Transparency Initiatives (EITI). In this article, I would like to argue that the EITI should address the emerging Chinese expansion in global energy markets by creating platforms for dialogues with either Chinese governments or Companies

EITI

This year, the Extractive Industries Transparency Initiative (EITI) will hold its 7th Global Conference in Lima, Peru, 24-25th February 2016. This year’s Conference will evaluate the implementation of the EITI Standard as adopted in the previous conference.

Since its establishment in 2002, EITI has aimed at being a platform for multi-stakeholder partnership in the extractives sector. It was primarily launched by Tony Blair, following the establishment of the NGO-led ‘Publish What You Pay’ campaign (Eigen, 2006). With full endorsement by the British government, several states declared their intention to join the initiative.

The numbers of participants in EITI has continued to grow, particularly due to the support and facilitation of the British government. Currently there are 49 countries who are implementing EITI, whilst 31 states are considered ‘compliant’ and 44 countries have published a report.

The “China Question”

One of the issues that will be raised in this conference is the expansion of Chinese oil companies. Since 2002–2003 (the same year as the establishment of EITI), there has been a rising global expansion of Chinese oil and gas companies into other Asian and also African countries (see Mouan, 2010). China has also, evidently, engaged with those states to control supply from resource-rich countries.

As noted by Poppy S Winanti and Emmanuel Bria (2016), China’s engagement is particularly visible in Southeast Asia, whose region is geographically (and geopolitically) strategic for the Chinese regional environment.

Chinese global investments in energy and extractive industries have undoubtedly brought challenges for global energy politics. In contrast to many Western countries, China is not as familiar with the norms and best practice of natural resource government, such as transparency and accountability – which are widely advocated and practiced by Western governments and organisations.

Although it is noted that Chinese business performance has proven to be more resilient than Western business -particularly during the global economic crises that so greatly affected the US and Europe; China does not necessarily comply with particular global norms such as EITI. China itself, until present has not yet implemented EITI at a national or subnational level.

Nevertheless, a brief from the EITI International Secretariat mentioned that Chinese companies who are investing in EITI countries have started to become involved in EITI reporting, in as many as 23 states.

The rise of China has brought an important question for the future of global resource governance to the fore: how can EITI maintain its norms, such as transparency and accountability, with the rise of China in the global energy market?

EITI has inspired many positive changes in the ways in which the nation-state manages its natural resources. However, despite this high level of achievement, there is still room and need for improvement. Critics have said that the norm promoted by EITI has been ‘weakened from below’ due to social and political changes in implementing countries (See Gonzalez-Espinosa and Klein, 2013).

China is a pertinent example of a state that has not yet implemented nor complied with EITI requirements. The United States and United Kingdom (two important countries campaigning for transparency and good governance) joined EITI in 2014. It is also visible that most of EITI countries are resource-rich developing countries; either in Asia, Africa or Latin America.

The absence of prominent energy players such as China has created a paradox in global resource governance. While the mechanism for accountable resource governance has been initiated, it still lacks support from some of the states with huge energy interests, such as China.

China petrol

Platform for Dialogue

The absence of China or Russia in this initiative can be understood, from International Relations perspective, as‘multipolarity’ in global resource governance (see Mouffe, 2013 for a discussion of this term). While the US and UK-led initiative put emphasis on ‘Good Governance’ as the main discourse of resource governance on transnational level, China (as well as Russia or several Latin American countries) prefer a strong state-led  role in managing their resources.

Therefore, global resource governance is in fact a contested discourse. EITI is not ‘the only game in town’ for natural governance. There are other discourses to manage natural resources (particularly oil, mining and gas) which exist in other states.

This fact has some significant ramifications for EITI. It is evident that the initiative can produce a mechanism for developing countries to manage their natural resources effectively and promotes good governance. However, we also need to aware that many big oil companies are based in big countries –or even owned by the government — governments that do not necessarily believe in ‘Good Governance’ as a normative basis for resource governance.

In this sense, EITI still needs to broaden its support from major states. In the upcoming conference, EITI needs to formulate a  model of partnership or dialogue that can bring along states with different models of resource governance at national or subnational levels.

This is turn, leads to a second question related to the rise of China in the global energy market. With its state-owned energy enterprises (such as CNOOC, Sinopec, or CNPC), the wide reach of those companies pose challenges for EITI to impose its principles and standards.

Several analysts have endorsed Chinese involvement in EITI to improve the business performance (Paris, 2010) of their resource companies. Yet, it appears that China still has its own logic of resource governance and is not really familiar with such EITI norms, standards and principles. With China’s global expansion in Asian and African countries, EITI needs to engage with China, to encourage the Chinese government and businesses to address current issues in extractive industries.

EITI can also play another role, for example, by introducing its standards to some states that are cooperating with China in extractive industries – thus hoping to have a knock-on effect upon China’s operations.

Thus, a challenge lies for EITI to provide  a platform for dialogue with both states that foster the EITI model for natural resource governance, as well as those which take a different route. With the current oil crisis, however, it is important for us to think beyond state or standards in extractive industry sectors. Standards, rules and procedures are important to make sure the natural resource industry can bring benefit to all people. However, any other means to manage natural resources are also important to be address and discussed.

By Ahmad Rizky Umar, a Postgraduate student from the Department of Politics, undertaking an MSc in Politics with Research Methods. Ahmad will be joining the Global Leadership Initiative as a Policy Analysis at the EITI Conference in Lima,Peru, later this month.

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