Trinidad and Tobago ranks on the 2017 Resource Governance Index
By Renuka N. Kangal, Project Coordinator, TTEITI Secretariat
(Business Guardian Article, Thursday 6th July, 2017)
International investors have many different options about where they can place their investment dollars, so it is important for Trinidad and Tobago to benchmark our economy against other global economies. Benchmarking exercises not only help us determine how we are doing compared to our competitors, but also highlight areas of strength and weakness within the competitiveness framework for the country
According to the Natural Resource Governance Institute’s Resource Governance Index, Trinidad and Tobago ranks 14 out of 81 countries.
On June 29, 2017 the TTEITI hosted the Launch of the 2017 Resource Governance Index at the Ministry of Energy and Energy Industries which ranked Trinidad and Tobago’s position amongst other countries in world that are involved in the extractive sectors.
Wealth does not necessarily mean good management and the Resource Governance Index (RGI) provides an international benchmarking that quantifies the quality of governance in resource rich countries using three indicators to arrive at the country rating including revenue management, value realization and enabling the environment. The specifics taken into account within each of these areas are captured in Figure 1A.
The 2017 RGI Report publishes resource governance data from 81 countries which collectively represents 82 percent of the world’s oil, 78 percent of its gas and a significant proportion of minerals, including 72 percent of all copper.
Of the 81 Index countries, only 6 identified as doing a satisfactory job, ranking high in all three criteria. In Latin America, six countries – Brazil, Chile, Colombia, Mexico, Trinidad and Tobago, and Peru – all earned satisfactory composite scores while Ecuador, Venezuela and Bolivia, received only partially satisfactory scores. The RGI also offers recommendations for both highly ranked countries like Norway and low-ranked countries like Eritrea. From focusing on implementation and continuing to open governments to bolstering state-owned enterprise governance and driving reforms, there are many ways for governments of resource-rich countries to become more effective and accountable to their citizens.
Based on the data in the index, the majority of governments inadequately govern their oil, gas and mining sectors. Sixty-six countries were found to be weak, poor or failing in their governance of extractive industries. Less than 20 percent of the 81 countries assessed achieved good or satisfactory overall ratings.
Trinidad and Tobago scored 64 out of 100 points in the 2017 RGI and ranked 14th out of the 89 assessments undertaken for the 81 countries surveyed. Trinidad and Tobago performs better in practices rather than in rules and regulations, with a 10-point difference in favor of the former. This result is particularly impacted by the taxation regime. In terms of regional performance, the country ranks fourth, where we are outstripped by Chile, Brazil and Colombia. The country obtained the highest score in the region as it relates to the gap between laws to properly govern resource management and how these laws are applied or function in practice. Figure 1B illustrates Trinidad and Tobago’s amalgamated positioning, relative to regional counterparts.
The relatively high scores attained by the country was attributed to publishing timely, regular reports on oil and gas production, prices and exports as well as sound Heritage and Stabilization Fund governance. The index report credits Trinidad and Tobago for satisfactory results in enabling the environment and value realization components but it achieves weak scores in the revenue management component.
Currently, Trinidad and Tobago discloses company payments data in a disaggregated manner via the Extractive Industries Transparency Initiative (EITI). In contrast, key tax terms such as royalty, state equity and production sharing rate (where applicable), are not set in laws but are left open for negotiation between the Ministry for Energy and Energy Industries and the licensee, bringing down the law result.
Trinidad and Tobago has published four EITI Reports to date covering Fiscal Years 2010 to 2015. Based on the reports’ findings, an estimated $840 million in differences between extractive companies’ declared revenue payments and Government’s declared corresponding receipts have been identified, audited and satisfactorily reconciled. The reports have also provided extensive recommendations on improving Government revenue collection, data management and audit and assurance processes. Data published in the reports have also informed the findings of the recent Gas Master Plan and assisted Trinidad and Tobago in meeting its obligations to the Open Government Partnership. The EITI Report for Fiscal Year 2016 is due to be published in the last quarter of 2017.
Some of the positives highlighted in the 2017 RGI Report included state enterprise transfer and reporting rules, soundness of rules and structure to the governance of the Heritage and Stabilization Fund as well as the standing of compliance with EITI implementation. The negative elements affecting resource governance for Trinidad and Tobago raised in the report included that there is no numerical fiscal rule in the budget that sets rules on balanced budgets or deficit limits as well as there was no centralized open data portal for information from the budget.
State energy enterprises were also assessed in the Index and Petrotrin ranked 9th out of the 74 state companies assessed with a score of 75 out of a possible 100. Petrotrin performed particularly well for its rules and reporting on finance and operations. However, the index noted that the company needed to be more transparent as it relates to the sales of its commodities and make more available information on monthly cash statements. It raised the need to show sales and other operating inflows and outflows including the collection of sales proceeds from the company to the government and selection of buyers and defining prices which are presently not rules based. The rating received by Trinidad and Tobago’s SOE places it in the upper quartile of the statistical spread whereby Petrotrin has outranked 86.5 percent of the countries participating in the RGI, this is represented in Figure 1C.
These statistics and findings published in the RGI Report 2017 provides insight as to what areas of natural resource governance and the country’s resource regime needs attention so as to improve the level of accountability and transparency. Openness in natural resource reporting and reconciliation is an important step towards enhancing country reputation and attracting further investment, therefore the RGI should be looked upon as a data tool by which areas of underperformance are identified and targeted for future reform. In this way, the efforts of the EITI process factors in as an integral instrument such that resource governance regimes, revenue management and budgeting is mainstreamed as Trinidad and Tobago moves to improve its future standing.