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Economy

Myanmar sheds some light on murky extractive industries

Myanmar published its first report in January about its implementation of the Extractive Industries Transparency Initiative -- an international program and voluntary pact to combat corruption in the oil, gas and mining industries. The report disclosed data about deals between resources companies and the Myanmar government, including payments from 57 companies to the government, a list of licenses allocated and background information on the local oil, gas, minerals and gems businesses.

     The fact that Myanmar published an EITI report represents a major milestone since it involves a level of transparency that would have been unthinkable just four years ago. But the report also highlights some  serious challenges that the new government will need to face  if it is to realize the EITI's potential.

     The first of these is the creation of a genuine climate of openness in which citizens can express their views and engage in debates about the use of the country's natural riches without fear.  Since the start of Myanmar's EITI process in 2012, cooperation between civil society organizations, the government (particularly the Ministry of Mines) and parliament has improved greatly. One example  is the civil society public consultations that took place during parliament's deliberations over laws governing hand-drilled oil wells, which allowed  those most affected to present their views to lawmakers directly.

     Another positive development was the establishment of local  EITI units in the country's states and administrative divisions. While these have been subject to delays and have recorded few concrete achievements to date, they have provided a valuable forum for dialogue at the local level that  is essential to making the EITI process in Myanmar accessible and useful to the public.

Restrictions remain

The outgoing government of President Thein Sein made commendable commitments to greater public engagement, but for the most part, conditions on the ground among citizens, government officials and resources companies outside of formal meetings have changed very little. In a number of cases since the EITI process began, civil society groups monitoring the impact of mining projects on the local population have been arrested or faced official harassment.

     This is contrary to the EITI's international Civil Society Protocol, which sets standards that Myanmar should meet regarding freedom to work and to speak out on natural resource management issues. It also inhibits efforts to bring accountability to an industry characterized by conflicts over land rights, poor distribution of benefits, adverse health and environmental effects and, in some cases, human rights violations.

     One of the main weaknesses of the new EITI report is that it offers no analysis on these issues of openness and freedom of expression and offers no recommendations on how to address them during the next phase of the process. Myanmar civil society organizations remain committed to greater collaboration with officials on environmental and social issues associated with the extractive industries but need to see these efforts reciprocated with respect for the freedom to publicly debate these topics as the EITI requires.

     A second challenge is ensuring greater transparency not just in global businesses like offshore gas, but also more politically sensitive industries such as jade. The new EITI report ducks this issue entirely; suggesting that Myanmar's jade is worth a fraction of the amount reported by researchers, academics and Chinese customs authorities. Almost all of the country's jade goes to the Chinese market.

     The reality is that jade is Myanmar's most valuable natural resource and the one that is most tightly bound up with the country's prospects for peace and political stability. A recent report by the international non-government organization Global Witness shows that most of the benefits from this multi-billion dollar industry are going to powerful opponents of reform, while the jade industry helps finance  Myanmar's most significant armed conflict, between ethnic Kachin and the armed forces in Kachin State, where the stone is mined. Of course the EITI cannot, on its own, resolve the entrenched problems of the jade business, but it can and must play its part.

     A third critical area concerns the role of state-owned enterprises and military companies which dominate parts of the extractive industries, not least oil, gas and jade. The EITI report highlights how state-owned enterprises are funneling the lion's share of revenues from extractive industries into "other accounts" outside normal government budgetary control. For example, as noted in a new report by the U.K.-based Natural Resources Governance Institute, Myanma Oil and Gas Enterprise, an SOE that is the key liaison for foreign oil and gas companies, moved around $1.4 billion into off-budget accounts in the 2013-14 financial year to March 31. The sum exceeds the amount that Myanmar spent on either health or education in the same period.

Gems revenues

Meanwhile, the vast sums generated by military companies from jade and other ventures are even further removed from public scrutiny. At two government gems emporium events in 2013 and 2014, for example, army companies chalked up aggregated sales of over $280 million, according to official figures. But the new EITI report makes no mention of this, and offers no clues as to where the money is and what it is being used for.

     A related issue, regarding unreported payments that are not adequately captured by the new EITI report, concerns the funds spent by companies on corporate social responsibility. While some oil, gas and mining companies report significant outlays on CSR, it is unclear to whom this reported expenditure is allocated and who benefits from it. 

     All of these challenges reflect a chronic weakness in the regulation and oversight of the oil, gas and mining industries and a deep-seated unwillingness of companies and many government officials to be accountable to the public. Aung San Suu Kyi's National League for Democracy party, which is set to form a new government, has placed great stress on the need for the "rule of law." Certainly this will be critical to the success of extractive industries reform in Myanmar. In addition,  Myanmar's new leaders may come under considerable pressure to go easy on businesses that are protected by powerful domestic and foreign interests, such as seen in the incident at Letpadaung copper mine in central-western Myanmar 2014, when security forces attacked protesters unhappy with forced resettlement, environmental damage and plans to expand the mine. The crackdown resulted in one killed and more than 100 injured.  

     Will the new government be able to use EITI to drive reforms that ensure that the benefits of Myanmar's resource riches reach the many rather than the few? Myanmar civil society groups are committed to working with incoming ministers and officials to achieve this outcome. We are already looking to Myanmar's second EITI report as an opportunity to demonstrate real progress in this regard. But we are also aware of the significant obstacles ahead. Indeed, in many ways, the task of realizing the full potential of the transparency pact begins now.

Moe Moe Tun is a member of the Myanmar Extractive Industries Transparency Initiative multi-stakeholder group and Joint Secretary of the Green Trust in Pyin Oo Lwin, Myanmar.

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