Myanmar now has three years in which to put in place a series of transparency standards and publicly report on government extractives revenues, payments from mining and drilling companies, and related issues. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Oct 15 2014 (IPS)

Lawmakers here are urging President Barack Obama to put transparency in the extractives sector at the centre of an upcoming trip to Myanmar.

While the government of Myanmar has recently engaged in a series of bilateral and multilateral pledges to make its lucrative but highly opaque mining and oil and gas industries more transparent, advocates increasingly warn that officials are failing to keep these promises."The real heart of the issue for civil society in Burma is the details of these contracts. They also want to start talking about the tremendous amount of money the Burmese government makes off of these oil and gas deals, and how most of that doesn’t benefit the people of Burma.” -- Jennifer Quigley

The U.S. government has been a key sponsor in facilitating these pledges, and many now see President Obama’s visit, slated for next month, as an important opportunity to prompt legal change in Myanmar, also known as Burma. Myanmar officials are currently revising related legislation, although little is known about these secretive talks.

Supporters say reforms, particularly around public information on extractives deals and revenues, could help to ensure that Myanmar’s significant natural resources wealth is used for development rather than simply enriching businesses close to the regime.

“Despite commitments to transparency and good governance, decision-making over the management of Burma’s national resources remains largely hidden from public scrutiny … the gap between the Burmese government’s promises and its delivery is widening,” 16 members of the U.S. Congress warned President Obama in a letter sent Tuesday.

“We therefore urge you, during your visit to Burma, to call on the Burmese government to ensure provisions on transparency and accountability are incorporated into revised laws, regulations and policies governing the extractives sector, and negotiated into new contracts and licenses.”

The letter, a copy of which was seen by IPS, includes backing from both Republicans and Democrats. Last year, the United States initiated a partnership between the Myanmar extractives industry and the Group of 8 (G8) rich countries, which could offer Obama additional leverage in demanding new transparency measures.

The lawmakers’ call comes not only a month ahead of President Obama’s planned trip to Myanmar (his second), but also as a global summit on extractives transparency begins in the country’s capital, Naypyidaw. The two-day meeting of the Extractives Industries Transparency Initiative (EITI), which promotes guidelines that are currently followed by 46 countries, comes just three months after Myanmar became one of the EITI’s newest candidate countries.

Under these guidelines, Myanmar now has three years in which to put in place a series of transparency standards and publicly report on government extractives revenues, payments from mining and drilling companies, and related issues.

Just a month after its EITI candidature was accepted, Myanmar signed several dozen contracts with domestic and international oil and gas companies. Yet according to Tuesday’s letter, the terms of those contracts remain secret, as are ongoing revisions to policies overseeing the extractives sector.

“The laws and regulations governing the extractive industries are currently being revised behind closed doors, with no public consultation,” the lawmakers state.

“Drafts of the first of these new pieces of legislation contain no provisions on public disclosure of data and do not reflect any of the promises of greater transparency made by the government through the EITI process.”

Beneficial owners

The contracts signed in August were for 36 oil and gas blocks, both on land and offshore, auctioned off to 46 local and global companies over the past year. While the details of those contracts remain under wraps, until recently almost nothing was known even of these companies’ owners.

Around the country’s EITI application, an international watchdog group called Global Witness began focusing on what’s known as ultimate beneficial ownership – information on who, ultimately, controls and benefits from a company’s activities. In June, the group had such information on the companies involved in just three of the blocks.

Yet after requesting information directly from the companies, Global Witness last week reported that many more companies had come forward with these details. The companies were also asked whether any of their beneficial owners were politically powerful individuals in Myanmar.

“In total, 28 companies have now participated in Global Witness’ ownership review, and we have been provided with full beneficial ownership details of all partners in 17 oil and gas blocks,” the group says in a new report, published Friday. “This shows that businesses can and will provide such information if they have an incentive, such as protection of their reputation, to do so.”

Global Witness says the information remains unverified and that a “hard core” of 18 companies continue to refuse to provide any information. Still, the group says this corporate response has already set a surprising international example.

“Not only is this significant locally, but it puts Myanmar in the unlikely position of setting a global precedent on transparency, as it’s the first time anywhere in the world that companies have systematically declared their ultimate ownership,” Juman Kubba, an analyst at Global Witness, told IPS.

“Our findings show that companies can reveal their owners if they’re pushed to do so. It’s now up to the Myanmar government with the support of the U.S. and other backers to make that push so that all oil, gas and mining company ownership in the country is public.”

Outside the framework

Still, some worry that the recent corporate disclosure wasn’t actually carried out through the EITI framework, thus suggesting that the government’s transparency pledges remain weak. They also dispute whether beneficial ownership is of foremost importance in the Myanmar context.

“This disclosure is incredibly important on the global scale, but when it comes to Burma the real concern has never been about ownership but rather about conflict related to resources,” Jennifer Quigley, the president of the U.S. Campaign for Burma, an advocacy group, told IPS.

“This wasn’t done through the EITI in this instance, and the real heart of the issue for civil society in Burma is the details of these contracts. They also want to start talking about the tremendous amount of money the Burmese government makes off of these oil and gas deals, and how most of that doesn’t benefit the people of Burma.”

Quigley says that Myanmar’s government has long been comfortable making pledges it has no intention of keeping, and she see little prospect of that changing in the near term. Still, she says the United States has linked itself so closely to extractives transparency in Myanmar that President Obama will need to broach the subject during his trip next month.

“This is really an area in which the U.S. has married itself to the Burmese government,” she says. “So they need to be paying more attention to the fact that the Burmese government isn’t living up to its EITI promises.”

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

It is common to find young people working in factories in Rangoon. Credit: Mon Mon Myat/IPS

By Carey L. Biron
WASHINGTON, Jun 12 2014 (IPS)

U.S. companies newly operating in Myanmar have until the end of the month to file official reports detailing the actions they’ve taken to ensure that their investments comply with safeguards around land, human rights and other concerns.

Such ‘due diligence’ reporting was a key compromise between activists and the U.S. government after Washington lifted sanctions on U.S. investments in Myanmar (formerly Burma) in mid-2012. Yet rights advocates here who have looked at the first round of disclosures are warning that most companies are failing to file strong reports while some are refusing to engage in the process at all.

“Responsible U.S. investment has the potential to further the U.S. policy goal to support ‘the establishment of a peaceful, prosperous, and democratic state that respects human rights and the rule of law’,” notes the U.S. Campaign for Burma, a prominent watchdog group here, in its first-ever analysis of the new reporting.

“[…] Burma doesn’t yet have the infrastructure necessary for protections. We’re very concerned that the labour market is going to be worse in Burma than in other places.” -- Jennifer Quigley, executive director of the U.S. Campaign for Burma.
The group says its findings are meant to encourage investors “to make forthright disclosures, manage risks, commit to responsible stewardship and transparency, and engage with civil society.”

Of the nine reports by six companies that have been filed with the U.S. State Department thus far, the U.S. Campaign for Burma says only a one, from Coca-Cola, is satisfactorily thorough. Coca-Cola told IPS in a statement that when it re-entered the Myanmar market in mid-2013 after more than 60 years, it undertook the longest and most in-depth due diligence process in the company’s history.

“From the very outset of our re-entry into Myanmar, Coca-Cola went to great lengths to integrate respect for human rights into all of our business activities,” Rehan Khan, the general manager of Coca-Cola Myanmar, said in the statement. “We hope these efforts contribute to an industry-wide culture in Myanmar of ethical and responsible business development.”

Other U.S. investors do not yet appear to have gone to such lengths. The U.S. Campaign for Burma rates two companies, Western Union and Clipper Holdings, as “questionable” based on their reporting, while three others – Capital Group Companies, Hercules Offshore and Crowley Marine Services – are described as “irresponsible”.

The two questionable companies are criticised for filing incomplete information, while Hercules and Crowley are no longer operating in Myanmar and didn’t file at all. Capital Group, meanwhile, filed a report suggesting that the requirement does not cover its “passive” investments in Burmese companies, though activists say no such exemption exists.

“The whole [reporting] process seems to be quite a mess,” Jennifer Quigley, the U.S. Campaign for Burma’s executive director, told IPS. “It’s very frustrating how many companies are trying to skate by with the absolute minimum amount of disclosure – or to disregard this responsibility entirely.”

Spirit of the law

The due diligence reporting requirement came about following debate over how the United States would lift its ban on U.S. investment in Myanmar, which at the time was seen by officials as tentatively opening up following a half-century of military rule.

Rights advocates urged the administration of President Barack Obama not to allow U.S. investments in certain sectors – in particular in extractives and large-scale agriculture – due to concerns over longstanding abuses.

In the end the government decided that no sector would be off limits, but rather that companies would be required to file annual reports on their efforts to ensure that international standards were being applied around their investments.

Investors are thus required to file such a report six months after new investments reach 500,000 dollars, or following any investment in the oil and gas sector. Thereafter, annual reports are due at the beginning of July.

From a watchdog’s perspective, however, a key gap has remained in this policy: the extent to which corporate policies would be extended to local business partners. Foreign companies, after all, are required to partner with local partners, many of whom have longstanding ties to the military, yet Quigley says the reporting on this issue has been vague.

“The U.S. administration has only stated that the ‘spirit of the law’ is supposed to extend to complete transparency around naming Burmese partners,” she notes. “But from these reports it appears that companies are not complying with that spirit.”

Just three of the six companies have named local partners, and each of these identities has raised concerns among rights groups.

Meanwhile, several prominent U.S. companies that have recently re-engaged in Myanmar – including Ford, GE, Halliburton and PepsiCo – have so far failed to file due diligence reporting at all. While the companies claim the requirement doesn’t cover their actions, the U.S. Campaign for Burma disputes this.

GE told IPS it hasn’t yet reached the 500,000-dollar investment threshold, though other companies were unable to offer a response by deadline. The U.S. Treasury would ultimately levy penalties for any such delinquency, but a Treasury spokesperson declined to comment.

New labour floor

The reporting deadline is arriving just as Gap Inc., the clothing company, has announced that it would be moving some of its operations to Yangon factories, becoming the first U.S retailer to do so. At the U.S. Embassy in Yangon on Monday, U.S. officials stated that the company would be partnering with USAID, Washington’s main foreign aid agency, as well as CARE International, a humanitarian group, to invest in Myanmar’s “social and economic growth”.

“Through partnerships, such as this one today, we are working together to ensure that communities benefit from an economy re-entering the international marketplace,” Chris Milligan, the director of USAID’s Myanmar mission, said at the event, according to a release. “Through this effort and other initiatives, we are encouraging responsible investment to improve the welfare of all people of this country.”

Yet Gap has also indicated its potential interest in a contentious economic zone outside of Yangon known as Thilawa. Co-funded by the Japanese government, Thilawa is the farthest along of multiple SEZs currently being planned by the Myanmar government.

The project has already run into significant concerns around plans for the relocation of thousands of people.

“We really need to get this right the first time around, because the biggest concern we’re hearing is that Burma is going to be the new ‘labour floor’,” Quigley says.

“Yet the international community won’t realise it, because Burma doesn’t yet have the infrastructure necessary for protections. We’re very concerned that the labour market is going to be worse in Burma than in other places.”

END