A Divisive bill that could open Myanmar’s lucrative mining sector further to foreign investment has been submitted for the third time to the Pyidaungsu Hluttaw for approval.
The long-awaited Mining Law amendment bill, which will update legislation from 1994, was suspended earlier this year following fierce disagreements between the upper and lower houses.
A key piece of legislation, it could bring significant new foreign investment into Myanmar’s natural resources sector, boosting government revenue.
The latest draft, submitted by the Pyidaungsu Hluttaw Bill Joint Committee, amends a clause to allow foreign investment into small and medium-sized mining ventures for the first time.
However, the amendment also states foreign companies will only be able to engage in certain value-added or trading activities depending on the size and quality of the mineral deposit.
This has been a focal point of debate between the two houses.
A motion approved by the Amyotha Hluttaw that would allow foreign investors to form joint ventures with smaller local companies was blocked by the Pyithu Hluttaw, which said this would risk pushing small local companies out of the market.
The existing law permits foreign investment but only into large companies. This restriction, along with myriad other factors, has stymied foreign interest. Last fiscal year, foreign direct investment into mining was just US$6.2 million through a single project, compared with $3.22 billion into the oil and gas sector.
The second notable change to the draft law is aimed at settling a dispute over the power to approve investments and oversee projects.
The Amyotha Hluttaw believes this power should be devolved to state and regional governments, and as such approved a clause allowing the Ministry of Mines to form region and state committees – each chaired by the local minister – which would grant investment approval.
Permits for evaluating, prospecting,studying the potential of plots, carrying out large, medium or small scale production, improving or selling a mineral, and mining for industrial raw materials or stone should be granted at the regional level, it said.
On the other hand the Pyithu Hluttaw said transferring the mandate of the Union government to oversee the sector could make it difficult to enforce sustainability.
The amended clauses proposed by the Bill Joint Committee seemingly seek a compromise, stating, “The ministry can form a region or state committee for scrutinizing and granting plots under the approval of the Union government” and that such committees “can issue working permits with approval from the ministry after scrutinizing the application”. These changes will now be debated once more.
When the bill was first discussed by the Pyidaungsu Hluttaw last November, only eight of the 21 clauses and eight additional suggestions were approved by both houses. Another review in May and June led to the approval of just three more.
Speaker Thura U Shwe Mann then suspended the debate until after Schedule Two of the constitution had been reformed. This happened in July, granting greater power over natural resources to state and regional governments.
The Myanmar Times contacted a number of MPs to ask if they would accept the amendments, but did not receive a clear response. U Phone Myint Aung, independent representative from Yangon Region, said, “It is interesting. So, wait and see who will accept it.”
The other clauses will be amended based on approvals in the Pyithu Hluttaw or the Amyotha Hluttaw.
Additional differences centre on the duration of contracts, the level of taxation and terms of investment for foreign companies.
Under the existing law, the Ministry of Mines acts as a non-equity partner but is still entitled to around 30pc of minerals extracted, in addition to income taxes and royalties.
Foreigners are also forbidden from exporting ore, coal and gold. On the issue of resettlement, companies are left to negotiate themselves, with little guidance on compensation. They are also required to apply for new permits at every stage of the development, from the initial assessment onward.
The risk for foreign companies is high. While Myanmar’s abundant natural resources range from gold and rubies to jade, coal, copper, tin and tungsten, the sector is plagued by controversies around safety, land rights, resources sharing, armed conflict and lawlessness.
Last week a landslide in the jade-rich region of Hpakant killed at least 113 miners. No-one has yet stepped forward to claim responsibility and companies operating in the area will likely not be charged.
It remains unclear which companies are active in the region, the extent of their interests, or the value of the industries themselves. Watchdog Global Witness last month placed the value of the jade industry alone in 2014 at US$31 billion, while government export figures are just a fraction of this sum.
International companies have often clashed with residents amid allegations of land dispossession and environmental damage.
Sporadic conflict between the military and armed ethnic groups, fuelled by mineral wealth, presents an additional risk. To add to this, a regulatory minefield, restrictive laws and a slow approvals process have led a number of hopeful companies to withdraw their applications and seek their fortunes elsewhere.
It is hoped the new law will also require the government to place a proportion of profits from the sector into a development fund, so that local communities will benefit.
Under the existing system, the Ministry of Mines passes income from the sector to the Ministry of Finance to be redistributed through the annual budget.
Most of the country’s most resource-rich areas are near to conflict zones. A truly nationwide ceasefire may open up such prospects, assuming the agreement incorporates mutually accepted resource-sharing terms.
Source: Myanmar Times