Myanmar’s mining debate: Suffering from flawed definitions?

Author: Jan Dharmabandu (Mining Engineer)

I am just about to finish my short assignment in Myanmar. During that six months I saw frustration and confusion in almost every stage of mine life cycle -exploration, mine development and operation -from proponents of small scale mines to international corporations. The root cause is the slow progress in the sector reforms that has been stumbling along now for at least 4 years.

The new mining act became law in December 2015. The corresponding rules and regulations are not out yet. It is claimed that they are with the legislature, waiting to jump the last few hoops. The adaptation of laws and regulations would not by itself be tantamount to a reformed mining sector – but it will mark a major milestone. The immediate next question for the investor would be “Will the fiscal regime (that will be facilitated by, but not necessarily defined in the new regulations) sufficiently compensate the risks – especially those associated with high investments necessary to introduce advanced methods and technologies to bring the local mining practice on par with the world’s best”.

The overwhelming driver of the drag is the pervasive confusion in public discussions and around design tables of public policy over basic definitions -the most pivotal among them being “What is mining “. Some senior officials from the ministry of natural resources and environment (MoNREC) lament in confidence that this confusion is sawn, if not engineered, by anti-mining lobby. That is easy to belive if the contents in the myriad of mainstream media opinon pieces are allowed as evidence: narrow but intensely argued opinions propelled by Samaritans of social and environmental good – often associated with NGOs.

They no doubt mean well. But unless the policy debates are based on firm and clear definitions, outcomes are likely to suffer from long delays and being ineffective. It is the poorest in the most rural areas that stand to loose the most as a result- not to mention the economy in general. That the environment too will suffer seems incredulous at first glance but has firm basis in reality: if one looks at historical evidence – the best way to dislodge destructive excavating for minerals is to facilitate responsible mining. Where there are minerals in the jungles, someone will take them out; legally or illegally; responsibly or otherwise; if not already, if not today, some other day.

The article below is an attempt to help refocus and recalibrate that basic premise “What is mining” in the Asia Miner (Volume 14: Issue 3L 2017 August):

What is & Why Mining: A Perspective from Myanmar

Mining is the first interface of civilization with nature. Each year about 5 billion tons of minerals are mined from the earth. Barring industrial catastrophes, it has also been the most “intense” interface between civilization and nature: in that both sides of the interface are impacted intensely by the transaction that takes place over the impact footprint. Take a 100ha mine site; its impact on its footprint is much more intense than had the 100ha been used for example, to run a farm or a factory. The same way, the same mine generally would generate a far higher positive economic impact and it is often unique- it is much easier to find substitute locations for the farm or the factory, but the mine has to happen where the mineralization is.

A potent contrast here is in the way how the socioeconomic to environmental impact trade-offs play themselves out in the long run including the post-closure phase. The impact on the environment, especially if mining is conducted professionally throughout its full project life cycle, is reversible. This reversal and recovery process is especially rapid in regions where dynamics of biotic and abiotic factors are intense – for example tropics and sub-tropics. This is not so had the virgin land cover been transformed to a rice field or a residential area. On the other hand the education, empowerment and service infrastructure that a well-run mine brings to rural communities are irreversible social investments. An illegal- logger who became a mechanic in the mine and his children who received a good education due to their father being stably employed and the community school being well-resourced, trigger a positive and complex social chain reaction that is impossible to accurately model.

A mining impact study by IFC done in 2013 found that “about 28 jobs in the economy were associated with one direct job in the mine”. Twenty eight (see Table) is an encouragingly high number. But there is much literature in public domain supporting job multiplier factors around 10 for mining projects in remote areas.

Like in any other profession, for professionals in mining, the application of their knowledge is governed by codes and ethics. An essential part of their training is to be “responsible” in addition to be knowledgeable. For example, a modern mine supervised by mining professionals would have, among many other dangerous equipment and activities; a myriad of moving vehicles with gross weights often exceeding 400 tons and rock blasts in some mines regularly setting off few thousand tons of explosives in one single go. Yet statistics from Australia, a country with a mining industry that generates about USD130 billion in annual sales revenue, show that an average worker is 20% more likely to get accidentally injured working in retail trading than on a mine. In countries where rules are respected and accountability counts, “Responsible mining” should sound almost as superfluous as “Responsible dentistry”.

Resource Curse is a phrase that forces its way into any high-level policy discussion on resource development and it is doing so currently in Myanmar too. It is a hypothesis that came into macro-economic parlance in the early 90’s where it proposes that resource-rich economies generally grow more slowly than resource-poor economies. At first glance, it represents a difficult puzzle since a free gift of nature should be a blessing, not a curse.

Although concern over efficacy of resource-dependent development is centuries old, the exact phrase “Resource Curse” was first used by Alan Gelb in 1988 as part of an economic research. He argued that resource poor countries engage earlier in labor-intensive competitive manufacturing with the result being faster diversification, higher saving rates, and faster build-up of human and social capital.

Since then there have been few assays challenging the concept of Resource Curse. More recently, Daniel Lederman and William Maloney of The World Bank concluded that the evidence for Resource Curse “remains elusive”. They say that nations with quality administrative institutions are able to manage their resource revenue and effectively turn it into positive economic growth. In addition to efficient revenue management, they note that quality institutions and monitoring mechanisms lead to transparency and accountability as well. Furthermore, they reduce space and incentives for corruption.

Mineral occurrences are subjected to rules of utility like other attributes of nature; population, water, terrain, flora and fauna, sunlight, wind etc. Any of them can have a positive utility (a resource that can be converted to a reserve), or a negative utility (a burden that needs a solution) depending on the time and the geographical location of their occurrence. Driven by technology or supply/demand movements, a mineral occurrence may or may not present itself as a mineral resource. The authors of Resource Curse Hypothesis failed to recognize this transient nature of mineral resources. Wright and Czelusta effectively utilized this intrinsic flaw in the Resource Curse hypothesis to undermine it.

Let’s take a glance into the future. Mining of mineral rich ‘polymetallic nodules’ from deep seas of PNG and elsewhere are scheduled to start production in 2019. Further up, Goldman Sachs project team argues that “mining in space is getting cheaper and easier, and the rewards are becoming more promising as time goes by”. These transformational changes in the supply chain of raw materials can significantly change the ability of individual nations to convert land based mineral deposits to mineral resources and then to mineable reserves. Also, as happened in Europe, mineral resources had a critical role to play in the development story of their host nations. But the same deposits are not considered “mineral resources” today, due to changes in the societal values and aspirations towards environment, safety, security and employment, despite demonstrable economic values these deposits continue to carry. The optimum utility of a mineral occurrence to a nation is in the early stages of the nation’s growth story.

Mining in Myanmar has had a terrible history tattered with catastrophic accidents, unbridled environmental damage and associations with armed conflict while contributing only marginally to national coffers. This resulted in policy makers today being suspicious – if not outright hostile -towards what they imagine to be “what mining is”, although the dialogues of late have become reassuringly mature.

In 2014 mining industry of Myanmar produced USD1.2 billion worth of minerals (excluding oil & gas and gemstones) compared to the USD 8.1 billion of the Philippines. Comparing few factors such as known geology, total land area and the population density between Philippines and Myanmar, an extrapolation can be drawn that Myanmar has the capacity to achieve several times higher mining related revenue than the Philippines.

There are number of factors critical for that transition. Some are outside the control of Ministry of Natural Resources and Environmental Conservation of Myanmar (MoNREC). On the part of MoNREC, the most important is clear regulations and efficient enforcement. Strict standards must go hand in hand with speedy and streamlined permitting processes.

Mining in Myanmar should be encouraged and supported. It can play a tremendous role especially in the early stages of Myanmar’s journey to prosperity.

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