Timber group replaces sub-contractors with service providers

This comes after it previously said no more sub-contracts would be issued. It announced that the decision to hire service providers was due to the MTE’s capacity limits. Experts have questioned the differences between sub-contractors and service providers and argued that transparency is essential in any reformed processes.

Last year, the MTE announced that it would only extract timber on its own capacity and would not issue sub-contracts to private firms to undertake extraction activities.

Instead, the MTE is going to carry out its activities with service providers in five different contracts – felling, skidding, road construction, trucking and loading/ uploading processes, U Khin Maung Kyi, deputy general manager for extraction at the state-owned enterprise, said.

The MTE is a state-owned enterprise (SOE) responsible for the cutting and export of timber in Myanmar. According to the 1992 Forestry Law, teak or any other hard wood extracted by MTE is permitted by the law.

The MTE has extracted 80,000 tonnes of teak and 200,000 tonnes of hardwood. After suspending their operations for a year, the organisation plans to extract 15,000 tonnes of teak and 350,000 tonnes of hardwood in fiscal year 2017-18, according to extraction statistics from the SOE.

U Khin Maung Kyi said that the decision to hire service providers is due to the limitation of the MTE’s institutional capacity to fulfil all the demands in extracting timber. The existing transport capacity is also hindered by the fact that the vehicles are in use for more than three decades.

“The MTE has a limited capacity to extract the full amount of timber.

“With the current number of elephants and vehicles for timber extractions, we do not have sufficient capacity or efficiency to manage the work on our own.

“This is because our vehicles have been used for more than 30 years. So we will hire service providers for the areas where the MTE cannot do,” he said.

U Khin Maung Kyi added that the service providers will not receive profit shares on timber trade and cannot buy the timber extracted. This signals a difference from the SOE’s past practices.

In the past, privates companies which the MTE shared sub-contracts with enjoyed profit shares on extracted timber trade. This practice lasted until the 2015-16 fiscal year, when timber extraction was suspended by the National League for Democracy-led government for a year.

The timber ban lasted until March 2017, extraction activities have since resumed.

“Under the new government, private companies will no longer have sub-contracts. Before that, they were having full operations from extraction and loading or uploading to the ports and sharing certain profits on timber trade.

“The EU does not like this kind of process which Myanmar once used,” he said.

U Khin Maung Kyi said that service providers would submit proposals regarding their services and projects to the corresponding regional MTE officials. The regional MTEs would then take the proposals to the central office of the MTE to decide which service providers would win the contracts.

But there are questions raised among timber experts regarding the differences between the role of subcontractors and service providers.

“The MTE announced to the world that it will extract timber on its own capacity. But then they said they will make contracts with service providers again. So what is the difference?” noted U Sein Win, chair of the Myanmar Forest Product Merchant Federation.

Salai Cung Lian Thawng, strategic adviser of Pyoe Pin Programme, said the MTE has to provide sufficient transparency over the way they select winners among service providers and how resources and money are spent and used.

“Does the MTE have enough budgets to work with service providers?

“On which criteria will they choose the service providers? How much money is involved in hiring the service providers? How will the MTE pay the service providers? All these processes need to be transparent to the public,” he added.

In April 2014, Myanmar banned export of raw timber logs to slow deforestation and to boost its own production.

The NLD-led government imposed a national logging ban in fiscal year 2016-17. During the ban, the country is meant to only rely on stockpiled timber.

The ban was put in place to staunch one of the world’s worst deforestation rates.

According to the United Nations Food and Agriculture Organisation, Myanmar lost 3.2 million hectares of forests and about 10.8 percent of its forests cover between 2010 and 2015. Only Brazil and Indonesia fared worse.

At the same time, the international community has made their concerns clear.

In June 2016, Sweden has prosecuted an importer and trader of Myanmar teak under a European Union rule that bans placing illegal or high-risk wood on the EU market, according to information from the NGO Environmental Investigation Agency (EIA).

In March, Danish authorities have made a ruling to place injunctions on all seven Danish operators bringing Myanmar teak into the Scandinavian country. The EIA released a press statement on March 15 which welcomed the injunctions imposed on all Danish operators placing Myanmar teak on Denmark’s market.

The decision follows the EIA’s submission of evidence that Danish timber company Keflico violated the European Union Timber Regulation (EUTR) and sets a clear precedent that other EUTR-competent authorities must follow, the statement said.

Source: Myanmar Times

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