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Philanthropy not legally required for investors: DICA

The government does not oblige the private sector to make philanthropic donations when doing business in Myanmar, a senior official has clarified.

U Thant Sin Lwin, head of the Directorate of Investment and Company Administration (DICA), said that neither the Investment Law nor the Myanmar Investment Commission requires investors – foreign or local – to spend a percentage of their profits on philanthropy.

He made the comments at a seminar on the governance of corporate philanthropy in Yangon while noting that donations are an integral part of Myanmar society and culture.

Vicky Bowman of the Myanmar Centre for Responsible Business pointed out one exception is the gemstones industry, where section 56 of the 2019 Gemstones Law requires 2 percent of a company’s investment to be paid to state and regional governments for spending in accordance with the guidance of the local lawmaker. She warned that this represents a significant corruption risk.

The Sagaing regional government recently began to require applicants for small-scale mining permits to make a K400,000 contribution to a township-level community development fund, which the sub-national government called a “CSR Fund”. Apart from the governance and corruption risks, the legal basis of the new requirement is unclear.

The Myanmar Investment Commission encourages investors to consider the many different ways their businesses can enhance people’s welfare and deliver “responsible and inclusive investment,” U Thant Sin Lwin said. Philanthropy, including partnerships with organisations which are working directly for public welfare, was just one way to achieve this.

Above all, he said it is about the way a company implements its investment and operates its core business. Key factors include direct and indirect creation of quality jobs, training and skills transfer, and paying taxes.

The government led by Daw Aung San Suu Kyi has vowed to attract responsible investment into the country. Instead of exacerbating conflict and human rights abuses, the State Counsellor wants investments “implemented with responsibility” to contribute to reduced conflict and development.

Investment Minister U Thaung Tun said the Commission is “actively promoting responsible, sustainable, and mutually beneficial investment — that is, investment which does not prioritise short term returns at the expense of future generations.” Despite transparency improvements brought about by the new electronic registry MyCo, the Commission has yet to disclose investment proposals prior to approval and improve the scrutiny of documents submitted by investors, as reported by this newspaper this year.

U Thant Sin Lwin also reminded investors to ensure that they are obeying all Myanmar laws and permit conditions, respecting human rights, avoiding and minimising negative environmental and social impacts and not engaging in corrupt practices.

Company directors should be mindful of their legal duties when making decisions on corporate philanthropy, ensuring that it benefits Myanmar society, “does no harm” and does not undermine the government’s fight against corruption.

The Myanmar Times revealed recently that vague regulations regarding tax-deductible company donations has led to corruption risks. The government to date does not have a list of institutions legally eligible to receive tax-deductible donations.

Some companies have become more anxious about making donations to the government since the UN Independent International Fact-Finding Mission identified in August around 60 foreign companies involved in joint ventures or with commercial ties to the Tatmadaw. The UN report linking corporate donations to possible complicity in ethnic cleansing has drawn the attention of the business and development community to the problematic issue of donations.

For example, Japanese brewer Kirin, which has a joint venture with military-linked Myanmar Economic Holdings Limited, was heavily criticised for making donations to the Tatmadaw in 2018. The firm responded with a “human rights impact assessment” and overhaul of relevant governance.

Speaking at the seminar, ActionAid Myanmar country director Araddhya Mehtta underlined the importance of tax rather than philanthropy as the biggest source of funding for social services and development.

Ms Mehtta noted that the country currently has the lowest tax revenue as a percentage of GDP within ASEAN, and questioned the impact of investment tax holidays and tax incentives for donations.

Source : Myanmar Times

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