Tuesday, June 10, 2014

Democratic Voice of Burma

Democratic Voice of Burma

Burmese union leader elected to ILO’s governing body

Posted: 10 Jun 2014 05:25 AM PDT

The secretary-general of the Federation of Trade Unions Myanmar (FTUM) became the first Burmese member elected to the International Labour Organization's governing body last week during the 103rd session of the International Labour Conference in Geneva.

FTUM secretary-general Maung Maung, who was elected on 2 June, said the Burmese delegation participated in a discussion on Convention No. 29, which prohibits the use of forced labour.

While Burma had ratified Convention No. 29 in 1995, a 1998 inquiry by the ILO showed that the use of forced labour in the country was "widespread and systematic". This finding prompted the international body to recommend that international companies cease all activities that could abet the practice of forced labour. These restrictions were lifted last year.

"We joined a discussion on a proposal to consider workers who provide work against their will in factories, and migrant workers who are forced to take up overseas jobs that are different from what they were previously promised as examples of forced labour," Maung Maung said, adding that his role in the ILO's governing body was limited.

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"What will I be able to do for Burma as a member of the ILO governing body? Nothing!" Maung Maung said. "However, as we have a mandate to deal with general labour issues relevant to each and every country, we can raise these with the Burmese government in an effort to sign an agreement regarding forced labour according to the ILO convention that is in line with any changes and recent developments."

The ILO governing body is made up of 56 titular members and 66 deputy members, all of whom are reappointed every three years. The 103rd International Labour Conference will go on until Thursday.

JICA dismisses accusations of negligence

Posted: 10 Jun 2014 05:21 AM PDT

The Japan International Cooperation Agency (JICA) has rejected allegations that it betrayed its own guidelines on "environmental and social considerations" in the Thilawa Special Economic Zone (SEZ), in which it has a 10 percent equity stake.

The charges were levelled by residents of the Myaing Thar Yar resettlement village, home to 68 families displaced by construction of the project's 400-hectare first phase (Class A). Last week, three villagers presented JICA with a formal complaint at the agency's headquarters in Tokyo, supported by Japanese activist organisation Mekong Watch.

In a statement, the villagers accused JICA of defaulting on "its responsibility to improve or at least restore displaced persons' standard of living."

Masahiko Tanaka, JICA's chief representative in Burma, claimed that, although JICA provided funds and technical assistance to facilitate the relocation, issues relating to compensation and compliance with “international standards” are ultimately the government's responsibility.

"On resettlement issues, and social considerations, towards the project-affected people, mainly, responsibility is [with] the government of Myanmar [Burma], not JICA," he told DVB. "Until now, we think the government of Myanmar has conducted [itself] very well concerning the social and environmental aspects … in accordance with international standards."

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Japanese entities hold 49 percent equity in the first phase of the project. A consortium of three industrial conglomerates – Marubeni, Misubishi and Sumitomo – holds the remaining 39 percent, aside from JICA’s 10 percent share. The remaining 51 percent is held by the Burmese government and an investment company comprised of nine privately-owned Burmese firms.

The resettled villagers were given two options for compensation: a pre-constructed house on a 25-by-50-foot plot, or title to a plot of the same size and 2.5 million kyat (US$2,500) to cover construction expenses. Despite certain amenities afforded to the villagers – including electricity, which they were largely bereft of before – many feel JICA has not lived up to its obligations.

The relocated village is located at the bottom of a hill, roughly five kilometres from the project site, which residents claim is plagued by drainage problems. Visiting DVB reporters were told that, although an improved road to the village has been built, its inhabitants are forced to rely on expensive motorcycle taxis for transportation – costs which can account for more than half of their daily wages.

"If we work in the project area, we will get paid 5,000 kyat [$5] per day … in the ports, jobs usually pay 3,000 kyat per day," a local resident told DVB. "But to take a motorcycle to work back and forth, it would cost 3,000 kyat.

"We have asked for bus and transportation systems to get to our workplaces, daily, but they were not supplied to us," he said.

JICA's Tanaka claimed that the transport-related compensation of 72,000 kyat ($72) provided to every person displaced was sufficient, and that the quality of the road was praiseworthy enough – despite the fact that the villagers remain without reliable transportation.

"JICA's guidelines say, 'Don't make things worse'. Our guidelines don't say, '[Make people] rich!'" Tanaka said. "Of course, some improvements should be done. But what I want to say is, not to make these farmers rich men, or millionaires."

Mekong Watch and the Thilawa Social Development Group, the banner under which some villagers have organised to take on JICA, have also made repeated complaints to the agency about the quality of their drinking water. Tanaka claimed the agency has been working with the government to remedy the situation.

"Yes, the government and [JICA] understand that the drinking water is not so good. I understand that the government is now trying to make a new, deep well," he said.

Some 4,500 people face displacement as construction gets underway on the second phase of the 2,400-hectare project.  The 400-hectare first phase is set to open by the middle of next year, and around 300,000 jobs are expected to be created once both phases are completed.

Mae Sot ‘hundi’ operator arrested for links to drug trade

Posted: 10 Jun 2014 03:51 AM PDT

Thailand's narcotics police arrested the owner of a "hundi" or money transfer operation in the border town of Mae Sot on Sunday and seized over US$6.1 million worth of assets believed to have come from drug trafficking in Burma.

Manee Khampeera, 52, was arrested after more than 100 drug suppression and security police raided her house in Mae Sot. Gen. Pongsapt Pongcharoen, secretary-general of the Office of Narcotics Control Board (ONCB) – which led the raid – said that the police have been investigating Manee Khampeera's business, Nakhan Manee 786 Co, since March, after allegations that it was providing money transfer services to drug dealers in Burma, via branches in Rangoon, Moulmein and Myawaddy.

Along with her house, land and vehicles, police also froze 70 bank accounts. According to bank records, Manee Khampeera, as well as six other associates, transferred 2.4 billion baht, or about US$73.9 million annually.

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"The dealers sold drugs on the streets, then they saved the money into their accounts which were then wired into your bank accounts as well as the accounts of the people who are connected to you," the general told Manee. "If you're found guilty, you will be punished."

Manee Khampeera has denied any link to the drug traffickers.

The ONCB has also issued arrest warrants for six Burmese nationals – Htee Da Soe, Nay Linn, Min Ko Naing, Moe Moe, Shapi Yarpi and Jangta Jaktaphan. They are suspected of running a drug network together with Manee Khampeera, who has been accused of providing Burmese drug traffickers with accommodation and transportation, as well as migrant ID cards in Thailand. The ONCB has reached out to the Burmese police for help to find the six suspects.

Rape summit aims to ‘shatter impunity’

Posted: 10 Jun 2014 03:17 AM PDT

British Foreign Secretary William Hague joined up with film star Angelina Jolie in London on Tuesday to host an international summit on rape in war zones, aiming to "shatter the culture of impunity for sexual violence in conflict". The summit was attended by a delegation of seven women representing Burmese civil society groups.

Hosted by the UK’s Foreign & Commonwealth Office (FCO), the three-day Global Summit to End Sexual Violence in Conflict welcomed nearly 1,000 experts, civil society representatives, rape survivors and religious leaders from around the world. The FCO's stated goals are to promote a new protocol for documenting abuses and prosecuting sexual crimes committed in conflict.

"We think that this is a very good opportunity for a balanced group of survivors from all over the world to come together and try to solve this problem," said Jessica Nkhum, a spokeswoman for the Kachin Women's Association of Thailand (KWAT). She added that though the Burmese government had commendably endorsed the Declaration of Commitment to End Sexual Violence in Conflict, the particular situation in Burma will require diligent monitoring to ensure its sincerity.

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British advocacy group Burma Campaign UK (BCUK) shared this view, warning that signing the agreement could be little more than a "PR exercise", and demanding that the government establish a clear action plan with a six-month deadline for implementation. BCUK said that the country's history of "broken promises" are cause for concern, as the problem of rape in Burma's conflict zones has not improved despite strides towards ending the country's six decades of civil war.

"Rape and sexual violence by the Burmese Army has continued unabated in conflict zones in Burma," BCUK director Mark Farmaner told DVB on Tuesday. "In fact, since Thein Sein became president, Burma Campaign UK has received an increased number of reports of rape by the Burmese Army."

These reports are particularly common in northern Burma's Kachin State, where a government offensive has displaced upwards of 120,000 civilians since June 2011. Internally displaced persons living in remote camps are particularly vulnerable to torture and sex crimes. KWAT has documented more than 70 cases of sexual violence committed by the Burmese military since 2011, with about half of those cases resulting in the victim's death.

When do foreigners pay tax in Burma?

Posted: 10 Jun 2014 12:59 AM PDT

With the liberalisation of the political landscape in Burma, many people have become aware of the significant potential of this economic frontier that was once closed to the world. A number of multinational corporations are exploring Burma and will bring in experienced expatriates to help build capabilities locally.

This is not something new but, given Burma's emerging-market status along with tax laws and practices that change frequently, vaguely written and consequently open to interpretation, investors need an up-to-date understanding of the tax situation. This article describes some of the more important issues arising from the employment of expatriates.

Scope of Taxation: Expatriates working in Burma will be subject to personal income tax from day one (subject to any applicable tax treaty provisions) but how much they will have to pay depends on their residence status.

If they are on a long-term assignment and stay in Burma for at least 183 days during the tax year (which runs from April 1 to March 31, similar to Hong Kong) or work for a company set up under the Burma Foreign Investment Law (MFIL), they would become tax residents and have to pay personal income tax based on progressive rates up to a maximum of 20 percent for fiscal 2013 and 25 percent for 2014 onward, after personal and allowance deductions.

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Strictly speaking, the Burmese Income Tax law states that resident foreigners should be taxed on worldwide income. However, the Internal Revenue Department (IRD) has stated that, based on current practice, only resident foreign companies are liable for tax on their worldwide income (except those under MFIL status) and not individuals. In other words, resident foreigners will have to pay personal income tax on income derived from sources within Burma but not including offshore non-employment income.

Note that this clarification has not been made in writing and is based only on oral representations by IRD officials. Not only foreign investors but also expatriate employees will thus need an up-to-date understanding of the tax situation (which is often based on tax officers' interpretations and changes frequently) to ensure they remain fully compliant.

On the contrary, expatriate employees on short-term assignments and staying in the country fewer than 183 days during the tax year (and not working for a company with MFIL status) will be considered non-residents and taxed at a 35 percent flat rate on gross employment income with no personal deductions or allowances permitted.

One way to minimise the expatriate tax cost would be to structure the assignment with a start date soon after 1 April, and ending just before 31 March, to ensure the expat spends more than 183 days in Burma during the tax year and is considered a tax resident.

Taxable employment income: The definition of taxable employment income is broad and includes salaries, wages, annuities, pensions, benefits in kind, such as free accommodation, gratuities and any fees, commissions or perquisites received in lieu of or in addition to salaries and wages.

Although benefits such as free accommodation are taxable, the IRD does offer favourable treatment of employer-paid accommodation by providing specific valuation guidelines.

Tax treatment of equity-based compensation received by both expat and local employees is one area of concern since there is no guideline from the tax authorities.

The challenge is when the benefit will be taxed and by how much, i.e. is the expat employee taxed on the full benefit received or only the proportion that relates to Burma-sourced income, as in many other countries?

Since the definition of taxable employment income is broad, you will need to obtain specific agreement from local authorities for the tax treatment of any other types of benefits, e.g. equity-based compensation benefits, employer's contribution to overseas social security, bonuses received during the Burmese assignment and related to performance in a prior year, and so on.

Social security contributions: The Social Security Law took effect on 1 April 2014 and applies to all entities with at least five employees (Burma nationals and/or expats). The current rates of contribution by employees and employers are 2 percent and 3 percent of wages, capped at 6,000 and 9,000 kyat (US$6 – $9) for the employee and employer respectively.

Foreign exchange controls: Typically, there are no restrictions with inbound remittances, but outbound remittances could prove difficult due to strict exchange control regulations. The next challenge is how the company structures the payment of expat compensation (percentage to be paid in the home country and in Burma).

On a first reading of the Burma tax law, many people may assume that it is not all that complicated. However, in fact, the regulations are broad and open to interpretation, in particular for expatriate-related issues that are not specifically addressed. As a result, both multinational companies and their expat employees should seek support from a Burma tax specialist to ensure compliance with frequently changing tax laws and practices.

 

This article was written by Napaporn Saralaksana, senior manager for international assignment services for PricewaterhouseCoopers Thailand, and originally published in the Bangkok Post on 10 June 2014.

Gap’s entry to Burma could bring more good tidings, MGMA says

Posted: 10 Jun 2014 12:10 AM PDT

Gap's entry into Burma could attract more foreign buyers into the fledgling garment industry, thus improving work conditions and increasing employment for workers, the chairman of Myanmar Garment Manufacturers Association (MGMA) said on Monday.

Retail giant Gap Inc announced on Saturday that they have started sourcing products from two South Korean-owned factories in Rangoon, making them the first US company to enter the garment sector since trade sanctions were eased in 2012.

With its experience in other countries, MGMA chairman Myint Soe said that Gap's presence is a "good opportunity" for improving workers' rights while increasing productivity.

"Having more companies like Gap invest in Burma will create a lot of job opportunities, and as it is a responsible investor, it can improve the rights and working standards for garment workers, making conditions better than they are now," Myint Soe said, adding that Burma's primary garment investors, Japan and South Korea, often focus on more detail-oriented clothing, which reduces productivity.

"Companies like Gap, they prioritise quantity while also accepting decent quality products – and they are not as strict as Japan or South Korea. I hope this will make work more convenient for our workforce and improve their productivity," he said.

Myint Soe added that he hopes apparel exports will reach US$2 billion by 2016.

After a trade embargo was slapped on Burma by the US in 2003 for its use of child labor, the once-profitable apparel industry dropped from $800 million in apparel exports to $300 million. After the US and EU eased sanctions in late 2012, the industry saw a steady increase in exports to about $1.2 billion in 2013, a 33 percent increase from the year before.

But major brands have been slow to enter, making Gap's investment a significant step for the sector. According to Courtney Wade, a Gap spokeswoman, the two factories will be producing outerwear for Old Navy and Banana Republic outlets. A company fact sheet also said that Gap's investment in the two factories will create jobs for about 4,000 people.

She declined to name the factories or their locations, citing competitive reasons.

While Gap is the first American brand in Burma, but it is not the first major clothing company. Swedish fashion brand Hennes & Mauritz – the second largest global retailer by sales – has been placing test orders from Burma since 2013, said company spokeswoman Andrea Roos, and is currently sourcing products from three Rangoon factories and one manufacturer in Pegu [Bago] Division.

"H&M is an expansive company and we always look for new potential sourcing markets," Roos said, declining to name details on the production value or future investments. "Our presence in our production markets is long-term."

Despite the interest, Myint Soe said that the industry still faces major challenges, such as the high cost of land prices for new factories and a lack of infrastructure.

"The government has to improve the infrastructure, such as for ports, transportation systems, electricity and communication lines," Myint Soe said, adding that growing industrial unrest in the sector is troubling as well.

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"The issues we are seeing between garment workers and their employers is not a good sign. They need to negotiate and be more cooperative with one another," he said. "Otherwise, the garment sector will get stuck midway to development despite having the opportunities."

Steve Marshall, liaison officer for the International Labor Organisation in Burma, said that in terms of minimum wage and labor rights issues, it is crucial for MGMA to play "a key role".

"Clearly, it is early days in the reform/transition process [to enter this market], with a number of business risks remaining," Marshall said in an email. "However, responsible investment working within national laws and recognising internationally accepted fundamental principles and rights at work has the potential to support both the social and economic reform objectives."

"The question of timing will no doubt be informed by each company's due diligence process," he said.
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