The Irrawaddy Magazine

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The Irrawaddy Business Roundup (April 9, 2016) Posted: 08 Apr 2016 07:21 PM PDT A Dawei Development Company official shows Reuters a model of the Dawei special economic zone during an interview in Bangkok on Sept. 19, 2012. (Photo: Reuters) Chinese Firm Gets Go Ahead for $3b Dawei Refinery A massive Chinese government-backed project to build an oil refinery in southern Burma was among the dozens of deals rushed through by the previous government before it left power at the end of March. According to a report from Reuters on Tuesday, officials at the Myanmar Investment Committee (MIC) have signed off on the state-controlled Guangdong Zhenrong Energy's project for Dawei, the coastal town in Tenasserim Division that is the site of a planned special economic zone (SEZ). The 100,000-barrel-per-day refinery, which will include a terminal, oil storage and distribution facilities, is estimated to represent an investment of US$3 billion, Reuters said. BMI Research, in an analysis sent out this week, said the project would reduce Burma's reliance on imported refined fuels. In the short term, however, the refinery may have to rely on imported crude until new domestic oil discoveries are made, it said. "The approval for Guangdong Zhenrong's project signals Myanmar's growing appetite for attracting greater foreign investment into its aging refining sector," BMI said. "Meanwhile, the firm's planned investment will be viewed favorably by China, as it falls in line with the country's broader maritime Silk Road initiative that seeks to expand Beijing's economic and geopolitical influence in Southeast Asia, among other regions." The MIC approved a total of 48 projects during its last meeting on March 25, raising concerns that projects were rushed through ahead of the democratically-elected National League for Democracy (NLD) taking power. But the Dawei refinery project will also raise concerns because of the local partners involved, who will control a combined 30 percent of the project, Li Hui, a vice president and head of refining at Guangdong Zhenrong, told Reuters. The first local partner is Union of Myanmar Economic Holdings Limited (UMEHL), a Burmese military-controlled company. But Burmese tycoon Tay Za, who is blacklisted by the United States over his links to the former military government, is also involved. Tay Za is the chairman of the Htoo Group, named by Reuters the parent company of Yangon Engineering Group, a partner in the Guangdong Zhenrong project. The state-run Myanmar Petrochemical Corp. is also a partner, Reuters said. Guangdong Zhenrong representatives spoke publicly about plans for a refinery in Dawei as early as 2012. That was before the government canceled the original concession for the Dawei SEZ after the developer, Thailand-based Ital-Thai Development (ITD) had problems funding the project. A new agreement, also involving ITD, was signed last year, with the government of Japan pledging to put up some of the cost. The project has raised concerns about the impact on local people and on the local environment in Dawei. Many fear that a planned deep-sea port and a road that would put the area within a few hours of Bangkok could degrade a pristine stretch of coastline. As well as coming during the lame-duck period after the military-backed Union Solidarity and Development Party (USDP) suffered a massive defeat at elections in November, the approval of the Guangdong Zhenrong project may also be unpopular since a Chinese company will be the majority owner, with 70 percent. Chinese developers to have a poor record of dealing with local communities and heeding environmental concerns in Burma. A Chinese company was also controversially granted the tender to build a port and industrial development in Arakan State during the final months of the last government. Australian Miner Hopeful of Long-Awaited Approval in Karenni State Australian mining company Eumeralla Resources believes it will get approval to begin mineral exploration in Burma's mountainous Karenni State before the end of September this year. New mining rules introduced late last year are expected to bring a flurry of foreign investment into the sector. However, as a document the company has produced in order to drum up investment warns, the regulatory environment for extractive industries in Burma is still uncertain, especially given the recent transfer of power. "Investors should note that Myanmar Government's policies on mining are especially fluid as a new Government has recently been appointed, which may result in material changes to mining laws or regulations," the document, published on Eumeralla's website on April 5, says. The Australian company first began applying for permission to explore for tin and tungsten in Karenni State in 2013, but the project has been held up attaining approvals at different levels of government. The company said it had "conducted successful negotiations over the license area with government authorities and expects the exploration permit to be granted in Q2 or Q3 of calendar year 2016," referring to a period from the start of this month to the end of September. The document is a share prospectus designed to attract more investment for various projects in which Eumeralla is involved. It says the company hopes to raise a total of Aus$1.3 million, or about US$980,000, in total. Some US$340,000 of that is intended for the company's project in Burma. "Funds will be used to finalize the formal grant process and begin mineral exploration at the exploration permit in Myanmar, the application for which is held by Mawsaki Mining Co., Ltd in which the Company holds a 70% interest," it says. The prospectus does not state who holds the other 30 percent interest in Mawsaki, a matter that has raised concerns that the project could fuel conflict in Karenni State. Previous Eumeralla filings say the shareholder is Myanmar Energy Resources Group, which was described as a "Myanmar conglomerate with operations across a diverse range of business sectors." As The Irrawaddy has previously reported, local civil society group the Molo Women Mining Watch has linked Mawsaki to the Karenni Nationalities People's Liberation Front (KNPLF), an ethnic armed group that allied with the Burmese military after signing a ceasefire in 1994, and became an official Border Guard Force in 2009. Garment Exports Predicted to Reach $12b by 2020 Burma's garment exports could be worth $12 billion by the year 2020, according to a report carried in state media, which also predicted that the apparel industry would employ some 1.5 million workers by that time. The Global New Light of Myanmar attributed the ambitious figures to an unnamed "international textiles monitoring body," but reports elsewhere said the prediction came from the Myanmar Garment Entrepreneurs Association. Garment exports were badly hit by international sanctions in the early 2000s, but since 2013 a number of international brands have begun sourcing from the country once more. Exports were expected to recover to about $2 billion last year, according to the Myanmar Garment Manufacturers Association. The sector employs about a quarter of a million people, the MGMA says. Abuses Reported in Korean-Owned Factories A new report claims to have uncovered labor abuses at garment factories owned or part-owned by South Korean firms. Local group Action Labor Rights said in its report late last month—entitled "Under Pressure"—that it had interviewed 1,200 workers at 39 different factories with South Korean links between April and June last year, comparing the findings to what's required of employers under Burmese law. The survey, the group's report said, "reveals significant non-compliance on the part of many Korean factories, particularly with laws on working hours and overtime. In factories surveyed, excessive overtime appeared to be the major issue of concern, both from a legal compliance perspective, but also in terms of the key issue impacting on the health, well-being and safety of factory employees." It said almost 30 percent of factories did not keep to a rule that limits overtime to 16 hours a week. The majority of workers, 62 percent, said they were not allowed to refuse to work overtime. "This is unsurprising given that almost two-thirds of workers [63%] said that their take-home pay was not enough to live comfortably," the report said. The survey also found discrimination against trade union leaders, and that reports of sexual harassment in the workplace were an issue. "On sexual harassment, 7% of female respondents reported that either they had such experiences or they heard their female co-workers had such experiences," it said. Thai State-Linked Firm to Prioritize Gas Power A branch of Thailand's state energy company is prioritizing gas-fired power in Burma, according to a Burmese state media report. The Global New Light of Myanmar said Wednesday that Global Power Synergy Co. had power generation projects totaling 3,000 megawatts in the works in Burma, citing the company's chairman and chief executive, who it did not name. GPSC's president is Dr. Toemchai Bunnag. The state newspaper said GPSC—which is a spinoff of Thailand's state energy conglomerate PTT—was planning to expand around the region as the Association of Southeast Asian Nations' economic integration plans take hold. "Establishment of gas-fired power plants is on the company's list of priority," the report quoted GPSC's CEO as saying. It said the company was involved in two plants that would produce 500 and 400 megawatts of power each, as well as the construction of a 2,000 megawatt coal-fired power plant. It did not give locations for the planned power plants, but GPSC has previously been named as a partner in a project for gas power in Thanlyin Township, just outside of Rangoon. Bangkok-listed public company PTT is the majority shareholder in GPSC. PTT's oil and gas exploration and production arm is also involved in offshore gas projects in Burma. The post The Irrawaddy Business Roundup (April 9, 2016) appeared first on The Irrawaddy.

Dateline Irrawaddy: “Corruption Is Still Rampant Despite The Anti-Corruption Law” Posted: 08 Apr 2016 07:14 PM PDT This week on the panel, lawyer U Ko Ni and former Lower House lawmaker U Ye Htun. Kyaw Zwa Moe: Welcome to Dateline Irrawaddy! This week, we'll discuss the State Counselor Bill, which the National League for Democracy (NLD) submitted to Parliament last week, as well as Daw Aung San Suu Kyi's guidelines for civil servants accepting gifts. Lawyer U Ko Ni and former Lower House lawmaker U Ye Htun, from Hsipaw Township, will join me for the discussion. I'm Irrawaddy English editor Kyaw Zwa Moe. U Ko Ni, the military representatives have objected to the State Counselor Bill in Parliament. But I think this bill may have been debated and passed today. How important is this law for Daw Aung Suu Kyi, her NLD party and also for the people? Why is the military so opposed to it? Ko Ni: By studying the objectives of this law, we can know its importance. We can also study the preamble, which explains why this law was enacted. The text of the law also states the four objectives of the law. Our country is failing and deteriorating in all aspects. We lag behind our neighbors in development. So, to bring rapid development to our country, which is declining and deteriorating in all aspects, good leadership is necessary; and this leadership must be provided by the person who people truly trust and rely on. As everyone knows, the majority of people, especially the ethnic groups, overwhelmingly supported the NLD in the November election. It is not strange that the Bamar people supported the NLD, but ethnicities such as Chin, Karen, Karenni, Mon, and Shan in their respective states also supported Daw Aung San Suu Kyi, out of a deep respect and a belief that she could really initiate change. So, what is the aspiration of the people? It is Daw Aung San Suu Kyi's leadership. On the other hand, the 2008 Constitution, which was drafted high-handedly without the consensus of people, does not allow Daw Aung San Suu Kyi to assume a leadership role in politics, because Article 59(f) [of the 2008 Constitution] bars her from doing so. KZM: This law was drafted because of constitutional restraints like Article 59(f), wasn't it? KN: Yes it was. Because Daw Aung San Suu Kyi's leadership was restricted, we were trying to appoint her as the counselor, referring to provisions in the Constitution and in other laws—so that she could provide de facto leadership. KZM: As far as I understand, Article 217 of the Constitution [stating that nothing shall prevent Parliament from "conferring functions and powers upon any authoritative body or person"] is related to this law. The NLD seems to have drafted this law based on this Article. KN: Yes, it is. Besides Article 217, there are other provisions in the Constitution that can be referred to as well. KZM: The State Counselor Bill clearly states that the Union Parliament assigns Daw Aung San Suu Kyi as State Counselor. What do the different ethnic groups think about this unusual law [written with one specific person in mind]? Ye Htun: What the ethnic groups want most is a true federal union. This is one objective of the State Counselor Bill. This is the part that ethnic groups welcome. As U Ko Ni has said, this law has emerged mainly because of Article 59(f). Because this Article bars Daw Aung San Suu Kyi from the presidency, the NLD tried to find another way out, and found this law. This discovery will help them more than if Daw Aung San Suu Kyi became the president. Suppose Article 59(f) was amended, and Daw Aung San Suu Kyi became the president. Then, she would not be able to communicate with the NLD or NLD lawmakers because of constitutional restrictions [Article 64 states that if the president is a member of a political party, they cannot take part in party activities during their term]. But now, she can join the National Defense and Security Council (NDSC) as the foreign affairs minister, manage the cabinet as the president's office minister, and under this law, she can also interact with members of organizations and agencies. She can meet the secretarial body of her party legitimately and can provide recommendations to prominent lawmakers, including parliamentary committee chairpersons. But, it is important to note that she is not supposed to give instructions to her party members and lawmakers, since the Constitution states that the three branches of power must be exercised separately. So, she would give advice. And everyone understands what advice means. Kyaw Zwa Moe: Ok, let's talk about another important topic. Yesterday, Daw Aung San Suu Kyi issued a set of guidelines regarding accepting gifts. Myanmar is one of the most corrupt countries in the world. [The country] finds these guidelines appealing. The question is how effectively those guidelines will be enforced. The guidelines are just about accepting gifts, and do not deal with bribes. So, U Ko Ni, how do you assess these guidelines? KN: We already have laws regarding bribery—Chapter(9) of Burma's Penal Code, regarding the offenses of civil servants, was enacted before 1948; and, the Anti-Corruption Act was enacted in the post-independence period. In this act, the punishment for taking bribes was increased to a ten-year jail sentence. The most recent one is the Anti-Corruption Law, enacted in 2013. This law is very good. It is up to date, and it seems that lawmakers studied related international laws before enacting this law, as it is fairly comprehensive. But there are difficulties in implementation. It is fairly difficult to enforce it. The problem is that corruption is still rampant in Myanmar despite the Anti-Corruption Law. There is corruption at each level of the [government] hierarchy. But punitive actions are rarely taken. There were only four or five corruption cases that were punished in the past three or four years. [Civil servants] take bribes one way or another. This problem was the worst when U Thein Sein's government officially allowed taking gifts that were valued at less than $US250, and said that it would not be treated as taking a bribe. Cartoonists responded to this with satirical cartoons. Daw Aung San Suu Kyi noticed it and therefore adopted these guidelines. As a legalist, I would say that Daw Aung San Suu Kyi has differentiated between bribes and gifts. Her guidelines concern taking gifts. Everything that is taken within the framework of her instructions will be considered a gift, and anything out of the framework of her instructions will be considered a bribe. If [bribes are taken], it will be treated as corruption and punitive actions will be taken. KZM: The 2013 Anti-Corruption Law could not be enforced properly. The government failed to implement the law. Why? YH: As far as I have studied, in countries with clean, corruption-free governments, the top leader, president or prime minister, he himself must be clean and dedicated to forming a clean cabinet. KZM: He himself must be clean? YH: Yes. There is a Burmese saying that says, "the roof must not leak" [if a leader is bad, his subordinates will also be bad]. In a country where the roof is leaking, implementation will not happen, no matter what laws are enacted, or how good they are. I was encouraged by Daw Aung San Suu Kyi asking her lawmakers and ministerial nominees to avoid corruption before she had even formed the government. Because she spoke out publicly against corruption, hopefully her anti-graft efforts will be successful. KZM: How effectively will [the guidelines] be implemented? Over the past 40-50 years, the society and the successive governments of Myanmar were used to giving and taking bribes. They did not even view the bribe for what it was. [High-ranking officials] received about US$400-800 to cut a ribbon [at the opening ceremonies of private companies]. There are still, more or less, some of the same ministers and authorities in the current government. How can this be tackled using the 2013 Anti-Corruption Law as a guideline? YH: Personally, I think it will be best if the guidelines can be as clear as possible. Under the new guidelines in our country, you can accept a gift valued at less than $21, and give gifts that are worth more than that to the government. KZM: Yes, the guidelines state those details. The guidelines set the maximum price of the gift at $21. KN: And [civil servants] can only [accept a gift] a maximum of four times. KZM: Yes, [civil servants] are not allowed to accept gifts of $21 from the same person or organization more than four times per year. So, the maximum they are allowed to take is $84 per year. It is quite detailed, but I think such details are justifiable. YH: [Vested interests] will take advantage of this weak point in the law and give gifts worth $21 several times. KZM: We have heard that some people give cars as wedding gifts at the wedding receptions of the children of high-ranking officials. It is very likely that they give these gifts in their own future interest. Most of the people I talked to yesterday like Daw Aung San Suu Kyi's guidelines. But what is the mechanism to expose corruption? There will be people who continue to take bribes under the table. We have not yet seen the complaint mechanism. So, U Ko Ni, what do you think Daw Aung San Suu Kyi and her government will do regarding this? KN: A mechanism is of course needed to enforce a law on the people. So, we have two points to discuss here. There will be a separate mechanism for guidelines issued by Daw Aung San Suu Kyi, through the Ministry of the President's Office. The guidelines are not related to the Anti-Corruption Law, but to gifts that civil servants are allowed to take. She had to issue these guidelines because of Burmese customs. In our country, there are customs such as paying respects to elderly people on religious and culturally significant days like Thadingyut and Tazaungmone, giving wedding gifts, and giving gifts to visitors who come to your home. These are the part of our culture. So, Daw Aung San Suu Kyi has issued these guidelines in fear of [civil servants] taking advantage of this part of our culture, and taking bribes—in other words, taking bribes under the cover of culture and customs. Violating these guidelines is not a big offense, and violators will be punished according to the code of conduct for civil servants. The violators, ministers or staff will be disciplined depending on the extent of the violations; however, the scope of these guidelines is limited. In the case of the Anti-Corruption Law, the scope is wide because it intends to prevent the abuse of power by those in positions of power in the judiciary and legislative departments. If you ask me how to implement the law, we need to categorize [corruption into different groups]. U Ye Htun has stressed that the leadership must be clean, and it is very likely that our current leadership will be. The leadership is usually only a few people, it is easy to check them and it is noticeable [if they do something wrong]. The middle level will be a larger number of people—by middle level I mean civil servants in power, for example, director-generals and directors. They may abuse their power and take bribes. And finally, there are low-level staff members. For some, their salaries simply do not suffice for them to make ends meet. So, some have to take tips or small amounts of money given [by customers] of their own volition. Those in authority can't treat this equally as an abuse of power. The NLD government needs to adopt, in cooperation with experts, a mechanism to punish people accordingly. Good by-laws and procedures also need to be adopted. KZM: U Ko Ni, U Ye Htun, thank you for your contribution. The post Dateline Irrawaddy: "Corruption Is Still Rampant Despite The Anti-Corruption Law" appeared first on The Irrawaddy.

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