By Chan Mya Htwe
Myanmar Times-Nov 28
As Myanmar awaits its validation result of Extractive Industries Transparency Initiative (EITI), the government has been criticised for not making progress in reforming the industries and state-owned enterprises.
Myanmar became an EITI member country in 2014 and is now going through its first round of validation process against the EITI Standard 2016, the objectives are clear: shape transparency, practice mindful governance via policy reform and legitimate tax information to a industry that has contributed significantly to the government’s budget.
The validation result will come out in early 2019 after the release of three reports which address the issues of tax management in the gemstone and oil and gas sectors. The first report published in 2013-14 has 14 recommendations and the second and third reports include 21 recommendations.
Among the recommendations, there are four for resource tax management, two for gemstones (including jade) and 15 for extractive sector governance, Myanmar EITI civil society representative Daw Moe Moe Tun said. The second and third reports covered tax incomes from oil and gas, gem, jade and other minerals (metals and pearl) in 2014-15 and 2015-16. According to the third report, 76pc of tax derived from the oil and gas sector.
The government secured K2,579,917 million from oil and gas companies including pipeline firms. Revenue from sales of production share in offshore blocks in 2015-16 constituted 52pc of all of the sector’s revenue and thus was major contribution to the national budget.
In fiscal year 2015-16, 51 companies which paid tax at least up to K1000 million were reconciled and the government received K707 billion, that covered 32pc of total tax revenue from this sector.
In fiscal year 2013-14, total tax revenue was more than K3000 billion and 85pc was from oil and gas sector, 13pc was gemstone and jade extraction and 2pc was other mineral extraction.
The country’s extractive industries are mired in notoriety for many reasons. One of them concerns directly the residents who live in regions which produce oil and gas.
Its impact is both environmental and social, and therefore Daw Moe Moe Tun argued that a special fund should be established where residents could choose in which ways they would allocate the money.
Although bidding works for oil and natural gas sites have improved, there’s a necessity in creating a report system related to employment data.
Daw Moe Moe further elaborated that there’s no transparency in state-owned businesses; no background, checks, registrations within the jade and gem sector and that there’s no scrutinising work conducted on the gem value – an essential measure to proper taxation.
In order to improve licensing process of mining and gemstone, the Ministry of Natural Resources and Environmental Conservation is now planning to develop a Mining Cadastre, which is also one of the recommendations in all three of the EITI reports, and has already formed a Pre-cadastre Working Group for data cleaning and compilation.
But the problem is not merely a regulatory one. The current production data are incorrect and it is estimated that most of its revenue is off the books.
“The communication [between government entities] is weak for businesses associated with the military and it can be seen in mining sector,” Daw Moe Moe Tun explained. The military is heavily involved in the extractive sector.
Above all, reform of SOEs is urgently needed.
“The governance of extractive SOEs is wrong. They [SOEs] grant licences for jade and gemstone sectors and also work as joint ventures [at the same time]. It is tantamount to having a serious conflict of interest.
“They collect tax and allocate. They are carrying out the governance of the entire sector and they need to take into account this issue,” said Daw Moe Moe Tun.
After the release of the three reports, the first one in 2014 and the last one in 2016, there has not been many changes. This inertia worries stakeholders even if Myanmar secures the validation result.
“If nothing’s been done, there is no point in passing the exam. If the government is approved even when the assessments are not carried out fully, it will certainly not implement them in the future. We need standards,” warned Daw Moe Moe Tun.
