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Natural Resources Management

Myanmar has plenty of natural resources include natural gas, petroleum, timber and valuable minerals such as gold, tin, rubies and jade. Although Myanmar has abundance of natural resources, its development has never been on the right way due to lack of proper economic growth, extensive poverty, military dictatorship and prolonged civil war.

In the early 1960s, Myanmar was the richest country in Asia with wealthy natural resources, but then it closed its economy to the outside world and is now the poorest country in the region. However, Myanmar has now opened up its economy to the outside world once again, and will soon regain its former glory.

On June 28, Natural Resource Governance Institute (NRGI) has unveiled that Myanmar’s oil and gas, various minerals, precious stones and gems are a failing grade for mismanagement according to the 2017 Resource Governance Index (RGI). Myanmar performed extremely poorly across all four components studied (institutional and legal setting, reporting practices, safeguards and quality controls, and enabling environment) and scored lowest out of 58 countries included in the index. Despite gradual improvementsin oil, gas and mining sector governance since 2013, the country lacks a strong legal framework or the capacity to implement laws and regulations. Myanmar lacks strong management in the natural resource sector. It needs greater transparency and sustainable natural resource management for the development of Myanmar’s natural resources

Many international investors have cast their eyes on Myanmar’s abundant natural resources for commercial exploitation. This has prompted international pundits and commentators to speak about a “gold rush” unfolding in the country. Other experts clearly state that there is “no treasure trove waiting to be released here,” and highlight the difficulties facing investors due to the lack of high-quality geological and geophysical data.

Today, Myanmar’s natural resources include oil and gas, various minerals, precious stones and gems, timber and forest products, hydropower potential, etc. Of these, natural gas, rubies, jade, and timber logs are the most valuable and currently provide a substantial proportion of national income. To date, there has been a very low level of systematic exploration of Myanmar’s natural resources due to lack of modern survey techniques. Although all resource sectors have different development strategies, an overall strategy – particularly in the energy sector – might be described as “more and quickly.” Since it was clear that reform was in process after the 2010 election, investors have flocked to Myanmar looking for opportunities, particularly in the energy and mining sectors. Late in 2012, a new foreign investment law was finally passed, after much debate, on the extent of possible foreign ownership and investment restrictions. The 1994 mining law has yet to be reformed, and many investors consider that a change of signature bonuses and the terms of production-sharing contracts will be necessary before interesting in this sector.

Foreign Direct Investment in Myanmar

According to official data, recent foreign direct investment in Myanmar has been concentrated in the oil and gas and hydropower sectors, with mining coming in third position by value. Investment commitments made in the 2010-11 fiscal year were approximately 30 times the rate of commitments made on average for the previous 22 years. The main investors by country were Myanmar’s neighbors China (including Hong Kong) and Thailand, followed by South Korea, Singapore, and others. While the vast majority of people in the national workforce are subsistence farmers, the gas industry and the precious and semi-precious stone-mining industries have provided the largest incomes, with gas earning of $3.6 billion for 2011–2012 and precious stones earning of approximately $3.4 billion in 2010 from auction sales. Estimates of informal revenues from this sector are much higher. Some believe that sectors of the trade may be undervalued by a factor of 9. The $3.4 billion official figure is believed to vary between $5.5 and $15 billion, but quality data is hard to come by. Foreign investmentin Myanmar is increasing with the potential reform process, but as Myanmar becomes more locked-in to global markets, intensification of agricultural investment promoted on such a large-scale could lead to a surge of foreign investment in land, brining the same negative impacts to Myanmar that it has elsewhere. In 2013, the Directorate of Investment and Company Administration (DICA) reported approved foreign investment of $1.4 billion. That jumped to $4.1 billion in 2014, doubled to just over $8 billion in 2015, and was up 18.4 per cent to $9.48 billion in 2016 but FDI in Myanmar is volatile, as the most recent reports indicate a sharp downturn in the first three quarters of Fiscal Year 2017, heightening the urgency of getting the reform implementation under way. Myanmar is expecting over $ 6 billion of foreign investment in fiscal year 2017-2018.

Mining and Land Conflicts

Myanmar is geologically very rich, and mining is significant as a large-scale industry and also in small-scale artisanal forms. Mineral occurrences cover all sectors, including base metals (gold, copper, silver, lead, zinc, tin, antimony, iron, etc.), industrial minerals, energy sources (mainly coal), gems (jade, rubies, sapphires, etc.), as well as “rare earth” minerals. Myanmar is perhaps best known for gold, jade, rubies, and sapphires. It is estimated that in the past, 90 percent of the world’s rubies came from Myanmar. The state is currently aiming to control and manage all aspects of production and sale of jade and gems, but in this sector, as well as in the gold sector, large informal and illegal industries exist.

The mining sector operates both through granting concessions or leases to investors, and through state-owned mining enterprises. The current mining law (Mining Law of 1994) protects companies involved in mining, and gives very few rights to landholders. This law has no provisions for Environmental Impact Assessments, Social Impact Assessments, or community consultation, although the focus in this respect is rapidly changing, and new guidelines are being developed at a rapid pace. As in many other places, the road to successful implementation will be long. Mining companies currently have broad regulatory freedoms to do as they please. An agreementbetween Myanmar mining authorities and China’s Ministry of Land Resources resulted in six major projects by 2008. Three major new or expansion projects are currently in progress. The case of the Monywa copper project by Wanbao Mining – a subsidiary of the Chinese arms manufacturer Norinco – caught international attention in late 2012. Local communities had protested against land confiscation and environmental destruction in connection with the mining project.

Conflicts over Resources

Despite being blessed with an abundance of natural resources, Myanmar’s citizens are among the poorest in Asia and lag behind their ASEAN neighbors in all aspects of human development. Myanmar’s natural resources were managed in unsustainable and nontransparent ways during decades of military rule and economic mismanagement. Lack of transparency in the past has raised many questions about potential misappropriation. Revenues were used for state needs, among them being military expenses to ensure the military’s control. While natural resources were being sold to neighboring countries, the local population was left empty-handed.

Yet, citizens are well-aware of the large revenues being obtained from gas, gems, timber, and minerals sales and exports and want to see these clearly translate into revenues in the national budget, as well as to see consideration and planning for the management of the wealth of the country in a way that will take them on the pathway out of poverty.

Many of the deposits of natural resources are located in ethnic areas of the country where long-running ethnic conflicts have often generated war economies to sustain decades of armed resistance against the central government. Investment projects in these areas have a lot of potential for conflict and for harming the fragile processes toward peace. Many observers agree that the ongoing Kachin conflict is basically about competition for local resources. In all areas, benefit-sharing models with ethnic groups – and, more importantly, matters of project control and autonomy – remain unresolved, not agreed, and unsatisfactorily legislated. Such discussion items are central to the political discussions that ethnic groups hope become part of the much-desired peace processes.

Current unprecedented levels of investment in the natural resources sector will massively increase pressure on natural resources, communities, and the country’s ability to manage developments in a responsible and sustainable manner. Due to the current weak regulatory framework, foreign investment has the potential to add significant extra pressure to a system already under immense strain.