Govt urged to upgrade legal framework for extractive industries

Vicky Bowman, its director, told a press conference held on Thursday that Myanmar needed to improve policy planning and enact legislative reforms to establish a coherent framework for the oil and gas sector, one that includes adequate safeguards.
“The government needs to fill the existing gaps in the legislative framework for the protection of the environment and human rights. As there are many things to do, the support of development partners and businesses play a key role,” she said.
Bowman added that the government should prioritise the protection of environmental impacts. She urged the Thein Sein administration to think carefully in undertaking the reforms.
“How they make changes to the legal framework is very important. The authorities should not make many changes at the same time, but need to focus on doing the process very well. Do it properly, and try not to waste time,” she said.
Bowman added that engaging with businesses and civil society would be key to the success of reforms. The Government has an opportunity to fill existing legislative gaps through contractual requirements to meet the International Finance Corporation performance standards as well as environmental, health and safety guidelines in the new production-sharing contracts signed with oil and gas companies that won bids for exploration of new blocks.
The centre yesterday published its impact assessment on Myanmar’s oil and gas sector in collaboration with its founding organisations, the Institute for Human Rights and Business and the Danish Institute for Human Rights.

The report aims to help companies conducting their environmental and social impact assessments, including human rights issues, more effectively. It also aims to support companies, communities and workers to work together to address concerns over potential impacts of operations.

“Under new Myanmar regulations, companies awarded blocks will have to conduct environmental and social impact assessments according to international standards, and develop appropriate environmental and social management plans to manage those risks throughout the project cycle. These are new concepts and requirements for Myanmar,” said Bowman.

In the last fiscal year, the government awarded 16 onshore and 20 offshore blocks for oil and gas exploration and production. To ensure a level playing field, the government should impose the same requirements on all operators and not just new entrants, the report says, adding that companies that had been awarded blocks previously should publicly commit to operating to the same international standards.

The report underscores the importance of stakeholder meetings and engagement with local communities.

“Engagement by business with stakeholders has historically been almost completely absent, leading to mistrust, misunderstanding and long-standing disputes. Businesses, whether those already present or investing for the first time, need an in-depth understanding of local priorities and concerns, through greater engagement with workers, local communities, national-level stakeholders and the local and national media,” the report says.

It also mentioned that the firms in the extractive sector need to understand three ongoing processes: proposed Constitutional reform; peace negotiations between the government and non-state armed groups; and the push for transparency and more localised distribution of revenue flows.

“Most of the mega projects are inevitably associated with conflict. Currently, ethnic minorities see very little benefit from oil and gas extraction in their areas,” said Thi Thi Thein, the centre’s sector-wide impact assessment manager.
“As far as we have learnt, land issues are very complex, and it is still a major challenge to foreign investors. Most rural families have limited protection under existing land laws,” she added.
Thi Thi Thein also said that there was inadequate consultation about land acquisitions, accompanied by a lack of due process, and concerns about corruption in the payment of compensation.
Despite such challenges, Bowman is optimistic about the industry’s outlook and the new entrants.
“We’ve found out that most of the newcomers in the industry are very large firms, which have a wide range of experience and follow international standards. And they have many shareholders. The entry of such firms may reduce the risks and local people’s concerns,” she said.
“We have contact with about 20 newcomers. The due diligence of most firms is quite satisfactory. Generally, small companies have higher risks than big ones. Big companies have acquired a lot of international experience. Yet, I am worried that the government doesn’t have enough experience,” she added.
The government should focus on high-risk assessment activities and contractual enforcement, Bowman said. “The government has already signed a lot of onshore agreements. If there is a breach of promise by businesses, the government can stop the contract. The authorities should carefully monitor what these companies are doing on the ground.”
Bowman sees the lack of skilled civil servants for monitoring firms’ activities as one of the major shortcomings of the Thein Sein administration. She called for more capacity-building programmes for government personnel.
“A certain percentage of funds should be allocated to providing training for a wide range of government personnel who are involved in regulating petroleum operations, including regional/state and local government authorities,” she said.