Business

Is Burma a ‘Global Leader’ of Corporate Transparency?

By Feliz Solomon 10 October 2014

RANGOON — Newly disclosed corporate ownership data has prompted one international advocacy group to label Burma as a “world leader” in transparency and urge the government to maintain pressure on industry stakeholders as the country moves toward achieving global standards.

Transparency watchdog Global Witness on Friday published a 30-page breakdown of 25 foreign and domestic oil and gas companies operating in Burma that have—upon being solicited by the group—published full or partial information about their “ultimate beneficial ownership,” which has been defined as the individual person or persons “right at the very top of the chain.”

“This is a global first in one of the places you might least expect it,” Global Witness analyst Juman Kubba said in a statement. “All over the world, corrupt politicians and crooked businessmen hide behind secret companies to steal oil, gas and mineral wealth. If Myanmar [Burma] is to turn the page on a history of cronyism and corruption linked to natural resources, it has to crack this problem.”

While the disclosure is viewed by most stakeholders as a step in the right direction, some analysts argue that proclaiming the notoriously corrupt nation as a success story and a potential precedent may be premature, speaking more to the inadequate state of global transparency than to Burma’s accomplishments.

“It is too early to say whether the Burmese government is taking the lead on the issue of transparency,” said Wong Aung, director of the advocacy group Shwe Gas Movement, which has devoted several years to promoting fairness in the gas and oil sector. “They have made promises, but we are still waiting for them to prove that they are committed to overcoming institutional challenges.”

The Global Witness report focused specifically on gas and oil companies freshly permitted to work in Burma, and does not yet examine the transparency of any other sector, which some suggest could offer misleading conclusions about investment and industry in Burma on the whole.

Earlier this year, Global Witness began surveying the 46 companies that were awarded exploration deals for 36 gas and oil blocks in Burma during two rounds of tender bidding since October 2013. By late June of this year, only 13 of those companies representing three resource blocks had supplied the requested information, but subsequent pressure has led more than three quarters of the developers to begin answering questions about ownership.

According to Global Witness, “a hard core of 18 companies” has not obliged as of today. Seven of those companies are domestic while the rest are foreign-owned. Canada’s Pacific Hunt, India’s Oilmax Energy Pvt. Ltd., CAOG s.a.r.l. of the Netherlands and Palang Sophon Offshore of Thailand were among those who did not participate.

Global Witness tracked down corporate management using very basic information provided by the Ministry of Energy, with many companies proving harder to trace than others; hard-copy surveys were in some cases hand-delivered to those companies who failed to reply to several months of inquiries sent by post, email and fax.

The questionnaires requested detailed information about the names of all ultimate beneficial owners and full disclosure of “politically exposed persons” who profited from the companies, which the group has defined as any person who holds a senior position in a government ministry or is related to or otherwise closely affiliated with a senior politician. Of the 25 respondents, only one declared such a connection.

Global Witness lauded the cooperation of the 10 private and 15 publicly listed companies that did participate, but urged the government and other stakeholders to use an upcoming conference in the nation’s capital to pressure the remainder to follow suit.

On Oct. 14-15, extractives experts and industry aces will convene in Naypyidaw for an annual board meeting of the Extractive Industries Transparency Initiative (EITI), an event meant to assess the overall global effectiveness and future procedures for the growth and success of the EITI, which is a relatively new and fast-evolving fiscal reporting protocol that was endorsed by the G-8 and has attracted 17 potential and 29 compliant signatories since it began in 2002.

The Burmese government pleased many international observers when it was accepted for EITI candidacy in July 2014, but has not yet proven that becoming EITI compliant will translate into better resource management. The EITI board allows 48 months to complete an initial industry revenue report and meet other membership criteria required for fully compliant status.

At the core of those requirements is the establishment of a tripartite “multi-stakeholder group” comprising government, corporate and civil society representatives. The multi-stakeholder group is designed to bind the government and corporate partners to be accountable to communities affected by extractive projects by publishing all payments and submitting them to independent auditors. Civil society stakeholders, in part, determine what kind of companies, products and revenues are subject to audit.

While Global Witness has suggested that the upcoming meeting could be used as a golden opportunity to demand that ultimate beneficial ownership disclosure be a hard-and-fast requirement for all companies working in Burma’s extractives, that goal may prove difficult to achieve. The inclusion of ownership is recommended by the EITI board but is not a compliance requirement. As Burma prepares to implement the protocol, many stakeholders have advocated for the provision but it is still unclear whether and to what degree it will be applied.

“We have been pushing them [corporate stakeholders] to publish this information, however, there are challenges in identifying who the stakeholders even are,” said Wong Aung, a member of Burma’s EITI civil society steering committee and director of the advocacy group Shwe Gas Movement. “I do not believe that crony companies will disclose this kind of information,” he added, emphasizing that the data is only meaningful to concerned communities if it is complete, inclusive, and applies especially to those corporate entities that are most reluctant to cooperate.

“There are more than 100 [extractive] projects operating in Burma informally, illegally, with no contract and no accountability,” he said.

While no one yet has a clear solution for tackling the many companies operating completely outside of the law, such as those with informal agreements or no legal contract at all, Global Witness offered a few recommendations for making ownership information more useful.

Those recommendations include coupling industry reform with legal protections related to freedom of expression, encouraging international donors to fund projects geared toward making industry data available in ethnic languages, and putting particular pressure on developers in conflict-prone ethnic states to publish ownership and other corporate data. At least nine of Burma’s onshore gas and oil blocks are located in areas that are or have been affected by armed conflict.

Loading