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BUSINESS

Investment Law Delayed as Rights Concerns Linger

With the push to introduce a new Investment Law delayed until after the election, observers have warned that more is needed to enshrine community protections for major projects.


RANGOON — With the yearlong push to introduce a new Investment Law delayed until after the election, observers have warned that more work will be required to enshrine sorely needed community protections for future investment projects.

The drafting of the investment bill—which will streamline and update the Myanmar Citizens Investment Law and Foreign Investment Law passed soon after Burma’s move to a quasi-civilian government—aroused criticism earlier this year for prioritizing investment capital at the expense of human rights and environmental protections.

Despite the introduction of new safeguards in the latest draft of the bill, civil society organizations say that more fundamental reforms will be necessary when the law is enacted, including a proper consultation and grievance procedures for communities affected by large-scale investments.

“Quite simply, [at the moment] there is not enough protection or recourse for people affected by these projects as companies, whether domestic or foreign, partner with local authorities and take land, extract resources, and make profits which don’t go back to the local area—all without any regard to the local communities and environment,” Alex Moodie, an advocacy and research officer for the rights organization Burma Partnership, told The Irrawaddy.

Community Consent

As the government courts foreign capital to jumpstart the economy and finance modern infrastructure, civil society organizations say that current conditions give companies involved in large-scale developments a free hand to run roughshod over local communities.

In the last 12 months, companies involved in several high-profile projects across the country have been criticized for failing to adequately consult with affected communities, despite apparent undertakings to do so.

Local civil society groups opposing the Dawei Special Economic Zone, a coal power plant backed by Toyo-Thai in Tenasserim Division, and the Mongton Dam have each alleged that ostensible community consultation sessions either did not comprehensively explain the impact of the project, did not consider community opposition to the projects or failed to meet with community members at all. In the case of Dawei, some locals reported only finding out about the project when construction crews arrived to lay groundwork for the arterial roads intended to service the project.

“We know from around the world that in conditions where there isn’t very strong enforcement mechanisms, the credibility and the legitimacy of consultation processes is questionable,” said Sam Zarifi, the regional director of the International Commission of Jurists (ICJ).

“Myanmar meets all of those conditions in terms of poor government enforcement and poor monitoring, and there is a temptation for businesses to try to take shortcuts.”

At the moment, there are no legislative or regulatory requirements for companies involved in large projects to undergo consultations with local communities. In the absence of these requirements, some foreign companies operating in Burma have nonetheless incorporated community consultations into their exploratory activities, in line with international standards set by the UN Guiding Principles on Business and Human Rights.

Human rights groups involved in monitoring investment projects have argued that the apparent lack of meaningful consultations does not bode well for the introduction of more substantial social and environmental protections under the new investment law.

Following public criticism from the ICJ, Human Rights Watch and other NGOs in March, the Directorate of Investment and Company Administration (DICA) extended public consultations and issued a new draft that addressed some observer concerns.

The July draft of the bill, seen by The Irrawaddy, strengthens human health and environment protections while giving the Union Government greater power to legislate future safeguards. Investors in certain industries will also be required to submit social and environmental impact assessments to the Ministry of Environment, Conservation and Forestry before investment permission is granted.

there is a temptation for businesses to try to take shortcuts.”

At a time when many senior echelons of the bureaucracy are largely staffed by holdovers from the junta era, it has been questioned whether the ministry would be able to protect its decisions on environmental clearance from outside interference.

Vicky Bowman, director of the Myanmar Centre for Responsible Business, noted that the ministry had yet to publish its long-delayed environmental impact assessment guidelines, which had the additional affect of burdening potential investors with legal uncertainty.

“There is definitely a problem in enforcement capability, with also MOECAF and its relative power with ministries,” she said. “At the moment companies are doing assessments on the basis of a legal framework, but the actual legal framework has yet to emerge.”

Both Zafiri of the ICJ and Moodie of Burma Partnership said that while fundamental changes would be needed to improve enforcement and legal protections, the government should set an example by incorporating requirements for free, prior and informed consent for affected communities into laws governing investment and development.

“If there was the political will to protect communities, stronger legislation could be pushed through, moves would be made to reform the judiciary, and the Myanmar National Human Rights Commission would be forced to take action against perpetrators of human rights violations,” said Moodie. “This isn’t the case, however, as it is profit, not rights that motivates those who hold political power.”

Legislative Limbo

Foreign investment in Burma has risen dramatically since the formal end of the military junta and the partial introduction of political and economic liberalization.

An estimated US$1.4 billion of foreign direct investment poured into the country during the 2012-13 fiscal year, rising to a record $8 billion of FDI pledges in 2014-15.

Despite the inflows, the country remains in 177th place of the 189 countries surveyed for the World Bank’s Ease of Doing Business Survey, the result of an uncertain political and regulatory environment, the dominance of state-owned enterprises and the decades Burma spent as an international pariah.

A desire to make Burma a more appealing destination for foreign capital has led the Directorate of Investment and Company Administration (DICA) to revise the country’s investment laws within three years of their introduction, but the move has been stalled by a combination of political inertia and a focus on other priorities.

On Aug. 25, with four days before the conclusion of the last Union Parliament session before the November election, The Global New Light of Myanmar reported that a backlog of 50 bills were awaiting parliamentary votes in Naypyidaw.

Despite telling The Irrawaddy in mid-August that he was confident the new Draft Investment Law would be passed in the latest parliamentary session, DICA director-general Aung Naing Oo conceded at a press conference on Aug. 26 that the bill would not be put to a vote until early next year.

Instead, much of the final two days of proceedings was taken up by the final discussion and successful passage of the Monogamy and Conversion bills, part of the legislative package sponsored by the Buddhist nationalist Association for the Protection of Race and Religion, known locally as Ma Ba Tha.

Echoing recent hints from official sources that have surfaced in the last week, Aung Naing Oo said the investment bill may be passed in a post-election session in January convened by members of the current parliament, before the swearing in of new lawmakers.

It is likely the bill will be passed in tandem with an overhaul of the century-old Companies Law, which DICA has been drafting with the assistance of the Asian Development Bank since mid-2013. The new framework is expected to relax foreign ownership prohibitions, streamline company registration and reduce auditing requirements for small- and medium-enterprises.

Aung Naing Oo told last Wednesday’s press conference he was satisfied that the investment and company bills together adequately addressed human rights concerns.

The New Order

Should the rumored January session fail to endorse the new Investment Law, the results of November’s elections will likely lead to further revisions of the bill.

The opposition National League for Democracy (NLD), which is likely to be a key player in formation of the next government, released its economic platform this month, which said the party would work to encourage “socially and economically responsible foreign investment” that was consistent with international human rights standards.

The extent to which the NLD would seek to incorporate current human rights standards into the draft investment law itself remains unclear.

The Irrawaddy attempted to clarify the specific provisions of the party’s investment policies on Aug. 20. Phyo Min Thein, an NLD lawmaker sitting on the Union Parliament’s Banks and Monetary Development Committee, referred telephone inquiries to the party’s central executive committee, where Win Thein referred inquiries to fellow CEC member Han Thar Myint, who then directed The Irrawaddy to Myo Myint. The latter declined to comment, citing a recent party edict prohibiting candidates from speaking to the media before the commencement of the election campaign on Sept. 8.

A source close to the NLD leadership, who has been consulting with the party on economic policy, told The Irrawaddy that discussions around the bill were ongoing, and further details around human rights protections had yet to be settled.

Despite the uncertain future of the bill, the ICJ’s Zarifi told The Irrawaddy that a delay would be beneficial to the people of Burma if it led to greater rights protections.

“Once you sign an investment law, revising it is a complicated negotiation going forward,” he said. “Governments are highly unlikely to attempt to revise it, much less successfully revise it. It’s better to do it right first than wait until it’s too hard.”

Additional reporting by Kyaw Hsu Mon and Thet Ko Ko.