1 Report No: AUS13088 Republic of the Union of Myanmar TA on EITI implementation Technical Advisory services to Myanmar EITI Secretariat Workshop and proceedings of constituency and outreach events Proceedings from workshops and roundtable on legal and contractual analysis May 18, 2015 SEGOM - HIS EAST ASIA AND PACIFIC Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected]. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Report No: AUS13088
Republic of the Union of Myanmar TA on EITI implementation
Technical Advisory services to Myanmar EITI Secretariat Workshop and proceedings of constituency and outreach events Proceedings from workshops and roundtable on legal and contractual analysis
May 18, 2015
SEGOM - HIS
EAST ASIA AND PACIFIC
Standard Disclaimer:
This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.
Copyright Statement:
The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be
a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages
dissemination of its work and will normally grant permission to reproduce portions of the work promptly.
For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright
Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470,
http://www.copyright.com/.
All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World
Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected].
D. 13 – 14 February 2014 – Presentation: Review of the Government’s Regulatory
Oversight Responsibilities and Framework for Onshore and Offshore Project
Development at US Department of State Energy Governance and Capacity Initiative
sponsored workshop on "Environmental Information Analysis and Compliance in Oil
and Gas Exploration,” Nay Pyi Taw (in English and Myanmar) .................................... 62
3. P155599 Legal and Contractual Analysis Annexes ................................................... 67
A. Workshop Series – John Strongman: ................................................................... 67
B. Natural Resource Governance 7 – 11 November 2013 .......................................... 68
C. Seminar on Institutions, Regulations, and Policy in Mining Industries 19 – 20
November 2013, Nay Pyi Taw...................................................................................... 70
D. Institutional Development and Modernization of State Economic Enterprises
March 5, 2015, Naypyidaw .......................................................................................... 78
E. Summary of Roundtable Consultation on Institutional Development and
Modernization of State Economic Enterprises in the Oil and Gas Sector ..................... 78
F. Discussion note: Corporate governance strengthening in the Myanmar energy
sector and Myanmar Oil and Gas Enterprise ............................................................... 81
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G. Oil and Gas Sector Roundtable Agenda ............................................................ 91
H. SEE Roundtable Proceedings .............................................................................. 93
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I. Consolidated Report - EITI Preparation Support for
Myanmar
Context: In 2011, Myanmar started on a series of critical political and economic
reforms, following fifty years of authoritarian military rule, civil war, and a centrally
planned, closed economy. Improved economic governance stands at the center of the
reform process started in 2011. To this end, in 2012, Myanmar’s President Thein Sein
issued a Presidential Decree that Myanmar would become a member of the Extractive
Industries Transparency Initiative (EITI). In June 2014, Myanmar became an EITI
candidate and the hosted the semi-annual board meeting in October 2014. The
country’s first EITI report is due in January 2016.
Myanmar is rich in natural resources, including oil, gas, minerals, gems, as well as
timber. These sectors officially account for an estimated 35% of total exports,
primarily from gas. Myanmar is the world’s largest producer of jade and among the
largest producers of rubies and sapphires. Reported gemstone total sales figures were
USD3.7 billion in 2011-12, although considerable uncertainty surrounds the sector,
and actual sales could be higher. Mining activities are currently limited in scale, with
export figures around USD70 million, but mineral potential is considered to be high.
Historically Myanmar’s resources have not been managed in such a way as to
translate them into improved services, infrastructure, and economic growth. Lack of
transparency and accountability affect oil, gas, and mining. Information about
contracting, payments, revenues, and destination of revenues are not made public.
This lack of transparency and military involvement in extractive operations has
contributed to public mistrust and lack of meaningful policy debate surrounding the
role of extractive industries in the economy. The decision to sign up to EITI
constituted an important practical and symbolic break with the past.
World Bank and DFID Collaboration: Once the decision to sign up to EITI was
taken, the immediate challenge was practical preparation in a context of very low
government capacity. The capacity challenges were myriad. These encompassed very
significant knowledge gaps, including of the institutional, legal, and regulatory
environment, even among Myanmar stakeholders themselves, compounded by the
very poor quality of data that affects all sectors in Myanmar. In addition there was
virtually no awareness of the EITI Standard and approaches to its implementation
across the public, government, or civil society. Finally, there was no tradition of
public dialogue, meetings between Government and civil society, and providing data
to the public. In recognition of the capacity limitations, President Thein Sein tasked a
quasi-independent think-tank, Myanmar Development Resources Institute (MDRI)
with the preparation of the EITI candidacy and appointed its Director, Dr. Zaw Oo, as
EITI National Coordinator.
Recognizing both the importance of supporting Myanmar to become an EITI member
and the depth of the capacity challenge, the World Bank and DFID moved quickly to
put in place the support necessary to address the capacity and knowledge gaps
sufficiently for Myanmar to complete the EITI candidacy process within the relatively
short time-frame decreed by the President. In April 2013 DFID approved an
Externally Funded Object (EFO) for the World Bank to run between April 2013 and
May 2015. In addition, the Bank and DFID also initiated an EITI donor coordination
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group. The Project Development Objective of the EFO is to provide advice to the
Republic of the Union of Myanmar on implementation of the Extractive Industries
Transparency Initiative including capacity building in areas of legal, contractual and
financial terms of licenses in the petroleum, gas and mining industries.
EFO Design and Activities: It was clear at the design stage that to be effective, the
EFO would have to work across multiple streams at once. These included hands-on
day to day technical advice and support, awareness raising and training, and creating
the baseline knowledge, documentation, and data necessary to implement EITI. In
addition it was clear that the activities, while focusing on Government and MDRI as
the lead EITI implementers, would have to also encompass civil society and the
private sector as EITI constituencies. To accommodate the need to work
simultaneously across different areas and constituencies, the EFO was designed as a
package of five mutually reinforcing work streams:
Technical Assistance on EITI implementation (P155590) – This activity was
the “backbone” of the package funded by the EFO, providing guidance and advice
on international good practices necessary for Myanmar to meet key milestones in
preparation of EITI candidacy and the early stages of implementation.
Constituency Building (P155600) – This activity assisted in preparing the three
EITI Multi-stakeholder Group (MSG) constituencies – Government, civil society,
and private sector – to understand EITI and meaningfully participate in the
process, through a series of awareness raising and outreach activities.
Legal and Contractual Analysis (P155599) - Basic understanding of the legal
and contractual issues affecting extractive industries operations among
constituents is essential to participation in EITI and to its effective
implementation. This includes also building understanding about the extractive
industry value chain.
EITI Scoping Study & Legal Review (P155597) - This aimed to produce the
Legal Review and the Scoping Study, both standard and essential parts of EITI
implementation. The Legal Review was delivered in 2013. However the Scoping
Study could not be delivered in time. Work commenced in April, 2015 and it will
be delivered in August 2015, using a different funding source.
Political Economy Study of Extractive Industries (P155598) – As noted above
at the outset, there was a very large gap in basic knowledge of the workings of the
extractive industries in Myanmar. This activity delivered the Institutional and
Regulatory Assessment of the Extractive Industries in Myanmar, in March 2015.
In addition to providing a knowledge base for the implementation of EITI, the
report will have broad uses among those interested in extractive industries in
Myanmar, including within the World Bank.
Outcomes: As of May, 2015, Myanmar has achieved candidacy status, hosted a major
international EITI event, and is well on its way to meeting the deadline for its first
report in January 2016. The EFO has met its original aims and been the mainstay of
international support to Myanmar’s EITI candidacy. Without the EFO-funded support
it is unlikely that Myanmar would have been able to successfully become an EITI
candidate country in June 2014. The EFO provided the assistance needed to meet the
essential milestones: i) MSG formation and functioning; ii) finalizing a costed
workplan; iii) production of essential sector analysis to allow informed decision-
making, iv) public awareness raising. Awareness of EITI is now significantly more
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widespread than even envisioned at the outset of this project, evidenced in the regular
coverage of EITI related events and issues in the domestic media, frequent references
to EITI by Government and CSO members, and the active discussion of EITI on
social media sites. In addition there has been a large increase in the availability of
information about extractive industries in Myanmar due to the reports produced under
the EFO, specifically the legal review and the Institutional and Regulatory
Assessment. In the area of institution building the EFO has gone farther than its initial
scope and supported the creation of an EITI Secretariat inside the Ministry of
Finance. The delay in the funding of the Scoping Study is regrettable but all other
aspects of the EFO have met, if not exceeded the original goals. As of second quarter
of 2015, Myanmar EITI is truly moving into implementation with the establishment
of the EITI Secretariat inside the Ministry Finance and commencement of the data
collection and reporting process which will lead to publication of EITI data in the
Reconciliation Report in January, 2016.
This consolidated report covers three work streams – Technical Assistance on EITI
implementation (P155590), Constituency Building (P155600), and Legal and
Contractual Analysis (P155599. There is a short separate narrative report for each
workstream. This is followed by an annex with the relevant supporting documents
and actual devliverables/outputs produced for the three activities.
II. P155590 Output Report - Technical Assistance on EITI
implementation
This activity was the “backbone” of the support package. An international technical
advisor was recruited in September 2013. A very experienced EITI expert with well-
established training, capacity building, and communication skills, the technical
advisor has been located at the Myanmar EITI coordination office at MDRI and
provided the day in and day out, step by step advice and support necessary to
satisfactorily implement EITI. This includes the formation of the multi-stakeholder
group, the MEITI workplan, the candidacy application, the TOR for the Independent
Administrator firm to draft the EITI report, the production of public outreach
materials, and regular formal trainings on various aspects of EITI. In addition the
advisor undertook a significant amount of capacity and institutional building within
the MDRI team and increasingly with the Ministry of Finance. Having this advisor in
place has not only been essential to Myanmar’s reaching its goal of EITI candidacy
but also to successfully integrating the other streams of assistance provided under the
EFO.
The EITI International Technical Advisor has contributed to all aspects of the EITI
implementation since her arrival in September 2013. Without this day to day
assistance, there would have been insufficient capacity and experience for Myanmar
to reach EITI candidacy, much less start well on the way to EITI implementation. The
following reports highlight eight of the key milestones achieved in Myanmar’s EITI
journey in which the International Advisor played a large role.
MSG Formation: MEITI’s multi-stakeholder group (MSG) was established in January
2014 and comprises 21 representatives of government, civil society and private sector.
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The MSG is the core of EITI implementation and is a requirement for candidacy. The
International Technical Advisor played an essential role on providing advice as to
what needed to be done to adhere to the EITI Standard, while at the same time making
the MSG reflect Myanmar’s particular circumstances. The Terms of Reference for the
multi-stakeholder group (MSG) was one of the first core outputs to be prepared
during the first quarter of 2014. This document, agreed and approved by the MSG,
also comprises one of the four requirements for EITI candidacy. An initial TOR was
produced which then went through a long consultation and feedback process, and
several iterations, before it was finally approved by the MSG in April 2014. In
response to the preferences of stakeholders, as permitted under the EITI Standard, the
MSG was established with six Government and six Private Sector representatives, but
nine CSO representatives, appointed from the MATA coalition.
At its 5th meeting in August 2014, the MSG agreed to establish 3 sub-committees,
each comprising 2 representatives from each of the 3 stakeholder groups, as follows:
Technical and Reporting Sub-Committee; Workplan and Governance Sub-
Committee; Communications and Outreach Sub-Committee. These three sub-
committees have undertaken much of the core planning and decision-making. The
International Advisor attends most sub-committee meetings as well as all MSG
meetings.
MSG Workplan and budget: The International Technical Advisor played a central role
in convening the discussions on the MSG workplan and on ensuring that the workplan
would allow Myanmar to achieve the core EITI benchmarks required by the EITI
Standard and the International EITI Secretariat in Oslo. The MSG workplan and
budget was initially produced during the first quarter of 2014. As with the MSG TOR,
this comprises one of the four requirements for EITI candidacy, and as with the TOR,
it underwent a very lengthy consultation and feedback process before the MSG
approved the final version in April 2014. An initial draft/estimated budget was
produced and approved by the MSG, in time for the candidacy application in May
2014. However, since then the workplan budget has been revised a number of times,
in particular with the aim of identifying and securing sources of funding for the
various activities, included but not limited to the EITI MDTF. The MSG Workplan
and Governance Sub-Committee has led and continues to lead on this, with close
support from the International EITI Technical Adviser and the MDRI MEITI
Coordination Office. The MSG has now agreed that in addition to the MEITI MDTF,
the other main source of funding that it is seeking to secure funding from the Bank-
managed country MDTF for Myanmar, funded by the UK and Australia.
MEITI Candidacy Application: The candidacy application was prepared by the
MEITI Team in MDRI with substantial input from the International Technical
Advisor during Q1 and Q2 2014. This had to demonstrate that the four minimum
requirements necessary for candidacy had been met, and the relevant documentary
evidence was also required to support this. Some further additional evidence was also
put together, where possible, to show that Myanmar had not just met but where
feasible and given the context, gone beyond, the key requirements for candidacy. A
draft with all the supporting evidence was produced, which was then approved by the
MSG in May 2014, after which it was submitted to the EITI International Secretariat
and Board. At its meeting in July 2014, the Board awarded Myanmar EITI
‘Candidate’ status.
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TOR for Independent Administrator: A draft Terms of Reference for the Independent
Administrator was produced for the MSG during Q3 and Q4 2014, again with
significant guidance from the International Technical Advisor. The TOR had to
respond to Myanmar’s context but also ensure that Myanmar would meet the
requirements set by the EITI Standard and enforced by the EITI International
Secretariat. The final document was approved by the MSG in December 2014 and the
consulting firm was selected in late April 2015. The successful completion of the
Candidate Application and the selection of the Independent Administrator are
evidence of the effective functioning of the MSG Technical and Reporting Sub-
Committee.
Transition of MEITI Secretariat function from MDRI-CESD to the Ministry of
Finance. – One of the key challenges facing EITI in Myanmar has been the transition
of the EITI Secretariat functions from MDRI, an external think tank, to Government.
This was necessary to bring Myanmar into line with international standards for EITI
implementation, but also to create a body that would be able to implement the MEITI
Work Plan. The International Technical Advisor provided key advice on the staffing
and functions of the new secretariat within the Ministry of Finance, and continues to
provide ongoing training.
In February 2015 the Cabinet approved the proposed new structure within the
Ministry of Finance. The EITI Secretariat unit was formally established as part of the
new Budget department. This unit has initially been designated with five members of
staff, of whom two are currently focusing mostly on EITI. However, it is anticipated
that the number of staff will rise to ten during the course of 2015 with at least five
full-time staff.
III. P155600 Output Report - Outreach and Constituency
Building
As noted above, there was virtually no awareness of EITI in Myanmar when
Government committed to become a candidate in 2012. EITI is at its core an
information sharing and dialogue process which requires that all three constituencies
in the multi-stakeholder group (Government, civil society, and private sector) have a
good understanding of the process and be able to function coherently as
constituencies. This activity aimed to help each constituency gain an essential
understanding of EITI and be able to meaningfully participate in public dialogue
about EITI and extractive industries in general. This activity consisted of 11 different
training and awareness raising events, sponsored by the Bank, the EITI Secretariat, or
other partners which contributed to increased capacity for dialogue and EITI
implementation.
Civil Society: It is noteworthy that the potentially most difficult of the three
constituencies, civil society, has responded with surprising speed and coherence to the
opportunity to participate in EITI. In October 2013, over 400 CSOs came together to
form the Myanmar Alliance for Transparency and Accountability (MATA), the first
such large-scale, multi-sector, representative coalition of civil society organizations in
Myanmar. The CSO constituency for the MSG is chosen by MATA.
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MATA is a civil society alliance that supports civil society actors to collaboratively
advocate for transparency and accountability in all sectors across Myanmar. More
than 400 civil society organizations, civil society network and individual from the
whole country of Myanmar are involved in MATA as members. The objectives of
MATA are: i) Advocate for transparency and accountability in the management of
natural resources by Government, private sector and civil society organisations; ii)
Raise awareness of the importance of transparency through education and training
sessions; iii) Build partnerships with INGO, NGO, Government, CSOs and other
stakeholders; iv) Strengthen the capacity of CSO and communities to improve Natural
Resources Governance; v) Increase freedom of information, monitoring mechanisms
and the accessibility of data; and iv) Promote the freedom of CSO participation in
Myanmar.
MATA participated in several of the outreach and training activities supported under
this sub-activity, particularly a public consultation held in Tanintharyi Region in July
2013 and the regional workshop in Jakarta in December 2013. In addition Bank staff
were invited to participate in and make presentations at several events sponsored by
Myanmar or international civil society organizations, including a Revenue Watch
Institute workshop in November 2013 and an EcoDev Learning event in June 2014.
These events have contributed to a significant expansion in CSO awareness,
understanding, and in general support for EITI and to the nine CSO representatives on
serving as equal partners in the MSG. A very positive by-product is also regular
communication between Bank staff and MATA members, providing a sustained
engagement between the Bank and CSOs.
Government: As Government necessarily has to take a leading role in the
coordination and organizing of EITI implementation, there was an urgent need to first
build awareness across Government about EITI and then to build capacity. In 2013
and 2014, activities were chiefly aimed at building awareness. Government
participated in a public consultation held in Tanintharyi Region in July 2013, the
regional workshop in Jakarta in December 2013, and a workshop on EITI and
Extractive Industries Governance in Myanmar specifically aimed at the inter-
ministerial EITI Working Group in 2013. In addition upon the request of the then
newly appointed Minister of Finance, the Bank EITI team put together a Briefing On
Revenue Streams Accruing From Extractive Industries In Myanmar in August 2013.
By 2015, these activities changed gear, moving into capacity building for the newly
created EITI Secretariat within the Ministry of Finance’s Budget Department. This
included a series of meetings, plus workshops in February 2015 in Nay Pyi Taw.
These were carried out together with MDRI’s MEITI Team and the EITI International
Secretariat. Particularly important was the workshop on EITI Implementation and
Extractive Industries Governance on February 10, 2015. The audience was the
Government EITI Working Group and included representatives from all the relevant
ministries. For the first time Government representatives discussed together how data
for the EITI reports would be generated and shared across ministries, making it one of
the most productive training exercises to date. An important result was much
increased understanding of the nuts and bolts demands of the EITI process and the
role played by officials at different levels in the relevant ministries. Additionally,
these officials built a fundamental basis of understanding of EITI and the mechanics
10
of implementation among the five EITI Secretariat staff, none of whom had previous
experience with or knowledge of EITI.
Private Sector: Private sector representatives took part in several of the activities
under this sub-activity and the EITI TA sub-activity described above. The EITI
process has enhanced the coordination among sector operators which was previously
conducted on a loose basis, subject to topical issues or challenges. With the EITI
process, the coordination has become formalized with separate constituency
groupings for oil & gas and mining operators, respectively. Secondly several of the
international companies, namely Total and Petronas were already familiar with EITI
from other contexts.
The Annex provides a complete list of events supported by the DfID-financed
Externally Financed Output, plus supporting documents. A more comprehensive
folder of presentations and papers are available in WBDocs.
IV. P155599 Output Report - Legal and Contractual Analysis
This sub-activity has aimed to create a basic understanding of the legal and
contractual issues affecting extractive industries operations is essential to participation
in EITI and to its effective implementation. This also building understanding about
the extractive industry value chain. Given the paucity of understanding of these
issues, even within Government, and near absence of coherent data, it was necessary
to conduct trainings for key stakeholders in the EITI process, specifically MDRI and
Government counterparts. This activity delivered 4 separate training events, three of
them multi-day, including special training for the MDRI team, a comprehensive
workshop on the EI value chain for the Ministry of Mines in November 2013, and a
successful roundtable on State Owned Enterprise reform targeted at the Ministry of
Energy and the Myanmar Oil and Gas Enterprise in March 2015. These activities
were the first events of their kind in Myanmar and contributed to the capacity
development of the MEITI team and enhanced capacity to undertake policy and
strategy dialogue by key Government ministries. Below are summaries of the key
training events and their results.
EITI and Extractive Industry Value Chain Workshop Series – October – November
2013: This series of three multi-day training/workshop activities was delivered by
John Strongman (retired GEEDR staff). The first of these was a four day workshop
specifically for MDRI staff, which covered EITI, financial data, and good governance
across the value chain. Particular attention was given to contextual information, tax
collection, and revenue flows, with regard to the new 2013 EITI Standard. This was
particularly important as the 2013 Standard had just been introduced, requiring a
higher and more comprehensive level of reporting than had been previously been the
case. This workshop series was aimed only at MDRI staff, as the team that was
responsible for coordinating EITI in Myanmar and informing others. A training
specifically for the MDRI had been identified as a priority. The result of the workshop
was that the MDRI team took a large step forward in terms of knowledge of EITI and
the ability to contextualize this knowledge within broader issues of extractive industry
governance. This in turn had several practical results – the team was better able to
articulate the aims of EITI to other audiences, argue the merits of becoming an EITI
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member with key decision-makers within Government, and mutually support each
other because all had received the training.
The second workshop was a two day workshops specifically for the media. This was
very important because the media had a great deal of interest in EITI but journalists
and editors had virtually no understanding of EITI. Additionally the workshop took
place barely a year after enormous changes in Myanmar’s media landscape, with the
abolition of the censor board and various other restrictions, leading to an explosion in
the number of publications and in the number of people consuming media.
Consequently it was a very important juncture for training for the media on EITI.
EITI is widely reported on in the Myanmar media, reflecting the public interest in
improved transparency and accountability in the extractive industries.
The last was a two day workshop specifically for the Ministry of Mines on
Institutions, Regulations, and Policy in the Mining Industry. The Ministry of Mines
was targeted given its significantly weaker capacity than the Ministry of Energy and
other ministries involved in the extractive industries. The training aimed to lay out
such issues as regulatory function, fiscal regime, safeguards, licensing, and
community impacts. This was the first time such a comprehensive look at these issues
had been presented to the ministry, including many topics that the Government will
have to report on directly in the EITI report. It contributed significantly to building
high level support for EITI in the Ministry of Mines, which has been consistently
supportive of and participated well in Myanmar’s EITI effort.
Institutional Development and Modernization of State Economic Enterprises in the
Oil and Gas Sector, Roundtable, March 5, 2105: This activity was requested by the
Ministry of Energy and the Myanmar Oil and Gas Enterprise during the 2014 EITI
Board meeting in Nay Pyi Taw. It was also enthusiastically supported by donors,
particularly DfID and Australia, which partner with the World Bank on the
Modernization of Public Financial Management. The roundtable brought together
World Bank and other experts in energy, corporate governance, and financing. This
included presentations on options for corporate restructuring presented by Robert
Lesnick (retired GEEDR). The roundtable directly supports the transparency and
accountability aims of EITI in convening a discussion about possible changes to
MOGE, rated as one of the least transparent state owned oil companies in the world.
In conclusion, the advisory services provided under the EFO have significantly
improved the structure and content of dialogue about the good governance in the
extractive industries. Civil society and sector operator stakeholders have combined
forces in an unprecedented manner to meet the challenge of EITI implementation. But
the collaboration has been much more ambitious than the required reporting on
revenue streams. A debate has opened about the entire value chain of extractive
industry operations from extraction of sub-soil resources to sustainable development
to the benefit of society as a whole. This debate has addressed five distinctive parts of
the value chain: (i) award of contracts and licenses for extraction, (ii)regulation and
oversight of the performance of operators, (iii) collection of taxes and royalties, (iv)
distribution and management of revenue accruing from operations, and finally (v)
implementation of sustainable policies and projects. The following chart illustrates the
five stages which have been addressed in the advisory services of the EFO.
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V. Annexes
1. P155590 - Technical Assistance on EITI implementation – Annexes
A. Multi-Stakeholder Group (MEITI-MSG) Terms of Reference
Multi-Stakeholder Group (MEITI-MSG)
Draft Terms of Reference 1. Introduction In the Republic of the Union of Myanmar, the Framework for Economic and Social Reforms (FESR) is being adopted and practiced for the achievement of the reforms process in the nation. The implementation of the Extractive Industries Transparency Initiative (EITI) is one of the reforms included in the good governance and transparency reforms. The President’s Office issued Presidential Decree No. 99/2012 which established the Extractive Industries Transparency Initiative for the better governance of the extractive industries and for the transparent and accountable management of all material revenues generated by these sectors. The Decree also appointed the government Leading Authority to oversee the successful implementation of EITI, as per EITI Requirement 1.2. The Myanmar Extractive Industries Transparency Initiative (MEITI) process shall be implemented by the Multi-Stakeholder Group (MSG) comprised of stakeholders from the government, private companies and civil society organisations in the Republic of the Union of Myanmar. According to Requirement 1.3 (f) of the 2013 EITI Standard, the MEITI-MSG is formed as per Notification No.3/2014 of Myanmar EITI’s Leading Authority. In conformity with the International EITI Standard, this Terms of Reference is hereby promulgated for the demarcation of the roles and responsibilities of the MEITI-MSG and for the smooth and sustainable functioning of the tasks of MEITI in a timely manner. 2. Vision and Mission of Myanmar EITI The Vision of Myanmar EITI is: “To realise the good governance and sustainable development of the extractive industries for the long term interest of the people and nation” The Mission of Myanmar EITI: “To promote transparency and accountability in the extractive industries and material revenue management of the Union of Myanmar”
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3. Objectives of Myanmar EITI The Objectives of Myanmar EITI are:
1) To acquire accurate, correct and up-to-date information regarding the management of natural resources and associated material revenues in a timely manner and to make the information publicly available
2) To create an enabling environment for the effective implementation of the EITI Standard
3) To support implementation of sustainable development and natural resource governance reforms through the successful execution of EITI.
4. Basic Principles of the MEITI-MSG In performing the tasks of realising transparency and accountability of extractive industries and material revenue management, the MSG members shall adhere to the following basic principles in their interactions with other MSG members and with other EITI-related stakeholders. These principles are in line with the 12 EITI Principles:
1. Transparency
2. Accountability
3. Integrity
4. National interest
5. People-centred
6. Sustainability
7. Free, prior and informed consent (FPIC)
8. Genuine participation and all-inclusiveness
9. Realistic and workable approach
10. Consensus
5. Establishment of the MEITI-MSG The MEITI-MSG comprises (21) member representatives. They are:
Six (6) representatives from the government;
Six (6) representatives from private companies; and
Nine (9) representatives from civil society organisations (CSOs).
5.1 For the smooth and convenient running of MEITI-MSG’s activities, Myanmar
EITI’s Leading Authority has appointed 1 Chair and 1 Vice-Chair of the MSG.
The Leading Authority has also appointed a national MEITI Secretariat, which
is led by the National Coordinator. {The Name of the MEITI-MSG members and
their representing organisations are described in ANNEX 1}
5.2 In order to participate as a member of the MSG, each representative can be
freely and fairly elected within their respective constituency group according
to their own criteria.
15
5.3 In case of a vacancy during the MSG term, this vacancy shall be filled by the
resigning MSG member’s alternate, with the concerned constituency
nominating a new alternate. Alternatively, the concerned constituency may
nominate a new MSG member. The Chair of the MSG shall endorse any
replacement.
5.4 If an MSG Member is absent from a MSG meeting, that MSG member’s
alternate may attend, participate in discussions, contribute to decision-
making and generally perform all the functions of that MSG member during
the MSG meeting. However, only primary MSG members can make specific
decisions regarding the MEITI Work plan, MSG Terms of Reference, EITI
Reports and annual activity reports. Notwithstanding the foregoing, any
alternate member representing a Private Company may make any decisions
on behalf of such Private Company provided that (i) such alternate member
has been given prior authorisation by the primary member of the relevant
MSG member and (ii) such authorisation has been disclosed to the MSG
5.5 The tenure of office for (duration of) the primary MSG members is
stipulated for 3 years and they have the right to be re-elected in the MSG’s
next term of office. In the MSG’s new term, it is recommended that at least
one third (1/3) of primary members from each constituency group shall be
included in the MSG.
5.6 In MSG meetings, a maximum of 5 observers from each constituency are
eligible to attend. The list of observers from each constituency shall be sent to
the MEITI Secretariat (Myanmar EITI National Coordination Office) at least 3
days in advance before commencing the meeting. The observers have no
right to discuss or make decisions, but may be invited to express their views
on specific matters by agreement of the Chair. Observers may also participate
in MSG discussions through their constituency representatives. Observers
shall also abide by the MSG Code of Conduct.
6. Roles and Responsibilities of MEITI-MSG and MEITI Secretariat (Myanmar EITI National Coordination Office) 6.1 Roles and Responsibilities of MEITI-MSG members The Roles and Responsibilities of the MEITI-MSG are as follows:
(a) To develop a fully-costed work plan for MEITI. MSG members must
ensure that the work plan is in line with the International EITI Standard
and its requirements
(b) With the assistance of technical experts, the MSG shall determine the
scope and materiality threshold of MEITI, and shall obtain the required
facts and figures for producing the EITI Report
16
(c) The role of an independent reconciler is crucial for the EITI process. The
MSG shall agree the Terms of Reference and lead the procurement of the
independent reconciler
(d) Oversee the EITI Report preparation process, review the draft EITI
Report, approve the final EITI Report and publicly launch it, in accordance
with the time schedule fixed by the International EITI Board
(e) Shall review annual progress against workplan, produce annual
activity/progress reports and send to International Secretariat
(f) Shall engage in validation, review and approval of validation report
(g) Shall review and amend the organisational structure, roles and
responsibilities and workplan of the MSG if all members agree this is
required
(h) As and when needed, the MSG shall supervise, monitor, evaluate and
amend the MEITI process to be successfully implemented in a timely
manner
(i) Shall supervise policy development, approval and the use of funds for the
MEITI process.
(j) In implementing the activities of the workplan, the MEITI Secretariat and
MEITI MSG members shall work together collaboratively (refer to MEITI
Secretariat Roles and Responsibilities at 6.5 below).
6.2 Responsibilities of the Chair of the MEITI-MSG The Responsibilities of the Chair of the MSG are as follows:
(a) To preside over MSG meetings (b) To liaise with the MEITI Leading Authority and MEITI Working
Committee (c) To endorse MSG meeting invitations, agendas, minutes and decisions (d) To facilitate MSG consensus and decision-making (e) To communicate with the International EITI Board, International EITI
Secretariat and other International Organisations related to EITI (f) To follow up with the national EITI Secretariat regarding the
implementation of MSG decisions.
6.3 Responsibilities of the Vice-Chair of the MEITI-MSG The responsibilities of the Vice Chair of the MSG are as follows:
(a) To act as Vice Chair of MEITI-MSG meetings
(b) To help the Chair perform their duties
(c) To undertake the responsibilities of the Chair as assigned by the Chair if
necessary.
6.4 Responsibilities of MEITI-MSG representatives from each constituency group
(a) Members of the multi-stakeholder group should have the capacity to
carry out their duties
17
(b) Members of the MSG should provide regular updates to the MSG
regarding work and decisions carried out within their respective
constituencies.
6.4.1 Government representatives have the following responsibilities: (a) Be actively engaged and committed to the MEITI implementation process
(b) Coordinate with Region/State Governments in order to implement clear
EITI policies and procedures at both local and national level
(c) Cooperate fully and work together with CSO and private company
representatives in the MSG
(d) Find solutions to overcome obstacles to the EITI implementation process
in collaboration with other MSG members
(e) Correctly disclose material revenue data and all necessary contextual
information on time and in accordance with the scope and reporting
templates approved by the MSG, and in line with the EITI 2013 Standard.
6.4.2 Civil Society Organisation (CSO) Representatives have the following responsibilities:
(a) Cooperate fully and work together with government and private company
representatives in the MSG
(b) Strengthen the capacity of other CSOs and the general public involved in
the EITI process
(c) Timely and extensive dissemination of information contained in the
MEITI Reports to the general public and ensure it contributes to public
debate
(d) Share information approved by the MSG with other CSOs and the general
public, and take action where necessary
(e) Find solutions to overcome obstacles to the EITI implementation process
in collaboration with other MSG members.
6.4.3 Private Sector Representatives have the following
responsibilities:
(a) Cooperate fully and work together with government and CSO
representatives in the MSG
(b) Work with other private sector members in their respective industries to
correctly disclose material payments data and all necessary contextual
information on time and in accordance with the scope and reporting
templates approved by the MSG, and in line with the EITI 2013 Standard
(c) Share information approved by the MSG with other private company
representatives, and take follow-up action where necessary
(d) Find solutions to overcome obstacles to the EITI implementation process
in collaboration with other MSG members.
18
6.5 Responsibilities of the MEITI Secretariat (Myanmar EITI National Coordination Office) The responsibilities of the MEITI Secretariat are as follows:
(a) To support the Chair, Vice-Chair, members of MSG, Sub-Committees and
Task Forces
(b) To organise and convene MSG meetings, prepare meeting agendas,
minutes and publish the minutes after obtaining approval of MSG
(c) To support the MSG by procuring assistance from technical experts in
extractive industries governance and revenue management where
necessary
(d) To provide support and advice to the MSG on technical matters relating to
EITI, and carry out relevant technical research as appropriate
(e) To disseminate information about the International EITI Standard,
process and international experiences to the public, by agreement with
the MSG
(f) To provide the MSG with an MEITI Secretariat performance report
including budget and financial statements and expenses once every four
months
(g) To communicate with the International EITI Board, International EITI
Secretariat and other International Organisations related to EITI
(h) To systematically manage MEITI’s funds and expenses and ensure they
are officially auditable.
7. Operating Rules and Procedures for holding MEITI-MSG Meetings 7.1 Meeting Frequency, Invitation, Notification and Amendment
(a) MEITI-MSG meetings will be held at least once every two months
(b) MSG meeting invitations approved by the MSG Chair will be sent by the
MEITI Secretariat 14 days prior to a meeting
(c) Draft meeting agendas and any issues or documents to be discussed shall
be sent at least 14 days prior to a meeting. Final meeting agendas will be
sent 3 days in advance. If MSG members would like to discuss any urgent
issue during an MSG meeting that is not on the agenda, they may do so by
agreement with the Chair
(d) Meetings can be held alternately in Nay Pyi Taw and in Yangon. Video
Conferencing can also be used at meetings
(e) If the date of a meeting needs to be changed, the MEITI Secretariat must
give MSG members 7 days prior notice
(f) If any constituency group wants to call an extra-ordinary MSG meeting,
such a meeting can be held with the approval of the MSG Chair and with
at least 3 days prior notice to the meeting.
7.2 Procedures for Holding Meetings and for Decision-Making
19
(a) Meetings are held in accordance with the ‘Chatham House Rule’, meeting
minutes must be made available after review and approval by the MEITI-
MSG
(b) Quorum for the meeting shall be at least 50% of the total MSG members
and over 50% of representatives from each constituency group
(c) In making decisions, the MSG will strive to reach consensus. If consensus
is not possible, each constituency group will discuss the matter within 14
days after which an extra-ordinary meeting will be held. A special task
force can be formed for this purpose.
(d) If an action agreed at an MSG meeting is not fully or partially
implemented it will be discussed again at the following MSG meeting, or
an extra-ordinary meeting can be held. If agreed by the MSG at the
meeting the action will be implemented by the responsible parties.
7.3. Publishing Meeting Minutes The MEITI Secretariat shall prepare draft minutes of MEITI-MSG meetings and send these to MSG members for review and approval within 7 days of holding of a meeting. MSG members must acknowledge receipt of the draft minutes by phone or email and send any comments to the MEITI Secretariat within 7 days. After 7 days, if there is no feedback, the minutes will be considered formally approved. Minutes will be published on the MEITI website within 1 month of holding of the meeting. 8. Formation of MEITI-MSG Sub-Committees and Special Task Forces MSG members can agree to establish sub-committees and special task forces on an ad hoc basis as necessary for the speedy and effective implementation of EITI. Such sub-committees and task forces must be led by at least one member of MEITI-MSG. MSG members shall decide the composition of such sub-committees and task forces, which may include non-MSG members and experts as necessary. Such committees must present progress reports and updates to MSG members at MSG meetings. 9. Code of Conduct To carry out their duties, MSG members agree to adhere to the international EITI Code of Conduct (The EITI Code of Conduct is attached to this TOR as an Annex 2)
20
B. MEITI Work Plan
GOM
Country MDTF
(or others)
from late
2015 onwards
Total
USD BE (USD) RE (USD) USD USD
1.1.1 Government unequivocal public statement of intention to
implement EITIPresidential Decree 99/2012
Completed by
December 2012
President's Office, Senior
Ministers/Leading Authority0 Achieved
1.1.2 Government appointment of senior individual to lead on EITI
implementation
Leading Authority appointed by
President, EITI Champion identified/
nominated - U Soe Thane
Completed by
December 2012President's Office 0 Achieved
1.1.3 Government commitment to work with civil society and
companies
- Government estabishment of multi-stakeholder group (MSG)
- MSG to develop and agree TOR
Government public statement of
commitment /
Presidential Decree 99/2012/
President's speech in UK/
MSG Formal Notification / TOR
December 2012-
March 2014Senior Government 0 Achieved
1.1.4 MSG to develop Workplan (fully costed and aligned with the
reporting and validation deadlines established by EITI board )
MSG MEITI Workplan agreed and
approved by MSG
Completed March
2014
MSG and MSG Workplan Sub-
Committee0 Achieved
1.1.5 MSG and MEITI Secretariat to prepare and submit candidacy
applicationCandidacy application prepared,
approved by MSG and Leading Authority,
submitted to International Secretariat
Completed and
submitted by May
2014
MSG and MEITI Coordination
Office0 Achieved
1.2.1 Carry out legal study to build on recommendations of legal
review and scoping study
Legal study to move institutionalisation
process and legal framework of MEITI
forwardsMid-2015
MEITI Coordination Office,
Experts, MSG51,650 0
1.2.2 Prepare for drafting EITI bill including consultation with
legislators and other key stakehoders
Basic draft framework prepared2016
MEITI Coordination Office,
Experts, CSO Working Group,
Government Working Group
3,575 3,575
1.2.3 Government EITI Coordination
1. Establish inter-departmental EITI working group under each key
EITI-related ministry (EITI Special Units)
2. Review and strengthen existing government EITI coordination
mechanism
Government coordination and
communications improved
Mid-2014 and
onwards
Leading Authority/ Government
Working Committee
Relevent Ministries/ MEITI
Coordination Office
0 Ongoing
1.2.4 MEITI Coordination Office/ Secretariat transition to Ministry of
Finance (MDRI-MEITI team to work with Leading Authority to agree
and implement step by step plan )
Transition Plan developed and agreedLate-2014 and in
3.3.1 Prepare for the 2nd Report including procurement of
Reconciler and possible second scoping study 2nd MEITI Report prepared 2016
MEITI Coordination
Office/Secretariat, Reconciler,
MSG
3.3.2 Production of 2nd MEITI Report 2nd MEITI Report produced and launched 2016-2017Reconciler, MEITI Coordination
Office
3.4 Validation 3.4.1 Engage in validation, review and approval of validation report Draft validation report produced by
validator - reviewed and approvedBy July 2017
MSG, key MEITI stakeholders,
EITI International Secretariat 0
Total estimate 484,600
4.1 Dissemination of the
MEITI report
4.1 Widespread communication and dissemination of MEITI report,
ensuring contribution to public debate including e.g.:
- Press Release
- (Media) Including TV, Radio, Print, events and activities
1st MEITI Report Widely Disseminated
and contributed to public debateLate 2015 - Early
2016
MEITI Coordination Office, MSG,
Gorvernment Working Group,
CSO Working Group, Companies
Working Group
10,000 37,500 47,500
4.2.1 MEITI Website (regular updating and maintenance) Website available 2014 and on-goingMEITI Coordination Office, MSG
input 3,0003,000 Partially Achieved
4.2.2 MEITI Secretariat to establish online and physical 'library' of
EITI related information for EITI stakeholders (where the
information is not publicly available, it should be approved by MSG)
Information available Late 2014
onwards
MEITI Coordination
Office/Secretariat 2,500 2,500
4.2.3 Develop MEITI communications plan/strategy Communication strategy developed and
approved by MSG Late 2014
Consultant, MEITI Coordination
Office and MSG36,475 36,475
4.2.4 Implement communications plan/strategy including e.g.
information, education and communication materials, outreach
events, workshops, seminars etc.
Ongoing implementation of
communications plan including wide
range of activities
Late 2014 -
Onward
MEITI Coordination Office and
MSG56,200
4.2.5 Possible Outreach Events to include:
1. Seminars and workshops (approx. 15)
2. National EITI Conference
Various outreach events and activities
held in line with the communications plan2014 - 2016
MSG, MEITI Coordination Office,
MEITI Stakeholders20,000 22,200 53,800 Ongoing
4.2.6 Outreach events for each constituency group EITI-related event/activity held by each
constituency group mid 2014 - 2016
MSG, Government Comiittee,
CSOs Working Group,
Companies Working Group,
MEITI Coordination Office
15,900 Ongoing
4.2.7 MSG to discuss and agree options for establishing regional
CSO-government EITI support groups
- options for establishing groups followed up
Options discussed and agreed by MSG,
follow-up activities plannedLate 2014 Onward
MEITI Coordination Office and
MSG, Government Working
Committee, CSO Working Group
12,400 10,800 23,200
Underway - 4
subnational pilot
projects beginning in
2015
4.3.1 MSG to establish internal monitoring and evaluation
mechanism e.g. MSG Monitoring and Evaluation Sub-Committee
Monitoring process in place and follow up
actions agreed for second year of
implementation
Late 2015
Onwards
MSG, and members of MEITI-
CSO from State/ Region
Constituencies
1,550 1,550
4.3.2 Post MEITI First Report Activities -
- Evaluate and review first report process
- Follow up MEITI Report recommendations
- Carry out any research/ studies as necessary including CSO study
using participatory action research methodology and PAME
Preparation for 2nd MEITI Report 2016 Onwards
MEITI Coordination Office, MSG,
Government Working Group,
CSO Working Group
12,000 12,000
4.3.3
1. Carry out review of government financial data management
system needs for effective EITI implementation (Consultant)
2.Consultant to develop the system based on the needs identified,
and provide training accordingly
Review carried out by early 2015
System in place by 2016
2015-2016
MEITI Coordination Office,
Government Working Group,
Consultant
300,000 300,000
4.3.4
MSG to review and revise the workplan
Annual review of workplan carried out by
MSG and workplan updated/amended as
necessary
March 2015MEITI Coordination
Office/Secretariat, MSG2,500 2,500
4.3.5
MSG to review annual progress (workplan), produce annual
activity/progress report and send to International Secretariat
Annual progress of workplan reviewed,
activity/progress report produced and
sent to International Secretariat
July 2015MEITI Coordination
Office/Secretariat, MSG2,500 2,500
599,325
Objective 1 total 2,317,615
Objective 2 total 181,700
Objective 3 total 484,600
Objective 4 total 599,325
TOTAL
ESTIMATE USD
3.2 Successful Production of
First MEITI Report in line
with EITI Standard
3.3 Second MEITI Report
4.3 On-going Monitoring,
Evaluation and Improvement
3,583,240
Objective 3 : Prepare and facilitate the process for implementing EITI
3.1 Sustainable Funding of
MEITI
(Funding Secured)
200,000
200,000
Total estimate
200,000
130,000
70,000
168,100
Objective 4: Increase the accessibility of data (Communication and Information Sharing)
4.2
Public Awarenss Raising and
Information Sharing
22
C. MEITI Candidacy Application Form
Contents Applicant Country Information .................................................................................... 22 REQUIREMENT 1.1 ....................................................................................................... 23 REQUIREMENT 1.2 ....................................................................................................... 24 REQUIREMENT 1.3 ....................................................................................................... 25 REQUIREMENT 1.4 ....................................................................................................... 31 Information about the Multi-Stakeholder Group ........................................................ 33 Annexes ........................................................................... Error! Bookmark not defined. Applicant Country Information Applicant: Republic of the Union of Myanmar Applicant Contact Point: Dr Zaw Oo National Coordinator MEITI Coordination Office 35B New University Avenue Road Bahan Township Yangon, Myanmar Telephone: Email: Date of Application: May (June) 2014 Other Information: www.myanmareiti.org Email: [email protected] Tel:
The government is required to issue an unequivocal public statement of its intention to implement the EITI. The statement must be made by the head of state or government, or an appropriately delegatedgovernment representative.
The first time that a senior representative of the Government of the Republic of the Union of Myanmar mentioned EITI was at the Myanmar Forum in Singapore on 8
th June 2012, where Minister U Soe Thein stated,
“We want to court foreign investments. Necessary steps, accordingly, have been taken to create an investment friendly climate for foreign investors. In time, we plan to introduce and practice Extractive Industries Transparency Initiative, which calls for governments to disclose all payments from oil, gas and mining companies” In July 2012, in an interview with the UK Financial Times, President Thein Sein stated “We are preparing to be a signatory to the Extractive Industries Transparency Initiative to ensure that there is maximum transparency in these sectors and try to make sure the benefits go to the vast majority of the people and not to a small group. The most important thing is to have completely transparent financial accounting to ensure that everyone knows where the revenues from these extractive industries are going." During a visit by the EITI International Secretariat to Naypyidaw on 16 July 2012, the government confirmed its intention to implement EITI. In December 2012, President Thein Sein issued Presidential Decree no.99/2012 which formally established EITI and states the government’s intention and commitment to implement EITI. The Presidential Decree formally establishes the Leading Authority of five Senior Ministers and designates their responsibilities for EITI implementation. On 14 December 2012, President Thein Sein publicly announced the government’s commitment to work with civil society and private sector on EITI implementation. Minister U Soe Thein was appointed EITI Champion. The Presidential Decree also established the government Leading Authority to oversee the preparations for implementation, including the establishment of a multi-stakeholder group and development of a work plan. Myanmar Development Research Institute (MDRI) is responsible for providing support to the government in preparing for implementation, and to coordinate awareness raising efforts among stakeholders. The Myanmar Framework for Economic and Social Reforms (FESR), agreed in December 2012, also specifically refers to EITI in Section 7.2 under ‘Governance and Transparency’. On the 15
th July 2013, President Thein Sein further reaffirmed the government’s commitment to implement
EITI in a speech at Chatham House in London. “We are eager to become a signatory to the Extractive Industries Transparency Initiative, or EITI, to ensure maximum transparency as well as work to attract new investment and develop our natural resources. We wish to avoid the so-called ‘resource curse’ and make sure that revenue from our natural wealth is used to reduce poverty, not fuel corruption. “ MZN/APK – President’s speech in March 2014 - hyperlink Evidence and supporting documents: Annex 1: Presidential Decree No.99/2012 Annex 2: FESR (cover page and pgs 5, 27 and 36)
REQUIREMENT 1.2The government is required to appoint a senior individual to lead the implementation of the EITI. The appointee should have the confidence of all stakeholders, the authority and freedom to coordinate action on the EITI across relevant ministries and agencies, and be able to mobilise resources for EITI implementation.
Presidential Decree 99/2012 formally established the Myanmar EITI Government Leading Authority, which comprises five senior government ministers. Senior Minister U Soe Thein was appointed the Chair of the Leading Authority and the senior individual responsible for EITI implementation in Myanmar. The Myanmar Development Resources Institute Centre for Economic and Social Development (MDRI-CESD) was appointed as the Coordination Office. The government Leading Authority includes U Than Htay, Minister of Energy, Dr Myint Aung, Minister of Mines, U Win Tun, Minister of Environment and Conservation, and U Win Shein, Minister of Finance. In 2013 a new Minister of Energy was appointed, U Zayyar Aung. The Leading Authority is responsible for overseeing the preparations for EITI implementation. The Decree states, “the Leading Authority is meant to ensure better management for extractive industries of natural resources, develop good investment environment, create opportunity for a frank and transparent discussion between private investors and the people.” The Leading Authority is also responsible for overseeing the formation of a multi-stakeholder group, developing an EITI work plan and taking the necessary steps to apply for EITI Candidate Status. The committee is also tasked with initiating reforms in the extractive sector so as to ensure that the country’s natural resources contribute to sustainable development. On 18
th November 2013, in response to certain CSO concerns, a multi-stakeholder meeting was held in
Naypyidaw for civil society, some company and some government stakeholders to openly discuss and agree next steps in terms of EITI in Myanmar. Senior Minister U Soe Thein presided over the meeting and responded directly and openly to CSO queries during the meeting. CSOs then agreed to move forwards with the EITI process. His intervention and the meeting outcome clearly demonstrate that he has the confidence of stakeholders.
Evidence and supporting documents Annex 1: Presidential Decree 99/2012 Annex 3: 18 November 2013, Naypyitaw Meeting Minutes
25
REQUIREMENT 1.3The government is required to commit to work with civil society and companies, and establish a multi-stakeholder group to oversee the implementation of the EITI. a) The government, companies and civil society must be fully, actively and effectively engaged in the EITI process. b) The government must ensure that there is an enabling environment for company and civil society participation with regard to relevant laws, regulations, and administrative rules as well as actual practice in implementation of the EITI. The fundamental rights of civil society and company representatives substantively engaged in the EITI, including but not restricted to members of the multi-stakeholder group, must be respected. c) The government must ensure that there are no obstacles to civil society or company participation in the EITI process. d) The government must refrain from actions which result in narrowing or restricting public debate in relation to implementation of the EITI. e) Stakeholders, including but not limited to members of the multi-stakeholder group must:
i. Be able to speak freely on transparency and natural resource governance issues. ii. Be substantially engaged in the design, implementation, monitoring and evaluation of the
EITI process, and ensure that it contributes to public debate. iii. Have the right to communicate and cooperate with each other. iv. Be able to operate freely and express opinions about the EITI without restraint, coercion
or reprisal. f) In establishing the multi-stakeholder group, the government must:
i. Ensure that the invitation to participate in the group is open and transparent. ii. Ensure that stakeholders are adequately represented. This does not mean that they need
to be equally represented numerically. The multi-stakeholder group must comprise appropriate stakeholders, including but not necessarily limited to: the private sector; civil society, including independent civil society groups and other civil society such as the media and unions; and relevant government entities which can also include parliamentarians. Each stakeholder group must have the right to appoint its own representatives, bearing in mind the desirability of pluralistic and diverse representation. The nomination process must be independent and free from any suggestion of coercion. Civil society groups involved in the EITI as members of the multi-stakeholder group must be operationally, and in policy terms, independent of government and/or companies.
iii. Ensure that senior government officials are represented on the multi-stakeholder group. iv. Consider establishing the legal basis of the group.
g) The multi-stakeholder group is required to agree on clear public Terms of Reference (TOR) for its work. The ToRs should at a minimum, include provisions on: The role, responsibilities and rights of the multi-stakeholder group:
i. Members of the multi-stakeholder group should have the capacity to carry out their duties.
ii. The multi-stakeholder group should undertake effective outreach activities with civil society groups and companies, including through communication such as media, website and letters, informing stakeholders of the government’s commitment to implement the EITI, the central role of companies and civil society, as well as widely disseminating the public information that results from the EITI process such as the EITI Report.
iii. Members of the multi-stakeholder group should liaise with their constituency groups. Approval of workplans, EITI Reports and annual activity reports:
iv. The multi-stakeholder group is required to approve annual workplans, the appointment of
26
the Independent Administrator, the Terms of Reference for the Independent Administrator, EITI Reports and annual activity reports.
v. The multi-stakeholder group should oversee the EITI reporting process and engage in Validation in accordance with chapter 3.
Internal governance rules and procedures:
vi. The EITI requires an inclusive decision-making process throughout implementation, with each constituency being treated as a partner. Any member of the multi-stakeholder group has the right to table an issue for discussion. The multi-stakeholder group should agree procedures for nominating and changing multi-stakeholder group representatives, decision-making, the duration of the mandate and the frequency of meetings. This should include ensuring that there is a process for changing group members that respects the principles set out in Requirement 1.3(f).
vii. There should be sufficient advance notice of meetings and timely circulation of documents prior to their debate and proposed adoption.
viii. The multi-stakeholder group must keep written records of its discussions and decisions.
Government commitment to work with civil society and companies: In December 2012, Presidential Decree 99/2012 established the Leading Authority and committed the government to working with private sector and CSOs for implementation of EITI. In April 2013 the Leading Authority (U Soe Thein) issued a letter committing government to work with all stakeholders and establishing the government ‘working committee’ for the purpose of EITI implementation.
Outreach and constituency building: The MEITI Coordination Office organised a significant number of meetings, outreach activities and workshops with each of the stakeholder groups during 2013 and early 2014 to gain buy-in and engagement into the process. CSO outreach and constituency building:
Rakhine State CSO Outreach Event - August 2013 1st CSO and government meeting about EITI was on 2nd August – Myanmar Insurance Enterprise Shan State – CSO Outreach Event – September 2013 CSO Training (with RWI), Yangon – September 2013 Big EITI CSO Conference, Yangon – 1-3 October 2013 Numerous one-to-one and smaller meetings with CSOs 2 media training workshops held in Yangon (Oct and Nov) MiCasa CSO meeting 6 November
Please see Annex ‘Myanmar MSG CSO members selection process’ paper – prepared by MC4T. Government outreach and constituency building:
EITI Promotion Trip to Rakhine State (government representatives) – August 2013 MEITI Government ‘Working Group’ met 7 times in total up to April 2014 Meetings between MEITI Coordination Office with Ministry of Mines and Ministry of Finance
representatives Numerous meetings betweenMEITI National Coordinator and senior government representatives Various meetings with individual government EITI stakeholders EITI Training Event in collaboration with EITI International Secretariat and Revenue Watch
Institute, in Naypyitaw on 10th
April – attended by 25 government officials from a range of institutions including Ministry of Finance, Ministry of Mines, Ministry of Energy, Ministry of Home Affairs (General Administration Department), Ministry of Forestry and Environmental Conservation…..
Privatesector outreach and constituency building: In terms of private sector outreach and constituency building, an initial meeting took place in June 2013 with the Myanmar Federation of Mining Associations (MFMA) at which preliminary discussions regarding their potential involvement in EITI were outlined. In early October 2013, the MEITI Coordination Office held a workshop with the government and private sector at Myanmar Insurance Enterprise. A wide range of private sector representatives attended, including representatives from both the international and national oil, gas and mining sectors (e.g. Wanbao, FMMA, Petronas, MPRL, Total, Chevron, Shell). In addition, from October- December 2013, the MEITI Coordination Office held a series of meetings with individual companies, to further explain the EITI process and their potential role in it. Individual meetings were held with Petronas, MPRL, Total, Chevron, Daewoo, PTTEP and MFMA, among others. Total, as a corporate EITI Board member, has for a long time been supportive of EITI implementation in Myanmar. On 18
th November 2013, mostly in response to a request from civil society, a large multi-stakeholder meeting was held.
in Naypyitaw at which Senior Minister U Soe Thein, Deputy Minister of Finance Dr Maung Maung Thein, and MEITI National Coordinator Dr Zaw Oo, openly discussed and responded to stakeholder questions and concerns regarding Myanmar’s intention to become an EITI candidate country. From the private sector, Daewoo and Petronas attended this meeting. In December 2013 an EITI private sector meeting was held in conjunction with EITI Chair Clare Short’s visit on 9-10 December in Naypyitaw. Here, the company representatives (including from Total, Chevron, Petronas, CNPC, MFMA and others) had the opportunity to meet with Clare Short and discuss any concerns or questions they had, as well as agree some next steps in terms of selecting private sector representatives for the MSG. Other general outreach and communications:
MEITI team and stakeholders attended EITI Global Conference, Sydney – May 2013 MEITI team training in Indonesia, September 2013 MEITI website ‘soft launch’ in December 2013 MEITI Brochure – October 2013 MEITI Booklet (with Pyoe Pin and EcoDev) Factsheets MEITI Newsletter – January 2014 Translation of EITI Standard into Myanmar Language
On the 18
th November a large multi-stakeholder consultation meeting took place in Naypytitaw at which Senior Minister
U Soe Thein reconfirmed the government’s commitment to work with CSOs and companies to implement EITI. MSG Representatives Selection Procedure and Establishment of MSG: Following a period of extensive outreach and constituency building, and amid plans and preparation for the establishment of the multi-stakeholder group, the Chair of the international EITI Board and the EITI Regional Director paid a visit to Myanmar to meet stakeholders, discuss progress and agree next steps. The MEITI Coordination Office prepared a ‘Next Steps Consultation Briefing Paper’ at the end of November which was shared with all key stakeholders and which outlined progress so far and proposed next steps. All stakeholders were invited to submit any comments, feedback or suggestions ahead of the multi-stakeholder consultation meeting planned for 9-10 December. The multi-stakeholder consultation meeting and other individual constituency group meetings took place in NPT during Clare Short’s visit on 9-10 December. Clare Short also met the President during her visit. One of the key outcomes agreed was that the MSG should be established and the first meeting should take place by December/ January. The Ministry of Mines organised a large EITI workshop meeting on 13 December 2013, to follow through next steps after the Chair of EITI’s visit. A large number of mining company representatives attended the meeting and the Minister of Mines and MEITI Coordination Office representatives spoke and encouraged companies to participate in the process. At the end of the meeting 2 mining sector representatives agreed to be MSG members – one international (CNMC Nickel’s Country Manager) and one national (the joint Secretary General of the Myanmar Federation of Mining Associations, who also owns a private mining company).
For the oil and gas sector, MOGE invited a number of companies to attend a meeting on 13 December, at which four company representatives agreed to sit on the MSG. It has initially been suggested (drawing on the recommendations provided in the MEITI Options Study) that there should be 4 oil and gas company seats. During the consultation and outreach process, it had been suggested that one of these seats should be left vacant until the outcomes of the current offshore oil and gas tender process was announced, enabling one of the new companies to have a seat on the MSG. However, at the MOGE meeting it was decided that the 4 seats should be filled as follows:
Total (international, private)
Petronas (international, state)
MPRL (national/international)
GoldPetrol (national) In terms of the government selection process, the government agreed to nominate its 6 members, reflecting senior government representatives from the key EITI related government institutions, by the end of December 2013. The names were given to the MEITI Coordination Office by the end of the year. The government Working Group includes senior government officials, many of whom are on the MSG. The appointed MSG members are all Director General and Director level, as follows:
Director General, General Administration Department, Ministry of Home Affairs
Director General, Forestry Department, Ministry of Environmental Conservation and Forestry
Managing Director, Myanmar Oil and Gas Enterprise, Ministry of Energy
Director General, Department of Mines, Ministry of Mines
Director General, Internal Revenue Department, Ministry of Finance
Director, Union Auditor General’s Office Finally, the MSG was formally established and the first MSG meeting was held in Naypyitaw on Saturday February 8
th 2014. Leading Authority formal notification establishing MSG – openly discussed at 1
st MSG meeting among
members: CSOs requested some changes – in particular:
There were concerns that the document was too similar to an MSG TOR
There was concern that only CSO individual names were mentioned, not other stakeholder groups
There was concern that the document didn’t specifically refer to the EITI Standard, especially 1.3
CSOs requested changes in accordance with these concerns
Further to discussions and agreement at the first MSG meeting, the Chair of the MSG agreed that some changes to the notification could be made. As such, the Leading Authority re-issued the Notification on 18
th February (date
of notification), and had it formally published it in the Government Gazette.
The second MSG meeting took place on the 6th
March 2014 and mostly focused on discussion of the draft TOR document as well as progress on the draft Workplan. The third MSG meeting took place on 7
th April. This included
discussion and approval of key documents and preparation of the candidacy application. The MSG TOR were not quite approved by the MSG members. A final draft, with comments from that meeting incorporated was circulated among MSG members during mid-late April so for their approval by the end of April (early May) at the latest. MEITI Stakeholders have the right to communicate and cooperate with each other. This is clear from the MSG meetings and other EITI related events to date. Stakeholders are able to operate freely and express opinions about the EITI. In terms of capacity development, a Capacity and Training Needs Assessment is included in the Workplan, and a training Plan for EITI stakeholders will be developed according to the needs identified. Many outreach activities are also included in the Workplan. An MEITI communications strategy will also be developed which will include a wide range of communications and outreach activities, including for the EITI Report. All key stakeholders and their main constituency group representatives have been actively involved in the process. In terms of liaison with broader constituency groups, each MSG constituency group is setting up structures for liaison with their broader constituencies, and although these have not all been set up or formalised yet, there has been extensive consultation among all constituency groups.
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For CSOs, there has been a considerable amount of broad consultation among constituencies, including regional/subnational awareness-raising, workshops, conferences and other activities. The Myanmar Coalition for Transparency (MC4T)- serving as an umbrella organisation for a number of CSO groups has now been ‘formally’ established and ensures regular and wider liaison with wider CSO constituencies around the country. For the private sector, an ‘Oil and Gas Group’ of 18 companies (convened by Total) has met twice since January 2014 and will continue to meet on a regular basis. Mining sector representatives have yet to meet with a broader mining constituency but have agreed to do this once the candidacy application has been submitted. MSG Terms of Reference (TOR) development process: At the first MSG Meeting in February 2014, two sub-committees were established, one of which was the Terms of Reference sub-committee. The objective of this sub-committee was to meet and work together to develop the MSG TOR. The TOR sub-committee meetings drew extensively from the recommendations in the MEITI Options Study (prepared by an international EITI expert), which assessed various options for MSG governance and structure in Myanmar, using several other international examples as benchmarks. The preferred suggested model comprised 21 members:
6 government
6 private sector (2 mining, 4 oil and gas)
6 (or more) CSOs Finally it was agreed that there should be 6 government and private sector representatives, and 9 CSO representatives for Myanmar EITI’s MSG. Three meetings of the MSG TOR sub-committee took place during February and March 2014. There was active participation of all members during the meetings, and discussions and developments of the draft were based on international good practice examples and the recommendations provided in the MEITI Options Study. After each meeting, the draft TOR were amended in line with discussions, translated and shared among members for their review and feedback. The final draft was agreed at 28th March meeting. A few further comments were received on Friday 4
th April from CSO and private sector representatives. These were discussed during 7
th April MSG meeting,
and some final small changes were agreed. It was also agreed that the final draft TOR would be shared with MSG members on Friday 11
th April for approval.
The TOR provides for alternates. Most MSG members have nominated their alternates and the rights and responsibilities of alternates are clarified in the TOR. Enabling environment: MEITI stakeholders, both in the MSG and beyond, are able to speak freely on EITI, transparency and natural resource governance issues. This has been clearly demonstrated at the end of 2013 and in early 2014 in a number of media articles, (see e.g. CSO representative interviews here and Mon media articles), and in meetings and workshops with companies and CSOs. It is clear (see also minutes of meetings) that CSOs and all MSG stakeholders are free to talk and raise issues of concern. CSOs have established a comprehensive national governance structure for EITI, which includes representatives in the States and Regions. In terms ofan enabling environment for company and civil society participation with regard to relevant laws, regulations, and administrative rules as well as actual practice in implementation of the EITI, it should be noted that many CSOs have been actively lobbying and engaging with parliamentarians and government regarding reform of relevant laws, in particular thedraft Association Registration Law (2013) and the Peaceful Assembly Law. The Association Registration Law requires any CSO to be formally registered. This had caused concerns among CSO groups, including some involved in the EITI process. It was raised as a key concern by CSOs in October 2013, as one of a few issues the CSO group wanted clarification on before agreeing to go ahead and participate in EITI. At the large CSO conference in early October, Dr Maung Maung Thein, Deputy Minister of Finance and MEITI MSG Chair, publicly stated that any CSO wanting to engage in EITI does not need to be registered. The International Centre for Not-for-Profit Law (ICNL) highlights on its website the developments and updates regarding the Association Registration Law process, and states that in January 2014, the Public Affairs Management Committee officially submitted the Association Registration Law to the Pyithu Hluttaw (House of Representatives) in Myanmar. ICNL notes that the Public Affairs Management Committee had already discussed the draft law with the Bills Committee and with the Ministry of Home Affairs.
Many CSO representatives have also been lobbying for amendment and review of Section 18 of Myanmar’s Law on the Right to Peaceful Assembly and Peaceful Procession, which requires permission to be granted for peaceful protest to take place. There has been some concern at the number of political prisoners in Myanmar as a result of this provision. CSOs raised this as a major concern at the MEITI multi-stakeholder consultation meeting in Naypyitaw on 18
th November 2013. Senior Minister U Soe Thein responded to CSO
concerns regarding political prisonersand publicly stated that a prominent female political prisoner would be released that week. The President had also publicly committed to release all political prisoners by the end of the year. With regard to Section 18, the penalty had been one-year imprisonment for protesting without permission, but the law was amended in January 2014, and now states that in the case of permission for a protest being refused by government, the penalty for going ahead and protesting without prior permission has been amended from one-year imprisonment to 6 months. Further amendments to Section 18 are on going and anticipated. In addition, there have been a number of other legal and regulatory reforms, including the 2012 Environmental Conservation Law which includes Environmental (and Social) Impact Assessment requirements that will also extend to all new extractive industry contracts. Also, the government has committed to implement the voluntary EU Forest Law Enforcement Governance and Trade Facility. While these reforms and initiatives are not specific to EITI, they are nevertheless indirectly associated, and demonstrate the government’s commitment to broader reform and to providing an enabling environment. It is also clear that EITI stakeholders are not, in practice, being impacted or restricted in terms of their ability to participate in the EITI process. Evidence and supporting documents: Annex 1: Presidential Decree 99/2012 Annex 3: 18
th November Meeting Minutes
Annex 4: UST Letter forming Government Working Committee Annex 5: Government formal notification establishing MSG, 18 February 2014 Annex 6: MSG TOR Annex 7: MEITI Next Steps Consultation Briefing paper – November 2013 Annex 8: 3 x MSG meeting minutes Annex 9: Sub-Committee meeting minutes (TOR) Annex 10: CSO selection process Annex 11: MOGE and MOM Selection Letters Annex 12: Leading Authority meeting with Government Working Committee – newspaper article Annex 13: MEITI Newsletter – January 2014 Annex 14: Selected media articles (inc. KoKo Interview – newspaper December 2013) Annex 15: Minutes of MEITI Office/Total meeting March 20
th
Annex 16: NPT workshop 16-17-18 Nov (invitation, agenda and list of participants) Annex 17: Meeting minutes MFMA 29 July 2014 Annex 18: Government Training NPT 10 April 2014 – invitation, agenda, participant list Annex 19: Minutes of Government/CSO meeting, 2 August 2013 Annex 20: Media training, invitation and list of participants Annex 24: MEITI Institutional Options Study (available from MEITI Coordination Office)
REQUIREMENT 1.4 The multi-stakeholder group is required to maintain a current workplan, fully costed and aligned with the reporting and Validation deadlines established by the EITI Board. The workplan must:
a) Set EITI implementation objectives that are linked to the EITI Principles and reflect national priorities for the extractive industries. Multi-stakeholder groups are encouraged to explore innovative approaches to extending EITI implementation to increase the comprehensiveness of EITI reporting and public understanding of revenues and encourage high standards of transparency and accountability in public life, government operations and in business.
b) Reflect the results of consultations with key stakeholders, and be endorsed by the multi- stakeholder group.
c) Include measurable and time bound activities to achieve the agreed objectives. The scope of EITI implementation should be tailored to contribute to the desired objectives that have been identified during the consultation process. The workplan must:
i. Assess and outline plans to address any potential capacity constraints in government agencies, companies and civil society that may be an obstacle to effective EITI implementation.
ii.Address the scope of EITI reporting, including plans for addressing technical aspects of reporting, such as comprehensiveness and data reliability (Requirements 4 and 5).
iii. Identify and outline plans to address any potential legal or regulatory obstacles to EITI implementation, including, if applicable, any plans to incorporate the EITI Requirements within national legislation or regulation.
d) Identify domestic and external sources of funding and technical assistance where appropriate, in order to ensure timely implementation of the agreed workplan;
e) Be made widely available to the public, for example published on the national EITI website and/or other relevant ministry and agency websites, in print media or in places that are easily accessible to the public;
f) Be reviewed and updated annually. In reviewing the workplan, the multi-stakeholder group should consider extending the detail and scope of EITI reporting including addressing issues such as revenue management and expenditure (3.7-3.8), transportation payments (4.1.f), discretionary social expenditures (4.1.e), ad-hoc subnational transfers (4.2.e), beneficial ownership (3.11) and contracts (3.12). In accordance with requirement 1.3 (g)(viii), the multi- stakeholder group is required to document its discussion and decisions;
g) Include a timetable for implementation that is aligned with the EITI reporting and Validation deadlines established by the EITI Boardand that takes into account administrative requirements, such as procurement processes and funding.
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At the first MSG meeting in February it was agreed to establish two sub-committees, including a ‘Workplan Sub-Committee’. Each constituency group was invited to nominate representatives for the sub-committees. The Workplan sub-committee comprises 3 government and3 private sector representatives, but just 2 CSO representatives (2 in each sub-committee, as selected by CSOs). Despite not all members being able to attend each meeting, significant progress was made during the meetings which took place on the 14
th and 28
th
February, then again on the 14th
and 28th
March. An initial draft document was developed which, after being reviewed by the International Secretariat and the MEITI Technical Adviser, was found not to be in line with EITI Standard Requirements. Various additional activities were proposed to ensure the minimum EITI Requirements are met. This draft was then shared with members ahead of the 28
th March final sub-commitee meeting, before approval by the MSG at the third MSG
meeting on 7th
April. All members of the sub-committee contributed to discussion and some small amendments were made to the draft. On 29
th March a budget was added and all the comments and feedback
were incorporated and this version was shared with all members. No substantive comments on the budget were received. CSOs then had various meetings among themselves to consult on and discuss the final draft, and submitted final comments and feedback on 4
th April. The Oil and Gas Group met on 2
nd April and also submitted final
comments and feedback on 4th
April. The final draft was presented to the Government Working Committee members at their meeting on xxxMarch/April?, and provided no further comments. At the third MSG meeting on 7
th April the Workplan was discussed and approved. It was agreed that while CSOs
still wanted to make more changes and additions to the document, these further suggested changes would be clearly reflected in the MSG meeting minutes for future review of the Workplan. It was agreed that this was the best approach given the time constraints faced by the MSG in terms of finalising all the documents to submit the MEITI candidacy application by the end of April, rather than the time-consuming process required to continue to make small amendments. The Workplan includes measurable and time bound activities and a timetable for implementation. It includes a ‘training and capacity needs assessment’ and the development of a training plan which will specifically address the needs identified. A number of other training and capacity development activities have also been included. The scope of EITI implementation and Workplan activities is tailored to contribute to the desired objectives identified. Various activities in the Workplan address the scope of reporting, including e.g. a ‘pre-scoping’ study/institutional and regulatory assessment (funded by the World Bank), a formal scoping study, and other studies which will enable improved data quality.An initial legal review was completed in January 2014, which assesses potential legal and regulatory obstacles and provides recommendations to government to overcome such obstacles. A further legal study will be carried out and this is included in the Workplan. It will build on the initial legal review and prepare government to embed and institutionalise EITI. The Workplan also includes preparatory work and consultations for an EITI Bill.
The Workplan was approved at the 3rd
MEITI MSG meeting on 7th
April - including total budget estimate. The MEITI Coordination Office is now planning a series of meetings to discuss funding options with the World Bank and DFID and other potential donors. At the third MSG meeting the MEITI National Coordinator also confirmed that during conversations with senior government in the previous week, it had been confirmed that MEITI will be included in Myanmar’s national budget. The Workplan includes an activity to be updated annually as well as a section on monitoring, evaluation and continuous improvement, which includes the establishment of a monitoring sub-committee who can lead on ensuring the review and updating of the Workplan, and extending the scope and detail on an annual basis. The Workplan be published on MEITI website and other relevant locations by early May. Evidence and supporting documents: Annex 21: Workplan Annex 8: 3x Minutes of MSG meetings Annex 22: Sub-Committee meeting minutes (Workplan) Annex 23: Summary of Legal Review Annex 25: MEITI Guidebook and Institutional Options Study (by International EITI Expert) available from MEITI Coordination Office
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Information about the Multi-Stakeholder Group
Name Title Organisation Contact Details Dr. Maung Maung Thein
The Extractive Industries Transparency Initiative (EITI) is a global standard that promotes transparency and accountability in the oil, gas and mining sectors. It has a robust yet flexible methodology for disclosing and reconciling company payments and government revenues in implementing countries.
EITI implementation has two core components:
Transparency: oil, gas and mining companies disclose their payments to the government, and the government discloses its receipts. The figures are reconciled by an Independent Administrator, and published in annual EITI Reports alongside contextual and other information about the extractive sector.
Accountability: a multi-stakeholder group (MSG) with representatives from government, companies and civil society is established to oversee the process and communicate the findings of the EITI Report, and promote the integration of EITI into broader transparency efforts in that country.
The EITI Standard encourages multi-stakeholder groups to explore innovative approaches to extending EITI implementation to increase the comprehensiveness of EITI reporting and public understanding of revenues and encourage high standards of transparency and accountability in public life, government operations and in business. It is a requirement that the MSG approves the terms of reference for the Independent Administrator (requirement 5.2), drawing on the objectives and agreed scope of the EITI as set out in the workplan. The MSG’s deliberations on these matters should be in accordance with the MSG’s internal governance rules and procedures (see requirement 1.3(g)). The EITI requires an inclusive decision-making process throughout implementation, with each constituency being treated as a partner.”
It is a requirement that the Independent Administrator is perceived by the multi-stakeholder group to be credible, trustworthy and technically competent (Requirement 5.1). The multi-stakeholder group and Independent Administrator should addresses any concerns regarding conflicts of interest. The Independent Administrator’s report will be submitted to the MSG for approval and made publically available.
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The requirements for implementing countries are set out in the EITI Standard1. Additional information is available via www.eiti.org
These terms of reference include “agreed upon procedures” for EITI reporting (see section 4) in accordance with EITI Requirement 5.2. The Board has developed these procedures to promote greater consistency and reliability in EITI reporting. The EITI process can be used to complement, assess, and improve existing reporting and auditing systems. The Board recommends that the process relies as much as possible on existing procedures and institutions, i.e., so that the EITI process draws on, complements and critically evaluates existing data collection and auditing systems. In this way, the EITI process has the potential to generate important recommendations to strengthen other oversight systems.
EITI Implementation in Myanmar
The President of the Republic of the Union of Myanmar, Thein Sein made a formal commitment to become an EITI Candidate country at the end of 2012, through Presidential Decree no 99/2012.This established the government ‘Leading Authority’ (chaired by the President’s Office) and the Centre for Economic and Social Development of the Myanmar Development Resources Institute (MDRI-CESD) was designated the national MEITI Coordination Office. A government inter-ministerial ‘Working Group’ for EITI, comprising 12 members, was established in April 2013. Significant progress was made throughout 2013, and by May 2014 Myanmar was ready to submit its candidacy application to the EITI Board.
At its 27th meeting on 2-3 July 2014, the EITI Board approved Myanmar’s candidacy application, and granted Myanmar until January 2016 to produce its first EITI Report. Myanmar now has until January 2017 to meet all 7 of the EITI Requirements and attain ‘EITI Compliant’ status.
MEITI’s multi-stakeholder group (MSG) comprising 21 representatives of government, civil society and private sector, is now working to implement MEITI’s 3-year workplan and prepare for the production of the first MEITI Report.
The MEITI workplan (attached in Annex 1) is aligned around 4 key objectives:
Contribute to broader reform for resource governance
Create an enabling environment for EITI
Prepare and facilitate the process for implementing EITI
Increase the accessibility of data (Communication and Information Sharing)
The MSG has established a Technical and Reporting Sub-Committee, which has responsibility for overseeing the scoping and reconciliation process, on behalf of,
On behalf of the MSG, the World Bank and the Government of Myanmar seek a competent and credible firm, free from conflicts of interest, to provide Independent Administrator services in accordance with the EITI Standard. The objectives of the assignment are to:
i. Part 1: Produce a scoping study to inform the MSG’s decision on the scope of the 2013-2014 EITI Report (MEITI workplan activity 3.2.4) – Phase 1 below
ii. Part 2: Produce an EITI Report for 2013-2014 in accordance with the EITI Standard (MEITI workplan activity 3.2.7) – Phases 2, 3, 4 and 5 below
The assignment will be divided into two separate contracts, as follows:
i. Part 1: Scoping study and summary Inception Report (Phase 1) – contract with the World Bank
ii. Part 2: Data collection (including provision of guidance and training to reporting entities), Reconciliation and Production of EITI Report (Phases 2, 3, 4 and 5) – contract with the Government of Myanmar
Scope of services, tasks and expected deliverables
The work of the Independent Administrator has five phases (see figure 1). The Independent Administrator’s responsibilities in each phase are elaborated below.
Figure 1 – Overview of the EITI Reporting process and deliverables
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Phase 1 – Preliminary Analysis, Scoping Study and Summary Inception Report
Background: The objective of the first phase of work is to ensure that the scope of the EITI reporting process has been clearly defined, including the reporting templates, data collection procedures, and the schedule for publishing the EITI Report. It is imperative that the scope of EITI reporting is clearly defined, in line with the EITI Standard and with the MSG’s agreed objectives and expectations for the EITI process. The findings from the first phase should be documented in a scoping study report (see 1.3 below) for the MSG. After the MSG agrees the scope, a summary inception report (see 1.4 below) should be produced.
Phase 1 will be under contract with the World Bank whereas the remaining phases (2-5) will be under contract with the Government of Myanmar.
The Independent Administrator is expected to undertake the following tasks:
1.1 The Independent Administrator should review the relevant background information, including the governance arrangements and tax policies in the extractive industries, the findings from any preliminary scoping work, the MSG workplan, and the conclusions and recommendations from previous MEITI-related reports where applicable. (A list of relevant documentation is provided as Annex 1).
1.2 The MSG has agreed that for the purpose of the scoping study, the extractive sector in Myanmar for 2013-2014 shall be defined as:
Oil and gas
Mining (including jade and gemstones, according to formal government Gem Emporium data)
1.3 The Independent Administrator should produce a scoping study report to inform the MSG’s decision on the scope of the 2013-2014 EITI Report. The scoping report should recommend a 5-year ‘reporting roadmap’ of progressively expanded reporting. In producing the scoping report, the Independent Administrator is expected to:
Contextual information
i. Review and summarise the legal framework governing the extractive industries in accordance with EITI Requirement 3.2. The consultant should draw on existing studies, such as the MEITI Legal Review.
ii. Provide a descriptive overview of the extractive sector in accordance with EITI Requirement 3.3. The consultant should identify and draw on existing sources of information.
iii. In accordance with EITI Requirement 3.4 and reflecting MEITI workplan activity 1.2.5, prepare a summary of the contribution of the extractive industries to the economy for 2013-2014.This should include information on the artisanal and small-scale mining sector where possible (MEITI workplan activity 1.2.7), and assess the quality of data from small-scale
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mining license holders, where possible, including its volume and its relative significance within Myanmar’s extractive industries and the economy overall.
iv. Identify sources of information about production and export data, comment on the quality and reliability of the data, and identify a mechanism for disclosing production and export figures in the 2013-2014 report (in accordance with EITI Requirement 3.5 and MEITI workplan activity 1.2.5).
v. In accordance with EITI Requirement 3.6 and MEITI workplan activity 1.2.9 and 1.2.10, investigate the role of state-owned companies in the extractive sector and suggest an approach for reporting on financial relationships between the government and the SOEs, quasi-fiscal expenditures, and government ownership in oil, gas and mining companies operating in Myanmar in 2013-2014. This should include identifying any barriers to comprehensive disclosure for the EITI report.
vi. Propose a framework for reporting on revenue allocations and distribution of revenues in 2013-2014, in accordance with EITI Requirements 3.7 and 3.8, including identifying government reporting entities and sources of information.
vii. Review the currently available information about license holders in 2013-2014 and assess the completeness and timeliness of the information. Where the information about license holders requested in EITI requirement 3.9.b is not comprehensive or accessible, the Independent Administrator should propose a mechanism for reporting and disclosure in accordance with EITI Requirements 3.9.
viii. Review the currently available information about license allocations in 2013-2014, and assess the completeness and timeliness of the information. Where the information set out in 3.10 is not publicly available, the Independent Administrator should propose a mechanism for reporting and disclosure in accordance with EITI Requirements 3.10 and MEITI workplan activity 1.2.13.
ix. In accordance with Myanmar’s workplan objectives and activity 1.2.12, the Independent Administrator should propose a definition of beneficial ownership consistent with EITI requirement 3.11.d, and a mechanism for reporting and disclosure in accordance with EITI Requirements 3.11.a-b. A model beneficial ownership declaration form is available from the EITI International Secretariat.
x. In accordance with EITI Requirement 3.12 (b), review and document Myanmar’s policy on disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals. This should include a summary of relevant legal provisions, actual disclosure practices and any reforms that are planned or underway.
xi. In accordance with Myanmar’s workplan objectives and activity 1.2.14:
a. Canvass stakeholder’s views and international practice on contract transparency
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b. Propose options for how the MSG might wish to consider approaching contract disclosure
c. Assess the feasibility and steps necessary in order to disclose relevant contractual information relating to the objectives of the EITI and, in accordance with the existing law, the encouragement in requirement 3.12 (a) and step 1.2.14 of the MEITI workplan.
xii. Include an overview of major Corporate Social Responsibility (CSR) programmes and social development funds at state/regional level.
xiii. Identify any barriers to disclosure of contextual information set out above, and set out options and make recommendations for addressing these barriers.
EITI reconciliation
xiv. Undertake a comprehensive analysis of the payments and government revenue streams related to the extractive sector (as defined by the MSG in 1.2 above) noting in particular the revenues streams that must be covered in accordance with EITI Requirement 4.1 (b). The analysis should also cover revenues related to the sale of the state’s share of production or other revenues collected in-kind (4.1.c), infrastructure provisions and other barter arrangements (4.1.d), mandatory and voluntary social expenditures (4.1.e and MEITI workplan activity 1.2.14), and transportation payments, such as pipeline transit fees (4.1.f).
xv. Taking into account the findings of vii above, review cadastre (or best equivalent and relevant source) and revenue data from 2013-2014 and make recommendations as to which of these tax payments and government revenue streams should be considered material, including suggesting materiality thresholds for company disclosure if appropriate (with reference to guidance note 2 and EITI requirement 4.1 and MEITI workplan activity 3.2.5).
xvi. Based on the proposed materiality definition, develop a preliminary list of the companies that make material payments and should be covered in the EITI Report (EITI requirement 4.2.a). Where materiality thresholds are proposed, this should include an estimate of coverage of company payments that will be disclosed relative to total government revenues from the sector. It should also identify the total contribution of companies not required to report (i.e. those that fall below the materiality threshold), with a clear indication of the relative size of each company. (This information will inform the assessment of the comprehensiveness of the EITI Report as per Requirement 5.3.c).
xvii. For each company, identify where available:
a. Company’s Tax Payer Identification Number
2 Guidance note on defining materiality: http://eiti.org/document/guidance-notes
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b. Sector and phase of operation, i.e. exploration, production, oil, gas, mining etc.
c. Type of license(s) held and the license number(s).
xviii. Based on the proposed materiality definition, identify which government entities should be required to report. It should be noted that the government is required to disclose all revenues, regardless of the materiality (EITI Requirement 4.2.b). Thus where materiality thresholds for company disclosures are established, a reconciliation of the company payments and government revenues in accordance with the materiality threshold would be appropriate. Any additional government revenues (i.e. from companies below the materiality threshold) would also need to be disclosed in the EITI Report as per Requirement 4.2.b.
xix. In considering which government entities should be disclosed, the consultant should identify whether sub-national government entities receive direct or indirect revenues from the extractive sector in accordance with Requirement 4.2(d) and Requirement 4.2(e), and MEITI workplan activity 1.2.11.
xx. Identify any legal, regulatory, administrative or practical barriers to comprehensive disclosure, and if necessary set out options and make and recommendations for addressing these barriers.
Data quality xxi. In accordance with EITI Requirement 5.2(b), examine the audit and
assurance procedures in companies and government entities that are likely to participate in the EITI reporting process, including the relevant laws and regulations, any reforms that are planned or underway, and whether these procedures are in line with international standards.
xxii. In accordance with EITI Requirement 5.2(c), The Independent Administrator should provide advice to the MSG on what information the MSG should require to be provided to the Independent Administrator by the participating companies and government entities to assure the credibility of the data in accordance with Requirement 5.2(c). The Independent Administrator should then employ his /her professional judgement to determine the extent to which reliance can be placed on the existing controls and audit frameworks of the companies and governments. The Independent Administrator should document the options considered and the rationale for the assurances to be provided. Where deemed necessary by the Independent Administrator and the multi-stakeholder group, assurances may include:
a. Requesting sign-off from a senior company or government official from each reporting entity attesting that the completed reporting form is a complete and accurate record.
b. Requesting a confirmation letter from the companies’ external auditor that confirms that the information they have submitted is comprehensive and consistent with their audited financial statements. The MSG may wish to phase in any such procedure so that the confirmation letter may be integrated into the usual work
41
programme of the company’s auditor. Where some companies are not required by law to have an external auditor and therefore cannot provide such assurance, this should be clearly identified, and any reforms that are planned or underway should be noted.
c. Where relevant and practicable, requesting that government reporting entities obtain a certification of the accuracy of the government’s disclosures from their external auditor or equivalent.
The Independent Administrator should exercise judgement and apply appropriate international professional standards in developing a procedure that provide a sufficient basis for a comprehensive and reliable EITI Report.
Presentation
xxiii. Prepare and present the draft scoping study to the MSG, the World Bank and the International Secretariat for review and comment. MSG members may then share the draft with their constituency groups for comments and feedback.
xxiv. Prepare a final scoping study report to the MSG and provide options and recommendations for the 2013-2014 EITI report.
xxv. Recommend how future scoping study reports can be improved.
1.4 After the MSG has considered the options and recommendations of the scoping study, and agreed the scope accordingly, the Independent Administrator should produce a summary Inception Report for consideration by the MSG. The Inception Report should:
a. Confirm the MSG’s position and agreed approach on the issues addressed in the scoping report (point 1.3.i-xxii above).
b. Confirm how the contextual and other non-revenue information in the EITI Report (point 1.3.i-xiii above) will be incorporated and analysed, as per agreement with the MSG. Information should be clearly sourced and attributed.
c. Confirm the level and type of disaggregation of the EITI Report in accordance with Requirement 5.2(e).
d. Provide advice to the MSG on agreeing appropriate provisions relating to safeguarding confidential information.
e. Where necessary highlight any unresolved issues or potential barriers to effective implementation, and possible remedies for consideration by the MSG.
f. Include draft reporting templates developed by the Independent Administrator for consideration and approval by the MSG based on
42
the agreed benefit streams to be reported and the reporting entities (1.3 above). Sample templates are available from the International Secretariat. It is recommended that the templates include a provision requiring companies to report “any other material payments to government entities” above an agreed threshold.
Phase 2 – Data Collection Phases 2-5 of the work will be under contract with the Government of Myanmar, whereas Phase 1 will be under contract with the World Bank.
2.1 The Independent Administrator is mandated by the MSG to distribute the reporting templates and collect the completed forms and associated supporting documentation, as well as any other contextual or other information requested to be collected by the MSG, directly from the participating reporting entities. The government should provide contact details for the reporting entities and assists the Independent Administrator in ensuring that all reporting entities participate fully. The MSG will provide oversight, and the MEITI Secretariat will support the facilitation of this process.
2.2 In accordance with MEITI workplan activity 3.2.6 and at the direction of the MSG, the Independent Administrator should develop guidance to the reporting entities, and should provide training on how to complete the reporting templates.
2.3 The Independent Administrator is mandated to contact the reporting entities directly to clarify any information gaps or discrepancies.
Phase 3 – Initial Reconciliation and Initial Reconciliation Report
3.1 The Independent Administrator should compile a database with the data provided by the reporting entities.
3.2 The Independent Administrator should comprehensively reconcile the information disclosed by the reporting entities, identifying any discrepancies (including offsetting discrepancies) in accordance with the agreed scope.
3.3 The Independent Administrator should prepare an initial reconciliation report based on the reported (unadjusted) data for consideration by the MSG in accordance with the agreed scope.
3.4 The Independent Administrator should identify any discrepancies above the agreed margin of error established at 5% of total revenues.
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3.5 With respect to contextual information and other data collected by the Independent Administrator or provided to the Independent Administrator by the government or MSG: the Independent Administrator will compile the data collected by the government, MSG, or reporting entities and prepare an initial report based on the reported contextual and other information in the format agreed by the MSG for reporting this information.
Phase 4 – Investigation of Discrepancies and Draft Independent Administrator’s Report
4.1 The Independent Administrator is mandated to contact the reporting entities in seeking to clarify any discrepancies in the reported data.
4.2 The Independent Administrator should prepare a draft Independent Administrator’s Report that comprehensively reconciles the information disclosed by the reporting entities, identifying any discrepancies, and reports on contextual and other information requested by the MSG.
4.3 The draft Independent Administrator’s report should:
a. Describe the methodology adopted for the reconciliation of company payments and government revenues, and demonstrate the application of international professional standards
b. Include a description of each revenue stream, related materiality definitions and thresholds (Requirement 4.1).
c. Include an assessment from the Independent Administrator on the comprehensiveness and reliability of the data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided.
d. Based on the government's disclosure of total revenues as per Requirement 4.2(b), indicate the coverage of the reconciliation exercise.
e. Include an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested information. Any gaps or weaknesses in reporting to the Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness of the report (Requirement 5.3(d)).
f. Document whether the participating companies and government entities had their financial statements audited in the financial year(s) covered by the EITI Report. Any gaps or weaknesses must be disclosed. Where audited financial statements are publicly available, it is recommended
44
that the EITI Report advises readers on how to access this information (Requirement 5.3(e)).
4.4 The Independent Administrator should make recommendations for strengthening the reporting process in the future, including any recommendations regarding audit practices and reforms needed to bring them in line with international standards. Initially, these recommendations will be for the MSG only, then, subject to their approval, can be included in the final report.
4.5 The Independent Administrator is encouraged to make recommendations on strengthening the template Terms of Reference for Independent Administrator services in accordance with the EITI Standard for the attention of the EITI Board.
4.6 The Independent Administrator should make recommendations for integrating EITI disclosures in government systems.
Phase 5 – Final Independent Administrator’s Report
5.1 The Independent Administrator should produce electronic data files that can be published together with the final Report.
5.2 The Independent Administrator should provide machine-readable files and/or code or tag EITI Reports and data files. The Independent Administrator should recommend the best format and approach for doing so.
5.3 Following approval by the MSG, the Independent Administrator is mandated to submit summary data from the EITI Report electronically to the International Secretariat according to the standardised reporting format available from the International Secretariat (Requirement 5.3(b).
The Independent Administrator will publish/make public their final report only upon the instruction of the MSG. The MSG will endorse the report prior to its publication. Where stakeholders other than the Independent Administrator wish to include additional comments in, or opinions on, the EITI Report, the authorship should be clearly indicated.
Qualification requirements for Independent Administrators
The reconciliation of company payments and government revenues must be undertaken by an Independent Administrator applying international professional standards (Requirement 5.1). It is a requirement that the Independent Administrator is perceived by the MSG to be credible, trustworthy and technically competent (ibid). Bidders must follow (and show how they will apply) the appropriate
45
professional standards for the reconciliation / agreed-upon-procedures work in preparing their report.
The Independent Administrator will need to demonstrate:
a. Expertise and experience in the oil, gas and mining sectors in Myanmar.
b. Expertise in accounting, auditing and financial analysis.
c. A track record in similar work. Previous experience in EITI reporting is not required, but would be advantageous.
d. Inclusion of a local expert/partner on the team is not required, but would be advantageous.
In order to ensure the quality and independence of the exercise, Independent Administrators are required, in their proposal, to disclose any actual or potential conflicts of interest, together with commentary on how any such conflict can be avoided.
Reporting requirements and time schedule for deliverables
The assignment is expected to commence on 23 February 2015, culminating in the finalisation of the EITI Report by 1 December 2015. The proposed schedule is set out below:
Signing of contract February 2015 Part 1:
Phase 1
Contract with the World Bank
Inception period 23 February – 29 May 2015
Scoping report 15 May 2015
Inception report 29 May 2015
Data collection & initial reconciliation
1 June – 15 August 2015 Part 2:
Phases 2 – 5
Contract with the Government of Myanmar
Initial reconciliation report 4 September 2015
Draft report 16 October 2015
Final report 1 December 2015
Client’s input and counterpart personnel
The Independent Administrator will report to the MEITI MSG and work closely, where necessary, with the MEITI Coordination Office and MEITI-MSG Technical and
46
Reporting Sub-Committee. The MSG and the MEITI Secretariat will provide support to the Independent Administrator, by agreement and as required.
Annex 1 – Supporting Documentation
Documentation on governance arrangements and tax policies in the extractive industries, including relevant legislation & regulations:
MEITI Legal Review, 2013
Institutional and Regulatory Assessment of the Extractive Industries in Myanmar (World Bank/Adam Smith International), 2014
Other relevant documentation:
MEITI Workplan
MEITI Guidebook and Institutional Options Study, 2013
Political Economy Analysis of EITI in Myanmar, Pyoe Pin, 2013
Pre-scoping study on EITI in Myanmar, Spectrum, July 2012
Myanmar Extractive Industry Revenue and Benefit Sharing, NRGI, 2014
Creating a Future: Using Natural Resources for New Federalism and Unity, Harvard Ash Centre, July 2013
MDRI-CESD sub-national governance report
Global Witness Report on Beneficial Ownership in Myanmar, June 2014
The World Bank, The Puppet Masters report, 2011
NRGI ‘Contracts Confidential’ Report, 2009
47
E. MOF MEITI Secretariat Unit: Organogram
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2. P155600 Outreach and Constituency Building Annexes
A. List of events and workshops conducted in support of Outreach and
Constituency Building under the Myanmar Extractive Industries
Transparency Initiative
2013
1. April 2013 – Myanmar – Gender and Extractives, for MDRI, Yangon
2. 25 – 26 July 2013 - Extractive Industries Governance in Myanmar, Public
Consultation, Tanintharyi Region
3. 2 August 2013 - EITI and Extractive Industries Governance in Myanmar -
Working Group and Civil Society Meeting, Yangon
4. August 2013 - Briefing On Revenue Streams Accruing From Extractive
Industries In Myanmar – Briefing For Ministry Of Finance/GOUM
5. November 2103 - EITI, Financial Management and World Bank, Presentation
for Revenue Watch Institute workshop for civil society
6. 2 – 5 December 2013 - EITI Regional Workshop, Jakarta, Indonesia.
Facilation (see workshop program) and, Presentations: i) EITI Workplans, ii)
MSG Governance
2014
7. January 2014 - Strategic Approaches to UNCAC Implementation – Links to
Public Financial Management and Extractive Industries Transparency
Initiative. Myanmar National Seminar, Implementation of the United National
Convention Against Corruption (UNCAC)
8. 13 – 14 February 2014 – Presentation: Review of the Government’s
Regulatory Oversight Responsibilities and Framework for Onshore and
Offshore Project Development at US Department of State Energy Governance
and Capacity Initiative sponsored workshop on "Environmental Information
Analysis and Compliance in Oil and Gas Exploration,” Nay Pyi Taw (in
English and Myanmar)
9. 30 June 2014 - Project Development, Procurement, and Contracts - Examples
and Principles, EcoDev Learning Event, Nay Pyi Taw
2015
10. 6 February 2015 – EITI and Extractive Industries Governance in Myanmar –
Presentation to the Ministry of Finance, Budget Department, EITI Unit, Nay
Pyi Taw
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11. 10 February 2015 – EITI and Extractive Industries Governance in Myanmar –
Presentation to GOUM EITI Working Group at EITI Secretariat, Bank, and
MDRI workshop in Nay Pyi Taw
B. August 2013 - Briefing On Revenue Streams Accruing From Extractive
Industries In Myanmar – Briefing For Ministry Of Finance/GOUM
Briefing on revenue streams accruing from extractive industries in Myanmar
The extractive industries in Myanmar contribute to federal revenue generation
through a variety of instruments which in combination make up the fiscal regime. In
general terms, the fiscal instruments aim to capture four dimensions:
1. Resource rent (or royalty or production sharing) in order to compensate the
state for use of its natural resources.
2. Variable income tax which is often in line with the general corporate income
tax.
3. “Windfall tax”, which is more common in the petroleum industry, in order for
the state to benefit from “super-normal” returns which can be realized when
high commodity prices allow an especially high profit after subtracting actual
costs of production (according to available information, “windfall tax” in
Myanmar is based entirely on production quantity since the government
production share increases in percentage as a function of production output.
On the other hand, sales value – hence profit – is not considered when
calculating the government production share. As a consequence, the prevailing
Myanmar “windfall tax” does not consider how price fluctuations may impact
operators’ profit margin).
4. Administrative fee to off-set government’s cost of regulation and oversight.
Important differences exist between the fiscal regimes for solid mineral extraction as
compared to the fiscal regime applying to the petroleum industry. The following
tables define the general terms applied in Myanmar with definition of the actual rate
applied as well as the recipient agency in charge of collection.
It should be noted that the current legal framework allows a certain discretion to the
authorities to modify or negotiate the terms. For instance, paragraph 20 (b) of the
Mines Law allows the Ministry to “exempt in whole or part, any royalty payable on
any mineral by the holder of a permit for such period as may be determined with a
view to promoting production of the mineral”. Likewise, the actual production sharing
arrangement and government’s equity participation can be negotiated.
It should also be noted that the arrangement of production sharing in the extraction of
solid minerals is not practiced internationally, as opposed to the petroleum industry
50
where the practice is generally accepted. Production sharing puts a significant burden
on the operator’s cash-flow, and acts in effect as an additional resource rent on top of
the royalty payment, when both are applied.
Table 1: Revenue streams in the mining sector
Payment type Rate Revenue Flow
Mineral Tax/Royalty
(based on sales not
production volumes)
3-4% for metallic minerals
4-5% for precious metallic
minerals
1-3% for industrial minerals
20% for ruby, sapphire, jade
and diamond
10% for other gems
Paid into a Ministry of
Mines Enterprises account
and then transferred to the
Ministry of Finance
Land Rent Fee TBD Paid into a Ministry of
Mines Enterprises account
and then transferred to the
Ministry of Finance
Licence Fee TBD Paid into a Ministry of
Mines Enterprise account
and then transferred to the
Ministry of Finance
Import/export duties Exempted
VAT No VAT in Myanmar
Corporate Income Tax TBD Paid to the Internal Revenue
Department of the Ministry
of Finance and Revenue
Jewelry Tax TBD Paid into a Ministry of
Mines account and then
transferred to the Ministry
of Finance
Production sharing
contribution
Up to 30% of total production Transferred to Ministry of
Mines in nature or cash
subject to commodity (to be
confirmed)
Free-carry equity
(government
ownership at no cost)
To be negotiated, with the
benchmark of 10%
Paid into a Ministry of
Mines account and then
transferred to the Ministry
of Finance
The following table of revenue flows apply to deep water blocks as of July 2012.
Table 2: Revenue Streams in the Hydrocarbons Sector
Payment type Rate Revenue Flow
Royalty 12.5% Paid into a Ministry of Energy
account and then transferred to
the Ministry of Finance
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Signature bonus Depends on the contract Paid into a Ministry of Energy
account and then transferred to
the Ministry of Finance
Production sharing
and bonus
Determined by production
levels
TBD
Import/export duties Exempted
VAT No VAT in Myanmar
Corporate Income Tax 25% (3 year’s tax holiday
starting from date of
production)
Paid to the Internal Revenue
Department of the Ministry of
Finance and Revenue
Training fund US$50,000 per year
(exploration)
US$100,000 per year
(production)
TBD
Research &
Development Fund
0.5% of contractor’s share of
profit oil
TBD
Comparison
The following chart traces the fiscal contributions by category in the mining sector in
Lao PDR. As can be seen, the Lao categories are very similar to the Myanmar
situation with the important exception of the Production Sharing component. Similar
trends would be observed in most other mining jurisdictions.
Case: Fiscal regime for the mining sector in Lao PDR
Source: Earth Systems, 2012
Effective collection of payments
A number of challenges may arise when rules and principles are applied in practice.
First, a common constraint in many countries is authorities’ problems in assessing the
Personal Income Tax
Community
Development Fund
Monitoring and
Inspection Budget
Monitoring and
Inspection Budget
Provincial Government
MONRE (DESIA)
MEM (DOM)
Dividends
Concession Rent FeeExtractive Company (Revenue
from Mineral Sales)
Department of TaxProfit Tax
VAT Supplier
VAT Rebate
VAT
Department of State Assets
Royalties
Excise (Fuel) TaxNational Treasury
EPF
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tax returns and payments made by operators. Very often operators’ calculations are
taken at face value without any audit performed by tax authorities. This may result in
issues such as under/overvaluation of sales or purchase prices, i.e. transfer pricing
with the intent to shift taxable income to the jurisdiction with lowest rates. Other
consequences may be incorrect calculation of depreciation, deduction of ineligible
expenses, etc. All of which at the risk of reducing the payments made to host
government.
Second constraint relates to clear definition of the source of taxation in order to
distinguish between different fiscal contributions, e.g. reporting which aggregates
corporate profit tax with excise taxes, import tariffs, etc. Along the same lines, tax
declarations may be filed on “net basis”, that is after companies have unilaterally
deducted tax exemptions or credits such as VAT reimbursement or others. The effect
of both practices is that authorities will have difficulties controlling and auditing the
tax declarations.
A third shortcoming which is reported in Myanmar is irregular tax payments which
lump together several quarters of tax payment or payment in instalments.
EITI reporting
The primary objective of the EITI is to shed more light on individual companies’ tax
contributions. A derived benefit of the EITI in Myanmar is expected to be that the
EITI would help provide a systematic picture of the payment streams from the
extractive industries. It should be stressed, however, that the EITI is a reporting tool
which can be vehicle to report financial data and payments which are already
available. EITI is not a financial management tool since it does not replace any tax
administration or treasury functions. In conclusion, the EITI can be a useful tool to
define some of the needs which must be filled in order for public financial authorities
to manage and account for the important revenue streams accruing from the extractive
industries.
For illustrative purposes, the Timor-Leste EITI Independent Reconciliation Report
from 2011 is attached. The report includes illustrative reporting templates, and was
prepared by Moore Stephens LLP). Timor Leste is in full compliance with EITI
requirements.
C. 2 – 5 December 2013 - EITI Regional Workshop, Jakarta, Indonesia.
Facilation (see workshop program) and, Presentations: i) EITI Workplans,
ii) MSG Governance
Workshop on the EITI Standard, Jakarta, 2-5 December 2013 – internal programme
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
Monday 2 December – pre-day
53
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
08:30-09:00
Registration
09:00-10:00
Session 1: Welcome and introduction to the pre-day
Introduction of participants and resource persons
Objectives of the pre-day
Facilitator: SB, EITI
10:00-10:45
Session 2: Challenges with natural resource governance
The extractive industry value chain
Identifying key challenges in the sector
Presentation of the value chain and collective brainstorming about challenges.
Facilitator: AS, WB
10:45-11:00
Coffee Break
11:00 – 12:45
Session 3: How the EITI works
EITI Basics: What is the EITI, who is part of the EITI, what is the EITI Standard
What are the benefits for government, companies and civil society, how to sign up.
Why is the EITI
relevant to my country?
Presentation on the EITI implementation cycle and the sign-up phase.
Presentation by stakeholders from Indonesia
(Gov’t, PWYP and Mining Association) on benefits of implementation.
Group activity on why the EITI is relevant in the participating countries.
Facilitator: SB, EITI
12:45-13:30
Lunch
54
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
13:30 -15:00
Session 4: Stakeholder engagement and MSG governance
Who are the stakeholders?
How to establish an MSG?
What are the role, rights and responsibilities of the MSG and its members?
Theory; EITI Standard on MSG functioning.
Group activity on identifying stakeholders
Case study by Indonesia and the Philippines
Facilitator: SB, EITI
15:00-15:20
Break
15:20-16:30
Session 5: Developing an EITI workplan
Identifying priorities and objectives for implementation
Theory: EITI Standard on workplans.
Case study by Philippines
Facilitator: AS, WB
16:30-17:00
Session 6: EITI International Management
The EITI Board, the International Secretariat,
The WB MDTF
Overview of the role and responsibilities
SB, EITI
AS, WB
17:00-17:30
Wrap up pre-day
Tuesday 3 December
08:30-09:00
Registration
09:00 – 10:30
Session 1: Welcome and introduction to the workshop
Opening remarks (ca. 30 min):
Clare Short, EITI Chair
Government of Indonesia - tbc
James Brumby, World Bank
Introduction of participants
Objectives of the workshop, expectations and structure of the week
Tour de table
Facilitator: SB, EITI
55
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
10:30 – 11:00
Session 2: Challenges of natural resource management
Presenting and discussing the EI value chain
How transparent is:
The legal framework/ tax regime/institutional setting
The license process
The contract
The tax collection systems
The revenues
The budget
Presentation by WB
Facilitator: MS, WB
11:00 - 11:15
Break
11:15-12:15
Session 2 continued
What are key concerns in the sector?
What reforms are underway?
Suggested country group activity :
- Discuss and identify challenges and priorities related to their country’s extractive sector.
- Agree what the top three priorities are and explain why.
- Report back to the wider group
Facilitator: MS, WB
12:15-12:45
Session 3: Resource Governance Index
Using the RGI to identify transparency gaps related to the EITI Standard
Presentation
Group activity?
Facilitator: MS, RWI
12:45 –
13:30
Lunch
56
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
13:30-
14:30
Session 3 continued.
Facilitator: MS, RWI
14:30-
15:00
Session 4: What do stakeholders want from the EITI process?
Linking the EITI to wider sector reforms
Presentation by Edie Bowles
Facilitator: AS, WB
15:00-
15:15
Break
57
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
15:15-
17:00
Session 4 continued
With reference to the challenges identified in session 2, identify objectives for EITI implementation and develop workplans reflecting these objectives (requirement 1.4).
Presentation on requirement 1.4 and how to develop a workplan.
Case study from the Philippines
Suggested country group activity:
With reference to the priorities identified in session 2:
Agree two- three key objectives for implementation.
Develop a ‘mock’ workplan that reflects the objectives, with clear activities, actions, timeline, costings etc.
Each group reports back explaining what they want to use the EITI for (objectives), why and how.
Facilitator: EB/AS, WB
17:00-17:15
Wrap up day one -
19:00
Dinner
Wednesday 4 December
58
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
09:00 -10:30
Session 4: MSG governance
- Role, rights and responsibilities of MSG members
- Decision making and achieving consensus.
- Building awareness and support. Are the right actors engaged in the EITI process? Will new objectives for implementation require engaging new actors?
Brief presentation from Afghanistan and Timor Leste:
- Key features of the MSGs in these countries (constituency representation, working practices)
- What works well and what are the challenges.
Summarize lessons learned: common challenges and good practice for effective MSG oversight.
Quick country group activity: With reference to theme 2 and 3, identify any new actors that need to be engaged in the EITI process in order to achieve the workplan objectives.
Facilitator: EB, WB
10:30-10:50
Coffee break
59
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
10:50-13:00
Session 5: EITI reporting – contextual information
Explain the purpose of requirement 3: Legal framework
- Overview of extractive sector
- Production data
- State-Owned Enterprises
- Distribution of revenues
- Licensing
- Beneficial ownership
- Contracts
What is relevant? What is available? Are there gaps or weaknesses in the information? Who should collate this information?
Presentation
Brief case studies from implementing countries?
Group activity (per country or per topic): gap analysis
Facilitator: SB, EITI
13:00-14:00
Lunch
60
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
14:00–15:30
Session 7: Comprehensive and reliable EITI reporting
Overview of changes in the EITI standard related to EITI reporting, including:
Scoping and preparations for EITI reporting, including standardized reporting procedures;
Full government disclosure
New disclosure requirements (sales, state-owned enterprises, transit payments and social expenditures)
Disaggregation
Data quality.
Participatory presentation
Facilitator: SB, EITI
15:30-15:45
Coffee Break
15:45-17:00
Session 7 continued.
Group activities - three scenarios:
- Scoping
- Procurement and TORs
- Data quality
Report back.
Mix outreach and implementing countries
Facilitator: SB, EITI
61
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
17:00-17:15
Wrap up day two
19:00
Dinner
Thursday 5 December 09:00 – 10:30
Session 8: Promoting public debate
Using EITI data Group activity: Analysis of EITI Reports
Suggested activity:
1. Divide in groups and analyse an EITI report from another country.
2. Look for interesting facts/developments
3. Present key findings.
Facilitator: EB and RA, RWI
10:30-10:45
Coffee Break
10:45-11:45
Session 8 continued
Communicating EITI impact
Case study from Indonesia: Maryati (PWYP) and Fajar (EITI Sec Indonesia)
Group activity: Developing a plan for communicating EITI stories
Suggested activity:
With reference to the previous activity, develop a “mini-comms plan” for communicating the findings of the EITI report:
-what is the key message?
-who needs to hear this story?
-who is best placed to tell the story?
-what tools are needed to reach the audience?
Facilitator: EB and RA, RWI
11:45 – 12:15
Session 9: Review and evaluation
Annual activity reports
Validation
SB, EITI
62
Time Session Content Methodology Resource
person(s)/
Facilitator(s)
12:15 – 13:15
Session 10: Wrap up
Transition arrangements
Technical and financial assistance
Summary of the workshop and next steps – implications for: - EITI workplans
- MSG governance
- EITI reporting
- Public debate
Open ‘mic’ questions, thoughts, ideas, reflections
Country group activity:
Post-workshop commitments and reporting back to the MSG
SB, EITI
AS, WB
13:15
Farewell lunch
D. 13 – 14 February 2014 – Presentation: Review of the Government’s
Regulatory Oversight Responsibilities and Framework for Onshore and
Offshore Project Development at US Department of State Energy
Governance and Capacity Initiative sponsored workshop on "Environmental
Information Analysis and Compliance in Oil and Gas Exploration,” Nay Pyi
Taw (in English and Myanmar)
Good Morning – Thank you to MoE, colleagues from the US State Dept and Norway. Very much the opportunity to be here and to talk about issues of great importance for Myanmar and where we hope we will be able to offer assistance relevant to Myanmar’s needs
My presentation today will focus on regulatory responsibilities and framework. Tomorrow, my colleagues Peter Leonard, Ruxandra Floruiu, and Reidar Kvam will discuss the role of civil society and companies in environmental monitoring and management
Before I turn to my presentation, I would like to reiterate that we are appreciative of the opportunity to be part of this discussion and to say a few words about the World Bank
World Bank – source of funds, but also a source of expertise, and promoter of global standards – and in this area we can be all three.
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EITI - technical assistance, support for the process. Also involved in improving governance and public financial management – connected to EITI. Also bring environmental expertise and historically played role in promoting environmental standards, including through our safeguards processes.
My presentation will focus on Government’s regulatory responsibilities and frameworks. My presentation does not describe how things in Myanmar but on how institutions in general, principles and standards, and tools and processes work together on environmental management. Focusing on oil and gas, but many of the issues also common to mining.
EI – large topic – generates wealth but also large environmental impacts compared to almost any other kind of industry. Pollutants that can hurt people, animals, and plants for generations. EI would not work if did not have environmental standards – people would get angry, shut down – impacts would be devastating that would make areas around operations unlivable. Environment can’t be thought of something that is separate – is part of what it is to do extractives
WE think of EI as the Value Chain – what changes country’s natural wealth into sustainable development. Five phases – Award of contracts and licenses to Implementation of sustainable development polices with revenues produced. EITI, which I will talk about a little later, increases accountability and transparency at each step.
As I said, extractive operations have multiple actors. Important to define role. Regulators – how each of these actors plays a role.
Government – starting point. Regulator – Sector ministry (MoE) and environmental agency (ECC) – Sets rules of the game
Looking at the regulatory responsibilities:
Sector
o Policy – how manage sector, role will play, what want from the sector
o Licensing o Compliance o Data – need to know what is going on – both revenue and impacts
Environmental agency:
o Environmental policy and standards o Practical – assessments and plans o Monitoring
Government each stage – rules that will apply
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o Planning – where – how to increase new exploration and production
o Exploration – what are the environment standards, what disclosures, transparency – avoids problems down the line
o Production – ongoing operations in line with regulations, emergency/non-routine
o Decommissioning
Not just government – CSOs, Parliament, Industry, International agreements – many of these
Basic principles that are accepted internationally – operator responsibility
o Social license – the idea that government can give a license but unless surrounding communities and other stakeholders do, can’t operate. Lepataung example of an operation which lost license – had operated for 10 years or more; new company – jobs, land, other issues – lost social license
o Polluter pays o Environmental compliance - not an add on – from day one o Public involvement – can’t be credible unless public involved and
unless engaged will have problems in relationship with community o ESIA, ESMAP, etc… - fundamental tools
Turning to the specifics – Environmental management systems – day to
day and catastrophes
Participation – some of the principles
International standards and initiatives – many, won’t go through in detail. Also don’t know which ones Myanmar already part of – but will highlight a few which are particularly important Greenhouse Gas Protocol Initiative – quantifying gas emissions –
climate change – emissions from oil/gas but also from exploration and production
UNEP Offshore Oil and Gas Environment Forum (OEF) Emissions from the Offshore Oil and Gas Environment Forum – UN Environment Program
Voluntary Principles - Security Issues and Human Rights International Maritime Organization – UN Agency/ Prevention of
Water Pollution by Oil IMO & IPIECA - Contingency plan for international oil spills –
(http://www.ipieca.org/) – really important – IPIECA is industry body/IMO is UN agency. What to do in case of spills in international waters?
Basel Convention - Control of Transboundary Movements of Hazardous Wastes and their Disposal was adopted on 22 March 1989 by the Conference of Plenipotentiaries in Basel, Switzerland, in response to a public outcry following the discovery, in the 1980s, in Africa and other parts of the developing world of deposits of toxic wastes imported from abroad
Convention on Migratory Species - The Convention on the Conservation of
Migratory Species of Wild Animals (also known as CMS or Bonn Convention) aims to conserve terrestrial, aquatic and avian migratory species throughout their range. It is an intergovernmental treaty, concluded under the aegis of the United Nations Environment
Programme, concerned with the conservation of wildlife and habitats on a global scale. Since the Convention's entry into force on 1 November 1983, its membership has grown steadily to include 119 Parties (as of 1 April 2013) from Africa, Central and South America, Asia, Europe and Oceania.
Framework Convention on Climate Change – Overarching UN Body to
address climate change Biodiversity Convention - Convention on biological diversity UN Law of the Sea - The United Nations Convention on the Law of
the Sea (UNCLOS), also called the Law of the Sea Convention or the Law of the Sea treaty, is the international agreement that resulted from the third United Nations Conference on the Law of the Sea (UNCLOS III), which took place between 1973 and 1982. The Law of the Sea Convention defines the rights and responsibilities of nations in their use of the world's oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources. The Convention, concluded in 1982, replaced four 1958 treaties. UNCLOS came into force in 1994, a year after Guyana became the 60th nation to sign the treaty.[1] As of August 2013, 165 countries and the European Union have joined in the Convention. However, it is uncertain as to what extent the Convention codifies customary international law.
MARPOL – International convention for the Prevention of Pollution
from Ships, 1973. Protocol in 1978, following tanker accidents – minizing accidental and routine pollution
a. Training Sessions Program b. Role of EITI in Natural Resource Management c. Contextual Information d. Financial Data – Comprehensive and Reliable EITI Reporting e. Good Governance across the Extractive Industries (EI) Value Chain f. Extractive Industries Value Chain, Third and Fourth Segments and
new EITI Standard
3. Media Workshop a. Value Chain b. Natural Resource Management
4. Ministry of Mines – 19 – 20 November 2013, Nay Pyi Taw a. Program - Seminar on Institutions, Regulations, and Policy in
Mining Industries, Ministry of Mines, Naypyitaw b. Presentations:
i. Opening Speech – H.E. U Myint Aung, Minister of Mines ii. Mining Development Challenges and Opportunities -
International Trends and Developments in Mining Challenges and Opportunities
iii. Regulatory Functions and Institution iv. Mineral Licensing v. Environmental Safeguards
vi. Mineral Fiscal Regime vii. Fiscal Instruments
viii. Some Guidance Points for Myanmar regarding the August 15, 2012 IMF “Fiscal Regimes for Extractive Industries: Design and Implementation” paper
ix. Managing Community Impacts, Vicky Bowman, Director, Myanmar Center for Responsible Business
c. Reports: i. Annex-1 – Workshop Outputs - Detailed Group Discussions
(English & Myanmar Versions)
ii. Annex – 2 – Evaluation and Feedback (English & Myanmar Versions)
iii. J. Strongman summary and report on meetings and workshops
I. State Economic Enterprise Reform Roundtable: 2 March 2015 – Institutional Development and the Modernization of State
Economic Enterprises in the Oil and Gas Sector, Nay Pyi Taw
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a. Meeting program b. Mandates and targets for the Myanmar oil and gas sector operators c. Energy sector challenges and prospects d. Profiling National Resources Companies e. Principles and good practices of corporate strengthening and reform f. Options for corporate strengthening in Myanmar energy sector g. Oil and Gas Roundtable Minutes
B. Natural Resource Governance 7 – 11 November 2013
Training Sessions
1. Natural Resource Management (2 hours)
This session would provide a high level framework for looking at EI
provide a comparison of oil, gas, large-scale mining and ASM in terms of
common features and key differences including how international prices
are set
Raise the regulator versus owner role and look at whether to take state
equity or not? Whether to have an NRC or not? (Mainly regulation: what
does it mean to regulate, what are the issues at stake, how to go about it?
Less about ownership arrangements)
2. EI Value Chain (2 hours)
This session would go over each of the segments of the EI value Chain 3. Licensing and Contracting (4 hours)
This session would describe government objectives and investors requirements for licenses
and contracts
(Include general principles of assessing investment proposals, i.e.
cost/benefits, land management, trade-offs between land and nat. res.
Usages)
provide an introduction to the general approach to licensing and
contracting found in oil and gas (production sharing contracts) , large-
scale mining (licenses and contracts) and ASM (permits)
give some details about licenses such as types of licenses, role of laws and
regulations; exploration licensing; exploitation licenses; open access and
competitive bidding; details such as length of license, renewal,
termination, hand back
give some details about mineral contracts and oil/gas production sharing
contracts including key provisions such as state participation; exploration
and development rights and obligations; data confidentiality; assignment;
Objective: Review challenges facing the energy sector in Myanmar Analyze options and approaches to strengthening,
commercialization, and corporatization of sector enterprises
Discuss strategies for institutional strengthening and development of energy sector enterprises in Myanmar
Consider regulatory environment and options for a broader SEE reform process
Content: - Myanmar energy sector analysis - Revenue management - Corporate governance - Case studies
Outcomes: - Common understanding of challenges facing the Myanmar energy sector,
- Proposal of next steps for energy sector strengthening and modernization of SEEs
E. Summary of Roundtable Consultation on Institutional Development and
Modernization of State Economic Enterprises in the Oil and Gas Sector
March 5, Naypyidaw
The World Bank, in collaboration with DFID (UK) and DFAT (Australia), hosted a roundtable discussion titled “Institutional Development and Modernization of State Economic Enterprises in the Oil and Gas Sector” in Nay Pyi Taw on 5 March 2015. Managing Director U Myo Mint Oo (MOGE), and Director General U Maung Maung Win (MoF) provided opening remarks and MDRI Director Dr. Zaw Oo acted as a discussant. Myanma Oil & Gas Enterprise, Myanma Petrochemical Enterprise and Myanma Petroleum Products Enterprise presented reviews of their strategic plans for corporate development and partnerships. Various sector experts and World Bank staff presented practices and experience concerning energy sector and corporate governance. The following is a summary of the discussion and findings of the roundtable:
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1. Modernization and corporate reforms of SEEs will be needed to meet
the increasing and changing demands from consumers and government
in Myanmar, but important pre-conditions and potential consequences
should be considered:
Various reform measures which are presently introduced are leading to a
degree of separation between line ministries and SEEs (e.g. separation of
cost centers, introduction of new tax instruments, etc.). It is essential that
such reforms be guided by a strategic plan for oil and gas sector value
creation in Myanmar.
The current separation of SEEs from the control of line ministries allows
greater independence to SEEs but is also putting more financial pressure
on SEE cash flow.
All SEEs are promoting strategies of joint venture partnerships in order to
gain access to technological know-how and mobilize capital for ambitious
investment plans.
Government stake is to be funded by existing assets. But it is not clear
what methodology is applied to assure that existing assets are priced at
“fair market value”.
The current strategy to form joint ventures may create benefits, but
should support a larger corporatization and modernization strategy in
order to protect the core value of the SEEs. To this end, other forms of
corporate reforms should also be considered.
Capacity to fund and oversee joint ventures may become a challenge as
high priority activities are included in the reform processes.
Corporate reforms must be accompanied by regulatory strengthening in
order to avoid unintended consequences, such as creation of monopolies,
neglect of unprofitable market segments, etc.
2. Petroleum sector growth is needed to fuel Myanmar’s economy:
Most of Myanmar’s existing oil and gas fields have reached peak
production and can expect declining productivity over coming years as
reserves get depleted. As a consequence new exploration and
development should be encouraged.
Domestic demand for gas, primarily for power generation will require
600-1000 MMCFD additional gas supply by 2030.
Gas and petrochemical industries can generate important job creation,
but more importantly, reliable domestic gas, and electricity, supply is a
pre-condition for growth in the manufacturing industry and productivity
gains in the agricultural sector.
Natural gas will continue to represent Myanmar’s largest contribution to
foreign exchange earnings and government revenue through export sales.
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Natural gas use and pricing policies must be carefully planned to
encourage a growing portfolio of supply and balanced export/domestic
demand.
Growth will require greater transparency in the upstream sector of
exploration and production, midstream reform to support construction of
open access pipelines, and increase in government capacity to govern
upstream and midstream operations.
3. Policy reforms and sector regulation must support a cohesive,
cooperative natural gas value chain for critical natural gas development
and use:
Exploration and production (upstream), gathering, treatment, processing,
transport and distribution (midstream), and end use products
(downstream), including export, make up the natural gas value chain.
Coordination, cooperation and planning is required across all components
of the value chain.
A key element is midstream services, often funded and operated by SEE
on an “open access” basis until this component reaches a critical mass and
can be operated at a profit on a stand-alone basis.
The Republic of Trinidad and Tobago is a good example of a country, with
gas reserves similar to Myanmar that has used a value-added policy to
attract Direct Foreign Investment in natural gas use industry to improve
its economy.
Strong government support at the highest levels, long-range master
planning, and price/tariff policies which support the natural gas value
chain are necessary to maximize the value of gas reserves.
4. Revenue management is a critical component of corporate governance
of the Myanmar SEEs:
SEEs represent approximately 40% of government tax income collection.
SEEs are also playing critical roles as “quasi-fiscal” agents through
financing of pensions, infrastructure, services, etc.
Regulation of private and corporate enterprises is still developing and not
yet complete (e.g. limited regulation of financial reporting and audits, no
stock exchange, etc.)
Profit-making SEEs are now enjoying greater flexibility and can retain
after-tax profits in separate “Other Accounts”.
Different models exist across the world for ownership and revenue
management of National Oil and Resource Companies, and different
country case studies and lessons should be explored by Myanmar
authorities.
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No single “best practice” model can be recommended, and authorities
should expect that the chosen model must be refined and revised over
time.
F. Discussion note: Corporate governance strengthening in the Myanmar
energy sector and Myanmar Oil and Gas Enterprise
I. Country context
Beginning in 2011, Myanmar launched major political and economic transformations aimed at increasing openness, public empowerment and inclusion in order to introduce broad-based democratic and market-based reforms. Job creation and productivity enhancement, together with poverty reduction, rank among the top priorities on the national reform agenda. To this end, government has initiated a program of improvements to the performance of State Economic Enterprises (SEE) in an effort to nurture drivers of growth. Efforts to date include outright privatization and sale or transfer of assets in some industries. In other sectors with high strategic importance to economic development, institutional strengthening has been paired with action plans introducing market-based transactions in a more gradual manner. Development partners, including the World Bank (WB), have provided assistance on stand-alone basis to a variety of strategic enterprises and to the ministries in charge of overall sector planning and regulation. Moreover, a World Bank mission undertook a cross-sector review of corporate governance options which were discussed at a conference in July, 2014. The power sector has been one of the first-movers with the Yangon Electricity Supply Board (YESB) embarking on commercial reforms as part of the strategy to improve and expand service delivery. Experience from these reforms, as well as others in the transport sector and elsewhere, will be important for other SEEs and industries. The Ministry of Energy (MOE) and Myanmar Oil & Gas Enterprise (MOGE) MOE have also initiated a reform process with the support from development partners such as the US State Department and the Norwegian Agency for Development Cooperation (NORAD). A comprehensive suite of support is going to the implementation of the Extractive Industries Transparency Initiative (EITI) in which MOGE and MOE are central partners. It is indisputable that MOGE and associated national energy companies (including Myanmar Petrochemical Enterprise and Myanmar Petroleum Products Enterprise) will play a pivotal role in the national reform process. MOGE is a key contributor to government revenue mobilization thanks to gas exports. Moreover, reliable energy supply will be a determining factor for enhanced productivity and economic growth and development. In the recent Investment Climate Assessment, access to electricity was identified by firms as the third-most-important constraint to doing business in Myanmar. Almost all
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firms in Myanmar face power outages due to insufficient network capacity and fuel supplies. Inadequate supply of fuel sources and fertilizer is constraining agricultural productivity, while manufacturing and heavy industries suffer from inadequate oil and gas supplies. MOGE has responded to the challenges by introducing various changes to its corporate governance and operational set-up. In addition, subsidiary enterprises have been created for specialized operations. In recognition of the need for more comprehensive reforms, Myanmar government and MOGE have requested support for sustaining the corporate change process. In light of the early achievements and lessons, there is a need to consolidate the efforts and explore options for an integrated package of support to improving SEE management, focusing on MOGE as per Minister of Energy's request.
II. Energy sector challenges
MOGE has traditionally played a pivotal role in the sale of natural gas to Thailand which is the primary export commodity and source of revenue for government in the order of US$3.5 – 4 billion. On the other hand, the Government and MOGE have neglected the domestic gas market where the price of gas is old at a price below the export price. As a result, Myanmar suffers from large gas shortages, which are estimated at about 50% of the domestic demand. Reforms realized to date have already introduced more transparent reporting procedures and allowed stronger control mechanisms to parliament and to central government units (including Ministry of Finance, Auditor General, amongst others). Although somewhat simplistic, it can be argued that MOGE previously answered to a single government demand of generating foreign exchange earnings and revenue. As a result of the reform process, the new demands facing MOGE are much more diversified. The following table provides a summary of the key objectives against which MOGE will be held accountable. These objectives and outcomes will guide the strengthening and reform of MOGE, MPE, MPPE and their subsidiary companies. Ultimately, the objectives will also help define the needs for legal reform and new regulatory agencies, although it is expected that MOGE (as many other national oil companies) will continue to have regulatory responsibilities which must be appropriately separated from core commercial activities.
Objective Outcomes Management of revenue from oil and gas sales
MOGE must be able to live up to the public demands for increased transparency in payments and revenue collection; this is defined through the Extractive Industries Transparency Initiative.
The multiplication of off-shore gas field operations and commencement of new business streams (The Shwe Oil and Gas pipeline) require more robust management and reporting systems.
MOGE (and government partners) must rapidly build capacity to analyze and negotiate contract terms of new oil and gas agreements.
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Strategic planning, including development of a gas sector master plan, is needed to improve transparency and clarity of the Government objectives in the gas sector.
Management of social and environmental impacts
With the reform process, the public demands for social and environmental accountability have increased dramatically. MOGE must be able to account for and respond to local grievances and concerns.
The award of on-shore and off-shore oil and gas exploration blocs will lead to an unprecedented level of survey and exploration activity in coming years. The roles of MOGE and ministries must be clarified and technical capacity and skills must be strengthened.
Gas and oil supply for domestic consumption
The current shortages of gas supply (about 50%) in the domestic market cripple the economy and contribute to acute electricity shortages (about 20%). Going forward, the Government is facing a major policy trade-off between fast increasing gas exports and improving gas supply to the domestic market where the economic value added of gas (in manufacturing, services etc.) is much higher than from exports.
Gas infrastructure, including high and low pressure compressor stations and pipelines, will require upgrading and expansions.
Transparency in beneficial ownership and award of licenses
Concerns about opaque ownership arrangements behind the newly awarded concessions are already increasing, and clarity about joint-venture arrangements must be enhanced.
Attraction of investment capital
The new gas pricing policy and regulatory regime will need to reflect the large investment needs in the sector and create incentives for domestic and foreign investors.
Institutional development and capacity building is needed to improve capacity of MOGE to implement ambitious development plans for the oil and gas sectors.
Competing demands for government investment in social services are likely to constrain MOGE’s ability to participate in project development (beyond mandatory free-carry ownership).
Regulatory functions The expected production of new seismic and geo-scientific data must be stored, managed and disseminated for public and private sector uses which extend well beyond oil and gas field development.
Procedures must be established for all stages of oil and gas development from early exploration to post-production decommissioning plans. This will also include cancellation of non-performing concessions and regular tenders of vacant development blocs.
III. Principles of SEE Reform
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The following section provides a summary of the recommendations offered in the note “Myanmar State Economic Enterprises (SEE) Reform” from July, 2014. SEE reform can take a variety of forms ranging from (i) corporate governance strengthening under continued state-ownership through (ii) mixed ownership models to (iii) outright privatization. The policy option at the two extremes of the spectrum is the choice between (a.) complete state-ownership of the enterprise (and all assets in the industry) with government representatives overseeing operations or (b.) full private ownership of companies and assets with the State regulating the sector by legal means and regulations without any ownership or control over assets. Inbetween the two extremes a multitude of combinations of State participation and private ownership can occur. It is not a choice between A or B since none of the two options exist in the energy industry. The challenging decision will be to identify MOGE at the appropriate place along the spectrum and with due consideration to transition arrangements and resources needed to implement the changes. Figure: Two ownership models The preferred outcome in the case of MOGE and other SEEs will involve a careful consideration and debate about six issues which will be discussed in the context of MOGE below. The six issues are:
- The portfolio of the State Economic Enterprise; - Corporate restructuring; - Corporate governance structure; - Legal, regulatory and institutional framework; - Implementation timetable; - Financing of the proposed reforms.
Portfolio assessment: The starting point of corporate reform will be to clearly define the purpose and objectives of the SEE in question in order to determine whether or not it is relevant for government to continue to play a role in its operation. In the case of MOGE, there may not be a question about government’s continued relevance as the owner of the enterprise (although the option of partial public share offering may be considered in 5 to 10 years – the time it is expected to take to develop separate cost centers for the various functions). On the other hand, the multitude of MOGE’s current operations will need to be analyzed separately. It is relevant to carefully consider which parts of MOGE’s current operations are commercial in nature as opposed to services or operations which are driven by political priorities and not easily governed by mechanics of the market. Such non-marketable services are likely not to be profitable neither at present nor in the long term and may be best carried out by
B. Complete State
ownership of assets
and production
facilities
A. Private ownership of
the asset base with the
State only intervening
through regulation
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separate government agencies or ring-fenced departments within or outside MOGE. Examples of politically-driven interests may include (i) nationwide supply obligations, (ii) regional development strategies, (iii) job creation, (iv) environmental protection and climate change targets, etc. MOGE is already engaged in various joint venture partnerships through its Production Sharing Contracts for existing on and off-shore oil and gas exploitations. Previous Bank analysis (World Bank, July 2014) has recommended that MOGE continue to pursue joint ventures and consider a partial public share offering in the 5-10 years horizon. The same strategy is recommended for Myanmar Petrochemical Enterprise and Myanmar Petroleum Products Enterprise. Corporate restructuring: Before any privatization (and possibly in place of privatization), it is imperative to evaluate MOGE’s asset base and separate MOGE’s operations into cost centers with separate responsibilities or lines of services or products. Typical cost centers would include (i) Drilling, (ii) Sales and Marketing, (iii) Pipeline operations, etc. Restructuring and creation of separate cost centers may present an alternative to privatization since well-structured cost centers enhance accountability of the separate business processes, services and products. Accordingly, potential inefficiencies can more easily be identified and performance improvements can be suggested. Corporate governance structure: Depending on the final reconfiguration of MOGE, steps must be taken to ensure that basic governance principles are protected, including (i) transparency, (ii) accountability, (iii) efficiency, and (iv) autonomy. The appointment of an independent Board of Directors which is technically competent, respected and free of political connections is traditionally seen as the instrument to protect good corporate governance. With these principles in place, stronger clarity can be afforded to:
- MOGE’s assets and liabilities as well as its rights and obligations; - MOGE’s legal autonomy and associated reporting obligations; - MOGE’s independent management of daily businesses such as
recruitment, salary levels, procurements, etc. - Principles for oversight and internal as well as external audit.
It is standard practice to define performance criteria which go beyond pure financial targets, such as security of supply, national service coverage, etc. to which MOGE should be held accountable. On the other hand, daily management and decision-making must be left to MOGE management without unduly interference from the Ministry of Energy or other government authorities. The board of directors should be allowed to carry out its necessary management oversight function. In order for this to happen, there may be a need to appoint new directors who can bring skills, objectivity and independence, and provide perspective for the formulation of a corporate strategy. In turn, directors must have the mandate to hold management to account for their implementation of agreed strategy. Legal, regulatory and institutional framework in place: Successful corporate reforms have important institutional implications, including for the organization
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of State shareholder units; redefinition of the role of MOF and revision of sector and corporate laws. Myanmar has already established a precedent for State shareholder management in the Ministry of Transport which established a State Shareholder Unit (SSU) to review regular reports from the state enterprises, monitor industry developments, attend shareholder meetings, and vote knowledgeably on director appointments and major corporate initiatives. Such SSU would not replace the responsibility of Ministry of Finance which must ensure the overall monitoring of equity performance of all State enterprises, advise other State shareholders on their enterprises (including appointment of independent directors), and address fiscal and other cross-ministry issues arising from State ownership. Moreover, MOF must provide central oversight on issues related to public-private partnerships, including project priorities, quality control, and fiscal incentives and guarantees. Considering the limited role MOF has played historically, these competencies will only develop over time and in parallel with capacity building in the areas of financial management and budget. As a legal underpinning, sector laws concerning oil and gas exploitation, transport and distribution should be passed in order to update the existing Petroleum Act, which dates from 1934, and related rules and regulations which are generally of an old date. This would complement the terms of contracts which have been signed between MOGE and its international joint venture partners. Implementation timetable and financing requirements: The total number of SEE which are formally controlled by the Myanmar State is estimated to be limited to around 45 enterprises. The reform process will be lengthy and must be guided by priorities in order to focus on areas where the greatest impacts are expected to occur. For MOGE, in particular, the process is likely to go through stages of gradual change in order to safeguard the important asset base under MOGE’s control. On the other hand, corporate restructuring is imperative in order to meet the daunting financing requirements facing MOGE and other energy enterprises. It is also unlikely that MOGE and other enterprises will be able to enhance accountability and productivity without a certain level of restructuring, such as creation of cost centers. Previous sections have already addressed the needs for corporate governance strengthening which must be made explicit in corporate by-laws, internal operating procedures and management systems. These initiatives can commence in the near term, subject to overall policy decisions concerning the mandate of MOGE, its objectives and overall business plan. Parallel joint venture engagements should continue while the internal and external governance reforms are implemented. Longer term reforms over the next five to ten years should consider strategic partnerships, public share offering or divestment of non-core operations. This may also include public-private partnership arrangements in the interest of mobilizing required investment capital for infrastructure expansion or in order to acquire operational and management expertise for activities which are new to the enterprise.
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Resources required undertaking the suggested reform processes would include, inter alia, (i) legal advice and transaction support, (ii) accounting expertise, (iii) training in corporate management and oversight of the same, and (iv) capacity building concerning regulatory functions.
IV. Achievements to date – experience from Yangon Electricity Supply Board
The Corporate Governance (CG) work for YESB – like the overall corporatization process – is still very much work in progress. Thus far, the CG work has focused on: a) designing the broad CG framework for YESB once it is corporatized (the newly corporatized entity is being called YESC); and b) Educating both the MOEP and YESB staff on basic governance principles and what the new framework will mean to them as shareholders, board members, and executives. The aim of the new CG framework is to put in place a structure that is commercially-oriented, fully autonomous, embodies the OECD CG principles of fairness, accountability, responsibility, and transparency and aligns with the requirements of the Myanmar Companies Act (1914). Although quite outdated, the Act does provide for a basic common law construct for CG, outlining the fundamental rights and responsibilities of shareholders, board of directors, and management (incidentally, there are plans to update the Companies Act in the coming year, led by the ADB). Beyond the basic requirements of the Act, the IFC team has strived to incorporate other leading CG practices for corporatizing SOEs to the extent practical in the YESB context. To date, the team has held several sessions with MOEP and YESB to discuss the CG design principles and how they will apply in practice. A preliminary CG Roadmap has been developed to help layout the various actions and timeframes needed to setup the CG framework over time. Although this will be revised once there is more clarity on the IFC investment and overall corporatization plan. Following is a brief summary of some of the guiding principles discussed thus far:
The Government must participate in the governance of YESC as a
Shareholder, such that any actions or authorities must be executed via
appropriate shareholder channels. The Companies Act defines particular
matters reserved for Shareholders, including items requiring super-
majority.
As a controlling shareholder, the Government must recognize that
minority shareholders will be granted particular rights and protections,
including nomination rights, consent rights, pre-emptive rights, and
information rights, among others.
Regarding the Board of Directors, the overall goal is to compose a group
of individuals that possess the requisite technical qualifications and
experience to guide YESC, capable of carrying out their duties objectively
and promoting the interests of YESC as a company, without being unduly
influenced by political or other forces. The Board Directors should be
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chosen via an objective process based on their technical qualifications
and the specific skillsets needed to guide YESC. They should not be
appointed for political purposes or influence. Individual directors should
understand and be fully capable of exercising core duties of care and
loyalty. They should also meet fit and proper criteria, including particular
integrity criteria.
The Board of Directors shall be granted autonomy and authority to guide
the company, providing strategic direction for the business and oversight
of management. This includes the authority to appoint the CEO and
senior management team and take decisions on major business matters,
as per governing documents (Articles of Association, CG Policies).
Likewise, Senior Managers should be chosen based on their technical
qualifications and the specific skillsets needed to manage YESC and carry
out the functions of their assigned management role. Consideration
should be given to the future direction of YESC and its need to further
modernize and become more commercially-oriented. Management (not
the Board or Shareholders) is responsible for the day-to-day operation of
the business. Part of that includes ensuring that sound frameworks for
risk management, internal control, and audit/assurance are in place.
Senior Managers should be given clear performance objectives and
incentives and be evaluated and held accountable against those
objectives/incentives by the Board of Directors. In turn, the Board
should be held accountable by the Shareholders.
Beyond the strict definition of corporate governance, the IFC team has also recognized and is pushing the need to address broader organizational capacity building needs in YESB to transform it into a more commercially viable entity. This will be a substantial task and possibly one of the most crucial for success of the overall corporatization process. The project will develop an Organizational Transformation Plan which will guide YESC in making changes over the long-term. For example, some of the major items include:
Redefine the organizational structure for YESC, including key units, roles/responsibilities, and reporting lines; re-map staff to the new organization.
Develop new HR policies and procedures specific to YESC (e.g., Hiring, Termination, Compensation, Benefits, etc).
Define a more formal strategic business planning, budgeting, and monitoring framework for the company, including formal performance metrics.
Develop a staff performance management framework which defines how staff are formally evaluated, incentivized, and held accountable in YESC.
Document new YESC-specific operational policies and procedures as needed for all operational and business functions.
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Strengthen key management and administrative functions via tools and training as needed (e.g., Finance, Human Resources, IT Management, Legal).
Implement/upgrade an IT infrastructure and new management information systems as needed (none exist currently).
Improve internal management analytics and reporting to support decision-making.
Deliver Staff Training on new roles and responsibilities and develop a change management & communication strategy for the transformation.
Finally, it is worth noting that based on IFC’s investment experience in Myanmar thus far, the need to do such in-depth capacity building in companies is very much the norm – even in private enterprises, let alone SOEs. For example IFC has in-depth advisory service projects ongoing in each of its financial sector investments to date to help build capacity in various ways (e.g., setting up CG and risk management frameworks, new product development, training). This should certainly be expected for any future SOE corporatization effort in Myanmar and will represent one of the biggest risks for any project.
V. International experience
The following section is derived from the Extractive Industries Sourcebook and (Tordo, 2011) which should be consulted for more detailed analysis. Enthusiasm for national resource companies (NRC) has waxed and waned, but they have proved a durable phenomenon, particularly in resource-rich developing States where NRCs have been tasked with commercial as well as non-commercial objectives. Their performance in pursuing those objectives has provoked debate. Meeting commercial objectives has proved difficult; in fact, with few exceptions, NRCs have scored poorly in terms of profitability compared to international, private corporations. In particular, funding equity participation in the EI sector has proved a problem for NRCs. In states where there are urgent competing priorities for the use of public funds, choices to not contribute to NRC equity participation in EI sector projects can hold back performance and development of capacity. Recent dramatic drops on NRC market capitalization (such as Vale, PetroChina, Gazprom and EDF) indicate that NRC may face increasing difficulties in capital mobilization over the coming years. Non-commercial objectives may include job creation, subsidies, regional development of disadvantaged provinces, etc. By assigning non-commercial objectives to NRCs, most of which are seen as the responsibility of government, these companies have the potential to not only undermine their own commercial effectiveness but also the non-commercial objectives and the effectiveness of government authority due to loss of transparency and accountability. Notwithstanding, in petroleum sector it is quite common for NRCs to have considerable regulatory obligations in addition to commercial functions. This is usually explained by capacity issues or overriding political considerations. In
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such cases, the non-commercial activities can be ring-fenced within the NRC for operational and accounting purposes and reported in the national budget and accounts. The debate over NRC performance in the past has prompted a number of positive responses. Commercial performance has been enhanced by the introduction of competition (by partnering with IRCs) and by privatization in varying degrees (by partial listing on stock exchanges). Funding issues have been addressed by adopting flexible contractual formulas (such as carried interests or production sharing) with the private sector that defers or cancels funding obligations. Technology transfer and skills development have occurred where NRCs have entered strategic joint-ventures with specialized international companies in the interest of developing skills. In general, the most successful NRC performances are found where commercial and non-commercial objectives are mutually consistent and not competing, for instance profitability and skills development go hand in hand, whereas profitability and price subsidies are incompatible. Good governance of NRCs generally requires clear oversight mechanisms as mentioned in the sections above. Norway is a good example where responsibilities are clearly separated between the (i) ministry which provides overall planning and policy-making, (ii) the (State-owned) company ensuring efficient operations, and (iii) the independent regulator which is defining the rules of the game, Commercially based shareholder roles can lead to companies that compete strongly in the international market place. Examples of companies with a strong commercially based shareholder role include: Codelco in Chile, Petronas in Malaysia, and Vale and Petrobras in Brazil. Some prominent exceptions which have been generally well managed and highly profitable and competitive include: in mining, CODELCO, the state copper mining company in Chile, and in petroleum, Statoil, the Norwegian petroleum producer.
VI. Coordination among development partners
There is a strong commitment among development partners in Myanmar to accompanying the process of corporate reforms. The US State Department and USAID are engaged in technical advisory activities with the Ministry of Energy and, to some extent, MOGE. DfID and Australian DFAT consider corporate strengthening of SEEs is a fundamental part of the overall governance reform program. The World Bank has already initiated corporate support to electricity distribution companies through the power sector program. Additionally, SEE reforms across all sectors are also discussed. A deeper engagement in corporate reforms of the energy sector enterprises would be aligned with current activities. It is recommended that a reform program for MOGE be guided by a holistic assessment of the energy sector demands and opportunities. Moreover, the timetable of MOGE reforms must also be adapted to the parallel Public Financial Management Modernization support.
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Sources of literature: Tordo, Silvana et al. (2011), National Oil Companies and Value Creation, World Bank Working Paper Raw Materials Group (2011), Overview of State ownership in the Global Mining Industry, World Bank Working paper McPherson, Charles, State participation in the Natural Resource Sectors: Evolution, Issues and Outlook, in The Taxation of Petroleum and Minerals; Principles, Problems and Practice, Daniel P., Keen M. and McPherson C. (2010) Adam Smith International (forthcoming), Institutional and Regulatory Assessment of the Extractive Industries in Myanmar, EITI Study World Bank (2014), Myanmar State Economic Enterprise Reform: Detailed Recommendations The Extractive Industries Sourcebook, www.eisourcebook.org
G. Oil and Gas Sector Roundtable Agenda
Topic Speaker 8.30 – 8.50 Opening session
- Welcome address and introduction of roundtable objectives
- Opening remarks
- Opening remarks
Dr. Maung Maung Win Director General, Min. of Finance U Myo Myint Oo Managing Director, MOGE Julie Fraser Practice Manager, WB
8.50 – 9.20 Overview of mandates and targets for the Myanmar oil and gas sector
- Myanmar Oil and Gas Enterprise
- Myanmar Petrochemical Enterprise
- Myanmar Petroleum Products Enterprise
U Myo Myint Oo MD, MOGE Daw Yin Yin Aung, Assistant Director, MPE Daw Khin Than Oo, Assistant Director, MPPE
9.20 – 9.45 Energy Sector Challenges and Prospects - Gas Value Chain - Policy and Regulation - Role of SEEs
Robert Lesnick Oil and Gas Consultant, WB
9.45 – 10.15 Open Discussion Zaw Oo Director, Myanmar
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Resources Development Institute Dejan Ostojic Lead Energy Specialist, World Bank
10.15 – 10.45 Tea break
10.45 – 11.00 Profiling National Resource Companies - Practical difficulties to value creation
Robert Lesnick
11:00 – 11.30 Corporate governance of SEEs and macro-economic & fiscal considerations
- State representation and ownership models
- Fiscal linkage of SEEs - Macro-economic linkages
Mark Miller, Financial Management Consultant, WB
11.30 – 12.00 Revenue Management and State Equity Participation
- Transparency - Funding SEEs
Vidar Ovesen, Revenue Management Consultant
12.00 – 12.15 Panel Discussion
Morten Larsen, Extractives Specialist, WB
12.15 – 13.15 Lunch Break
13.15 – 13.45 Observations on Yangon Electricity Supply Board reform
Vikram Kumar, Resident Representative, IFC
13.45 – 14.30 Case Study: Development of Trinidad and Tobago gas industry
Robert Lesnick
14.30 – 15.00 Tea break
15.00 – 15.15 Options for corporate strengthening in Myanmar energy sector
Robert Lesnick
15.15 – 16.00 Group discussions: Options for strengthening of the Myanmar oil and gas sector
1. Myanmar Oil & Gas Enterprise
2. Myanmar Petrochemical Enterprise and Myanmar Petroleum Products Enterprise
3. Min of Finance and Min. of National Planning and Economic Development
Facilitators
16.00 – 16.30 Reporting out
Facilitators
16.30 – 16.45 Closing ceremony U Tin Maung Yee
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Director, MOGE Daw Lei Lei Thein, Deputy Minister, MNEPD
H. SEE Roundtable Proceedings
A roundtable discussion on Institutional Development and Modernization of State Economic Enterprises in Myanmar’s Oil and Gas Sector was held on the 5th of March 2015 in Nay Pay Taw. The meeting was organized by the World Bank as part of its project on Public Financial Management, which is jointly supported by funding from the Department of Foreign and International Development of the UK (DfID), and the Department of Foreign Affairs and Trade of Australia (DFAT). The roundtable was attended by 31 officials from the Government of Myanmar, including, the Director General of the Budget Department of the Ministry of Finance (MOF), the Managing Director of Myanmar Oil and Gas Enterprise (MOGE), one presidential advisor, 21 officials from the Ministry of Energy, 4 from the Ministry of Finance and 4 from the Ministry of National Planning and Economic Development, and by 25 participants working for the WBG and development partners.
The consultation set out to achieve the following objectives:
Review challenges facing the energy sector in Myanmar
Analyze options and approaches to strengthening, commercialization, and corporatization of sector enterprises
Discuss strategies for institutional strengthening and development of energy sector enterprises in Myanmar
Consider regulatory environment and options for a broader SEE reform process
Opening Remarks: U Maung Maung Win, Director General, Budget Department, Ministry of Finance U Maung Maung Win reported on the GOM’s efforts to modernize SEEs through learning from the experience of other countries, adopting international best practices and cooperating with international partners. He explained that the SEEs have been instructed to re-orient goals from output targets to profitability, to focus on marketing and product quality, and are now subject to stricter financial discipline under the new budget system. He stated that in the future selected SEEs will be required to privatize or corporatize. U Myo Myint Oo, Managing Director, Myanmar Oil and Gas Enterprise (MOGE)
U Myo Myint Oo summarized the current situation in the State Economic Enterprises under the Ministry of Energy, namely MOGE, Myanmar Petrochemical Enterprise (MPE) and Myanmar Petroleum Products Enterprise (MPPE). He noted recent increases in exploration for, and production of crude oil and natural gas. He also reported on the development of the National Energy Management Committee in 2013, and the approval of the comprehensive National Energy Policy in early 2015. He reported that the demand for crude oil was expected to increase by 4.6 %
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annually to reach 3.93 MTOE in 2030 and natural gas by 6.1% to 4.07 MTOE, with oil expected to contribute 18.3% and natural gas 19 % to the energy mix. The government intends to prioritize domestic supply of natural gas. U Myo Myint Oo concluded by reporting that MOE is in the process of partially corporatizing some services and by outlining the government’s goals to improve transparency and financial incentives for investment. Julie Fraser, Practice Manager, World Bank Group Ms Fraser reviewed the objectives and program for the workshop, encouraged lively participation and debate and emphasized that although restructuring of the oil and gas sector would be a long process, the WBG will be there to provide support throughout. Session 1: Overview of Mandates and Targets for Myanmar Oil Myanmar Oil and Gas Enterprise, Wah Wah Thaung: Executive Officer (MOGE) Daw Wah Wah Taung provided updated figures for exploration and production of oil and gas in Myanmar, including production levels of current onshore and offshore fields, pipeline construction, joint ventures, and quantities of natural gas exported and supplied domestically. She reported that Myanmar had recently completed a bid round for new off shore concessions and that 20 blocks have been provisionally awarded to 8 companies for future exploration and production activities. These operators include a number of very large and experienced international oil companies. Based on the National Energy Policy’s goals to develop the oil and gas sector sustainably, MOGE is seeking to partially corporatize by establishing JVs for selected services. Invitations for Letters of Expression of Interest (LEOI) have already been announced for JVs for drilling services, seismic services and pipeline construction and maintenance. MOGE is currently seeking legal, technical and commercial support to review and finalize these JV relationships. Myanmar Petrochemical Enterprise, Daw Yin Yin Aung, Assistant Director (MPE) MPE is responsible for production, import, distribution and export of petroleum products, fertilizers and petrochemicals from crude oil and natural gas, excluding the distribution of motor fuels. It operates 3 refineries and 5 fertilizer factories, 3 LPG plants and one methanol plant in central Myanmar. All of these facilities are small, old and are not operating at capacity. MPE is planning to implement a number of JVs. A tender process for the JV for No. 1 Refinery has already closed and the results will be announced in 2015. Announcements have been made for Letters of Expressions of Interest for joint ventures in the LPG Plant in Nyaung Don and Crude and Petroleum Products Movement. Invitations to tender for these projects will be carried out soon. MPE
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intends to corporatize by promoting participation of the private sector and developing PPPs. Myanmar Petroleum Products Enterprise, Daw Khin Than Oo, Assistant Director (MPPE) MPPE is an SOE that is responsible for wholesale and retail distribution of petroleum products. It operates on a market based policy. Since 2010 it has transferred 261 state owned petrol stations to the private sector. MPPE continues to operate fuel terminals, is responsible for granting importation and distribution licenses, and for supervising private sector operations, including the current total of 1,462 petrol stations MPPE has established a joint venture for the distribution of aviation fuel at Yangon airport and is seeking to establish further partnerships for this product at other airports around the country. It is currently in discussions with a consultancy company regarding the establishment of a joint venture for the importation, storage and distribution of petroleum products. Energy Sector, Challenges and Prospects, Robert Lesnick, Consulant, World Bank Group Mr Lesnick led a group activity designed to recognize technical and geopolitical advancements which have occurred over the last 15 years, and which will continue to advance through 2030. He stressed that Myanmar’s challenge is not only to reach current levels of global economic development but to expand at a rate fast enough to catch up with and become part of the global economic community within the next 15 years. He presented an analysis of the strengths, weaknesses, opportunities and threats facing the petroleum sector as viewed by the potential private sector investor. It was noted that Myanmar’s established petroleum industry and favorable fiscal terms are considered strengths, and that unexplored prospective areas would be viewed as opportunities for investment. However issues regarding transparency, access to petroleum services and natural gas markets are weaknesses within the current corporate landscape. Key threats to successful development include concerns about environmental liabilities and obtaining a social license to operate. A review of natural gas industry structure followed. Individual components of the natural gas value chain were defined and it was stressed that there must be cooperation and coordination between each individual activity. From a government perspective it is critical that policy and regulation consider the value chain as a whole rather than focus on individual components. Within the value chain model the creation of transportation, treating and processing infrastructure is critical to support gas development. Often this industry is built and owned by an SEE and use of the facilities offered openly to industry under a tariff. In closing, Mr Lesnick
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pointed out that it is critical that the government establish a principle based system to prioritize gas use. Discussion of Opening Program U Zaw Oo, Economic Advisor to the President/ National Coordinator, Extractive Industry Transparency Initiative Myanmar U Zaw Oo reported that the President has recently announced a 3rd phase of reform in Myanmar, which while focusing on producing early results will also link up to long term sustainable reforms. In light of this he felt that the this workshop provided a timely opportunity to reflect on how SEEs can reform in a way that gives immediate benefits, but also can be linked with the building of the foundations for the future. He also emphasized current efforts of the government to adopt the principles under EITI which require a higher degree of transparency with regard to the treatment of revenues within this sector. In regard to the issues raised in the first session he confirmed the need to adopt a natural gas value chain model. He registered concern that there were significant gaps in Myanmar’s value chain, which needed to be analyzed, so that actions could be taken to close these before drawing up a grand plan. He felt that this is an area where Myanmar could really benefit from external expertise and lessons learned from other countries. U Zaw Oo noted that Myanmar is now seeking to expand EITI principles beyond the initial focus on improving revenue transparency and to address some of these gaps in contracts, awards and licenses and develop more comprehensive resource governance program. He noted that several governance issues need to be addressed and improved as the MOE modernizes. One specific concern being the need to divest regulatory responsibilities from the current operating SEEs. He requested external support to develop an effective regulatory framework and appropriate institutional structures, and to build capacity within the ministries and the SEEs to negotiate and build relationships and /or to compete with members of the international petroleum community. He suggested that the most senior government leaders should lay out the objectives for the modernization efforts and determine activities for initial implementation of a corporatization strategy, including sequencing of policy reform versus privatization efforts. He felt that the government should think carefully about the model they wish to adopt to corporatize SEEs, not just in the energy sector, and cautioned that there may be a need to establish a new authority to oversee government interest in regard to the development of a wide array of joint venture companies. U Zaw Oo concluded by stating that capacity building is key. He requested international support to help Myanmar to understand how to mitigate the impact of volatility in the global petroleum market, the technological challenges and opportunities in the energy sector, and how reforms in this sector can be
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constructively linked to reforms in other sectors, especially in the emerging manufacturing sector. Dejan Ostojic, Lead Energy Specialist, World Bank Group Mr Ostojic pointed out the need to address Myanmar’s immediate short term needs when considering reform of the energy sector. He stressed the importance of the gas market in Myanmar, both as the country uses gas exports as a pillar of development but also because of severe shortages in domestic gas supply. He noted there needs to be good understanding of this market, including who the anchor clients that will underpin the development of sector will be. Mr Ostojic also raised the issue of regulatory reform, noting that operating practices, regulatory practices and policy practices are currently all mixed together under MOE. However he felt that gas pricing policy was the issue of critical importance in regard to regulation within the sector, as it must take into consideration long term objectives, but also conditions within the market such as affordability and as it plays a critical role not just in one industry but in the development of the country as a whole. He concluded by stressing the need for a long term strategic vision, and to develop the institutional capacity to continually review and revise this in response to the challenges as the world changes at an ever increasing pace. U Maung Maung Win, Director General Budget Department, Ministry of Finance U Maung Maung Win stated his appreciation for the presentations from the SEEs under MOE. He stressed the importance of these three enterprises in terms of government revenue in Myanmar and therefore of the need for careful consideration of the costs and benefits to government of their commercialization. U Myo Myint Oo, Managing Director MOGE U Myo Myint Oo described the planned joint venture processes in MOGE, MPE and MPPE, and explained that their goal is to increase efficiency and profitability through the privatization of certain services. He stated that MOE is currently seeking consultants to advise on the joint venture process, which it hopes to complete within 2015-2016. In addition he reported on MOE’s efforts to increase government revenue through the launching the international bidding round for onshore and off shore blocks. In 2013 a second onshore bidding round was held and awarded to 14 companies and more recently a bidding round was held for 20 off shore blocks, 8 of which have been awarded to date. Rome Chavapricha, World Bank Group, Energy Specialist Yangon Mr Chavapricha suggested that the Government of Myanmar may wish to consider minimizing further investment in the oil and gas sector as this is known to be a sector where private sector interest is robust.
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Session 2: Profiling Natural Resource Companies, Robert Lesnick Mr Lesnick reviewed 9 practical difficulties which can reduce operational efficiency and the creation of value within SEEs and provided a number of examples as follows:
Conflicting ideologies – PDVSA in Venezuela was given a widen mandate which included running schools and grocery stores. This interfered with efficient management of the oil and gas.
Economic Cost: NOC in Libya actually destroyed the value of the domestic crude oil by refining it into motor gasoline and fuel.
Operational Efficiencies: PEMEX in Mexico destroyed one of the world’s largest gas fields by going against international best practice and injecting nitrogen to try to extend the life of the field.
Lack of Competition/Barriers to Entry
Subsidies and Non-commercial Interests: Petrobangala in Bangladesh receives a lower price for its gas than a private oil company which results in inefficiencies such as cutting corners, of failing to maximize production of the field as they cannot afford to invest properly.
Weak Corporate Governance
Funding Constraints: The state owned oil company in Nigeria is required to give all of the revenues it generates to the state. However the treasury failed to provide sufficient funding to meet the company’s share of the investment, so it had to borrow funds its operating partners, and then repay these debts with oil. This then significantly delayed the receipt of revenue by the state from this sector.
Conflicts of Interest
Imbalance of Control: It is not possible for an SEE to operate on a commercial basis if it is led by political decisions. In Nigeria the SOE had entered into a long term contract to supply natural gas to its neighbors, but when gas supplies ran short, rather than allowing it to meet its contractual obligations, the government forced it to divert gas to local industries. This was not only bad in terms of commercial reliability but also had negative implications in terms of Nigeria’s relationship to its neighbors.
Mark Miller, World Bank Group, Public Financial Management Program Corporate governance of SEEs and Macro-economic & Fiscal Considerations Mr Miller highlighted the importance of Myanmar SEEs to the macroeconomic and fiscal environment. He suggested that corporate governance reform could drive a more dynamic SEE sector and in turn increase economic growth and improve public services. However he emphasized that that under a more arms length arrangement, while taxes and dividends would remain in the budget, retained balances would not. Therefore both the timing and ultimate amount of revenue obtained from the sector may change, especially in a joint venture where a partner is not likely to accept the siphoning off of income. Mr Miller pointed out that there had already been some changes to the SEEs in the energy sector and suggested some possible next steps in the reform process, including reform of the legal and regulatory framework, clarification of the policy direction of state in regard to SEEs, and clarification of roles and responsibilities, particularly ownership arrangements, the responsibilities of the Board of Directors.
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Vidar Ovesen, Revenue Management Consultant, NORAD Revenue Management and State Equity Participation Mr Ovesen outlined five principles and practices for sound oil and gas revenue management, and went on to provide 3 potential models for National Oil Companies (NOCs) which represented the range of funding systems of upstream petroleum SEEs that currently exist throughout the world. Model 1: All revenues are paid to the government and the NOC is funded by
the National Budget Model 2: The resource rent goes to the government. The NOC is
commercialized and retains profit from its own activities Model 3: All PSC revenues are channeled through the NOC, and a share of the
total revenues is transferred to MOF. Mr Ovesen reviewed the pros and cons of each of the models. He emphasized that no one model is preferred and that careful consideration should be given to whatever model Myanmar chooses to use as part of its modernization efforts. He noted the need to strengthen revenue administration, by ensuring that the fiscal regime provides the right incentives, by carrying our revenue projections, and conducting cost audits of operator’s expenses and by improving coordination, transparency and accountability. He concluded by stating the citizens should benefit from oil and gas revenues, by highlighting the importance of transparency and capacity development and by pointing out that it takes time to develop a professional NOC. Session 3: Case Studies Vikram Kumar, Resident Representative, International Finance Corporation Observations on Yangon Electricity Supply Board Reform Mr Kumar provided an overview of YESB, and outlined the anticipated benefits of corporatization, including more rapid growth of systems and services and easier access to capital through independent listing of the company on the stock exchange. He suggested that comprehensive due diligence covering financial, technical, social and environmental issues is an important part of the privatization process, and that an outside independent assessment of value is required to serve as a reference point to balance those of government and potential investors. Early findings in regard to YESB have highlighted the need for capacity building in procurement. Mr Kumar also stressed the importance of establishing an effective governance structure of the new private entity. As part of an open discussion it was noted that an independent regulator must be established before the joint venture could be set up. It was also pointed out that although there are many existing environmental concerns and liabilities in regard to YESB privatization, agreement has been reached as to how these will be rectified within the new joint venture.
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The focus of the IFC investment is on reducing the current high losses within the system. IFC estimates that an investment of 40 million USD in loss reduction will result in the equivalent additional energy to the construction of a 100 million USD power station. A distinction was made between investment in generation versus distribution and it was pointed out that the current focus of YESB is likely to remain concentrated in distribution. With regard to funding of growth, reference was made to the previous benefits of corporatization whereby a successful joint venture resulting in a bankable company will provide access to a broad number of lending instruments (stock, bonds, and short term credits). Robert Lesnick, Trinidad Experience in Building an Indigenous Gas Industry Trinidad provided an interesting model for industry structures whereby the state holds strategic interests throughout the gas value chain. Although Trinidad and Myanmar report equal reserves of natural gas, Trinidad’s production is approximately three times that of Myanmar’s and much of it is used internally to supply value added industrial manufacturing. As a result Trinidad’s gas related revenue as a percent of export is 25-30 percent higher than that of Myanmar. Trinidad was able to achieve this high level of industrial gas use despite its isolated location, its relative smallness in size and population and its lack of technological knowhow, because of a focused vision and sustained commitment at the highest levels of government. The Point Lisas Industrial Estate was cited as an example of how diversified use of natural gas could be established over time. The current estate of approx 3.3 square miles is home to over 100 companies which have invested over 2.5 billion USD and currently use over 1.6 BCFD of gas. The estate employs over 4,000 Trinidad citizens and has created thousands of additional jobs outside in support activities. The establishment of the 100% state owned natural gas company which gathers, treats transports and distributes natural gas throughout Trinidad and Tobago was considered critical to these achievements. During the open discussion period, issues around the pricing of gas in Trinidad were clarified, and it was noted that the use of SEEs to provide the midstream gas services was not unique. Other countries using this model include Argentina, the UK, and Russia. With regard to the timing of development of the gas sector it was noted that this is often a function of the degree to which existing gas infrastructure exists within a country. For complete green field development it is not uncommon for projects to take 15 years or more to complete from the time of first gas reserve discovery. However in countries with significant existing infrastructure similar sized projects can be completed in approximately 4 years. While Trinidad is an interesting model of development for a country with natural gas resources of a similar size to Myanmar, it is not necessarily a good pricing model as it is in a different region of the world. Trinidad was highlighted to demonstrate the
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importance of high level government vision and long term commitment for any gas industry to develop successfully. Session 4: Breakout Discussions Robert Lesnick Introduction Mr Lesnick noted that effective organizations have mutually supportive structure, systems and processes. Structure defines the organization including the roles, responsibilities and skill sets necessary to conduct business. Processes are how decisions and strategies are made, how communications take place, how projects are managed and how assets are operated. Systems support the organization and include physical infrastructure, technology, programs, training and reward structures. It is necessary to consider all three aspects when conducting modernization efforts. Participants were asked to identify three opportunities to improve structure, processes and systems as part of MOEs modernization program and to describe how these changes could be achieved. The following table summarizes the presentations made by SEEs and Ministries present.
• Import crude oil to refine or petrochem. products
• J-V (51:49) through tender process or PPP
• Attract FDI
• From subsidized pricing to market pricing
• Autonomous budget/ cost center
MOE – MPPE SOE function, sale to YGN airport to expand to other airports
• New technology for pumps, transportation & distribution of products
• Control and regulatory body
J-V for terminals and storage facilities + distribution and selling (one part or all?)
• HR policies: Employee motivation
• Recovery emergency system
• Permits for hard-to-reach locations
MOF / MNPED
Plan2030: GDP 3,000 $ per cap 8% ann. growth
Dept structure to improve • Consolidation of SEEs
(close coordination) • Technology, skills
Profit-based taxation
20% state participation Improved revenue collection/ profit-sharing Audit and modeling
Improve energy sector Consider industry development (insufficient energy)
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development
capabilities
Diversify revenue generation to industry prod. PPP, corporatization
In conclusion the exercise most commonly identified issues related to the development of joint ventures as the biggest challenge facing SEEs going forward. The group recognized that new skills and business processes would be necessary for the joint ventures to be successful, including monitoring and revenue collection capabilities from other ministries. Closing Remarks U Tin Maung Yee, Director, MOGE U Tin Maung Yee thanked the participants for their active participation and the WBG and other agencies for providing the content. He acknowledged a lot of useful and important information had been shared and encouraged the bank to follow up with the Ministry of Energy in a number of areas including governance, joint venture creation and pricing policy.