With Mining Law Changes, Are Foreign Firms Set to Dig In?
Long-anticipated revisions to Burma’s Mining Law, which were passed by the outgoing Parliament at the end of last year, could spur foreign investment in a sector that is still vulnerable to frontier market perils.
The new law, which was finalized after being stalled in Parliament for more than two years, is significantly more favorable to foreign firms than the legislation previously in effect, which dated back to the days of the former junta in the 1990s. The updated rules officially aim to “promote the development of investment in respect of mineral resources” and are expected by many in the industry to usher in a new wave of foreign investment in Burma’s mining sector.
The amended legislation was signed into law by President Thein Sein on Dec. 24, just weeks before he is set to hand over power to a new administration led by the National League for Democracy (NLD).
According to a summary of the regulatory changes released by Valentis Resources, a Rangoon-based exploration and mining services company, the new rules pave the way for foreign firms to buy their way into already existing small- and medium-scale mining projects in joint ventures with local Burmese firms and then expand those projects. The expanded role this will potentially afford foreign companies stands in contrast to the 1994 Mining Law, which in effect only made partnerships between foreign firms and large local companies feasible.
Another key change included in the new regulatory framework concerns production-sharing, which under the previous rules stipulated that some share of what was produced at a mine be given to the government, in addition to paying royalties. Under the new rules, firms can instead enter into a form of profit-sharing with the government or an equity participation that would allow for the government to buy a stake and invest in a given project.
The new regulations were drafted with the input of the chairman of the Upper House Mining and Resources Committee, Nay Win Tun, an ethnic Pa-O businessman affiliated with the Pa-O National Organization (PNO) militia who has a number of investments in Burma’s mining sector, including in Kachin State’s lucrative jade mines by way of his firm Ruby Dragon. Nay Win Tun’s involvement in the drafting of amendments to the law was flagged as problematic by the London-based NGO Global Witness, which last year produced a lengthy exposé on Burma’s jade trade. “Effectively, this means that a prominent industry player is involved in setting the rules which will regulate his own business,” said the watchdog group’s report
The revised rules were also drafted with the advice of the Australian Agency for International Development (AusAID) and other international experts. In a 2013 interview with Australia’s ABC Radio, Burma’s Minister for Mines Myint Aung explained that the changes were being drawn up with the aim of meeting international expectations.
“With regards to the Mining Law, we are still in the revising and reviewing stage and working very much closely with the AusAID to become that law [sic] an internationally recognized and accepted standard,” said Myint Aung at the time. Like Thein Sein, Myint Aung is set to leave office next month.
Although party chairwoman Aung San Suu Kyi and other senior figures in the incoming NLD government have given few details about how they will deal with the mining industry, it is expected that whomever becomes the next mining minister will follow the course set by the Thein Sein administration’s handling of the Ministry of Mines and continue with changes deemed necessary by foreign investors.
That view is shaped in part by the Nobel laureate’s handling of the chairwomanship of a parliamentary inquiry into a violent crackdown against land-rights activists at the Letpadaung copper mine site near Monywa in November 2012. The inquiry ultimately concluded that the despite the heavy-handed way government authorities dealt with farmers and monks protesting the seizure of land, the mega mine project involving a partnership between a Chinese state-owned company and Burmese military-controlled firm should continue.
The Ministry of Mines has declared its intention to sell state-owned mining assets. “Privatization of the tin and tungsten mines and mines and industrial mines is also being planned and will be put into effect in the very near future,” reads the ministry’s website, something that will likely please potential foreign investors, should the incoming NLD government carry out this pledge.
The amended rules are set to be implemented within 90 days of their being signed into law and the Ministry of Mines is tasked with drawing up attendant regulations that comply with the new legislation, including those covering the size of exploration permits and the creation of regionally and state-based permit granting boards.
Source: Irrawaddy News
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