Myanmar Government provided a strong legal framework which will require the disclosure of beneficial owners of companies involved in the extractive sector13 Nov 2019
The Myanmar President’s Office, on October 2, issued a notification providing a strong legal framework that requires the disclosure of beneficial owners of companies involved in the extractive sector.
Notification No. 104/2019 confirms the mandate of the Beneficial Ownership Task Force to make decisions regarding ownership disclosures and empowers the Directorate of Investment and Company Administration (DICA) to implement them. The notification also paves the way for 158 companies and 5 state-owned enterprises operating in Myanmar’s oil and gas production and transportation, mineral, pearl, jade and coloured gemstone industries to disclose their true owners by January 1, 2020, setting an important precedent in the country’s efforts to increase transparency in its natural resource sector.
Due to the efforts of the Extractive Industries Transparency Initiative (EITI) — a global standard to foster transparency and accountability in the oil, gas and mining sectors — Myanmar stakeholders are now discussing the issue of beneficial ownership. Myanmar became an EITI candidate country in 2014, and formed a multi-stakeholder group (MSG) of representatives from government, companies and civil society to oversee progress of the implementation of the EITI Standard.
In its 2016 EITI Standard, the EITI included for the first time a requirement that implementing countries disclose the beneficial owners of all companies operating in the extractive sector by January 2020. The Standard also requires implementing countries to identify beneficial owners who are “politically exposed persons” (PEPs) — individuals who hold or have held public roles that expose them to opportunities for bribery and other forms of corruption — as well as their relatives and close associates.
To implement this requirement, the Myanmar government convened the Beneficial Ownership Task Force in June 2018. Representatives from companies and civil society sit on the task force along with officials from the Anti-Corruption Commission, Financial Intelligence Unit, the Central Bank of Myanmar and other government agencies. The task force and the EITI MSG have decided on the definition of beneficial owners and PEPs for Myanmar as well as on institutional arrangements for information collection and disclosures.
With the deadline of January 2020 only months away, the presidential notification could not be more timely. It strengthens Myanmar EITI’s ongoing efforts to collect beneficial ownership information through an online platform and to prepare the publication of its upcoming beneficial ownership report, which covers 163 extractive entities (all featured in the latest Myanmar EITI report).
These steps confirm the government’s commitment to progress and put the country among the vanguard of EITI implementing countries seeking greater transparency around beneficial ownership. However, the first disclosures will be just one step in a long process of building integrity. To capitalise on this progress, further steps are needed after the January 2020 deadline.
Firstly, relevant government agencies will need to verify and use the information disclosed. There are ongoing discussions on integrating the information into existing DICA reporting systems. Gradually, disclosure requirements can also be expanded to the existing procedures of other monitoring or licensing agencies. For instance, extractive state-owned enterprises making beneficial ownership information a mandatory part of licence application and using it to screen for potential conflicts of interest during their decision-making on new oil and gas blocks or mineral, jade and coloured gemstone concessions expected in 2020.
Secondly, the Beneficial Ownership Task Force and the Myanmar EITI MSG should make the information collected publicly available to all citizens free of charge. This will allow journalists and civil society organisations to scrutinise the data and complement the government’s reform efforts. This is especially important given that verification requires more resources, time and knowledge than any single stakeholder possesses.
Thirdly, to be able to fully meet the EITI requirement, the Beneficial Ownership Task Force should expand its current scope to cover all companies with interests in the Myanmar extractive sector. A review of existing Myanmar legislation and ministerial regulations would identify gaps, synchronise rules and streamline beneficial ownership requirements in the existing standard operating procedures of relevant government departments.
The concept of beneficial ownership disclosure is still new in Myanmar, and there are particular concerns about the security of information. However, most stakeholders, including many companies, seem to realise the feasibility and benefits of ownership transparency. This is largely due to the leadership of DICA, enabled by the strong support from the Myanmar EITI National Coordination Secretariat and the Beneficial Ownership Task Force.
A well-implemented presidential notification should strengthen the fight against corruption, illicit financial flows and widespread tax evasion in extractives, and should help restore public trust. By shedding more light on who really owns and benefits from Myanmar’s extractive companies, the upcoming disclosures will support the work of anti-corruption and tax compliance actors. More transparency in this area can also contribute to the Myanmar government’s ongoing efforts to build a more robust business environment, improve Myanmar’s investment attractiveness and contribute to the country’s ranking in international indexes. A level playing field, reduced corruption and lowered tax-avoidance risks will ultimately benefit the citizens of Myanmar.
Aye Kyithar Swe is senior Myanmar officer at the Natural Resource Governance Institute (NRGI) in Yangon. Matthieu Salomon is senior governance officer at NRGI and former Asia-Pacific and Myanmar manager.