Australia to help Myanmar build mining regulatory regime

Author: | Published: 10 Apr 2012
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Myanmar’s government could work with Australian officials to establish a mining regulatory regime that closely mirrors the Australian system, IFLR can reveal.

The move would see the Myanmar bodies work with Australian authorities to align local mining laws, contractual commercial terms and processes, such as the concession registration system, more closely with international standards.

One senior official at the Myanmar Investment Commission (MIC), the body working on the changes, told IFLR discussions had taken place in January with the former Australian foreign minister Kevin Rudd.

Rudd had urged him to study Australia’s mining practices and consider the possibility of Australia assisting the country.

“He told me the EU had asked Australia to keep an eye on Myanmar on the EU’s behalf, to work with us closely and generally advise us where possible,” he said.

“For that reason he was very interested in establishing a mining sector scholarship programme within Myanmar, and helping us with education, health sector and heritage reform.”

With Rudd’s departure from office in February the talks had stalled, he said. But he was confident progress would be made and Australian sanctions on Myanmar would be eased together with the EU and US embargoes on involvement in the country.

“Because of the success of these by-elections, things will change fast,” he said.

Click here and here for exclusive IFLR video footage of Aung San Suu Kyi inspecting polling stations in her constituency on the morning of Myanmar's by-elections.

Market participants in Myanmar’s oil and gas sector have been working to resume discussions amid growing frustration with the much-criticised regulatory regime governing the local mining sector.

While Australian sanctions on investment in the country remain, it is likely Australia will assist in building an improved legislative landscape under a national aid organisation such as the Australia Mining for Development Initiative much like they have previously done in Laos, and in Papua New Guinea.

One source close to the matter said the Australian government was keen to provide Myanmar with an aid surface to help them in implementing the business of mining. But everything is on the table for now, he said.

He branded Myanmar’s mining regulations as a total mess and deliberately dysfunctional both in terms of the laws in place and how they were implemented.

“Mining laws here are primarily focused on gem mining and designed so that the relevant ministers can profit from the lucrative jade and gold trade,” he said.

“The sector’s fiscal regime and production sharing criteria is also draconian and designed more for the oil and gas sector,” he said. “This results in un-commercial headline terms when related to mining investment.”

The mining department is bureaucratically opaque too, according to the source. Processes such as the concession register are very outdated, he said. “In most other jurisdictions, it is possible to see in real-time what investment opportunities are available via online registration,” he said. This is not the case in Myanmar.

Much will also depend on the Myanmar federal budget that is produced. This will collate 40 years of information for the first time. “It should help to demonstrate how much revenue could be brought in through mining investment and ensure revisions to market regulation moves further up the reform agenda,” he said.;

“The Australian regime is successful,” he said. “Myanmar would benefit from the involvement of an international yet regional government that has the capacity and willingness to come in and support the building of a new regulatory framework.”

Another market participant added that a more transparent system would benefit the local population in attracting more players to the market and better balancing the influence of Chinese investors in the sector.

“Chinese investors have been very aggressive here and local market participants have been getting ripped off,” he said. “The government needs to balance investment in the sector and try to introduce systems that are actually implemented directly.”

“There is massive investment potential here, if an efficient regulatory framework is put in place,” he said.

The Australian and Canadian regulatory regimes are the template for most mining acts around the world, and mining companies are used to doing business based on those regimes, and the level of predictability that they provide.

“The only department in Myanmar that has a proper western level of predictability, and which operates a professional and commercial regulatory regime is the oil and gas ministry,” he said. “Investments there are well structured and open. Mining investment in contrast is one of those black areas that is really behind.”

“There is no doubt all that has been happening in Myanmar recently is very positive,” he said. “But investment in the country is still very risky in parts and first mover advantage can turn into first mover disaster if you are not careful.”