The mining sector is one of Myanmar’s biggest earners, and the government is keen to entice more foreign investors to support its development. Reforms to the 1994 mining law should help ease restrictions on ownership, which will benefit international and domestic firms alike. However, a number of proposed changes to the law, as well as highly publicised protests at local mines, may lessen the sector’s appeal to some investors.
In January Yangon, Myanmar’s largest city and commercial capital, hosted the second Myanmar Mining Summit, at which Myint Aung, the minister of mines, reaffirmed the country’s call for both foreign and local investors to become involved in the sector, pledging “the highest level of accountability, transparency and reliability”.
Officials from the Ministry of Mines (MoM) met representatives from a number of international companies, including the US-based Freeport-McMoRan; Australia-based White Energy, as well as Evolution Mines; Malaysia-based Smelting; and two firms based in India, MN Dastur and Tanintharyi International. Russian companies, which have been seeking new sources of copper and nickel abroad in recent years, may also show interest in Myanmar.
Officials emphasised the potential for investment in mining to generate jobs in Myanmar, which needs to finds jobs for its citizens, while also noting the importance of ensuring that the environment – including water and forest resources – was not harmed by development.
Since Myanmar’s liberalisation began, mining has garnered much international attention, ranking second after energy, according to officials. The country has reserves of copper, gold, tungsten, nickel, tin and precious stones. With resource-hungry China and India as neighbours, and many Western countries lifting sanctions, Myanmar is in a strong position to build up its mining sector, particularly with an eye on exports.
Up to now, Myanmar has remained relatively unexplored by major international mining firms. As a result, the country is attracting attention from some medium-sized players, which see substantial opportunities for growth.
International press reports suggest that Australian mining firms are particularly well placed for entry, given their experience working in remote regions and a strong reputation for environmental protection.
Some players, however, have been holding back on investment in anticipation of reforms to current mining legislation, which closes some segments to foreign investment and in others stipulates profit-sharing agreements which see the government take a substantial share of earnings without necessarily taking on capital costs.
However, a new mining law that aims to boost investment would replace existing legislation dating back to 1994. International press reports in 2012 suggested that the law reform would be completed this year, though it is still unclear when it will be implemented. The new rules are expected to follow Myanmar’s broad liberalisation strategy, which has included the removal of some curbs on foreign ownership.
The draft law’s provisions include leaving partners in joint ventures to negotiate stake ratios, rather than having them dictated by the government, U Aye Thwin, the chief engineer at the MoM’s No 2 Mining Enterprise, said at an industry conference in Singapore in December 2012. This would allow foreign firms to take 100% ownership of projects, though Aye Thwin suggested some restrictions would remain. Tax holidays and provisions to allow foreigners to take 50-year leases on mines, as well as a guarantee against nationalisation, are also in the draft law.
However, a ban on raw ore exports may remain. This rule could benefit Myanmar in the long run, as it is designed to ensure that the country exports value-added secondary and tertiary products, rather than being reliant on raw material exports. Countries across the region, including Malaysia and Indonesia, as well as a number of other emerging markets, are currently engaged in a drive to develop value-added, leveraging their existing natural resources.
Investors and officials will hope that future deals can avoid the troubles plaguing the Lapadaungtaung copper mine near Monywa, where police have broken up protests by local villagers regarding environmental damage and what they see as inadequate compensation. The clashes at Lapadaungtaung have attracted international attention and have the potential to harm the reputation of Myanmar’s mining industry. However, speedy implementation of new legislation that promotes transparency and environmental protection could counteract that.