Govt coffers held back by SOEs: EITI

A representative of the Extractive Industries Transparency Initiative (EITI) said Myanmar’s government fails to understand the severity of how the so-called Other Accounts of state enterprises are holding back the country’s development.

EITI will be organising a workshop on reforming state-owned enterprises (SOEs) engaging in this sector will be held mid-February, according to EITI trilateral coalition in Myanmar. Preliminary discussions for the workshop were completed in January and the three-day workshop will be the first of its kind before any amendments can be made on the 1989 SOEs Law.

“The government side said it refused usage of the term ‘reform’ and that things are done according to the law, If reforms are required, the law must be amended first. After that we plan to hold that workshop,” said Daw Moe Moe Tun, central committee member of EITI trilateral coalition.

EITI has conducted transparency and responsibility studies of SOEs for better management. After reviewing the accounts, Myanma Oil and Gas Enterprise (MOGE) is found to have the biggest revenue among the SOEs, and the Myanmar Gems Enterprise (MGE) was harming the environment the most but had little revenue in comparison, Daw Moe Moe Tun said.

“We point out that the revenue is lower than the revenue of the garment industry. If they operate systematically, they can earn much more revenue,” the expert said.

Nearly US$1.2 billion was saved as reserve funds by MOGE in 2014 and the five raw materials manufacturing industries saved US$1.3 billion in their OAs in the same year. In 2015 the figure dropped to US$644.7 million for MOGE, and US$762.5 million for the five raw materials manufacturing industries s.

Like the oil and gas sector, the mining sector SOEs are the main receipients of taxes from mining contracts. According to the lists of 2015-2016, SOEs affiliated to the Ministry of Natural Resources and Environmental Conservation saved nearly US$105.95 million (K129.6 billion) in their OAs.

“The revenue from Other Accounts is more than half of revenue from the resources sectors. This is an issue. According to the lists of World Bank, 30pc of the population of Myanmar is poor,” she added. If the SOEs use the finances in Other Accounts, they can bring in U$150,000 per year to the treasury, but it “the government doesn’t understand this.”

“The government and the state enterprises think that we have exaggerated on these things. In reality, we carry out in accordance with the standards.”

SOEs related to oil and gas, jade and other precious stones and other minerals extraction sector will be included. EITI in Myanmar organised a workshop during its public talk about the second and third reports on January 11, 2019.

“It aims to implement reforms in SOEs engaging in mineral resources extraction industry. There are partnerships with SOEs in our country but they are just playing regulator role, not business role, and we will review it,” said mining department deputy director general U Kyaw Thet.

EITI’s reports stated information on audit of tax revenue and other charges (not tax) produced from Myanmar mineral resources sector in the fiscal year of 2014-15 and the fiscal year of 2015-16. Fourth report for the fiscal year of 2016-17 will be released at the end of March 2019.

EITI’s coordinator U Soe Win said the group wanted to carry out SOEs reforms since a year ago but details cannot be disclosed due to the sensitivity of the issue.

According to the summary of the report, the state manages oil and gas sector via Myanmar Oil and Gas Enterprise (MOGE) and make production sharing contracts which share with contractors. The SOEs continues receiving budgets from the State’s budget. After cutting costs, 45 percent of net profit will have to be paid to the state funds. Profit-making SOEs can keep profits in the Other Accounts (OA) in the state bank, unaccountable to parliamentary scrutiny.

“Regarding SOEs, standards from other countries have been studied more including China, one of our neighbours. We won’t copy directly. We’ll do what’s compatible with us. Foreign experts will also take part,” Daw Moe Moe Tun said.

Myanmar has begun to take efforts to become a member of EITI at the end of 2012 and submitted its membership application in 2014. In the 27th Board Meeting of EITI held in Mexico in 2014, Myanmar was granted the membership, and the first report was published in December 25, 2015.

Due to the governmental transition in Myanmar, EITI temporarily stopped its tasks, and in March 23, 2017 a new trilateral coalition was formed with seven government representatives, seven private representatives and nine civilian representatives.

Myanmar’s request to the board to reset the dates of the second and the third reports on March 31, 2018 was confirmed by the International EITI, and July 1, 2018 was confirmed as the first day to conduct assessment on Myanmar.


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