Myanmar govt faces setbacks in enforcing compliance with EITI database

The government says it lacks the mechanisms to force companies to disclose ownership information through a public registry, which are part of recent measures to clean up corruption in the extractive industry.

Myanmar’s Extractive Industries Transparency Initiative (EITI) unit, a government body under the finance ministry, held a press conference on February 28 to address criticisms over those measures.

According to a report released by natural resources expert Charlotte Boyer on the same day, out of a total of 163 extractive companies, 121 submitted information about their beneficial owners, but 31 of those had major flaws or disclosed insufficient information. The “significant gaps” in their submissions undermined the credibility of the data or showed a weak understanding of the beneficial ownership requirements, the report said.

Set up to meet the requirements of EITI, the database covers five state-run enterprises, including Myanma Gem Enterprise and Myanma Oil and Gas Enterprise, and 158 other extractive entities.

The public registry is part of the government’s efforts to tackle issues related to beneficial ownership, referring to individuals who ultimately own or substantially benefit from a private company, and “politically exposed persons” (PEP), defined as people who are or were entrusted with prominent public functions and their family members and associates.

As Paul Donowitz, Global Witness Myanmar team leader, explained, the information is supposed to help prevent the corporate anonymity which facilitates money laundering, bring transparency to licencing and public procurement, reduce opportunities for fraud and cronyism, and boost investor confidence.

However he added: “The released data itself is riddled with incomplete and inaccurate information, and the current legal framework and available resources for implementation and enforcement are lacking.”

The Myanmar Times earlier identified serious flaws in the database. Only five out of the 163 companies declared that they have politically exposed persons, while some with very obvious links to powerful figures, such as Kyaing International Gems Co, did not disclose their connections.

Officials at the press conference conceded the government did not have a mechanism to force companies to comply with accurate disclosure. However public scrutiny was an effective incentive, they said.

Mr Donowitz warned that those responsible for maintaining these public registries “must guard carefully against the temptations of backsliding”. For example, he said the decision by the Directorate of Investment and Company Administration (DICA) to place key identifying information about corporate officers behind a paywall on its company registry “sends the wrong message both to domestic actors and the international community.”

Companies listed as non-compliant by the Boyer report had sent requests to submit their ownership information, a DICA official said.

The government should set up internal mechanisms to verify the information submitted and enforce sanctions for non-compliance, said Ma Aye Kyithar Swe, senior officer of Natural Resource Governance Institute.

The Boyer report named the companies who are non-compliant.

Six companies, for example, failed to disclose natural persons shareholders owning more than 5pc of shares as beneficial owners or as intermediaries for actual beneficial owners. These six were named as Kyaw Naing & Brothers Gems company, Shining Star Light Gems & Jewellery, Sai Laung Heing Minging Company, Phyo Pyae Sone Gems Company, Shwe Byain Phyu Gems Company, and Chaow Brothers Gemstone Enterprise.

Four private companies were found to only have disclosed legal owners without identifying any beneficial owner. They are Myanmar Yang Tse Copper, First Resources Company, Myanmar Ruby Enterprise (Gems & Jewellery) Company, and Myanmar Wanbao Mining Copper.

“While it is technically possible that no natural person qualifies as beneficial owner, it would imply a divided capital and an extremely divided decision chain,” the report said.

The Myanmar government in the long run needs to mainstream a process into existing procedures, according to Ma Aye Kyithar Swe.

It could be designing the disclosures as part of MyCo, Myanmar’s first electronic company registry MyCo, to allow companies to update data anytime instead of an annual exercise, as well as to require extractive companies to disclose their beneficial owners at the point of licence application, she told this newspaper.

There are plans to include beneficial ownership disclosure in MyCo, said U Thant Sin Lwin, director general of DICA.

DICA is part of the government’s beneficial ownership task force led by finance minister U Soe Win.

The Myanmar Centre for Responsible Business, in a letter to DICA, has suggested requiring business owners to provide information about themselves and family members who are or were senior government or military officials.

The information would then enable these individuals to be identified by regulators, investors and other stakeholders as PEPs.

Source: Myanmar Times

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