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5. Legal Frameworks for Investment in Large-Scale Agriculture in Myanmar

On 27 April, Oxfam and MCRB hosted a multistakeholder discussion on ‘Responsible investment in plantation agriculture' in Yangon. The workshop, which discussed examples of good and bad practice in Myanmar relating to oil palm, bananas and rubber, focussed on the Myanmar legal framework for investment, including land acquisition and regulation of environmental impacts.

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5. Legal Frameworks for Investment in Large-Scale Agriculture in Myanmar

  1. 1. Legal frameworks for investment in large- scale agriculture in Myanmar Recap and overview Vicky Bowman Director, Myanmar Centre for Responsible Business Workshop on Responsible investment in plantation agriculture, with a focus on land (Novotel Yangon Max, 27 April 2018)
  2. 2. Draft Paper MCRB Oxfam) on responsible investment in large-scale agriculture ▪ In preparation by MCRB/Oxfam legal consultant Margaret Wachenfeld ▪ Will invite comments/consultation in May 2018 ▪ Covering laws for: • Company regulation • Investment Law • Land • Environment including EIA • Health and Safety • Labour • Ethnic Nationalities • Etc……… ▪ This presentation contain key points/analysis ▪ Companies which invest responsibly and do EIA need to know the complete legal framework
  3. 3. Environmental Conservation Law 2012 Environmental Conservation Rules 2014 (Art38-39 EQS, Art 51-61 EIA) MOECAF Notification 616/2015 EIA Procedure Draft ESIA Guidelines (generic) (ADB) Draft Public Participation Guidelines (MPE/VLS) Draft Sectoral Guidelines Mining (ADB) O&G (NorEA); Hydro (IFC); etc Further Environmental Quality Standards (ADB TA for some) MOECAF Notification 616/2015 National Environmental Quality (Emission) Guidelines) Other Environment and Social safeguard laws e.g. Forest, Wildlife, Investment , Ethnic nationalities, Disability, Labour, Hazardous Waste, Planning Relevant Sectoral Rules, Regulations, By-laws which concern environmental and social safeguards Relevant notifications, orders, directives & procedures Could include Zonation Plans, Building Code Sectoral Law(s) Sectoral Rules, Regulations, By-laws Existing Sectoral notifications, orders, directives and procedures Sectoral standards which are lacking and need to be notified/issued as Directives Gaps in primary law relevant to sectoral activity Gaps in byelaws and rules relevant to sectoral activity Gaps in tertiary legislation relevant to sectoral activity Existing legislation in the purple outline is applicable to all projects in the sector, even if they are not required to do an IEE/EIA. Gaps in regulation are depicted by Red boxes. For those which do need to do IEE/EIA, these gaps can be partially covered by including in the EMP and ECC specific requirements (e.g. taken from the relevant IFC EHS Guidelines). These can be referred to in Sectoral Guidelines. However, Myanmar legislation should be put in place in due course to ensure all sizes of project are regulated appropriately
  4. 4. The legal framework for responsible investment needs to be clear and effective ▪ Complete • E.g. missing some environmental standards – noise, waste etc • 1894 Land Acquisition Act does not cover e.g. loss of livelihood for those who use but do not own land (IFC Performance Standard 5 on Resettlement) ▪ Consistent • E.g. size thresholds for plantation : IEE/EIA Procedure: IEE > 200 < 500 hectares, EIA > 500 hectares Investment Law MIC Permit >1,000 acres (405 hectares) ▪ Simple, and without unnecessary red-tape ▪ Effective monitoring and accountability • Many reports are required from companies but are they written, meaningful and read? o MIC/DICA – quarterly (not) and now annual (published); o EIA - six monthly, published • How are grievances handled? Who in government is responsible for receiving and resolving them if the company doesn’t? ECD? MIC? MOALI? GAD? ▪ Fully communicated and enforced
  5. 5. Step I: Register as a Company in Myanmar ▪ Those involved in large scale agriculture need to register as a company under 2017 Companies Act ▪ Art.2(a): “Myanmar companies” = < 35% foreign shareholding ▪ Whether a company is ‘foreign’ or ‘Myanmar/citizen’ has implications for: • What a company is permitted to do under the Myanmar Investment Law (MIL) • Land ownership
  6. 6. Step II: Myanmar Investment Commission or not? ▪ All ‘foreign companies’ need to go to MIC for projects involving agricultural land because they are prohibited from owning or renting land for > 1 year unless they have an MIC Permit (or Endorsement for small-scale projects). This provides land rights authorisation (LRA): land use rights for < 70 years. ▪ Myanmar investors do not need a LRA Myanmar Investment Commission (MIC) Permit is required (MIL Art 36c. Myanmar Investment Rules) for Foreign or Myanmar large-scale agriculture investment which: ▪ Are “strategic” (Rule 3): • Involves rights to use > 1,000 acres (405 ha) land for primarily agriculture purposes • Is a government granted concession > $20 million investment • Crosses international border or conflict (not defined) area (>$1 milllion) • Crosses State/Region boundary ▪ Is regarded as having large potential environmental/social impact (Rule 5) because it: • includes involves compulsory acquisition and rights to use > 100 acres (40.5 ha) land or where >100 individuals will be displaced (Rule 5) • requires an EIA (under the EIA Procedure)
  7. 7. MIC ‘Incentives’ in Agriculture ➢ Tax exemptions potentially available from Myanmar Investment Commission under the MIL for ▪ Promoted sectors • Agriculture and related services (except tobacco) • Plantation/conservation of forest and other businesses ➢ Promoted regions (Notification 10/2017) potential income tax exemption of ▪ Zone 1 ‘less developed’: 7 consecutive years: • Kachin (14 townships), Kayah (7), Kayin (7), Chin (9), Sagaing (34), Tanintharyi (4), Bago (5), Magwe (13), Mandalay (2), Mon (2), Rakhine (17), Shan (42), Ayeyarwady (10) ▪ Zone 2 ‘moderately developed’: 5 consecutive years • Kachin (4, mostly urban), Sagaing (3), Tanintharyi (7), Bago (23), Magwe (12), Mandalay (13), Mon (8), Yangon (13), Shan (14), Ayeyarwady (17), Naypyitaw (8) ▪ Zone 3 ‘adequately developed’: 3 consecutive years: Mandalay (14), Yangon (32)
  8. 8. Restrictions in the Investment Law: Agriculture ▪ Prohibited for foreign investors: Manufacturing forest products from forest area/government administered natural forest ▪ Only allowed as joint venture with any citizen-owned entity (i.e. Myanmar company) or Myanmar citizen: • Cultivation of crops in agriculture land, distribution to the local market and exporting • Processing, canning, manufacturing and marketing of food products except milk and dairy products ▪ Only allowed with approval of relevant ministries (Notification 15/2017): • MoALI: production of seasonal crops • MONREC: o Logging in forest land and land administered by the government; o Establishment of forest plantations (teak, hardwood, rubber, bamboo, cane etc); o Wood-based industry and related businesses with implementation of forest plantation
  9. 9. Step III Legal pathways for acquiring agriculture/plantation land which do not – in principle - require an MIC Permit
  10. 10. Step III: Options for a Myanmar investor to obtain land which do not involve MIC Vacant, Fallow or Virgin (VFV) Management Land Law 2012 ▪ Common option for acquiring access to land → Government can allocate land in tranches of 5000 ha up to 50,000 ha Note: Under Myanmar Investment Rule 3 the threshold requiring MIC Permit is 1,000 acres/405 ha. → this tranche size would require MIC Permit Company applies → to VFV Land Management Committee ▪ Application passes up/down through multiple layers of VFV Committees for approval ▪ Opinion sought from MoALI Perennial Crop Division ▪ Committee issues a Recommendation based on environment & appropriateness of crops based on soil and weather conditions Farmland Law 2012 (under revision) ▪ Farmers typically have Land Use Certificates (LUC) ▪ Apply → to Farmland Administrative Bodies (FAB) ▪ Application passes up/down through multiple layers of FAB for approval ▪ Myanmar companies can lease farmland directly from farmers if they have secured a land use certificate (LUC) ▪ Farmers typically have smaller plots of land: leasing land from farmers requires negotiations with many individual farmers in the same area ▪ Foreign investors require permission from the Government to lease farmland Forest Law 1992 ▪ Myanmar company or foreign company → applies to MONREC for permission to establish a commercial plantation on forest land ▪ MIL imposes restrictions on foreign companies using forest land
  11. 11. Usage Right (relevant Government Form) Responsible Government Authority Entities entitled to acquire or use this type of land VFV Law Right to use VFV land: • for industrial crops (Form 11) • for perennial plants and orchards (Form 12) Central Committee for Management of VFV Lands (CCVFV) Myanmar individuals and companies VFV Committees at the levels of: ▪ State/Regional ▪ District ▪ Township ▪ Village tract Foreign Companies in joint ventures with the government Myanmar companies or individuals with a MIC Permit or Endorsement, through the LRA process Farmland Law Farmland Rules Land Use Certificate (LUC) issued to farmers (Form 7, accompanied by a map on Form 105) Central Farmland Administrative Body (FAB) ▪ includes Ministry of Home Affairs, General Affairs Division (GAD) Myanmar companies can buy or lease LUCs from farmers Farmland Administrative Bodies at levels of: ▪ State/Regional ▪ District ▪ Township ▪ Village tract Foreigners (individuals or companies) can lease farmland from farmers but only with permission of Government. Unclear which government agency under Farmland Rules; presumably MoALI (line ministry responsible for farming)
  12. 12. Forest Law Permission to Use and Contract with the Forest Department Forest Department Myanmar citizen or company FD branches at levels of: ▪ State/Regional ▪ District ▪ Township Foreign investors (MIC Notification 15/2017): ▪ are prohibited from manufacturing forest products from forest areas and government administered natural forest ▪ as part of MIC process, require approval from MONREC to: (i) log in forest land and land administered by the government (ii) establish forest plantations (teak, hardwood, rubber, bamboo, cane etc) (iii) carry out wood-based industry and related businesses with implementation of forest plantation Right (relevant Government Form) Responsible Government Authority Entities entitled to acquire or use this type of land
  13. 13. Step IV Responsible business requirements when establishing, and during, operations
  14. 14. Environmental Conservation Law: 2015 EIA Procedure EIA and Initial Environmental Examination (IEE) requirements for Plantation Industrial/Crop Production (rubber, oil palm, cocoa, coffee, tea, bananas, sugar cane) in Annex 1 of EIA Procedure Plantation Industrial/Crop Production (e.g. rubber, palm oil, cocoa, coffee, tea, bananas, sugar cane) IEE ≥ 200 hectares but < 500 ha EIA ≥ 500 ha Annual Crop Production (e.g. cereals, pulses, roots, tubers, oil-bearing crops, fibre crops, vegetables, and fodder crops) IEE ≥ 500 ha but < 3,000 ha EIA ≥ 3,000 ha Concession Forest IEE < 10,000 ha EIA ≥ 10,000 ha ▪ Single assessment (EIA) should cover environmental and social impacts ▪ After approval by ECD/MONREC, an Environmental Compliance Certificate (ECC) is issued including requirements on the company, including for monitoring and reporting, and notifying MONREC of any breaches. ▪ Smaller plantations may be required to submit an Environmental Management Plan ▪ Companies should provide MIC with information about their EIA/IEE/EMP plans at time of MIC Permit application ▪ MIC Permit can be issued conditional on obtaining necessary permits including the ECC. ▪ ECC should be provided to MIC once received (MIL (Article 65(q)) and MIR (Articles 188-189)
  15. 15. What about existing plantations? Art.8 EIA Procedure: ‘Any project already in existence prior to the issuance of Environmental Conservation Rules (June 2014), or the construction of which has already commenced prior to the issuance of the Rules, and which, in either case, shall be required to undertake , within the timeframe prescribed by the Department, an environmental compliance audit, including on-site assessment, to identify past and/or present concerns related to that Project’s environmental impacts, and to: a) Develop an Environmental Impact Assessment (EIA) or Initial Environmental Examination (IEE) or Environmental Management Plan (EMP); OIL PALM PLANTATIONS IN TANINTHARYI (SOURCE FFI) Allocated hectares Planted hectares Zero activity N/A 6 companies <200 hectares (EMP-type) 1 company 8 companies >200 ha < 500 ha (IEE-type) 6 companies 8 companies >500 ha (EIA-type) 37 companies 22 companies b) Obtain an ECC; and c) Take appropriate actions to mitigate adverse impacts in accordance with the Law, the Rules and other applicable laws
  16. 16. MCRB field research on oil palm noted that some companies did not have proper waste management systems at their mills. Most labourers use stream water for bathing and laundry contaminating it with soap and detergents. Pesticides and other agricultural chemicals contaminate stream water further. Other relevant environmental laws to be incorporated into EIA/EMP etc ▪ 2015 National Environmental Quality (Emissions) Guidelines: regulations on noise, vibration, emissions and liquid discharges (Plantation Industrial - Sec.2.2.1) ▪ 1994 Protection of Wildlife and Conservation of Natural Areas Law and 2002 Protection of wildlife and Protected Areas Rules (revised in 2017): Support for wildlife protection and conservation of natural areas ▪ 2006 Conservation of Water Resources and Rivers Law – protects from industry, vessels or local people polluting the environment ▪ 2016 Pesticides Law – controls use of pesticides
  17. 17. MCRB’s oil palm field research found that labour conditions vary from company to company. In some cases living and working conditions are very bad, including workers are forced into bonded labour (debts to employer etc). Relevant labour laws/social issues for agriculture to be incorporated into EIA/EMP etc ▪ Working conditions, including working hours, rest and leave ▪ Minimum Wage Act (2013) ▪ Payment of Wages Act (2016) ▪ Freedom of Association and Collective Bargaining ▪ Social Security Law (2012) ▪ Occupational Health & Safety Law (draft under discussion) ▪ Forced Labour ▪ Child Labour ▪ Non-discrimination and disability rights
  18. 18. Companies must also abide by the Myanmar Investment Law MIL Article 65 Chapter XVI (Responsibilities of Investors) (a): Respect….the customs, traditions and traditional culture of the ethnic groups in the Union (g): Abide by the applicable laws, rules, procedures and best standards practiced internationally for this investment so as not to cause damage, pollution, and loss to the natural and social environment and not to cause damage to cultural heritage (j): Pay wages and salaries to employees and respect and comply with the labour laws (o): Pay effective compensation for loss incurred to the victim, if there is damage to the natural environment and socioeconomic losses caused by logging or extraction of natural resources which are not related to the scope of the permissible investment Rule 196: Publish annual report (in addition to quarterly operational reports) ✓ How company has carried out investment in a responsible and sustainable manner ✓ Employment performance ✓ Impact on the environment and local community ✓ Land used and changes to land or land uses ✓ Compliance with MIC Permit & other applicable laws
  19. 19. Step V: Other recommendations for operating responsibly ▪ Conduct business responsibly and transparently, in line with the spirit of the Myanmar Investment Law ▪ Carry out due diligence, EIA/IEE etc, in line with international standards ▪ Use international standards where there are gaps in Myanmar law ▪ Get ahead of future changes to Myanmar’s environmental laws by using sustainable agricultural practices ▪ Understand land situation in Myanmar including the perspective of those living on and using the land, and find out how ‘virgin’ land is actually occupied or used ▪ Build good relationships with communities from Day 1, including for handling complaints ▪ Consider a Community Development Agreement for longer term
  20. 20. Thank you!