4. Promoting and enabling responsible business conduct

Promoting and enabling responsible business conduct (RBC) is of central interest to policymakers wishing to attract quality investment and ensure that business activity in their countries contributes to broader value creation and sustainable development. RBC principles and standards set out an expectation that all businesses avoid and address negative impacts of their operations, while contributing to sustainable development where they operate.

RBC expectations are affirmed in international principles and standards and increasingly in legislation. Recent years have seen a proliferation of high-level statements, including at G7 and G20 forums, national legislation, economic instruments and industry initiatives on RBC. All recent ASEAN Blueprints include references to RBC. In particular, policy action has focused on promoting the integration of RBC in core business operations, including also in how companies manage and deal with their supply chain. Any company that wishes to integrate in the global economy and participate in trade and investment must be aware of the fact that their buyers, clients, and partners may have various obligations when it comes to RBC. Broadly speaking, RBC is also an entry point for any company that wishes to contribute to the Sustainable Development Goals (SDGs) or to achieve specific economic and sustainability outcomes.

Myanmar’s liberalisation process initiated in 2011 has enabled greater integration in global supply chains, strengthened the rule of law, and enhanced civil society participation. The first Investment Policy Review of Myanmar highlighted the progress made in these areas and proposed options to leverage this context of reforms to promote and enable RBC (OECD, 2014). A number of policies and initiatives have emerged since then in support of RBC. The adoption of the Myanmar Investment Law, which includes explicit references to responsible investment, as well as the related legislative initiatives, was an important step in that regard. RBC commitments and provisions are also embedded in various national policies, strategies, and legal documents. The Myanmar Sustainable Development Plan (MSDP) 2018-2030 includes objectives for the expansion of the private sector as the engine of environmentally conscious and socially responsible growth. Promotion of responsible investment is also embedded in the vision of the Myanmar Investment Promotion Plan (MIPP) for the period 2016/17 – 2035/36.

Various initiatives have been spearheaded by international organisations, civil society and businesses. The UN Global Compact Myanmar chapter established in 2012 had 123 participants as of 2019. The Myanmar Centre for Responsible Business (MCRB), created in 2013 as a joint initiative of the Institute for Human Rights and Business and the Danish Institute for Human Rights, has become an important player for the promotion of RBC in the country. Business networks and associations such as the ASEAN CSR Network, UMFCCI, the American Chamber of Commerce and EuroCham organise regular events and make resources on RBC available to the public. The government and international organisations have collaborated with business networks to promote RBC on various occasions.

With Myanmar’s greater openness and integration in global supply chains has also come increased international scrutiny. In a context where demands on RBC are rising globally, the recent political and humanitarian situation has attracted significant international attention and affected global perceptions on Myanmar, with direct and indirect economic impacts on investment and trade as well as on sectors such as tourism. Since 2018, the EU commission has launched a period of “enhanced engagement” with Myanmar in relation to the EU Everything But Arms (EBA) arrangement, which guarantees preferential access to the European market for all exports except for weapons and ammunition, due to alleged shortcomings in respecting core human rights and labour rights standards (EU, 2019).

To address reputational issues, support productivity gains and achieve its objective to attract responsible investments, Myanmar has every interest in working toward alleviating the concerns of investors and trade partners. This implies sustaining efforts to address human rights issues, minimise business exposure to RBC risks and strengthen the enabling framework for RBC. The government could also directly support businesses in implementing RBC principles and standards and help them navigate RBC risks. Communicating clear expectations and providing guidance as to what business responsibility entails, as well as disseminating and supporting implementation of relevant due diligence instruments in targeted sectors such as raw materials and the garment industry, could be particularly effective. The government also has a role to play in providing strategic directions for RBC at country level and ensuring that all stakeholders work jointly toward the same goal and consistently contribute to national efforts to promote and enable RBC.

This chapter takes stock of the initiatives and various advances made in relation to RBC since the first Investment Policy Review of Myanmar, outlining steps taken by the government to promote and enable responsible business practices. Environmental considerations, as well as aspects related to SEZs and land rights are addressed in more detail in Chapters 6, 7 and 8, respectively. This chapter also highlights opportunities for the government to further support businesses in implementing RBC principles and standards in Myanmar’s current context, as well as drive national efforts to promote RBC.

Responsible business conduct (RBC) principles and standards set out an expectation that businesses should avoid and address negative impacts of business activities, while contributing to sustainable development in countries where they operate. RBC is an integral part of a quality investment climate and, as such, is at the heart of the OECD Policy Framework for Investment under which this review is being undertaken.

RBC means integrating and considering environmental and social issues within core business activities, including throughout the supply chain and business relationships. Many businesses, governments and stakeholders are familiar with the term corporate social responsibility (CSR) which has historically been used to describe business interactions with society. Over the last years, CSR has increasingly been used alongside RBC and Business and Human Rights (BHR), with some using the terms interchangeably (e.g. the European Union) (Box 4.1). All these concepts reflect the expectation that businesses should consider the impact of their operations and supply chains on people, the planet and society as part of their core business operations and not as an add-on. A key characteristic of CSR, RBC and BHR is that they refer to corporate conduct beyond simply complying with domestic law and call on business to contribute positively to sustainable development while managing risks and any harm that may result from their activities and from that of suppliers and partners. These concepts are not and should not be understood to be equivalent to philanthropy.

In recent years, concepts such as inclusive business and social enterprise have also gained ground globally including in Asia. Some countries have defined a set of criteria for some of these notions, including Inclusive Entrepreneurship, Social Cooperative, and Green Enterprise among others. For example, in Viet Nam, the 2014 Law on Enterprises introduced a legal form and definition for registering a social enterprise, whereby any enterprise with an objective to resolve social and environmental problems or to serve the public interest, and reinvesting at least 51% of its annual profits for these purposes, can be considered a social enterprise (OECD, 2018c). These concepts are not mutually exclusive and can intersect. For example, the concept of inclusive business, which tries to encompass business activities that go above and beyond the scope of ‘traditional’ business practices to integrate diversity or target the bottom of the pyramid, is connected to the concept of RBC. However, it is important to note that these concepts neither automatically nor systematically intersect: a business could be inclusive, but fail to take appropriate measures to identify, prevent and mitigate actual or potential adverse environmental or social impacts. RBC principles and standards apply to all businesses, including those that have a specific social or environmental focus (Box 4.2).

The main OECD instrument for promoting and enabling RBC is the OECD Guidelines for Multinational Enterprises (the Guidelines). The Guidelines are practical recommendations from governments to businesses on how to act responsibly. They cover all areas of business responsibility, including information disclosure, human rights, employment and labour, environment, anti-corruption, science and technology, competition, taxation and consumer interests. To support implementation of the Guidelines, the OECD has developed due diligence guidance which provide practical recommendations to businesses on how to identify and respond to risks of adverse impacts associated with particular products, regions, sectors or industries. OECD RBC Due Diligence instruments are: the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas minerals, the OECD-FAO Guidance on Responsible Agricultural Supply Chains, the Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector, the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector and the OECD Due Diligence Guidance for Responsible Business Conduct.

To date, 49 countries - including 37 OECD members and 12 additional economies – have adhered to the Guidelines. Governments that adhere make a binding commitment to implement them and encourage their use. The Guidelines have a unique implementation mechanism – the National Contact Points (NCPs) which are agencies established by governments. Their mandate is twofold: to promote the Guidelines, and related due diligence guidance, and to handle cases (referred to as “specific instances”) as a non-judicial grievance mechanism. Adhering governments have an obligation to establish an NCP to further the effectiveness of the Guidelines.

The first Investment Policy Review highlighted the importance and potential avenues for Myanmar to promote and enable RBC in a context of reforms initiated in 2011 that had opened the way to greater integration with the world economy, strengthening of the rule of law, and enhanced civil society participation. A number of policies and initiatives emerged since then in support of RBC. In recent years however, the political and humanitarian context has attracted international attention and affected the way businesses operations in Myanmar are viewed.

The MSDP 2018-2030 includes objectives related to the creation of quality jobs, together with the expansion of the private sector as the engine of environmentally conscious and socially responsible growth (Government of Myanmar, 2018). Promotion of responsible and quality investment is also embedded in the vision of the MIPP 2016/17 – 2035/36. The MIPP emphasises that investments must be responsible, comply with the principles of business conduct, and meet international standards. The MIPP also expresses the government’s intention to consider social, cultural and environmental impacts of any proposed investment (MIC, 2018). The 2016 Investment Policy explicitly states that local and foreign investors shall comply with the principles for responsible investment and business conduct (Government of Myanmar, 2016a).

These commitments are reflected in a number of legal documents. The 2016 Myanmar Investment Law explicitly makes its first objective to “develop responsible investments which do not cause harm to the natural environment and the social environment for the interest of the Union and its citizens”. Under this law, investors shall obtain an approval from the Myanmar Investment Commission (MIC) to invest in certain types of projects, including notably those that are likely to cause a large impact on the environment and the local community (Government of Myanmar, 2016b). The 2017 Myanmar Investment Rules specify that to obtain such a permit, investors must demonstrate a commitment to carry out the investment in a responsible and sustainable manner, including by limiting potentially adverse environmental and social impacts (Government of Myanmar, 2017). Implementation of these provisions are discussed later in this chapter. The MIC, a government-appointed body responsible for verifying and approving investment proposals, and issuing notification on sector-specific developments, has an explicit mandate to safeguard environmental conservation, emphasise social impact, abide by existing labour laws and support corporate social responsibility (DICA, 2019).

The government has initiated reforms that strengthen the enabling framework underpinning RBC. As mentioned in Chapter 2 of this Review, the new Companies Law enacted in 2017 represents an important step forward in improving corporate governance and transparency. Important efforts have been made to promote transparency. Myanmar became a candidate country to the Extractive Industry Transparency Initiative (EITI) in 2014, and is a member of the Asia Pacific Group on Money Laundering (Baker McKenzie, 2019). As part of Myanmar’s efforts to comply with EITI standards, the government instituted a requirement for companies operating in the extractive industry from 1 January 2020 have to disclose their beneficial owners. In addition, in November 2019, DICA issued a directive which requires all businesses to disclose the information pertaining to their beneficial ownership to DICA and the Internal Revenue Department, so as to enhance transparency and accountability. These developments are discussed in further detail later in this Chapter.

In 2017, the 2013 Anti-Corruption Law which established the Anti-Corruption Commission (ACC) was amended to reinforce the power of the ACC, giving it authority to launch preliminary investigations into information received (Chau, T., 2019). On 3 August 2018, DICA issued the Anti-Corruption Code of Ethics for Companies and Body Corporates, and urged companies to respect and adhere to the Code of Ethics for the development of the Myanmar business environment (DICA, 2018). The government is also collaborating with international organisations to promote RBC.1

International organisations, civil society and businesses have played an important role in the promotion of RBC in Myanmar. The introduction of the UN Global Compact in 2012 was an important milestone in that regard (UN, 2012). The Compact counted 123 participants in Myanmar in 2019 (UNGP, 2019). The Myanmar Centre for Responsible Business (MCRB), created in 2013 as a joint initiative of the Institute for Human Rights and Business and the Danish Institute for Human Rights, is a key player for promoting RBC, providing research on key RBC issues in the country, organising seminars and dialogues, convening multi-stakeholder initiatives and actively contributing to law-making processes through submissions to the government (MCRB, 2019). In 2018, MCRB, together with DICA and the OECD, kicked off a Responsible Business Seminar series intended to share practical experience of how to do business responsibly in Myanmar. (MCRB, 2018). The Responsible Business Fund (RBF) was launched in 2017 as part of a 3-year Danish assistance programme. RBF is an MMK 18 billion (USD 12 million) Challenge Fund to increase the competitiveness and responsible behaviour of Myanmar enterprises by providing partial grants to SMEs for the implementation of innovative projects in RBC-related areas. By December 2019, 635 projects had been approved across all 14 states and regions (RBF, 2019).

In 2018, the Myanmar Institute of Directors (MIOD) was established to promote corporate governance standards and best practices in Myanmar. An independent organisation governed by a board of directors comprising both public and private sector representatives, the institute was formed with support from the International Finance Corporation (IFC), and the governments of Australia and the United Kingdom (MIOD, 2019). The Myanmar government has collaborated with the DaNa Facility, a UK-funded private sector development programme, on various activities support inclusive and sustainable private sector business growth. This includes a scoping study and the development of recommendations endorsed in 2018 to promote inclusive business. As a follow up from this work DICA has been assigned to co-ordinate the implementation of a strategic framework for inclusive business (DICA, 2018). It will be important to ensure alignment among various initiatives that target private sector contribution to the SDGs, including the various efforts to promote RBC. In the context of this review, DICA has communicated to the OECD that initiatives such as these are targeted at promoting “smart” development.

Various initiatives have been spearheaded by business networks and associations as well. UMFCCI has established a CSR Committee, and actively promotes RBC in Myanmar through various events. In May 2019, UMFCCI, with the support of the ILO, organised a two-day forum on Business and Human Rights to facilitate learning, experience sharing and planning on implementing RBC (ILO, 2019). The ASEAN CSR network is implementing a programme called “ASEAN CSR Fellowship” which aims to create RBC ambassadors. Myanmar was included in the programme in 2017 and 2018 (ASEAN CSR, 2019). The American Chamber of Commerce launched a CSR Excellence Recognition Programme in 2015 to recognise companies that create long-term economic and social benefits in Myanmar communities (AmCham, 2019). EuroCham Myanmar created the CSR Advocacy Group in 2017, which became in 2019 the EuroCham Myanmar Responsible Business Initiative to promote RBC among its members (EuroCham, 2019).

RBC has increasingly become a priority for policymakers, businesses and stakeholders globally, including in Asia. Rising RBC demands and expectations are reflected in various high-level statements and commitments, such as in ASEAN blueprints. The ASEAN Socio-Cultural, Economic, and Political-Security Community Blueprints 2025 all mention CSR. Myanmar has been one of the leaders in the regions with the explicit references to responsible investment in the Investment Law as well as the related legislative initiatives. Leaders at G7 and G20 forums have made important commitments to promote RBC principles and standards. Several countries have passed laws that require businesses to manage RBC risks associated with their operations, including throughout their supply chains. RBC provisions are also increasingly embedded in economic instruments (Box 4.3).

These developments affect the way investors make decisions at home and abroad. In that sense, while Myanmar’s liberalisation process has allowed greater integration in global supply chains, it has also increased scrutiny as to how investments would affect people, the environment and society. The human rights context is an area of attention for businesses. The OECD Guidelines include a dedicated chapter on human rights and recommend that businesses carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts. The UN Guiding Principles explicitly aim to enhance standards and practices with regards to business and human rights.

The first Investment Policy Review highlighted progress made in strengthening human rights protection in Myanmar, including progress towards establishing the rule of law and opening space for civil society. The review also recognised potential constraints that the government could face in enforcing new human rights and labour standards throughout its territory, especially in border areas often still highly militarised. Further progress has been made in a number of areas discussed in the first Investment Policy Review. The ratification of the International Covenant on Economic, Social and Cultural Rights in 2017, was a positive development in that regard (OHCHR, 2019a). Myanmar is still not a party of most major international conventions however, having ratified 4 out 9 UN Core Conventions, and 3 out of 8 ILO Fundamental Conventions (OHCHR, 2019a; ILO, 2019).2

The Myanmar Human Rights Commission (MNHRC) Law passed in 2014 aimed to reinforce the MNHRC membership, power, duties, support and structure and align it with the UN Paris Principles, which set the international standards for National Human Rights Institutions (Liljeblad, 2016). Despite progress made since the establishment of the MNHRC in 2011, the capacity assessment conducted by the MNHRC in 2018 with support from the Asia Pacific Forum of National Human Rights Institutions, UNDP and OHCHR identified remaining challenges in strengthening the MNHRC’s mandate, independence and trust among civil society and NGOs (MNHRC, 2018). As of March 2019, the MNHRC was deemed partially compliant with the UN Paris Principles based on the review conducted by the Global Alliance of National Human Rights Institutions (GANHRI) in 2015 (GANHRI, 2019).

In recent years, however, the resurgence and expansion of internal conflicts in parts of Myanmar has attracted considerable international attention, including in relation to human rights. In 2014, the UN Special Rapporteur on the Situation of Human Rights in Myanmar, while stressing the importance of the far-reaching reforms which transformed the political, economic, social and human rights landscape after 2011, also identified signs of possible backtracking which, if left unchecked, could undermine Myanmar’s efforts in this area. The report called for attention to shrinking democratic space, respect for rule of law, discrimination against ethnic minorities, forced labour, land grabbing and forced evictions (OHCHR, 2014). Rebounds of violence in conflict-affected zones have led to humanitarian crises and massive population displacements since 2017. The situation in Rakhine State is at the centre of proceedings at the International Court of Justice (ICJ) based in the Hague (ICJ, 2019).

This context affects the way businesses perceive the investment landscape and conduct their operations. The 2018 World Bank Economic Monitor highlighted the effect of the political and humanitarian situation on global perceptions of Myanmar and their indirect effects on sectors such as tourism, which experienced a 50% decline in the number of tourists from the United States and Europe in the first half of 2018. The report also notes that the slowdown in FDI commitments could reflect uncertainty in the investment climate related to the Rakhine crisis (World Bank, 2018). For example, the EU Everything But Arms (EBA) arrangement, which guarantees Myanmar tariff-free access to the European market for all exports except for weapons and ammunition, is tied to a commitment to respect the values enshrined in 15 fundamental conventions of the United Nations and the International Labour Organisation. Since 2018, the EU Commission launched a period of “enhanced engagement” involving intensified dialogue and monitoring with Myanmar, as well as with Cambodia and Bangladesh, over human rights concerns (EPRS, 2019). In February 2020, the EU partially withdrew the tariff preferences granted to Cambodia under the EBA trade scheme due to the alleged serious and systematic violations of the human rights principles enshrined in the International Covenant on Civil and Political Rights (EU, 2020a).

Alleviating the concerns of investors and trade partners implies sustaining efforts to minimise business exposure to RBC risks in Myanmar. This means, for example, ensuring that a robust legal framework is in place, and that it is implemented. As mentioned earlier, important reforms have been made in recent years to strengthen the RBC framework. While the notion of responsibility is embedded in several policies and laws, laying out clearly what business responsibility entails and providing guidance to businesses and investors could support them in meeting these expectations.

The 2016 Investment Law, in particular, has an objective to develop responsible businesses that do not cause environmental or social harm. The law also gives a mandate to the MIC to review and make decisions on certain investment proposals, including large investments in strategic sectors covering energy, infrastructure, and extraction of natural resources; investments in border or conflict-affected areas; projects that could adversely affect land rights; investments that use state-owned land and buildings (see Chapter 8). Article 64(d) of the Myanmar Investment Rules specifies that the MIC must assess every proposal and consider whether the investor or the proposal has demonstrated a commitment to carry out the investment in a responsible and sustainable manner, including by, as relevant, limiting any potentially adverse environmental and social impacts. This gives the MIC an opportunity to communicate to investors what expectations are with respect to RBC at different stages of the review and monitoring process, and explicitly refer to the main international instruments on RBC.

As noted in Chapter 2 of this review, concerns have been raised with regards to the application of Art. 64(d) of the Myanmar Investment Rules. Stakeholders consulted for this review reported that the MIC typically requires investors to commit to spend 2% of profits in corporate social responsibility activities, while no clear guidelines define what activities qualify as CSR for this purpose. Some countries have experimented with similar requirements, notably India, with mixed results.

Clarifying to applicants what RBC entails and whether and how philanthropic activities may qualify for this purpose alongside other corporate practices addressing standard RBC expectations of limiting any adverse environmental and social impact arising from business operations, including from suppliers and partners, would significantly improve regulatory legibility and help businesses channel resources into more meaningful RBC practices. Philanthropic activities and RBC are not mutually exclusive; however, it is important that the two are not conflated. The government could consider issuing guidance laying out clear expectations on RBC, as has been done for example in the Thilawa SEZ with the Notice No 4/2015 to ensure the Responsible Investment in the Thilawa Special Economic Zone. In drafting such guidance, the Government may consider making explicit reference to key international instruments on RBC, such as the OECD Guidelines and the OECD Due Diligence instruments among others, for reinforcing the significance of such policy and providing additional guidance to companies and practitioners of high-level standard expectations they should aim for when adopting RBC practices.

As part of this guidance and throughout the process of applying for an investment permit, investors should be encouraged to conduct risk-based due diligence in line with OECD Due Diligence instruments relevant to the sector in which the investments are being made, and to communicate on their due diligence efforts. This could have the dual advantage of both promoting RBC among investors, and ensuring that the proposal assessment teams have relevant information available to assess the RBC aspects of investment proposals. Under the current process, when they submit a proposal to DICA, investors are requested to provide information on their social security for employees, social welfare plans, and evaluation environmental impact arrangements (DICA, 2019c, 2018a). Additional information on RBC policies and due diligence efforts could provide DICA with relevant elements to consider when assessing a proposal. Due consideration should be given to how the 2% rule fits within these goals. It should be also noted that, while charity is a legitimate form for businesses to engage with the society, RBC is more comprehensive and focuses on integrating environmental and social considerations into core business operations.

When applying for a permit or endorsement from the MIC, investors could commit in writing to carry out their activities in accordance with specific RBC standards, such as the OECD Guidelines and the UN Guiding Principles. Such an explicit commitment to observe international RBC standards would be relevant for MIC’s consideration and should be included in the application and endorsement forms signed by the applicants.

As highlighted in Chapter 3 of this Review, strengthening co-ordination between DICA and the Environmental Conservation Department (ECD), responsible for Environmental Impact Assessments (EIA), is necessary and could go a long way in clarifying expectations related to environmental impacts, besides reinforcing the adequate application of environmental safeguards. Under the MIL and the MIR, any project that falls under the scope of the Environmental Conservation Law, Rules and Environmental Assessment Procedures needs to obtain a MIC permit. For “EIA-Type” projects, any permit granted by MIC is still subject to compliance with EIA obligations. Stakeholders consulted as part of this review have reported that this requirement is not always understood and respected by investors. In addition, capacity issues within ECD and delays in completing EIA processes, as described in more detail in Chapter 6 of this report, may give additional incentives to investors to ignore or resist implementation of EIA requirements.

Communicating clearly, at all levels of the government and during the entire process, the importance and legal obligations relating to Environmental Laws is an important aspect of ensuring that proposed investments are responsible and do not harm the environment. This could include, for example, giving more prominence to this conditionality on MIC’s permits and throughout the screening and approval process. Streamlining the approval processes carried out by DICA and ECD, as proposed in Chapter 3 of this review, could also be effective in that regard. In addition, this would facilitate taking a comprehensive look at projects’ impacts and avoid treating social and environmental issues in silos.

Communication by businesses on how they address their risks and impact is an important step and an integral part of a risk-based due diligence process. The OECD Due Diligence Guidance for Responsible Business Conduct recommends that, as part of their due diligence, businesses communicate externally relevant information on due diligence policies, processes, activities conducted to identify and address actual or potential adverse impacts, including the findings and outcomes of those activities (OECD, 2018b).

In several countries, publicly reporting on how RBC risks are managed has become a legal requirement. In the EU, under Directive 2014/95/EU, certain large companies have to publish reports on the policies they implement in relation to environmental protection, social responsibility and treatment of employees respect for human rights, anti-corruption and bribery, and diversity on company boards. Although the directive gives companies significant flexibility to disclose relevant information on what they consider useful, it specifies that companies may rely on standards such as the OECD Guidelines, UN Global Compact or ISO 26000 to produce their statements (EU, 2014). Examples of national measures are provided in Box 4.3.

Under the MIR, after screening an investment proposal, the MIC must publish a summary of the proposal within 10 working days after the date of receipt and before issuing the MIC Permit. In 2019, there were reports that this was not systematically done or in a way that could provide sufficient information to the public on the proposed investments (Chau, 2019). DICA could further support businesses and facilitate communication with stakeholders and affected communities by both systematising the publication of investment proposals in line with the 2016 Investment Law and ensuring that comprehensive information on steps taken by investors to address environmental and social risks is made available.

In order to effectively review and assess investments against RBC standards, proposal assessment teams could be offered targeted and regular training on RBC standards and risk-based due diligence. Clear risk categories and priorities could be defined at DICA’s level to support an assessment of prospective investors commensurate with the severity and likelihood of RBC risks associated with the investments. In line with its current mandate, the Investment Monitoring Division at DICA should ensure that approved investments continue to meet RBC expectations throughout the lifetime of the project. Ensuring that a formal and systematic process is in place to assess investors on RBC would be important to support effective monitoring of the sustainability risks identified at investment review stage. Building the capacity of the Investment Monitoring Division on RBC standards and risk-based due diligence could also be useful in that regard. Some trainings have already taken place and could be built upon.

The government could support businesses in navigating risks and implementing RBC standards by supporting due diligence efforts. Various actors have called for action in that regard. In 2018, the UN Special Rapporteur on the human rights situation in Myanmar concluded that all businesses investing in Myanmar should conduct rigorous human rights due diligence in accordance with international standards, and all the more so in areas affected by violence and conflict (OHCHR, 2018).

Various internationally recognised instruments, including the OECD Due Diligence Guidance for Responsible Business Conduct, and the UN Guiding Principles, recognise that some operating contexts, including those affected by conflicts, may increase the likelihood of being associated with adverse impacts (OECD, 2018; UN, 2011). Responsible businesses seek guidance from States about how to avoid contributing to human rights harm in these difficult contexts. It is also the role of the government to provide an enabling framework for businesses to ensure that they are not associated with adverse impacts as recognised by the OECD Guidelines, as well as the UN Guiding Principles. This section provides examples of actions the government could take to help enterprises manage risks in Myanmar and enable them to bring a positive contribution to the country’s economic and sustainable development.

Myanmar enjoys abundant natural resources including oil and natural gas, hydropower potential, various minerals, precious stones and gems, precious metals, timber and forest products, among others. These resources have the potential to generate income, growth, sustain livelihoods and foster local development. However, many of these resources are exposed to environmental and social risks, and located in conflict areas where risks are heightened. In particular, businesses operating in certain raw materials sub-sectors including jade, timber, as well as rubber and other agricultural products, may face heightened risks of directly or indirectly financing armed groups and armed group leaders (Woods, 2019). In 2019, the UN Special Rapporteur on the situation of human rights in Myanmar stated that “as with hydro-power projects, the extraction of natural resources, including gems and timber, continued to be inextricably linked to the cycle of armed conflict and human rights violations in Myanmar”, including displacement, environmental destruction and corruption at the hands of the military, militias, ethnic armed organisations and private actors. The report called on any business enterprise purchasing natural resources from Myanmar, in particular, jade and rubies, and timber from Kachin and Shan States, to conduct heightened due diligence (OHCHR, 2019b).

Harnessing the potential of Myanmar’s rich natural endowments requires managing them in a transparent, inclusive and sustainable way, and creating an enabling environment for businesses operating in these sectors to act responsibly.

Myanmar’s economy relies extensively on primary sectors, although the importance of industry and services sectors have grown in recent years. In 2018, agriculture, forestry and fishing, still accounted for 24.5% of the country’s GDP according to the World Bank. Due to the prevalence of informality in the sector, the contribution of forestry and fishing to the economy is not fully reflected in national statistics (Fodor and Ling, 2019).

Myanmar’s agriculture and forestry supports employment and livelihoods for a large part of the population, and is particularly essential for poverty reduction. However, unsustainable use of some of Myanmar’s resources poses environmental risks and compromises the potential of the sector in bringing development benefits to the population. These issues are further discussed in Chapter 6 of this review. Chapter 8 provides details as to how land issues affect farmers and smallholder farmers in particular, and can be addressed to safeguard the rights of farmers and local communities and involve them in the country’s development. Chapter 8 also lays out key considerations to support responsible investors in conducting due diligence in the agriculture sector. The government should support these efforts and promote awareness of these considerations as well as internationally recognised frameworks to facilitate RBC due diligence in the sector. The OECD-FAO Guidance for Responsible Agricultural Supply Chains, in particular, provides a useful framework in that regard and should be widely promoted and disseminated within Myanmar’s agriculture and forestry sector (Box 4.4).

Myanmar is well-known for its substantial mineral deposits. The country is notably home to the world’s largest and most valuable jade deposits in Kachin state. Around 90% of the world’s jade and ruby is mined in Myanmar (NRGI, 2018a). Rubies of Myanmar are particularly sought after and have been considered of the finest quality in the world (UNIDO, 2017). Myanmar also enjoys significant deposits of lucrative metals and industrial minerals, including gold, tin, tungsten, copper, zinc, among others (OBG, 2019).

The mining sector is primarily governed by the Mining Law, which applies to all minerals except gemstone, and the Gemstone Law. Despite the important potential of these resources, the contribution of the mining sector to Myanmar’s economy remains relatively limited, estimated at 1.1% of the country’s GDP in 2016-2017 (MEITI, 2019b). The sector has however attracted attention due to reported issues with environmental and social practices, high-profile disputes with local communities and alleged links with conflicts (NRGI, 2016). Various reports have highlighted the existence of risks in Myanmar’s jade and other gemstones industry. Reportedly, the rapid expansion of jade mining in Kachin states with the use of heavy machinery since 2000 has been reported to have impacts on human rights and the environment, including reports of child labour, loss of land and livelihoods, polluted groundwater, land slides and flooding. Jade production and trade has also allegedly contributed to conflict in Kachin and Shan states, with similar parallels also being reported in the ruby sector (Swedwatch, 2018; OHCHR, 2018; Global Witness, 2015; OHCHR, 2019, NRGI, 2018b).

It has been estimated that 60 to 80% of gemstones mined in Myanmar are undeclared and traded outside of the formal system (OBG, 2020). This results in lost revenues for the government, while preventing citizens from sharing in the sector’s potential benefits. In addition to large mechanised operations, Myanmar’s jade and gemstone sector includes significant artisanal and small-scale mining (ASM) (NRGI, 2019a). The Gemstone Law as of 2016 recognises the right to engage in ASM, but it has been reported that ASM actors often negotiate deals with permit holders and informally pick through the waste generated by industrial mining operations, leading to hazardous working conditions and abusive working arrangements (NRGI, 2019a; Hammond, Mon, 2019).

The government has made efforts to address the situation. In 2016, the government made the decision not to renew mining permits after their expiration, until reforms took place in the gemstone sector (Sway, 2016) and initiated the development of a national gemstone policy meant to set consistent practices and guidelines for the industry, create a fair business environment and protect the public interest (Htwe, 2018). A draft policy, developed through a multi-stakeholder process including government, industry representatives, civil society and with the assistance of foreign experts, was in its final stage in late 2018 (MEITI, 2019b). The draft policy reportedly incorporates issues related to managing environmental impact, ensuring sustainable mining of jade and gemstones, creating a level playing field for businesses operating in the sector and a system of accountability to the state and local communities (Htwe, 2019).

In early 2019 a new law governing the gemstone sector was passed, with the aim to eradicate illegal mining and extraction of gems, tackle illicit gemstone trade, and reduce the environmental impact of extraction activities (Chau, 2019c). Civil society organisations have however raised concerns that the process for drafting the new gemstone law did not follow the participatory approach of the gemstone policy to integrate stakeholders’ views. Reportedly, the law does not integrate some of the provisions aimed at enhancing the environmental management of mine sites of the gemstone policy (which has not yet been approved) (Global Witness, 2018; Hindstrom, 2018).

Governance experts and civil society organisations have also expressed concerns that the new law does not address several fundamental issues and risks in the sector, including conflicts of interest, opacity of licensing procedures, corruption and revenue collection (Chau, 2019c; NRGI, 2019a). The enactment of this new law could be an important starting point for further reforms in the industry, building on the findings of the multi-stakeholder consultations led in the context of the development of the gemstone policy. The government could consider using the momentum of the recently enacted Gemstone Law to adopt the Gemstone Policy, and ensure coherence and consistency between the different frameworks. It would be important to consider how the two interest and complement each other.

Reforms have also taken place in the non-gemstone minerals sector. Field research on limestone, gold and tin mining in Myanmar led by MCRB in 2018 highlighted some negative impacts including child labour, notably among migrant children in subsistence gold mining areas; hazardous working conditions; work without contracts; environmental damage; and loss of land and livelihoods. Several of these issues are interconnected, with for example environmental issues affecting the health of local communities. The report also found that armed groups were involved in the extraction of the three minerals (MCRB, 2018). The research identified environmental and social risks specific to subsistence, artisanal and small-scale mining activities, which accounts for the majority of production of gold, tin and industrial minerals. In the case of gold, the report estimated that as much as 90% of production and 95% of employment comes from ASM. ASM is also considered to account for more than 60% of tin production (Pact, 2019). While offering economic opportunities for many poor communities, these largely informal practices are characterised by the use of rudimentary, labour-intensive techniques for mineral extraction, often under hazardous conditions (MCRB, 2018).

The government has been working towards addressing some of these issues. Several environmental and social provisions were added by the 2015 amendments to the Mines Law and the 2018 Mines Rules. Under the Mines Law, mines are required to minimise environmental damage and negative impacts on local communities, and to make an annual contribution to a fund for environmental conservation. They also need to contribute to a Mine Closure Fund for environmental rehabilitation and reforestation. The Mines Rules include requirements for the company to submit at the time of its application for a Production Permit the evidence that it has undertaken negotiations with local communities about local social responsibility, and obtained their agreement (MCRB, 2018). Interviews conducted by the Natural Resources Governance Institute (NRGI), however, indicated that in practice, mining permits often automatically confer land rights (NRGI, 2019b).

The passage of the amendments of the Myanmar Mines Law in 2015 and promulgation of the 2018 Mines Rules have also opened the way for a decentralisation of permitting powers for ASM, by granting state and regional permit scrutiny boards the power to award ASM permit. These developments could play a positive role in reducing informality and enhancing governance in the ASM sector (NRGI, 2019b). Special attention however needs to be paid to building capacity at state and regional level, and ensuring co-ordination between the national government – which makes decisions over the issuance of medium and large-scale licences – and the states and regions to avoid overlapping claims between ASM and large-scale operators. One aspect to it is to ensure that a robust land management framework is in place and that customary rights are adequately recognised and enforced. This question is further examined in Chapter 8 of this review.

Co-ordination, clarity and consistency across various laws and processes more broadly is key to attract responsible investments and facilitate RBC. This includes for example ensuring alignment between mining licensing permits and other relevant processes stemming from the MIL and Environmental Conservation Law. Under the current framework, inconsistencies relating notably to thresholds and project cycles have been noted between EIA requirements and the Mines Rules (MCRB, 2018). Ensuring clarity and consistency across oversight and monitoring processes is key to enable RBC.

Ensuring that a robust framework is in place and adequately implemented is essential to facilitate implementation of RBC standards by businesses. The government could also support businesses’ due diligence efforts in line with internationally recognised instruments in the mining sector. This would help enhance the reputation of the sector and support businesses in meeting the requirements set by foreign investors and trade partners. For example, in January 2021, the EU Conflict Minerals Regulation will enter into force. This regulation mandates due diligence in line with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (the OECD Minerals Guidance) to EU importers of tin, tungsten, tantalum, and gold, to ensure that EU companies in the supply chain import these minerals and metals from responsible and conflict-free sources only (EU, 2017). The United States also has specific requirements applying to companies importing these minerals under section 1502 of the Dodd-Frank Act, including filing a conflict minerals report. Since 2012, the US Securities and Exchange Commission recognises the OECD Minerals Guidance as an international framework for due diligence measures undertaken by companies that are required to file such a report (Box 4.5).

Targeted at companies operating in the minerals supply chains, the OECD Minerals Guidance provides a framework to help companies sourcing from or directly operating in conflict-affected areas prevent or mitigate adverse impacts, including financing conflict or fuelling, facilitating or exacerbating conditions of conflict. The Minerals Guidance also provides recommendations to help companies minimise the risk of marginalisation of the artisanal and small-scale mining sector, particularly the victims of extortion, while promoting conflict-free supply chains, thereby creating economic and development opportunities for artisanal and small-scale miners, including through formalisation and legalisation efforts. The government should consider broadly disseminating it and supporting its uptake by businesses.

Several countries have taken measures to support and facilitate implementation of the Minerals Guidance, including publicly endorsing it, and integrating into legislation. For example, the EU Regulation on Responsible Mineral Supply Chains (Regulation (EU) 2017/821), which lays down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas is based on the OECD Minerals Guidance (Box 4.5). A number of national and global industry initiatives aim to help and encourage businesses in the minerals sector to align their practices with the Minerals Guidance. Governments can also play a role in convening, steering and supporting such initiatives.

The importance of promoting and enhancing transparency in global supply chains, particularly when it comes to understanding various supplier/buyer relationships, has gained increased attention in recent years. Governments have an important role in that regard. For example, in 2015, G7 leaders urged private sector implementation of human rights due diligence, and committed to take action to promote better working conditions by increasing transparency, promoting identification and prevention of risks and strengthening complaint mechanisms. G7 leaders also committed to take action to ensure greater transparency of financial flows and contribute to the work of the Financial Action Task Force (FATF), an inter-governmental body that sets international standards to prevent global money laundering and terrorist financing (G7, 2015; FATF, 2019).

Some businesses have also been at the forefront of transparency efforts and have published supplier lists and committed to dialogues with civil society and trade unions on this topic.3 Civil society organisations as well as industry actors have also launched initiatives to promote open and transparent supply chains. In the garment and footwear sector, for example, the Open Apparel Registry maps and provides open access information on garment facilities worldwide (OAR, 2020). In extractive industries, the Extractive Industries Transparency Initiative (EITI) provides a global standard to promote the open and accountable management of oil, gas and mineral resources. Implemented by 53 countries and supported by a coalition of government, companies, and civil society, the EITI standard requires the disclosure of information along the extractive industry value chain from the point of extraction, to how revenues make their way through the government, and how they benefit the public (EITI, 2020).

Myanmar committed to implement the EITI in 2012 and was accepted as an EITI Candidate in July 2014. Through this process, important progress has been achieved in the promotion of transparency in Myanmar’s extractive sector. The first EITI report published as a candidate country in 2016 was hailed as a major step toward transparency and accountability in Myanmar’s natural resource governance (EITI, 2017). Following the publication of the EITI annual progress report for 2018-2019, the EITI Board commended Myanmar for its progress with respect to EITI implementation, including in relation to policy reforms, transparency in extractives data, and public dialogue. The Board also stressed the need to further improve the environment for civil society participation, particularly in subnational regions. The Board also encouraged Myanmar to further improve public disclosure, particularly related to licence allocation, gemstone production data and state economic enterprises (SEEs), and emphasised the need for Myanmar to ensure that the status of military-affiliated extractive companies is clarified and their activities are comprehensively addressed in accordance with the EITI Standard (EITI, 2019).

In 2016, EITI instituted a requirement for EITI member countries to mandate the disclosure of beneficial ownership information of companies operating in the extractives industry. The impetus for beneficial ownership disclosure was reinforced by Myanmar’s participation as a member to the Asia/Pacific Group on Money Laundering (APG), a regional inter-governmental body that promotes the effective implementation of internationally accepted anti-money laundering and counter-terrorist financing standards, including notably the FATF Recommendations. Developed by the FATF, the FATF Recommendations, include specific recommendations to enhance the transparency and availability of beneficial ownership information of legal persons and arrangements (FATF, 2019). In its 2018 Mutual Evaluation Report of Myanmar, APG rated Myanmar as non-compliant with the FATF Recommendations related to transparency and beneficial ownership of legal persons and arrangements. This rating was maintained in APG's first follow up report on the Mutual Evaluation of Myanmar published in August 2019 (APG, 2018-2019).

Against this background, in October 2019 the Office of the President issued, as previously mentioned, a notification (Notification No. 104/2019) requiring that companies operating in the extractive industry, including state-owned enterprises, disclose their beneficial owners. The introduction of this requirement, which became effective on 1 January 2020, is a laudable achievement. The notification also appointed DICA as a focal point for the Beneficial Ownership Task-Force Agency formed to support the implementation of beneficial ownership disclosure requirements (MEITI, 2019a). DICA has made basic beneficial ownership disclosure information available on an open access database available on DICA’s website. In February 2020, out of 163 companies falling under the scope of the Presidential Notification, 121 extractive companies and state-owned enterprises both disclosed and submitted their beneficial owners and related information (DICA, 2020).

In addition, on 15 November 2019, DICA issued a directive which requires all businesses incorporated in Myanmar to disclose the information pertaining to their beneficial ownership to DICA and Internal Revenue Department (DICA, 2019d). While this is another important move towards more transparency, several civil society organisations and experts have raised concerns that the directive could create confusion over Myanmar’s beneficial ownership rules. Key questions include the legal basis and practical modalities for including companies, beyond extractive industries within the scope of the directive, as well as alignment of the beneficial ownership threshold introduced by the Directive with existing laws and regulations (Chau, 2020a; Global Witness, 2019).

For example, the directive defines beneficial owners as someone with more than 5% of shares with voting rights, while the Central Bank of Myanmar, in Directive 18/2019 on customer due diligence related to anti-money laundering and counter-financial terrorism, sets the threshold at 20% (Chau, 2020a ; CBM, 2019). The 2014 Anti-Money laundering law, on which DICA’s directive is based, defines a beneficial owner as someone who “exercises effective control over any company or arrangement” but does not state a specific percentage (Chau, 2020a; Myanmar Government, 2014). Questions also relate to the implementation of the directive, as recent reviews of information disclosed by companies have identified gaps, notably with regards to politically exposed persons (Chau, 2020b; Global Witness, 2020). Going forward, ensuring clarity and consistency of the beneficial ownership requirements, and establishing adequate accountability mechanisms would be important to further DICA’s objectives to enhance transparency, deter tax evasion, money laundering and terrorist financing.

Despite the above-mentioned initiatives, in February 2020 Myanmar was placed back on the anti-money laundering “grey list” of FATF – a watchlist Myanmar had been removed from in 2006. In making its decision, the FATF highlighted a high degree of criminal activity and insufficient understanding of money-laundering risks in key areas (Allard, 2020; Global Witness, 2020). These observations echo previous findings by the APG which had identified high money-laundering threats, with higher risk predicate offences including drug production and trafficking, environmental crimes (including illegal resource extraction such as jade, wildlife smuggling and illegal logging), human trafficking, corruption and bribery. The evaluation highlighted complex contextual issues that increased Myanmar’s exposure to transnational profit-driven crime and related money-laundering, including the involvement of non-state actors controlling significant territories and economic resources in Myanmar. The report also noted the existence of governance weaknesses in SEEs and the involvement of politically exposed persons, making SEEs particularly vulnerable to fraud and corruption (APG, 2018)

SEEs play an important role in Myanmar’s economy, generating approximately 50% of fiscal revenues, largely from the natural resource sector (NRGI, 2018a). As such, they have significant leverage to improve the business climate and promote RBC. Doing so is aligned with the OECD Guidelines which apply to all entities within the enterprise in all sectors, whether of private, state or mixed ownership. The same is true for the UN Guiding Principles, which apply to all states and all enterprises. UN Guiding Principle 4 stipulates that states “should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence” (UN, 2011). The 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises also recommend that the state ownership policy make clear any expectations the state has in respect of RBC by SOEs. The SOE Guidelines further recommend extensive measures to report on foreseeable risks, including human rights, labour, the environment, and risks related to corruption and taxation (OECD, 2015a).

The first OECD Investment Policy Review already mentioned that important reforms were initiated in the mid-1990s and accelerated from 2012 to restructure and privatise SEEs. The review also stressed the importance of further improving the framework for SEE governance and ensuring that RBC-related policies and laws are implemented, including within the military-controlled conglomerates (OECD, 2014). Enhancing the efficiency of SOEs still ranks high on the government’s agenda. The MSDP 2018-2030 includes specific policies to improve the operations of SEEs and privatise those that have the potential to be reformed. In 2016, the government announced a plan to privatise state-owned factories in four years to allow for greater competition and foster industrial development (Government of Myanmar, 2016c). In 2019, government officials reiterated the need to restructure and privatise loss-making state-owned factories (Htwe, 2019b).

While the privatisation of unprofitable SEEs might ease the financial burden for the Union budget and has the potential to generate efficiency gains, emphasis should also be placed on improving the transparency, oversight and accountability of entities that remain under the control of the state. Various observers have noted that reforms introduced to make SEEs more financially independent have created new challenges in that respect. Since 2012, SEEs have been retaining 55% of their profits in independent account known as “Other Accounts” that are not subject to the same rules as other government funds. The accumulation of large reserves over the years in “Other Accounts” has limited transparency and comprehensiveness of information as to how these resources are used and recorded in national budgets (NRGI, 2018a; World Bank, 2018; OECD, 2015b). Questions have also been raised with regards to the extent and nature of military involvement in the management of SEEs, as well as the economic interests of the military in private companies (NRGI 2016, 2018a; UN, 2019). In 2019, the EITI board called on Myanmar to clarify the status of military-affiliated companies and ensure that their activities are comprehensively addressed in accordance with EITI standards (EITI, 2019).

Progress has already been made in this area. The recently introduced requirement to disclose information on beneficial owners and their links to politically exposed persons (see section above) could significantly advance transparency and accountability of Myanmar’s SEEs. Ensuring effective implementation of this requirement will be an important task for the government. The government has also announced reforms that would abolish the “Other Accounts” of SEEs and transfer all income from these accounts to the Union Government (NRGI, 2019a). This is a positive evolution and the government should continue and intensify its efforts to promote transparency and good governance in SEEs. The government should ensure that SEEs implement RBC standards and in particular conduct risk-based due diligence in accordance with relevant due diligence instruments, such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and the OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector.

Myanmar’s political context affects all sectors in various ways. All businesses regardless of the sector in which they operate need to take adequate steps to identify and address environmental and social harms. This includes for example protecting workers and other vulnerable groups and avoiding directly or indirectly contributing to financing or fuelling conflicts. Such measures are more easily implemented and effective if undertaken collectively. The Myanmar garment sector provides an example of how industry players can organise themselves and collaborate to promote RBC. Its experience may serve as an example for other industries.

Several industry actors in the garment sectors have collaborated to propose options to help businesses source and operate responsibly in Myanmar. Such initiatives have the potential to help address reputational risks and bolster export growth in the sector, which is particularly relevant in the garment sector. In Myanmar, garment exports have been growing fast, boosted by preferential access to the EU market under the EBA scheme since 2013. Myanmar’s garment exports rose from USD 349 million in 2010 to nearly USD 4.6 billion in 2018, accounting for about 10% of the country’s export revenues. The EU represents about 60% of Myanmar’s garment exports. Potential withdrawal of the EBA scheme over human rights and labour rights concerns could be particularly detrimental to the garment sector (Thomas, 2019).

Specific concerns have been raised including poor living conditions, work without contract, undue fines and salary deductions, excessive or forced overtime, child labour, and unhealthy and unsafe working conditions. A study conducted with 403 workers from twelve factories located in different industrial zones found, for example, that a little over half workers had signed a contract, only about one fifth had received a copy and many earned significantly less than the minimum legal wage. Interviews also revealed that workers could be fined for taking sick leave, for being late at work or other minor infractions such as not wearing shoes or a complete uniform. At all investigated factories, workers worked six days a week and they all reported that they regularly work overtime hours, sometimes forcibly, for example to avoid wage cuts. The research also found indications of the existence of child labour. Workers had very limited knowledge of their rights to join and form trade unions, or knew of the existence of formal procedures to raise complaints (SOMO, 2017).

Myanmar’s garment production is concentrated in industrial zones and SEZs. As mentioned in Chapter 8 of this review, land allocations of large land areas, including for SEZs and industrial zones, have not always followed international good practice in respecting the existing land use rights of local communities. In addition, as indicated in Chapter 7, SEZs are governed by a special regime. Although national laws relating to land, labour and environment still generally apply, civil society organisations have argued that the legal framework for SEZs in Myanmar does not establish clear procedures and lines of responsibility and accountability, weakening the human rights and labour rights framework and constraining workers’ access to grievance mechanisms (MCRB, 2018 ; Fairwear, 2018).

Several initiatives have been launched to address decent work issues in the Myanmar garment sector. For example, Action, Collaboration, Transformation (ACT) was set up in 2015 and brings together brands, retailers, manufacturers and trade unions to address the issue of living wages in the textile and garment supply chain. In November 2019, ACT brand suppliers and IndustriALL affiliated sectoral union agreed upon and launched the Myanmar Freedom of Association Guidelines which aims to secure constructive relations between employers and workers and to specify the practical application of the principles of Freedom of Association under international labour standards, as well as the timeline for collective bargaining (ACT, 2020). The Ethical Trading Initiative (ETI) has addressed letters to the Myanmar government on behalf of ETI member companies that were then sourcing from Myanmar, or considering investing in the country, in reaction to Myanmar’s employers vote against a minimum wage. Fair Wear Foundation has developed a costing tool, which includes a labour minute calculator for Myanmar, to help suppliers and buyers ring-fence labour costs and wage increases within price negotiations.

Multiple industry actors have called on businesses to apply due diligence when sourcing from or operating in Myanmar. For example, in 2018, the Fair Wear Foundation (FWF) requires its members to take additional specific measures when sourcing from Myanmar, in addition to what FWF requires of its member companies in other high-risk production countries. These measures include maintaining an updated list of suppliers being used in Myanmar in FWF’s database, to be made available to the public; conducting due diligence in accordance with the OECD Guidelines; auditing suppliers in Myanmar; promoting processes to ensure Freedom of Association and enhance social dialogue at suppliers; payment of at least the legal minimum and work towards the payment of a living wage; follow FWF guidance on age verification to avoid risks of child labour (FWF, 2018).

The ETI has released guidance to help businesses act responsibly in the current context while retaining a role in providing decent work and fostering respect for human rights. While recognising the challenges of conducting due diligence in certain contexts (for example because of the difficulty to access information and to map risks and actors) ETI proposes a four-point plan to help businesses have a positive impact in the country. The plan includes specific recommendations to ensure that workers have access to effective grievance mechanisms, and to engage collectively with the Myanmar government, national trade associations and other relevant parties (ETI, 2019).

Such initiatives underscore the positive role that responsible businesses can have on economic, environmental and social progress. The government would benefit from convening, engaging and supporting them. It could also leverage these initiatives to actively disseminate guidance on RBC tailored to the specific needs of the industry, such as the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.

Meaningful stakeholder engagement is an essential aspect of a risk-based due diligence process. The OECD Due Diligence Guidance for Responsible Business Conduct lays out clear expectations that due diligence should be informed by meaningful engagement with stakeholders such as workers, workers’ representatives, trade unions (including Global Unions) community members, civil society organisations, investors and professional industry and trade associations. Meaningful stakeholder engagement is characterised by two-way communication, through which enterprise and stakeholders freely express opinions, share perspectives and listen to alternative viewpoints to reach a mutual understanding. The government can play an important role in supporting this process by ensuring that stakeholders may express their views and engage with businesses. More broadly, creating an environment where stakeholders are empowered to express their views and actively participate in policy design as well as consultations organised by businesses, the government or a group of stakeholders, is essential to ensure effective promotion and implementation of RBC.

The first OECD Investment Policy Review highlighted progress made since 2011 in enabling civil society participation in the public debate. The review also noted the importance and potential for Myanmar to further expand the role of civil society, including to help ensure that laws protecting worker and human rights are effectively implemented (OECD, 2014). In 2014, however, the Special Rapporteur on the situation of human rights in Myanmar identified signs of backtracking that could threaten the achievements of the previous years and called for more public freedoms. The Special Rapporteur highlighted attempts to impede the activities of civil society and the media through intimidation, arrests and prosecutions (OHCHR, 2014). Since then, various international observers have raised concerns over the treatment of human rights defenders in Myanmar facing pressures, prosecution and arrests (FIDH, 2018; Amnesty International, 2019; Human Rights Watch, 2019). In 2019, the EITI board noted concerns regarding civil society’s freedoms of expression and of operation, and emphasised the need for the government to take corrective actions to ensure that there is an enabling environment for civil society beyond the multi-stakeholder group engaging in the EITI process (EITI, 2019). These concerns were echoed in early 2020 by the EU in a report highlighting key concerns to be addressed in Myanmar, including discrimination, hate speech, freedom of media and labour rights (EU, 2020b).

In recent years, concerns have also been raised with regards to online threats that activists may face on social media, as well as the spread of abusive speech targeted ethnic minorities, human rights defenders, women and others, and called on both companies and the government to do more to fight incitement to violence, discrimination and hatred (OHCHR, 2019c ; Ellis-Pettersen, 2018). The role of social media in spreading content potentially leading to real discrimination and violence has been found to be significant by the independent international fact-finding mission on Myanmar (OHCHR, 2018). Over the last decade, online platforms have become increasingly essential parts of daily life for much of the world. While creating opportunities for workers and society at large, they may also face challenges when it comes to RBC and should take a robust and tailored approach to prevent and address any adverse impact that may result from their activities (OECD, 2019b).

Stakeholders are important actors of RBC promotion and implementation. Creating a safe space for participation in the public debate, policy design, identification of RBC risks and issues, as well as dialogue with both businesses and government, is essential to enable RBC. Reinforcing the legal and institutional framework to ensure that civil society actors are encouraged to freely express their views, in line with various calls from international organisations, CSOs and trade partners is critical in that regard. Businesses, including in the digital world, also have a responsibility in creating an environment conducive to stakeholder participation and dialogue.

As mentioned earlier, RBC initiatives have proliferated since 2011. This is a positive evolution that creates a strong footing to foster broad implementation of RBC standards. However, several international and local organisations have raised the risk of fatigue around the topic, and emphasised the importance of co-ordination and consistency in policies and initiatives on RBC. All actors involved have a responsibility to ensure that initiatives build on each other, and that expectations on RBC are clearly and consistently communicated.

More efforts are needed to ensure that the various government objectives on responsible investment are implemented. It is the government’s role to provide the strategic direction in this regard, such as by developing a national action plan or making targeted efforts to integrate RBC in key strategic areas. For example, the government can consider working with stakeholders to develop a National Action Plan (NAP) on RBC. This could be an effective way to ensure that all stakeholders work consistently toward the same goal and consistently contribute to national efforts to promote and enable RBC.

To date, 20 countries have already produced a NAP on Business and Human Rights, and 21 more are in the process of developing or have committed to developing one. On 29 October 2019, Thailand was the first country in Asia to adopt a NAP on Business and Human Rights. The scope of NAPs varies from country to country. Some go beyond the theme of business and human rights by encompassing the environment (for example France and Italy) and RBC more generally, such as the United States. Considering the importance of national resources in Myanmar, the country’s vulnerability to climate change and ongoing government efforts to promote RBC, ensuring that a NAP in Myanmar covers the broad range of RBC policy areas would be particularly relevant.

Although Myanmar does not yet have a formal process to develop one, first steps toward the development of a NAP have been taken. In February 2015, the then Economic Adviser to the government of Myanmar, expressed interest in doing so. In 2016, the International Corporate Accountability Roundtable (ICAR) and the Alternative ASEAN Network on Burma (ALTSEAN-Burma) joined forces to support the development of a NAP and published a “shadow” baseline assessment in 2017 (ICAR, 2019). In 2016, the MNHRC together with the ASEAN-CSR network and UMFCCI held a consultation workshop focused on NAP development (DIHR, 2019). In December 2019, the OECD and DICA jointly hosted a consultation and policy dialogue including a dedicated session on NAP, delivered with support from the Thailand Ministry of Justice and UNDP. In 2019, UNDP initiated a project to support NAP development in Myanmar.

Developing a NAP could be an effective way to map risks and identify RBC priorities for Myanmar as well as gaps in protection in consultation with stakeholders. This constitutes a first step to determine how to address such risks at national level, but also provides information that supports businesses in the identification and prioritisation of risks, which is an important step in a risk-based due diligence process. NAP processes can also provide a platform for engaging with stakeholders on RBC issues. As indicated in the Guidance on National Action Plans for Business and Human Rights developed by the UN Working Group on Business and Human Rights (UNWG), NAPs need to be developed in inclusive and transparent processes, taking into account the views of relevant stakeholders, which may include civil society organisations, national human rights institutions, trade unions, business enterprises and associations, as well as representatives of population groups that may be particularly vulnerable to business-related human rights abuse, such as children, women, indigenous peoples, ethnic minorities and persons with disabilities. Broad stakeholder engagement is essential to build the legitimacy and effectiveness of the NAP (UNWG, 2016)

There is no one-size-fits-all approach to developing a NAP. The success of NAPs largely hinges on identifying gaps in the existing regulatory framework, and on developing concrete commitments in a country-specific context. Past experience has shown that without strong political will, commitments to develop NAPs can be slow to materialise, and sometimes result in NAPs that do not sufficiently rely on stakeholders’ knowledge to select evidence-based priorities, or remain limited to existing initiatives without taking a forward looking approach (EU, 2017). In Myanmar, while the momentum for NAP development is reflected in the various expressions of interests and above-mentioned initiatives, a meaningful and explicit commitment to develop a NAP would be important to support a successful NAP process. Ensuring that the government has the capacity to lead such a process would also be essential.

The UNWG Guidance recommends that once the government has formally committed to engage in a NAP process, it should establish a format for coordination and communication between relevant government entities, for example a cross-departmental working group (UNWG, 2016). Creating such an institution could be relevant in Myanmar within and beyond the NAPs process to facilitate communication with all relevant actors in Myanmar, and support policy coherence on RBC. So far DICA has played an important coordinating role in this regard within the government, including also by supporting efforts by expert members of the MIC to promote RBC, as well as by promoting RBC at the sub-national level. Such coordination could be relevant for the NAP process as well. The UNWG guidance further recommends that once a formal cross-ministerial or cross-departmental working group is established, one or several government entities should be designated to lead the process, including coordinating collaboration within government and with non-governmental stakeholders, as well as leading the drafting process. The NAP process could be an important conduit to promote RBC in Myanmar more broadly, including for translating and adapting relevant RBC instruments and making them widely available to the public, developing guidance on Myanmar-specific RBC issues and topics, and engaging with businesses, civil society organisations, international CSOs, international organisations and all relevant actors on an ongoing basis.

Ensuring access to effective remedy is an important aspect of RBC and as such should be covered under the NAP process. In Myanmar, various judicial and non-judicial dispute grievance mechanisms are already in place, with different mandates, structures, and capacities. Some of them are described in this Review. For example, as mentioned in Chapter 8, three bodies (Central FAB, Central VFV Committee, the Central Committee for Re-inspection of Confiscated Farmlands and Other Lands) have some mandate to resolve land disputes. Under the MIL, an investment-state grievance mechanism is to be established in 2020 to prevent and resolve disputes before they escalate to a legal dispute. As mentioned in Chapter 2 of this Review, a notification issued on 7 April 2020 clarifies some details regarding the composition and mandate of this mechanism. The MNHRC has a mandate to verify and conduct inquiries in respect of complaints and allegations of human rights violations (MNHRC, 2019). Mediation and dispute resolution mechanisms also exist at community level – primarily village tract administrators, village elders and religious leaders and co-exist with the official system. The development of a NAP could provide an opportunity to map all existing dispute resolution mechanisms and identify gaps and potential solutions to ensure that stakeholders have a venue to bring and resolve issues that may occur when businesses fail to meet RBC standards.

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Notes

← 1. In 2018, the OECD, together with ILO and the EU, launched a 3-year programme to promote responsible supply chains in Asia in partnership with six Asian economies including Myanmar. A number of events including workshops targeted at businesses and a policy dialogues co-hosted with DICA have been held in Myanmar under this programme (OECD, 2019a). In December 2019, UNDP and the EU announced the launch of a 4-year programme to promote the implementation of the UN Guiding Principles on Business and Human Rights in six countries including Myanmar (UNDP, 2019).

← 2. The UN Core Conventions not yet ratified are: International Convention on the Elimination of All Forms of Racial Discrimination (CERD), International Covenant on Civil and Political Rights (CCPR), Connvention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (CAT), International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families (ICMW), International Convention for the Protetion of All Persons from Enforced Disappearance (CPD); The ILO Fundamental Conventions not yet ratified are: Right to Organize and Collective Bargaining Convention Equal Remuneration Convention, Abolition of Forced Labour Convention, Discrimination (Employment and Occupation) Convention, Minimum Age Convention.

← 3. For example, Nestle and Unilever published their palm oil supply chains in February 2018, making them the first companies to do so. https://seekingalpha.com/article/4152771-chain-unilever-and-nestl-publish-detailed-supplier-lists

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