Mining Sector Wide Impact Assessment

245 Pages·2017·5.24 MB·English

Sector Wide Impact Assessment of
Limestone, Gold and Tin Mining in
Myanmar

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The Myanmar Centre for Responsible Business (MCRB) was set up in 2013 by the
Institute for Human Rights and Business (IHRB) and the Danish Institute for Human Rights
(DIHR) with funding from several donor governments. Based in Yangon, it aims to provide
a trusted and impartial platform for the creation of knowledge, building of capacity,
undertaking of advocacy and promotion of dialogue amongst businesses, civil society,
governments, experts and other stakeholders with the objective of encouraging responsible
business conduct throughout Myanmar. Responsible business means business conduct
that works for the long-term interests of Myanmar and its people, based on responsible
social and environmental performance within the context of international standards.

© Copyright Myanmar Centre for Responsible Business (MCRB), Institute for Human
Rights and Business (IHRB), and Danish Institute for Human Rights (DIHR), March
2018. All rights reserved. MCRB, IHRB and DIHR permit free reproduction of extracts from
this publication provided that due acknowledgment is given and a copy of the publication
carrying the extract is sent to the headquarter addresses below. Requests for permission
to reproduce and translate the publication should be addressed to MCRB, IHRB and DIHR.

Acknowledgments

The partner organisations would like to thank the Governments of Denmark, Ireland,
Netherlands, Norway, Switzerland and United Kingdom for their ongoing support to MCRB.

The partner organisations would also like to thank all those who participated in the field
assessments across Myanmar, and in the October 2016 consultations on the draft SWIA
report. They also thank members of the Advisory Group which commented on the research
plans and initial findings: David Allan, Charlotte Bisley, Daw Devi Thant Cin, Jack Jenkins
Hill, Emma Irwin, U Sein Myint, John Sykes, Richard Taylor, U Thein Lwin, Cristina Villegas,
Guy Williams and U Zaw Win.

MCRB is also grateful to the Union Government, and in particular the former Ministry of
Mines, as well as the Governments of Shan State, Kayin State, Kayah State, Sagaing
Region, Mandalay Region, Tanintharyi Region, Bago Region and Kachin State for their
support in the field research phase during 2015/16.

Particular thanks are also due to PeaceNexus Foundation and Dr Richard Horsey for their
support, input and comments on the conflict dimensions, as well as Gabriela Factor,
Francesca Castellani, Lorenzo Cotula and Gillian Cornish for their useful comments on the
draft report. The team would also like to recognise the invaluable contributions of the MCRB
mining SWIA field research team under the leadership of Aung Kyaw Soe and Khin Moet
Moet Myint; Margaret Han, Hlaing Min Oo, Khin Pyae Pyae and Thet Naing Oo.

The report was written by Nora Götzmann, Elin Wrzoncki (DIHR) and Ida Jøker Krog
(MCRB), together with Vicky Bowman and Aung Kyaw Soe (MCRB), with important
contributions from Donna Guest (MCRB), Margaret Wachenfeld (IHRB), Tulika Bansal and
Allan Lerberg Jørgensen (DIHR). Research support was provided by Kelly Matthews,
Linnea Kristiansson, Elizabeth Arnott and Lukas Bogner, DIHR interns, Anders Planck-
Hendriksen and Gemma Wardle, interns at MCRB, and Liya Mo, MCRB consultant who
assisted with the process mapping.

All findings and recommendations in this SWIA are the sole responsibility of the partner
organisations.
CONTENTS
List of Abbreviations …………………………………………………………………………….4
List of Boxes, Charts and Tables………………………………………………………………..5

EXECUTIVE SUMMARY ……………………………………………………………………9

1. INTRODUCTION …………………………………………………………………………...22

2. MINING IN MYANMAR …………………………………………………………………..32

3. LEGAL AND POLICY FRAMEWORK ………………………………………………....46

4. SECTOR-LEVEL IMPACTS ………………………………………………………….76

5. CUMULATIVE AND PROJECT-LEVEL IMPACTS ………………………………110
5.1. Community Engagement and Grievance Mechanisms ……………………..114
5.2. Community Impacts and Development ……………………………………….124
5.3. Land ………………………………………………………………………….134
5.4. Labour ………………………………………………………………………….146
5.5. Women and Children ………………………………………………………...168
5.6. Conflict and Security ………………………………………………………...182
5.7. Environment and Ecosystem Services ……………………………………….194

6. REGION-SPECIFIC GOVERNANCE AND CONFLICT ANALYSIS …………….206

7. RECOMMENDATIONS
7.1. Recommendations to the Myanmar Government……………………………..216
7.2. Recommendations to Companies in the Mining Sector ……………………..225
7.3. Recommendations to Ethnic Armed Organisations ……………………..232
7.4. Recommendations to Civil Society ……………………………………….234
7.5. Recommendations to Other Governments ………………………………236

ANNEX A. ADDITIONAL INFORMATION ON SWIA METHODOLOGY …………….240

APPENDIXES (separate documents available on www.mcrb.org.mm)
Main Myanmar laws regulating environmental and social impacts of the mining sector
Linked Initiatives activities of development partners in the Myanmar sector
Stakeholders interviewed in field research
List of Tables, Figures and Boxes

Table 1: Mining Licences issued by State and Type as of 31 January 2018 .................... 35
Table 2: Types of Mineral Exploration and Production Permits ........................................ 58
Table 3: Requirements for EIA, IEE or EMP in the draft Mining Rules ............................. 63
Table 4: Annex 1 of EIA Procedure (extract): Categorization of Mining Activities ............ 68
Table 5: Myanmar Extractives Revenue ........................................................................... 78

Figure 1: Company experience of applying for an integrated permit ................................ 54
Figure 2: Environmental and Social Impact Assessment in the Mine Lifecycle ................ 67
Figure 3: Small-Scale Gold Licencing Process ................................................................. 90
Figure 4: The Spectrum of Corporate Social Responsibility (CSR) ................................ 105
Figure 5: Mining SWIA Field Research Locations ........................................................... 243

Box 1: Terms used in the report .......................................................................................... 7
Box 2: The United Nations Guiding Principles on Business and Human Rights ............... 25
Box 3: Impacts through Business Relationships ............................................................... 26
Box 4: Recommendations made by the OECD as part of the Myanmar Investment
Policy Review Chapter on Responsible Business Conduct (RBC) ................................... 27
Box 5: Overview of State-owned Enterprises (SOEs) and their Responsibilities .............. 50
Box 6: Royalty Rates for Minerals, Amended Myanmar Mining Law (2015) S.18 ............ 61
Box 7: Overview of Terms Contained in a sample Production Sharing Contract .............. 62
Box 8: Example Models for Revenue Sharing .................................................................. 83
Box 9: Eight Steps to Designing a Resource Revenue Sharing System .......................... 85
Box 10: Five Factors for Consideration in the Reform Process Regarding the
Role of SOEs and Military-Affiliated Companies ............................................................... 95
Box 11: Mineral Resources Policies ................................................................................ 101
Box 12: Corporate Social Responsibility (CSR) & Creating Shared Value (CSV) .......... 105
Box 13: Relevant International Standards, Guidance and Initiatives on
Community Engagement and Grievance Mechanisms ................................................... 123
Box 14: International Standards, Guidance & Initiatives on Communities & Mining ....... 133
Box 15: International Standards, Guidance & Initiatives on Land & Mining .................... 145
Box 16: Legal Provisions on Contracts, Wages, Working Hours and Leave .................. 149
Box 17: Health and Safety in Subsistence Mining .......................................................... 158
Box 18: Working Conditions in Subsistence Mining ........................................................ 161
Box 19: International Standards, Guidance & Initiatives on Labour Rights,
Safety & Mining ............................................................................................................... 166
Box 20: The Gendered Impacts of Mining ....................................................................... 170
Box 21: Impacts of Mining on Children’s Rights .............................................................. 173
Box 22: International Standards, Guidance & Initiatives on Women and Mining ............ 179
Box 23: International Standards, Guidance & Initiatives on Children’s Rights
and Mining ....................................................................................................................... 180
Box 24: Karen National Union (KNU) Mining Licencing Rules and Regulations ............. 185
Box 25: International Standards, Guidance & Initiatives on Security and Conflict
in the Context of Mining .................................................................................................. 192
Box 26: International Frameworks on Mercury and Cyanide .......................................... 196
Box 27: International Standards, Guidance & Initiatives on Environment and
Ecosystem Services and Mining ..................................................................................... 204
Box 28: Kachin Armed Groups Involved in Mining in Kachin State ................................. 210
Box 29: Armed Groups Involved in Mining in Wa and Pa-O Self-Administered Areas
(Shan State) .................................................................................................................... 212
Box 30: Armed Groups Involved in Mining in South-East Myanmar (Kayah, Kayin,
Mon and Tanintharyi) ...................................................................................................... 214
Box 31: Topics Covered in SWIA Questionnaires ........................................................... 242

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List of Abbreviations

ADB Asian Development Bank
ARDS Acute Respiratory Distress Syndrome
ASEAN Association of Southeast Asian Nations
ASM Artisanal and Small-scale Mining
CCCMC China Chamber of Commerce of Metals Minerals & Chemicals
Importers & Exporters
CDA Community Development Agreement
CEDAW Convention on the Elimination of All Forms of Discrimination
Against Women
CPB Communist Party of Burma
CRC Convention on the Rights of the Child
CSO Civil Society Organisation
CSR Corporate Social Responsibility
DGSME Department of Geological Survey and Mineral Exploration
DIHR Danish Institute for Human Rights
DoM Department of Mines
EAO Ethnic Armed Organisation
ECC Environmental Compliance Certificate
ECD Environmental Conservation Department
EHS Environment, Health and Safety
EIA Environmental Impact Assessment
Note: This SWIA reflects the preference of ECD by using ‘EIA’ to refer
to what may elsewhere be referred to as ESIA or ESHIA.

EMP Environmental Management Plan
ESIA Environmental and Social Impact Assessment
ESHIA Environmental, Social and Health Impact Assessment
EITI Extractive Industries Transparency Initiative
ESMP Environmental and Social Management Plan
EU European Union
FDI Foreign Direct Investment
FPIC Free, Prior, and Informed Consent
GAD General Administration Department
HRIA Human Rights Impact Assessment
HSE Health, Safety and Environment
ICJ International Commission of Jurists
ICMM International Council on Mining and Metals
IHRB Institute for Human Rights and Business
IFC International Finance Corporation
IEE Initial Environmental Examination
ILO International Labour Organisation
KIO Kachin Independence Organisation
KNSO Karenni National Solidarity Organisation
KNU Karen National Union
LGBT Lesbian, Gay, Bisexual and Trans-gender people
MCRB Myanmar Centre for Responsible Business
ME-1 Mining Enterprise No.1
ME-2 Mining Enterprise No.2
MEC Myanmar Economic Corporation
MEITI Myanmar Extractives Industries Transparency Initiative
ME Observers Mining Enterprise Production Monitors
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MFMA Myanmar Federation of Mining Associations
MGE Myanmar Gems Enterprise
MIC Myanmar Investment Commission
MoD Ministry of Defence
MoECAF Ministry of Environmental Conservation and Forestry
MoLIP Ministry of Labour, Immigration and Population
MoM Ministry of Mines
MoNREC Ministry of Natural Resources and Environmental Conservation
MPE Myanmar Pearl Enterprise
NCA Nationwide Ceasefire Agreement
NDA-K New Democratic Army-Kachin
NGO Non-government organisation
NLD National League for Democracy
NLUP National Land Use Policy
OECD Organisation for Economic Cooperation and Development
OSH Occupational Safety and Health
PNO Pa-O National Organisation
PPE Personal Protective Equipment
PSC Production Sharing Contract
RBC Responsible Business Conduct
SOE State-owned Economic Enterprise
SWIA Sector Wide Impact Assessment
TB Tuberculosis
UMEHL Union of Myanmar Economic Holdings
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNESCO United Nations Educational, Scientific and Cultural Organisation
UNGPs United Nations Guiding Principles on Business and Human Rights
UWSP United Wa State Party
VFV Vacant, Fallow and Virgin Lands
VPSHR Voluntary Principles on Security and Human Rights
WHO World Health Organisation
3Ts Tin, Tantalum and Tungsten

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Box 1: Terms used in the report
Formal mining sector
 Formal operations: Mines that have been granted a minerals permit from the
central Union Government or its representatives will be referred to as permitted or
licensed operations. According to the Myanmar Mines Law and Rules, permits
can be granted for a range of mining activities, including large-scale, medium-
scale (category introduced in the 2015 Amended Law but not yet defined), small-
scale or subsistence mines.
 Large-scale mine: A large-scale mine, permitted according to the Myanmar Mines
Law and Rules, is an operation of industrial mineral production with substantial
investment, using sophisticated technology and know-how. A large-scale mine
site connotes the area surrounding a permitted, large-scale industrial mine,
including ancillary infrastructure, such as processing facilities or factories, that are
on the site. On a large-scale mine site, there might also be several subcontracted,
smaller operations. These operations are not licensed for independent mineral
production by the central authorities.
 Small-scale mine: A small-scale mine, permitted according to the Myanmar Mines
Law and Rules, is an operation involving the commercial extraction of minerals,
requiring small investments and a comparatively lower possibility of mineral
productivity. In practice, some permitted small-scale mines are larger, as sites may
consist of several, adjacent small-scale concessions. A ‘small-scale mine site’ may
therefore be larger than the size specified by the above regulations. As with large-
scale mine sites, there might also be several subcontracted, smaller operations on
a small-scale mine site. These are not permitted for mineral production by the
central authorities.

Informal mining sector
 Informal operations: Mines which have been granted permissions by an ethnic
armed organisation (EAO), or mining activities that take place on land leased by a
company but for which the company does not hold a government-issued minerals
production permit, are referred to in the SWIA as informal operations.
 Subsistence mine: According to the 2015 Amended Myanmar Mines Law, a
permitted subsistence operation carries out mineral production by using either hand
tools or machinery equipment of limited horse power. However, all subsistence
mines encountered during SWIA field research operated without a permit and
periodically relied on machinery which exceeded the specification. Therefore,
subsistence mines are included in the report as part of the informal mining sector.
 Artisanal and Small-scale Mining (ASM) is a term frequently used to refer to
mining that relies on simple techniques and physical labour, which is often
performed without formal mining permits, has a low productivity, lacks safety
measures, health or environmental protections, may be practiced seasonally, and
is characterised by economic insecurity.
 Subcontracted mine operation: On a licensed large- or small-scale mine site, the
operation of an adit (an entrance to an underground mine, which is horizontal or
nearly horizontal, for the purpose of entering, draining water and ventilating the
mine) or pit may be subcontracted out to individuals or smaller companies, called
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subcontracted mine operators in this report. Such arrangements most frequently
function on the basis of production sharing between the permit-holder and the
subcontractor. The subcontractor has to respect the rules set by the permit-holder.
 Subsistence mining area: Where many very small mines operating at
subsistence-level with limited investment are clustered close together
geographically, it is referred to in this report as a subsistence mining area. Such
areas were frequently found to include informal small-scale and subsistence mines,
miners working on waste piles, cooperatives of panners and, in some areas, small-
scale mines that had been granted permissions to mine by a local EAO. An alluvial
or hard rock subsistence mine site is usually structured around a ‘pit owner’ who
has established control of a small area, often by having raised the capital to invest
in machinery.

Workers
 Workers: Workers in the formal mining sector include employees who are
directly employed by the licensed operator. These workers usually, but not always,
have a formal, written employment contract and a fixed monthly wage. Such
operations may also employ contract labour, workers contracted by a third-party
to work for the main company, as well as daily workers or casual workers who
are employed on a day-by-day basis, subject to availability of work. Such workers
are paid only for the days they work and the pay may vary according to the type of
work carried out on a particular day. Subcontracted mine operations also employ
daily workers. Individuals and groups, sometimes family units, may also pay a fee
to a permit-holder to pan or sort through mine waste on the permit-holder’s
concession and usually have to share their production with the permit-holder.
These workers are referred to as subsistence miners.
 On subsistence mine sites, usually the pit owner operates the pit helped by workers
employed on a daily basis or a production sharing basis. On gold mine sites, there
may also be panners. Panners are more often self-employed and many adult gold
panners work in groups of three to five, splitting their production evenly.

NB: The definitions and examples given above are based on practices observed during
field research carried out by MCRB from December 2015 to May 2016 and as they
relate to the production of limestone, gold and tin. It is to be expected that there are
several other operational arrangements used in Myanmar’s mining industry, not least in
the large informal sector.

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Executive Summary

This sector-wide impact assessment (SWIA) on limestone, gold and tin mining in Myanmar
analyses the impacts of mining of these commodities on the environment, local communities
and workers. It covers sector-wide, cumulative and project-level impacts, looking at both
the formal and informal parts of the sector. Recommendations are made to the Myanmar
Government, businesses, civil society, ethnic armed organisations and other governments
on how adverse impacts of the mining sector can be avoided and addressed, and how
positive impacts can be maximised. By outlining key findings from the extensive fieldwork
undertaken for the assessment and making concrete recommendations, the assessment
seeks to contribute to building a platform for dialogue about how Myanmar’s mining sector
can be shaped to contribute to poverty reduction and development.

Myanmar’s national territory contains extensive mineral wealth with proven reserves
spanning industrial minerals and stones, heavy metals, jade and gemstones, and energy
sources such as coal and uranium. Although minerals have long been exploited in
Myanmar, much of the country’s geology remains unknown. The sector is characterised by
limited access to modern technology and financial investment, with most investment being
by Myanmar companies, some in collaboration with cross-border investors, and much of it
informal and unlicensed.

Overall, the SWIA research found few environmental, social and human rights protections
in the mining sector and widespread poor practices. Even at larger established mines, very
few good practice examples could be identified. Extensive adverse impacts on the
environment and human rights were documented throughout the country and across
different types of mining activities. This reality has led to the poor public perception of
mining in Myanmar. It means that if the mining sector in Myanmar is to be developed to
make a positive contribution to the country’s development, significant steps will need to be
taken by the Government, businesses and civil society, to address current adverse impacts
and work towards the implementation of good practices. Five main challenges that need
addressing are identified below.

The SWIA focuses on limestone, gold and tin in the exploration and exploitation phases
of the mineral value chain. These commodities were selected because, whilst the majority
of Myanmar’s mining revenue continues to come from jade and gemstone extraction, other
commodities are increasingly being developed. Furthermore, the environmental and
human rights impacts of jade and gemstone mining have received significant attention, both
nationally and internationally, whereas the impacts of other mineral commodities have not
been subject to the same level of scrutiny.

For all three commodities, the SWIA considers impacts associated with the formal (including
formally permitted large- and small-scale mines) as well as informal (including informal
subsistence mining) parts of the sector, as well as the interaction between these. While
there is no reliable data on the scale of the informal sector, MCRB field research and other
sources indicate that the informal sector comprises a large component of the mining sector
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EXECUTIVE SUMMARY
for these three commodities. The role of the informal sector, as well as the potential for its
increased formalisation, therefore comprise important discussion points in the SWIA and
future dialogue and action on the Myanmar mining industry.

A SWIA goes beyond a particular project to assess the impacts of a sector at three-levels:
project-level, cumulative and sector-wide. This means that the mining SWIA addresses
the impacts of mining operations and activities on workers and communities, as well as the
impacts of the sector as a whole, on the enjoyment of human rights in Myanmar. The
methodology draws on established environmental and social impact assessment (ESIA)
methodologies, international human rights and labour standards, and key international
frameworks such as the United Nations Guiding Principles on Business and Human Rights.
The research conducted for the SWIA was both desk- and field-based, carried out over a
12 month period and including interviews with 1378 persons at 41 sites in 8 areas, and two
public consultations in Yangon. The field-based research included interviews with the full
range of relevant stakeholders, including Government, businesses, employees and casual
workers, local communities, civil society and others.
Five main challenges for achieving responsible mining in
Myanmar
1. Policies, laws and regulations relevant to mining activities lack clarity and
inhibit responsible investment
In the current process of regulatory reform, the legal landscape is changing rapidly,
including for mining. This has created a number of associated uncertainties. New laws and
regulations are not always consistent: there is a lack of alignment between different
applicable laws, and sometimes even contradictions or conflicting requirements. For
example, the fieldwork found inconsistencies between the Union-level requirements
outlined in the 2012 Environmental Conservation Law and permissions issued at
state/region-level regarding permissible distance of mining activities from water sources.
There is also lack of consistency between the Mining Rules and the EIA Procedure.

Furthermore, current laws and regulation are unclear regarding the attribution of
responsibilities for oversight of mining projects. For example, it is unclear which
government authorities are responsible for monitoring and oversight of environmental,
health and safety and labour conditions in mining operations. Such gaps and
inconsistencies are problematic for government oversight bodies. They are also problematic
for companies, which may be undertaking activities in a manner that is legal according to
one set of rules or regulations but not another.

The field research also found that there is a lack of guidance from the Ministry of Natural
Resources and Environmental Conservation (MoNREC) on what precisely is required of
mine operators. In the absence of clear guidance it is difficult, if not impossible, for
state/region-level and township-level administrators, as well as companies, to have
certainty regarding the standards to be applied in mining operations. A number of –
apparently unnecessary - township-level requirements applied to mining companies,
particularly at the exploration stage - were identified during the field research that seemed
to have no basis in Union-level law or regulation. High level officials in some sub-national
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EXECUTIVE SUMMARY