MYANMAR S SOVEREIGN WEALTH. 29 & 30 JUNE 2015 YANGON CONFERENCE REPORT Consultation Draft TOWARDS PEOPLE-CENTRED NATIONAL SAVINGS

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1 MYANMAR S SOVEREIGN WEALTH TOWARDS PEOPLE-CENTRED NATIONAL SAVINGS 29 & 30 JUNE 2015 YANGON CONFERENCE REPORT Consultation Draft

2 Inside front cover

3 Contents Towards People Centred National Savings Conference Executive Summary 4 Introduction to Myanmar s Sovereign Wealth 5-6 Text from the conference brochure available to all delegates in English and Myanmar Thanks and conference objectives 7 Delegate breakdown 8-10 Summary of conference speakers and activities 11 Photos Speakers key points Questions and Answers summary Options Workshop: Specific Myanmar Sovereign Wealth Scenarios Concluding comments 32 Appendix 1: Excellency U Soe Thane s opening address 33 Appendix 2: Dr Maung Maung Thein s message Hypothetical agenda for SWF in Myanmar 34 Appendix 3: Vidar Ovesen s Legal framework Issues

4 Towards People Centred National Savings Conference Executive Summary The possibility of a sovereign wealth fund or natural resource fund for Myanmar moved a step closer when Excellency U Soe Thane expressed interest in a fund at the Extractive Industries Transparency Initiative (EITI) board meeting in Nay Pyi Taw in October Acting on that initiative, Spectrum prepared an issues briefing paper drawing on much relevant international experience and proposing the key questions for discussion in the Myanmar context in preparation for a stakeholder policy conference. On 29 and 30 June, some 250 civil society and government representatives met to explore the topic, discuss questions and develop inputs for future policy direction. It was very apparent from the active discussions and engagement that the public has informed and strong views on many parts of the agenda. They were readily able to develop clear inputs on key policy components towards shaping a national natural resource fund or national savings fund. Aspects that were clear: Inclusion of all resource incomes to a fund is considered important and should not be limited just to oil and gas revenues. (ie. oil, gas, minerals, gems, jade, forest products, water revenues should all be considered) There are clear expectations on social expenditure requirements both as budget allocations and as supplementary long-term funding supported by a people centred savings fund Strong desire exists for at least 20% of natural resource revenue flows to be saved to a fund for the next 10 years with that increasing to 30% after 10 years. Some considered 35% of revenue flows should be saved. Delegates desired that public input be essential to guide fund policy directions (Education, health, social welfare, agricultural development, job creation are the expected spending areas.) The majority of delegates considered that a fund should have an overseas investment strategy to ensure higher safety and security than can currently be guaranteed for domestic investments in Myanmar. On matters of the budget deficit there was strong focus on the discipline and scrutiny needed to return as quickly as possible to a surplus budget. Additional controls, further attention to fiscal rules and more oversight were requested. An access to information law is considered critical as part of transparency and accountability progress. The law formation process as part of natural resource fund development should be made public and have consultation at each stage. EITI and Open Government Partnership (OGP) progress should continue. Three additional public oversight committees were recommended: a priority scrutiny committee for national spending a transparency and openness committee a loans committee to ensure discipline in borrowing and debt minimisation. Significant commitment to awareness raising was requested. Further points are detailed elsewhere in the Conference Report and Concluding Comments section. The field is considered important to many ministries, so a multi-ministerial briefing or roundtable was suggested by Excellency U Soe Thane as a means of disseminating conference output and conclusions. Additionally it was suggested that a next stage conference should be held in Nay Pyi Taw for allowing further dissemination and progress, as part of the awareness raising and information dissemination process. For a successful start to realising the objectives of a National Savings Fund, many of the policy aspects need further consideration and action now. Inclusive public involvement mechanisms and awareness raising are considered essential. Policy reform aspects related to revenue management, the budget surplus and debt control are considered critical. The potential benefits for future generations are desired by all. Further mechanisms for debt control and a more disciplined process for the taking on of national debt were considered important. 4

5 Introduction: Towards People Centred National Wealth in Myanmar Text from the conference brochure available to all delegates in English and Myanmar Gas, gold, jade, rubies, forests and water some of Myanmar s resources are sustainable, many are not. The benefits from extraction and sale of non-renewable resources can only happen once, making responsible use and revenue management paramount. Some countries have managed their resource wealth well and now have enormous benefits from this, but many have not. For example, Botswana focused on education provision from their diamonds, creating a very foresighted scheme; while Norway has the world s largest per capita pension fund from oil and gas. Other countries like Nauru enjoyed temporary wealth and are now poverty stricken, with the resource long depleted. Many have suffered from the resource curse allowing poor management, waste and corruption to mar the country, resource extraction to dominate the economy, with other commerce then suffering and not developing. A Sovereign Wealth Fund (SWF) is no silver bullet. Many think of a SWF as a blessing on its own. Establishment of a sound fund needs MANY good decisions, each of which is complex. A high quality fund needs much planning, wise policy decisions and prudent management. So many questions and options Gas, gold, rubies, jade, forests, water... Myanmar is a country with an abundance of natural resources for generating wealth. Yet currently its citizens are some of the poorest in Asia. With recent political and economic transitions, Myanmar now has the opportunity to plan for and address crucial questions about future options for wealth preservation and an enduring legacy for future generations. need exploring and critical decisions are needed: How can revenues flow into the national accounts to best benefit the people? Many suggest revenues should flow directly into the national treasury. How can negative impacts on public services due to volatile oil and gas revenues be avoided? Many countries have introduced fiscal rules to smooth expenditures. How should choices between spending now on immediate needs, infrastructure and savings be balanced? Countries have done this differently - Myanmar needs to find its model. How should transparency beyond the EITI be improved, so that people get information about how revenues are managed and spent? Many will suggest regular public disclosure of information, independent audits and strong oversight mechanisms. How should the savings be managed and invested - in Myanmar or internationally - many would say internationally. Which revenues should be included in a fund? Oil and gas revenues or revenues from minerals and gems too? Most would say all. Should others be considered? Budget Surplus & Financial Discipline are Critical Critically, a fund will only work where there is a budget surplus, otherwise you are borrowing from one to pay another. How can Myanmar change its national overspending (5%+ budget deficit) to a surplus budget that allows national savings now? 5

6 Much wage and other financial discipline will be needed. However, the timing for considering this with potential future gas discoveries hoped for in the near future is good. Time is needed to prepare. The stabilisation effect of a natural resource fund offers many benefits to help smooth volatile resource revenues. Governance, Transparency & Accountability If a fund is set up now, how would it be governed? Most say public involvement and governance is critical, given the lack of trust in Myanmar s recent history. How much investment should there be domestically to allow for infrastructure development? Or should all fund savings be left untouched to allow for more rapid fund growth? How should women s and girls needs particularly be provided for in thinking about a SWF? Myanmar has just contracted many gas blocks. Before first gas is Many resource-rich countries have established natural resource funds to reduce revenue volatility and to ensure that future generations also benefit from the natural resources. Through the eyes of most in Myanmar, wealth for the future is dependent on decisions made today. produced and revenues increase, decisions are needed on how to manage future gas revenues for the people. Similarly, jade revenues are considered enormous, but some studies show little benefit for the people. A future fund may be one way to enhance management of Myanmar s treasures. Conclusions Elsewhere, much has been learned about how to match types of resource revenue flows, the decisions needed for the country context, to the fund type, setup and governance. Specific blueprints have been designed and international principles established for transparency and accountability. Much discussion, public awareness raising, public opinion seeking and setup of governance models is needed. A recent Harvard report highlights the issues of revenue flows not providing national benefits. Dapice and Vallely from Harvard have suggested these revenues must be directed to productive investments if peace and development are to have a chance. Long term national savings can be considered a wise investment in many situations. 6

7 Delegates gather outside Inya Lake Hotel on 29 June for a group photograph Conference objectives and acknowledgements Spectrum Sustainable Development Knowledge Network aimed to increase participation and enhance debate on the subject of Myanmar s Sovereign Wealth among informed stakeholders. To support this we conducted a significant scale, civil societyled conference for 250 people, involving predominantly civil society but also government and development partners. The conference has provided the chance to increase access by local stakeholders to information, facilities and tools needed to support their understanding of sovereign wealth and national savings options and key milestones and challenges for establishment. formulation, as well as increase the inclusion of other actors in the ongoing development process and discussions. We would like to extend our sincere thanks to all our speakers for their contributions, addresses and presentations, as well as for their thoughtful, open and enthusiastic participation in the question and answer sessions. Spectrum is also grateful to Norwegian Church Aid, the Norwegian Ministry of Foreign Affairs and Unicef for their financial support of this project. A range of speakers from government, development partners, development actors and civil society provided a broad picture of the situation, as well as highlighting the gaps in knowledge, information sharing and policy. Workshops and question and answer sessions provided a forum for delegates to discuss objectives, policy preferences and challenges and to consolidate some key concerns and suggestions. Spectrum hopes to provide feedback to government on the progress achieved, assist further policy and roadmap 7

8 Delegate numbers and breakdown Government Total attendance: 249 Male: 152 Female: 97 Yangon Regional Government representatives: 35 Male: 16 Female: 19 Regional representatives: 72 Male: 51 Female: 21 Female Yangon area representatives: 142 Male: 85 Female: 57 Male Overview of audience main ballroom, Inya Lake Hotel 8

9 Delegate breakdown: Attendance by region 10

10 Summary of conference speakers and activities Day One President s Special Minister for Economic Development, Excellency U Soe Thane Keynote Address read by Spectrum Director, David Allan Spectrum Director, David Allan Setting the Stage, People Centred National Wealth Funds - Context & Opportunities Ministry of Finance, Excellency Dr Maung Maung Thein Finance Priorities and Fiscal Discipline in Myanmar Norwegian Ambassador, Excellency Ann Ollestad Welcome Remarks and Address Day Two David Allan, Director, Spectrum Recap Day 1 and Opening Remarks Andrew Bauer, Senior Economic Analyst, Natural Resource Governance Institute Policy Options for Revenue Distribution Maw Htun Aung, Myanmar Officer, Natural Resource Governance Institute Current revenue distribution in Myanmar what are the challenges? Lena Nguyen, Social Policy Specialist, UNICEF Myanmar s first national social protection strategy Andrew Bauer, Senior Economic Analyst, Natural Resource Governance Institute Responsible Natural Resource Use / Resource Curse Vidar Ovesen, Consultant, Oil for Development Program Good Governance, Value Chains and SWF Myths Panel Responses to Floor Questions (First Four Speakers) Open Floor Discussion - Burning Questions on Sovereign Wealth Funds (SWFs) Min Zarni, Myanmar Development Resource Institute (MDRI) Understanding revenues from Extractive Industries Vidar Ovesen, Consultant, Oil for Development Program (Norad) Key Process Questions and Managing Revenue Flows Aniruddha Bonnerjee (Bon), UNICEF Social Protection Consultant, on behalf of Bertrand Bainvel, UNICEF Representative, Myanmar Children in the Census David Allan, Director, Spectrum A Decision Framework, International Fund Blueprints and the Santiago Principles Panel Responses to Floor Questions Workshop Session How to Define and Measure Success? (Revenue Flow to Treasury, Budget Deficit, Revenues to Regions, Fund Spending Targets) Group Feedback Workshop Representatives Clarifications / Questions Needing Further Work Wrap-up Day 1: Spectrum & MoF Representatives Dr Kaythi Myint Thein, Gender Equality Network (GEN) Gender considerations for a Myanmar Sovereign Wealth Fund Financial Flow Options Open Floor Discussion People Centred Wealth Funds: Specific Decision Options for Myanmar - Group work Options for Spending / Saving Balance - Public Input to Priorities Options for Domestic Spending / Investment Infrastructure Investment or Social Service Options for National Debt Management - Loans Process, Scrutiny and Fiscal Discipline Options for Maximising National Surplus, Fund Input and Initial Growth Possibilities Options for Fund Investment Strategy - International / Domestic Balance Options for Fund Investment Strategy - International Asset Allocation Criteria Options for Governance Models, Public Involvement, Inclusive Representation Overcoming Transparency and Accountability Challenges Group Report back 5-10 Minutes per Topic, then Clarifications and Wrap-up Vidar Ovesen, Consultant, Oil for Development Program (Norad) Policy, legislative needs and legal framework needs David Allan, Director, Spectrum Final Comments, Next Steps and Reporting Back Wrap-up Day Two and Evaluation 11

11 Introductory address by Excellency U Soe Thane on EITI, OGP and SWF steps forward, read by Spectrum Director David Allan Panel answering questions after presentations Dr Kaythi Myint Thein, Coordinator, Gender Equality Network (GEN), Lena Nguyen, Social Policy Specialist, UNICEF, David Allan, Director, Spectrum Excellency Anne Ollestad, Norwegian Ambassador delivers a welcome address on Norway s SWF and progress in resource governance Marte Briseid of the Norwegian Embassy and Vidar Ovesen, Key Resource Person and Consultant, Norad Oil for Development Program L to R - Andrew Bauer, Natural Resource Governance Institute, U Zaw Naing, Deputy Director General, Treasury, Ministry of Finance, other MoF and government staff 12

12 Excellency Dr. Maung Maung Thein, Deputy Minister of Finance giving address on a hypothetical framework and steps for Sovereign Wealth Fund setup in Myanmar Kachin business woman and social actor Ja Seng Khawn makes presentation of group work findings Conference participants Group work Media interview with Excellency Dr Maung Maung Thein, Deputy Minister of Finance Group work report back Group work report back 13

13 Registration Resource governance cartoon exhibition held and appreciat held and appreciated Registration U Zaw Naing, Deputy Director General Treasury, Ministry of Finance and David Allan, Director, Spectrum, discussing fiscal discipline, budget deficit and national debt issues Group discussions Naung Win of Ministry of Finance and other participants Excellency Ann Ollestad, Norwegian Ambassador and David Allan, Director, Spectrum Recording group work conclusions 14

14 ed Recording group work conclusions Group work on key questions Nang Shan, Shalom and U Aung Myint, Director, Ministry of National Planning and Economic Development Recording Team - Jack Jenkins-Hill, Anna Trahair and Khaul Pi, Spectrum Andrew Bauer, Guest Speaker, Senior Economic Analyst, Natural Resource Governance Institute Eight key discussion areas for the conference 15

15 Speaker highlights We are undertaking reforms so that no conflicts in our country are because of resources. Excellency U Soe Thane, the President s Special Minister for Economic Development, provided a written message to open the conference. In this speech U Soe Thane expressed commitment to increase transparency and accountability in the extractive industries in Myanmar; ongoing commitment to Extractive Industry Transparency Initiative (EITI) and Open Government Partnership (OGP) processes; his happiness at having civil society input in the sovereign wealth fund design process; and his eagerness at establishing the fund as soon as possible. He said: We are undertaking reforms so that no conflicts in our country are because of resources. Excellency U Soe Thane gave assurances at the conference opening of his commitment to the conference follow up. We will have a ministerial briefing on the output of the conference, and we look forward to another event in Nay Pyi Taw (The full transcript is in Appendix 1.) We will have a ministerial briefing on the output of the conference, and we look forward to another event in Nay Pyi Taw. In his scene setting address, Spectrum Director, David Allan gave a broad introduction to Sovereign Wealth Funds (SWF) and the current position of Myanmar in relation to transparency, accountability and natural resource management issues. Through a series of quotes from President Thein Sein, and leading economists, David showed progress that Myanmar had made, and further work needed: Make sure the benefits go to the vast majority of the people and not to a small group. (President Thein Sein, 10 July 2012) The most important thing is to have completely transparent financial accounting to ensure everyone knows where the revenues from these extractive industries are going. (President Thein Sein, 10 July 2012) The management of natural resources will determine whether Myanmar is transformed into prosperity or collapses into conflict. (Paul Collier) Any country with resources can do alright in the short term, it s the long term that is the problem. (Paul Collier) If a country doesn t reinvest wealth below ground above ground, the country is poorer. (Joseph Stiglitz) He highlighted critical factors such as: needing a budget surplus as a priority discipline needed now in taking on extra debt and the need to pay off national debt risk profile to guide the balance of international and domestic investment intergenerational objectives to guide fund profile. He also highlighted recent figures showing the disparity between officially traded jade, and illicitly traded. He considered links highlighted by Ross in The Oil Curse between oil wealth and male dominated decision making structures, and gave examples of successful and unsuccessful natural resource wealth use and corresponding objectives and achievements. He concluded that the objectives will define the fund type and urged national thinking on what we want to achieve, not, what should we spend on. This will allow different types of national budget, national spending and people focused national saving decisions. The most important thing is to have completely transparent financial accounting to ensure everyone knows where the revenues from these extractive industries are going. Welcome remarks were delivered by Norwegian Ambassador, Excellency Ann Ollestad. She shared words of encouragement, advice, and support for Myanmar s natural resource fund. Key points: Myanmar is a country with vast natural resources, and this has a great potential for generating sustainable economic wealth 16

16 It is imperative to make sure that the people of Myanmar benefit from its wealth, and the best way of doing this is by engaging civil society and making informed decisions. that benefits the people of Myanmar. There is no quick fix or a single model, decisions must be made through a process of inclusive dialogue. There are many aspects that need to be discussed. SWF can only be one of several policy instruments to ensure sound financial management. It is imperative to make sure that the people of Myanmar benefit from its wealth, and the best way of doing this is by engaging civil society and making informed decisions. One fundamental principle is that natural resources belong to the people, and that their extraction and use should benefit all people, finding the right balance between spending on immediate needs and saving for the future. Civil society has a vital role in holding government accountable to the way in which petroleum resources are used. To do this they must have lots of knowledge on the complex issues that go alongside it. Dr Maung Maung Thein, Deputy Minister of Finance, spoke on the process of setting up a Sovereign Wealth Fund and some possible options for taking this forward. He said: The importance of a SWF has been acknowledged, and the Ministry of Finance is seriously considering setting up a fund. The four key steps will be 1) gaining the political will, 2) formulating the policy, 3) drafting a law, and 4) implementation of the policy. Four key parts of formulating the policy are considered to be 1) returning the budget to surplus, 2) determining the In setting aside extractive industry revenues we should not only look at financial returns, we should also look at social returns. fund objectives, 3) determining the fund revenue sources, 4) determining the investment vehicles and management regime. He discussed who might control this fund would it be the Ministry of Finance/Central Bank or a group of senior government officials? Would it be set up as a private company? How should the funds be used? In setting aside extractive industry revenues we should not only look at financial returns, we should also look at social returns, he added. Some funds help governments to overcome the resource curse, others have not met objectives. The things that make a difference are the rules, institutions and oversight. Andrew Bauer, Economist, NRGI, spoke about Responsible Natural Resource Use and Resource Curse. Which countries have managed natural resources well, and which countries have managed them badly and what were the different experiences and results? Key points: There is no natural resource curse. Dubai s development was fuelled by oil wealth, Malaysia has built diverse industries on oil investment, Chile has transferred mineral resources into diverse sectors and economy. There is a resource curse. Libya, Tunisia, Azerbaijan, Georgia countries that are oil rich have invested less in social sectors. Most countries with high growth rates have lacked natural resources. Why is there a negative relationship between development and resource wealth? Explosions of government salaries, balance of power shifts from private to public sector, volatile oil and gas revenues and dependence on oil weakens public financial management. Natural resource revenues are very large, they are not directly tied to citizens and seen as free money. They are volatile and subject to rapid change, and there are many transparency and accountability issues. He concluded: The creation of a SWF can help governments to invest over time. Some have helped governments to overcome the resource curse, others have not met objectives, or have become slush funds. The things that make a difference are the rules, institutions and oversight. 17

17 A natural resource fund is not a substitute for sound fiscal management. Vidar Ovesen, Consultant, Oil for Development Program spoke on Good Governance, Value Chains and SWF Myths. He defined a SWF as government pool of money, mostly for macroeconomic purposes to stabilise the economy and save for future generations this money can come from different sectors. A natural resource fund is a fund exclusively deriving from natural resources. Key points: Natural resource governance can transfer resources to wealth, rather than waste and corruption In Norway natural resource revenue is used to improve public services, but this has also had negative impacts on other sections of the economy Citizens have a legitimate right to know how natural resources are managed they are national assets, and belong to everyone how they are managed should be public information Transparency and accountability prevent corruption, waste and bad governance. Public scrutiny has a positive impact on decisions and how they are made. It also builds confidence. More information makes it easier to understand how things are managed, and contributes to public awareness A natural resource fund is a means, not a goal. It is important to think about the value chain and what measures are needed to develop sound mechanisms for natural resource management A natural resource fund is not a substitute for sound fiscal management. There must be a good budget process that is comprehensive and covers all sectors. It is important that there are good policies which are actually implemented. How can we get quick wins from a SWF? While it is important to invest in future generations, the current generation needs things now. Min Zarni, Myanmar Development Resource Institute (MDRI) spoke on understanding revenues from Extractive Industries. Key points: How are we going to invest for future generations and how are we going to spend for the current generation? Is it the right time to establish a SWF? What model is appropriate? What model are we going to use? Are we going to use it for stabilisation? For investment? For future generations? What approach would be appropriate for Myanmar? Most of Myanmar s well known revenues come from the natural gas sector, this may increase significantly as offshore gas blocks have been contracted and exploration is starting Min Zarni discussed that in 2002 there were only two producing gas blocks. Later there were two more projects, and now 14 onshore blocks and 15 offshore blocks have exploration underway. The amount of income generated from natural gas may well double in the next few years. How can we get quick wins from a SWF? While it is important to invest in future generations, the current generation needs things now. SWF needs to be set up in an open and transparent manner, to build trust and confidence. Vidar Ovesen, Consultant, Oil for Development Program (Norad) spoke on Key Process Questions. Key points: The Ministry of Oil and Gas Enterprise (MOGE) and Ministry of Finance (MoF) are important institutions how are they collecting revenues? Having a fiscal regime helps you to attract good companies and investors to help and capture resource rents Government needs greater capacity to audit revenues SWF management who is going to manage these funds? What are the assets and investment funds that you should invest in? What regulatory and accountability mechanisms should be in place? There is not much transparency in revenue streams, but some important steps have been taken to improve this it s not good enough to cover the information once a year in an EITI report. It should be updated continuously with ongoing access How do we ensure that an appropriate share of profits is going towards citizens? Data only shows revenues that are part of the national budget. There are other funds too but they do not go through national budget 18

18 Need to consider governance structure, checks and balances between different institutions and the role that civil society plays in this process. Need to consider governance structure, checks and balances between different institutions and the role that civil society play in this process, reporting requirements and disclosure information If you are not sensible in establishing a good fiscal regime, you won t have any revenue available to save in a natural resource fund I would encourage you to look at the entire value chain when talking about natural resource management. You should not copy and paste, but you should consider what is important in the specific Myanmar context. If you are not sensible in establishing a good fiscal regime, you won t have any revenue available to save in a natural resource fund. Aniruddha Bonnerjee (Bon), UNICEF Social Protection Consultant, spoke on behalf of Bertrand Bainvel, UNICEF Representative in Myanmar, on the topic of Census Implications on Investing in Children, and Resource Revenue Linkages. Key points: Expenditure: People centred focus there are consequences for children, so we need to look at allocation of resources After the census we know more about demographics and access to basic services and can look at how to improve budgeting for human development Children make up 34.12% of the population. Six out of 10 children are poor and six out of 10 poor people are children Without access to basic services 31.4% of population will not be able to contribute to the future. We cannot talk about poverty alleviation without talking about children In Myanmar there are more boys than girls, it should be the other way round Nationally 65% of children go to school, but 4.5 million of children are not in school. In Shan state 50% of children do not go to school 29% of children do not drink from improved water sources Overall budget deficit is 5% of GDP Revenues are expected to increase Looking at the social sector much spending is on salaries. Revenue generation: 32% of total revenues come from taxation, future flows of revenue are expected to be quite strong We believe that it is time to start spending natural resources on children, if this is done society will improve Budget needs to be re-balanced so women and children don t bear the brunt of inadequate service delivery Norway and Sweden became rich through systematic expenditure on children When you invest in children today, you will get a more stable and prosperous tomorrow. When you invest in children today, you will get a more stable and prosperous tomorrow. Spectrum Director, David Allan spoke on Decision Frameworks, Fund Blueprints and the Santiago Principles. Key points: Decision framework: Some suggest that the scale and timing of revenues from natural resources determine how much of the revenues can you use and for what. The figure shown is very helpful as a discussion piece on decision frameworks (see diagram 1 on page 19) It will be years before profits on oil and gas occur so a long term approach is needed US$10 billion gap with jade revenue losses (see diagram 2 on page 19) how do you get political will so that money is in the right place to be supporting policy that you want? Various assessment tools have been used to show how well funds operate. Ranking against standard criteria shows vast differences in fund operations. Santiago Principles or generally accepted principles for SWF management suggest that fund management should be on economic not social considerations Santiago Principles can be segregated into principles for governance, disclosure, definition, operations Good work has been done on management of revenue pulling together different rules on how you manage funds. 19

19 The recap overnight, presented by David Allan, Spectrum Director, summarised nine key questions identified in the interactive sessions on day one: 1. Natural Resource Funds who are the key stakeholders in Parliament and how will the government resolve conflict with ethnic armed groups? 2. How do other countries spend this money for their development? 3. Budget deficit and international debts how can we start a fund despite the deficit? 4. How do we ensure that our sovereign wealth fund mechanism is independent? 5. Money is going into the state budget how do we make sure that the revenues are all going there? 6. In ethnic areas without national reconciliation, we can not improve natural resource management in Myanmar 7. Myanmar has a lot of mega projects where implementation has happened without satisfactory consultation. When we learn about these projects there are a lot of negative impacts for communities. 8. Myanmar is in budget deficit, so is it the right time to start a SWF? If we don t have a surplus, why are we talking about a SWF? What is the real objective? Lots of data about jade does the government acknowledge this information? 9. Focus is on oil and gas are we not talking about mining and other minerals? It drew attention to the fact that the conference opening by Minister U Soe Thane opened the way for follow up work and for inputting the results of the group work. It recapped on the 4 step process the government would look at for taking the process forward. If there is no national consensus around the revenue sharing formula, it will not hold. There needs to be a strong political process of consensus building. Andrew Bauer, Economist, NRGI, spoke on Policy Options for Revenue Distribution. Key points: Five different types of places that money can go: national budget, sovereign wealth fund, pension fund, sub-national entities, state owned companies Why should we create an extra budgetary fund, and not just put all of the money into the budget? It can help save for the future, but can also be a pool of money for corrupt regimes to play with as seen in Libya, Iraq and Russia Russia has one fund that is for budget stabilisation and one for pensions the government has taken billions of dollars from the pensions fund and spent it If Myanmar is considering a NRF, it is important to keep in mind the dangers that we have seen in other places The Ministry of Oil and Gas Enterprise (MOGE) can also be part of the operational process. It can be a regulator to give licenses, check legal compliance and promote local content and participation in the oil and mining sectors National oil companies can contribute to employment and GDP, but can also lead to siphoning of public funds and corruption an Angola oil company spent $32 billion Costs of reinvestment from MOGE exceeded costs spent by the government on health and education for 2013/2014. Intergovernmental transfers: most countries have a formula for how revenues and distributed. No revenue 20

20 Diagram 1: Investment diagnostics based on revenue characteristics Source: Delivering on the Promise: Leveraging natural resources to accelerate human development in Africa, produced by the Bill and Melinda Gates Foundation and the African Development Bank Group Diagram 2: First realistic picture: New versus old jade and gems trade data Source: NRCA Myanmar Business Update, June

21 sharing system in Myanmar large scale mining happening in all states but Chin and Yangon and oil exploration takes place in all states Significant under reporting of Myanmar extractive industries Reasons for revenue sharing: equalise revenues, to improve public service delivery and to share risks. Oil, gas and mineral revenues cause local damage and livelihood loss areas should be compensated Resources create conflict and resource sharing can help to mitigate this. If there s no national consensus around the revenue sharing formula, it will not hold. There needs to be a strong political process of consensus building. If it is not possible to amend the constitution, it s important to see what can realistically be done effectively and efficiently within the limited situation. Maw Htun, NRGI, spoke on the current revenue distribution challenges in Myanmar. Key points: There must be changes to alleviate the challenges for state and region government. Otherwise the budget will end up not getting to the sectors that need to be improved In 2012 Central government allocated 3.4% of union budget to States and Regions. This slightly increased in 2014 according an NRGI survey Others schemes of revenue sharing from central government are through the poverty reduction fund from central government, through the World Bank s country strategic assistance fund provided to targeted villages It s important to refer to the 2008 constitution. Schedule I says central government has to manage certain tasks, Schedule II indicates how budget should be allocated to states and regions but not giving them the power to make decisions on how these budgets should be prioritised, especially for education, health and social service deliveries More budget is allocated to Kachin, Chin and Kayah states. UNDP household survey shows these states are the poorest regions. If they only have decision making power on specific task assigned by central government, money can go only to assigned projects, rather than to education or health or social care delivery At present, central government allocation to health and education is 8%. The draft education law will allocate 20% from central government in future budgets Civil society and environmentalists have concluded that there is rapid deforestation after peace agreements, related to concessions given to businesses, and licenses allocated by both government and armed groups in their respective regions. The cause of this is the lack of a revenue sharing system to regional governments, forcing exploitation of their own resources for revenue, ending up with environmental destruction and surge of land related concessions There is an urgent need to bring these revenue sharing issues to the peace table as well as for stakeholders to address issues Implications of not having the strong fiscal options for revenue sharing? there is a lot of official, unofficial and illegal mining in the armed group regions If it is not possible to amend the constitution, it s important to see what can realistically be done effectively and efficiently within the limited situation to address these issues. Investing in health and education is a real way for resources to truly benefit future generations in Myanmar. Lena Nguyen, Social Policy Specialist, UNICEF, spoke on Social protection. She said that social protection can help level the playing field with respect to social and economic disadvantages. Key points: 8 in 10 people or 40 million people in Myanmar live under or just above the poverty line. If you are living just above the poverty line, any kind of shock will push you under. The line between the poor and non-poor is often very hard to draw 80% of households are clustered around the poverty line, social protection should be provided universally rather than 80% of households are clustered around the poverty line, social protection should be provided universally rather than trying to assess who is poor and who is non-poor this way there is a risk of exclusion. 22

22 trying to assess who is poor and who is non-poor this way there is a risk of exclusion Myanmar social protection strategy is a framework to try and fill the gaps in the current system. Ministry of Health and Education budgets have increased in recent years, but the Ministry of Social Welfare s budget has decreased. With the social protection strategy in place, revenues from natural resources provide a key means and the real opportunity to address gaps. The headcount of the poor could be reduced by 6.6 million, 65% of households could be closer to crossing the poverty line, and income inequality would fall by 65% What is the best way to use the revenues from natural resources, which are abundant in Myanmar? Investing in health and education is a real way for resources to truly benefit future generations in Myanmar. 8/10 people or 40 million people in Myanmar live under or just above the poverty line. If you are living just above the poverty line, any kind of shock will push you under. Dr Kaythi Myint Thein, Gender Equality Network (GEN) spoke on Gender considerations for a Myanmar SWF. She said that people-centred development should be about all people: men and women, rich and poor, rural and urban, majority and minority. Gender equality should be a key principle of any SWF, as well as a consideration in practice through targeted programmes. Key points: Typically society in Myanmar doesn t perceive gender inequality. But there are a lot of women who have no opportunities. GEN research shows major gender inequality that needs to be addressed SWF opportunities need to be given for women at local and international level to take up leading roles Women s voices are not heard in public decision-making or at the top level. There is low participation in decisions about land and only 4% of MPs are women Gender equality in distribution of financial resources can help advance key development goals such as child welfare, health and education Extractive industries and projects tend to employ men, often migrants. Extractive industries have been linked to increases in gender-based violence, prostitution, human Urban and rural women need to be consulted. Use of local languages, women-only consultations at times and places convenient and safe for women and children in their care. trafficking, sexual harassment and STI/ HIV transmission In Myanmar, women are negatively impacted by activities that would source a SWF. A 2015 report by the Tavoyan Women s Union highlights impacts on women from the Dawei Special Economic Zone, including loss of land, collapse of shellfish population, and sexual harassment and rape by migrant workers Gender equality should be a guiding principle of Myanmar SWF, including commitment to women s empowerment in SWF documents. Need specific mechanisms to reach and benefit women in SWF design, management, monitoring, and benefit-distribution. In each stage of the process urban and rural women need to be consulted. Use of local languages, women-only consultations at times and places convenient and safe for women and children in their care are needed. Women must be included in fund management board, with rural, non-elite, and ethnic representation and female leadership How will the fund be monitored? Gender-disaggregated data, baseline assessment, monitoring and evaluation, impact assessment are essential How will benefits be distributed? Need to respond to women s needs creation of business opportunities for women. Good to consider lessons learned from Small and Medium Enterprise (SME) programmes. David Allan, Spectrum Director, spoke on public involvement models, consensus building and access to information. He highlighted that there were a host of involvement models possible, many of which are quite new for use in Myanmar. He highlighted the need for information dissemination to citizens as part of accountability work and Paul Collier s call to action in 2008 Until we have a critical mass of informed citizens, politicians will get away with gestures It will look good, but it won t work! Examples of usable involvement models could include giving input to parliamentarians, advisory committees, 23

23 Diagram 3: Norway s model for SWF Public Input A supervisory council Source: Government Pension Fund Global Norway, NRGI and Columbia Center on Sustainable Investment Diagram 4 Source: Vidar Ovesen s SWF conference presentation, 30 June

24 Until we have a critical mass of informed citizens, politicians will get away with gestures It will look good, but it won t work! citizen panels, minister Open Hours, letters to ministers, requesting and responding to departmental Calls for Input, public hearings, open working groups, online discussion forums, scenario planning exercises, non-binding referenda, commissioning of research, surveys, or public opinion polls or running public workshops, seminars and conferences. Many possibilities exist. Norway s model of using a supervisory council in SWF governance was discussed and useful and possibly appropriate for Myanmar (see Diagram 3 on page 22) Models for consensus building in Myanmar were considered as very problematic, and needing much work. Information access, citizen and public involvement were considered key to this. In the post ceasefire period, the political dialogue process has significant potential to involve the ethnic armed group actors which will also be key. Ongoing processes for awareness raising, formulation, definition and debate of objectives will need a lot of work. rents and collect revenue flows is the responsibility of the Ministry of Energy Macroeconomic and fiscal policy is the responsibility of the Ministry of Finance For collection and management of oil and gas revenue flows there is overlap. Various parts of government and civil society need to be involved Government division of responsibilities: Oversight mechanisms, revenue distribution, reporting requirements and access to information, SWF management, SWF investment management There are no easy answers, but it is important to discuss these issues deeply, and to find the appropriate model that suits Myanmar The first thing to do is design policies through government that are based on discussions on national objectives Once policies have been made, legislation must be introduced in each of these areas with responsible ministries. Legislation should cover natural resource governance Establish a manager of the fund which is normally the Ministry of Finance This event is a very good starting process for public discussion and dialogue, and I wish you all the best of luck moving forward. Myanmar desperately needs an access to information law. Continuing the work started with the commitment to Open Government Partnership in 2016 seems one of the best routes forward. There are no easy answers, but it is important to discuss these issues deeply, and to find the appropriate model that suits Myanmar The last presentation was from Vidar Ovesen, Consultant, Oil for Development Program (Norad) on Policy, Legislative Needs and Legal Framework Needs (see Diagram 4, p22). Note that Vidar s presentation focused on oil and gas revenues, and the approach can be generalised to broader natural resource revenues. Key points: Looking at the value chain and how to capture resource 25

25 Questions and discussion: Panel Discussion: Andrew Bauer, Min Zarni, David Allan and Vidar Ovesen Q Before we start talking about the management of natural resource revenue, should we not be talking about how to better manage natural resource extraction? Min Zarni: SWF is not a goal, but a means to reach it when thinking about the establishment of a SWF, the whole value chain must be considered. The nature of extractive industries is very difficult, the revenues won t flow into the country the next day, revenues are seen years later and it takes about 10 years for an offshore project to get into production stage. What are we going to do to manage resources before they get to the production stage? This is an important question. Q Myanmar has a huge budget deficit. How are we going to balance the budget, and if we cannot how are we going to establish a SWF? David: Perhaps there is not enough income and perhaps the balance is not right. EITI has allowed people to get a clearer picture of what revenues are and what sectors they are collected from. Collecting all these revenues would make a dent in the deficit. On the spending situation, peace is a big issue. Resources are spent on defence and conflict rather than health and education. Until we can attain peace, money will not flow to productive and efficient sectors. The important thing is for citizens to have a better idea of the national accounts. As Paul Collier has said, there may be no difference until you have a critical mass of concerned citizens to take things forward. Vidar: There is no use in having a SWF while you still have a budget deficit. It is important to be prepared for when there is a spike in revenues, which is what Timor Leste did. Debts should be decreased first. Andrew: An NRF is used in different ways. A saving or macroeconomic management tool; an earmarking fund for oil revenues for eduction etc; a development bank where funds are invested in the domestic economy. There are three separate discussions to be had. The last thing that you want is a fund that belongs to an individual where the contents can be spent how they like. Funds should go through the budgetary process. Q Min Zarni: What are the objectives? What will the strategy be? Is it sensible for Myanmar to invest overseas? What is the strategy for future economy and future growth? Are you going to suggest ways that the government can exercise greater financial discipline? David Allan: A Citizen s Budget will be released shortly this will kick-start citizens understanding of budget breakdown and how spending takes place. This will also help accountability mechanisms. Everyone should ask for more budget information if they want a better future. We have an alarming debt situation Asia Development Bank, the World Bank and others are giving loans to Myanmar. Some government departments are taking on debt independently. Different ministries are taking on debt without it going through the treasury. A process for overall debt control is very much needed, and it seems this should be managed by treasury. This also links to questions over energy strategy the government could take on huge amount of debt for a grid system, when this might not be the best choice and strategy is not clear. Q&A: Aniruddha Bonnerjee (Bon), David Allan and Vidar Ovesen Q Does Myanmar have the resource curse? There are different resource curses Myanmar has not seen the benefits from natural resources that it should. There is currently no lasting wealth benefiting citizens. Many countries have poor economic growth from bad management of resources. Resource curse is normally talked about in economic terms, but should also be talked about in relation to conflict, corruption etc Is it possible to use revenues in a good manner I believe it is possible. De-couple natural resource expenditure from public expenditures to smooth over variability or volatility When a country faces a resource curse there is an increase in inflation, brain drain, dollar reserves declining. Myanmar has these. We are not seeing the full resource revenues in the national budget. On the balance between saving and spending it is good for finance to be used to stabilise. We need to ensure that the economy is able to absorb and has capacity to spend the money on effective projects. Many countries are very eager to spend. Timor Leste has saved 70% of oil and gas revenues the economy is not big enough to absorb revenues % of government revenue is derived from oil and gas. 26

26 Q How can the sovereign wealth fund contribute to decentralisation and the peace process? Only through meaningful political dialogue can issues of peace and conflict be managed. Different mechanisms are needed does not necessarily need to be a SWF, could be a different budgetary category to separate revenues. Is it critical to protect parts of the revenue to stop them being misused. The constitution says that all resources are property of the union. Devolution is not true decentralisation. Challenges in South Sudan money that would go to states was much higher than revenues received. There were challenges with transparency and good governance. Challenges associated with decentralisation arrangements Decentralised revenues in Peru. Mining law guarantees a certain portion of revenue flows to state government. This caused its own difficulties as state governments did not have the capacity to manage this and different political agendas came into play. Myanmar ministries are getting stronger, and state governments have a lack of capacity. There are not sufficient transparency and accountability mechanisms at present. Decentralising revenues needs careful staging and focus on capacity enhancement. Q What do we need to focus on for peace natural resource governance or revenue governance? If political dialogue can take place, different people can take part. Ethnic armed groups are using resources to fund conflict and at present they are not getting information on best practices in resource revenue management. This is a complicated matter and unified goals are very important. Q Would it be better to stop all of the new projects before clear policies are put in place? Policy development is very important. Given the long time it takes for projects to become profitable in terms of revenue management process there is enough time to design policies while continuing projects. Not appropriate to stop all projects. There is a long process for exploration years for profit areas. Minerals have caused conflicts in Myanmar. Detailed exploration work would help develop value of resources, to know what is worth developing. Panel Discussion: Andrew Bauer, Maw Htun Aung, David Allan 84.5% of oil revenues goes to national and 16% goes to sub-national government. Every country is different Inter-fiscal framework a multi-year budget is an important tool for implementation The critical question is not what pot the money comes from, but what objectives you want to achieve Oil, gas and mining is usually very destructive. The only reason to do it is when people benefit from it. Is Corporate Social Responsibility the way to do it? Usually not it is voluntary and companies usually do the minimum. Local content can help. The best way to benefit is to tax them a lot and spend that money on health and education. Panel Discussion: Lena Nguyen, Dr Kaythi Myint Thein and David Allan Q Gender are you looking at the rights of women, or looking for a quota for women? Is it because there is no chance for women to participate, or because they are not participating? David: What we are talking about is that men and women are different and have different needs, and therefore the planning and representation of these need to be addressed differently. Gender is just as much a men s issue as it is a women s issue. Lena: Question of equality and equal representation. Women need to be in a leadership position there are only one or two women in leadership positions. Society needs to support women in these leadership positions through capacity building. How do you categorise poverty? Is it education or material support for communities that will alleviate poverty? Q Lena: When we look at poverty, we are not just looking at lack of money, but also material conditions such as access to clean water. When we look at multi-dimensional poverty, policy interventions will be different and include attention to different sectors. Social protection should be thought of not as charity, but as building access and availability of education and health care. Investment in social sectors is investment in human capital. It is investment in children that can help to break the cycle of poverty and can stop the repetition of poverty from generation to generation. 27

27 Key questions and comments raised during day one: Natural Resource Funds who are the key stakeholders in Parliament and how will the government resolve conflict with ethnic armed groups? How do other countries spend this money for their development? Budget deficit and international debts how can we start a fund despite the deficit? How do we ensure that our sovereign wealth fund mechanism is independent? Money is going into the state budget how do we make sure that the revenues are all going there? In ethnic areas without national reconciliation, we can not improve natural resource management in Myanmar Myanmar has a lot of mega projects where implementation has happened without satisfactory consultation. When we learn about these projects there are a lot of negative impacts for communities. Myanmar is in budget deficit, so is it the right time to start a SWF? If we don t have a surplus, why are we talking about a SWF? What is the real objective? Lots of data about jade does the government acknowledge this information? Focus is on oil and gas are we not talking about mining and other minerals as well? Do we discuss oil and gas? Are you trying to stay away from areas where there is conflict? When you talk about revenue sharing and budget transparency, how should we establish the SWF so it involves budget transparency? We need to take time this is related to the political world, and comes back to the constitution. Where and when should multi-stakeholder discussion take place? Who will carry out education and awareness raising on SWFs? Where will the SWF be located? At union level or state level? How will laws be harmonised? There are already many laws, but they often contradict each other if we are going to make strong policies and laws, how will they work together? How and what kind of fund should be established? What will the first resources be? Myanmar is not a people centred country we have many problems in many places. Whilst there are resources, it is important for us to use them properly Are we going to save the resources and funds for the future generations, or are we going to spend the funds for the future generations? Some people say we need a SWF, some people not. SWF is like a piggy bank what will be the objectives? How can civil society participate in this process and how can we ensure transparency, accountability and checks and balances. Which sectors should be part of SWF minerals? Oil and gas? Government is only giving us information. Are they asking for participation? Civil society should be able to take part in the drafting of laws. What do we need to do to make the process more inclusive and capture the participation of all groups. 28

28 Group work feedback: Day One Workshop Session How to Define and Measure Success? (Revenue Flow to Treasury, Budget Deficit, Revenues to Regions, Fund Spending Targets) Group One Why exclude 55% of Revenue from Ministry of Oil and Gas Enterprise (MOGE)? What accountability is there on this? Is it possible to make technical support available for MOGE capacity building? What are the priorities? Will existing revenue fund go to development of infrastructure or to future generations? Should the National Budget be made public? Are there countries where budget information is made available to the public? We know that policy and regulation of a Natural Resource Fund (NRF) is being drafted. How is it drafted and who is involved? When will it be finalised? Are there any examples of the role of non-state actors in managing NRF allocation? If a steering committee manages the NRF, who will be involved? How can we ensure women s participation? What will be the impact of an NRF if we put aside of 8% of the fund for children, education or health? How long will it cover social costs for the whole country? Group 2 How can we set up a SWF with budget deficit and debts? How do we start planning the fiscal rules and principles? Should we suspend or extend projects? How to put policy, law or regulatory frameworks in place? How to design a steering committee? Who should be on it? Group 3 Revenue from mining goes to the National Budget as income tax. How likely is it that a fund will be established? Is it possible to formulate a SWF without national reconciliation process, while natural resources are being located across states and regions of Myanmar? Myanmar people have experienced tough challenges in so many ways. Many mega projects have been set up without acknowledging and consulting the public. Extracted material is not for public use, only to export to foreign countries. The president has made many promises but failed in actions Conference full text report should be in Burmese for ease of dissemination across to government, NGOs etc. Group 4 What s the purpose of a conference related to SWF in a country where there is currently a budget deficit? Not ready for this discussion How has the government responded to variation between UNcomtrade, China and Myanmar government figures? At this conference, there is a lot focus on the development of a fund from oil and gas. How should other resource sectors be considered? How would revenue sharing mechanisms work for resource rich ethnic areas? Is it assumed that there is conflict in oil and gas sector? It s important to take time on this, but how would a multistakeholder engagement process work and at what level? How can we increase SWF awareness and knowledge available to a wide range of people? Group 5 Current discussion on federal matters: Would a fund be set up after the decentralisation of governance or before allocating power to states and regions? How would laws be harmonised for the overall fund rules? What approach to checks and balances by CSOs to avoid the fund going to ex-military holdings? How can government be accountable and transparent? How to control undesirable actions? Need mechanism to check on and take actions against misconduct if ministries failed to follow the rules. Group 6 How to clarify the resources and funds? Considerations of SWF energy, oil and gas, jade or water? Is there a draft SWF plan for Myanmar (policy, collection system for revenues, participation of people)? Group 7 What are the objectives of a Myanmar SWF? How can CSOs can get involved for the entire process? How to select what sectors the fund development is for? What work is the government currently doing on SWF? Group 8 What is the government budget deficit? Is data available? SWF is about natural resources. What of other resources? We should have strong policy. Education and health are long term goals. How to address the short terms goals? Need examples of failure and success stories from other countries which are applicable for Myanmar? Are we going to invest the renewable or non-renewable resources? How do we advocate on this to the MPs in parliament? 29

29 Group work feedback: Day Two People Centred Wealth Funds - Specific Decision Options for Myanmar Group 1: Options for Spending / Saving Balance Public Input to Priorities Of Myanmar s extractives revenues, how much should be saved? Options for saving: Some said we should start saving now, some said not yet. The group voted for 80% spending and 20% saving for as our country has so many areas where we need to fill gaps in different sectors. We should spend the 80% in education, health and other infrastructure that needs to development and also in necessary reforms in the transition period When we talked about the transition period, theoretically we are not in this period yet. We are still at the libertisation stage (just released from restrictions). To get to the transition period, we have so many processes to go through including institutional reform by central government. A lot of ministries have to come up with anti-corruption strategies, looking at the wasted energy and money For the 20 years after 2025, we propose a spending- saving option. But hopefully we can have increased savings at a certain times We may have some questions on what we should spend on. The government is planning to be a candidate for membership of OGP in There are criteria to be eligible for that. If we can meet up the 75% of the criteria as part of it, we have to spend on the improvement in performance of being transparent, citizen budget process If/when we have decentralised or federal system, we might to need to take those savings for budget allocation to State and Region governments. Also the 20% saving considerations are to mitigate the Dutch-disease (potential impacts) in Myanmar, for stabilisation purpose, and to fill up the budget deficit if necessary. health (10%) social protection (10%), crisis resulting from conflicts (10%) infrastructure/tech (10%), environmental protection (5%) and saving (35%). All decision for spending would be prioritised for natural resource extraction areas and the marginalised or poorest communities. Group 3: Options for National Debt Management Loans Process, Scrutiny and Fiscal Discipline How should Myanmar s taking on extra debt and loans be controlled? If we need a loan, there must be analysis of why we need it, in what areas and for what purposes Spending must be in line with the amount of money coming from extractive industries. Priority areas are education, health and communication If necessary, we should go to international lenders. For mega projects, we still need international support for technology and expertise We suggest three committees to control debt management. First, a Scrutiny Committee (government, CSOs, affected community representatives, MPs, national and international experts) to consider the need for a loan Second a Fundraising Committee seeking loans (good interest rate) and debt solutions ( particular ministers, financial consultant, MPs) Finally, a Working Committee for implementation (audit, MPs, ministries, experts and CSO representatives) Before the national debt management process is formalised, a wide public consultation is needed. The principles of Free, Prior and Informed Consent (FPIC) should be in place, to manage EIA, SIA, HIA and policy framework. Group 2: Options for Domestic Spending / Investment - Infrastructure Investment or Social Service How do we better balance social investment compared to infrastructure investment? We would withdraw funds for domestic spending on sectors not included in the National Budget for states and regions 35% of the total fund should be untouched and saved. The remaining 65% would be spent if necessary. We would make sure not to spend if the national budget covered expenditure needs If necessary, we would spend it on: education (20%), Group 4: Options for Maximising National Surplus, Fund Input and Initial Growth Possibilities How can we increase the amount saved now and in the short to medium term? Budget formula: Surplus equals revenue minus expenditure (development infrastructure plus current expenditure). Revenue is calculated from the total of donations and taxation To increase revenue, there must be principles and rules for collecting revenue effectively. 30

30 Group 5: Options for Fund Investment Strategy International / Domestic Balance Should investment of savings be in internationally held savings, or domestic investment? Funds for international investment purposes need saving accounts or to buy bonds Domestic investment strategies must be categorised into short-term (eg: agricultural and livestock sector to be able to boost up the economy) and long term (eg: education and health sectors). Will be identified by potential returns We thought about risk mitigation. We should keep aside some funds in savings and some for investment. We would invest internationally for high returns. We would need strong policy or a fiscal reform process to be able to manage returns from investment We know for certain that there are some risks in investing domestically, since there is no strong governance or policy framework in place in Myanmar. Domestic investments might suffer too much loss if there s economic crisis. Group 6: Options for Fund Investment Strategy International Asset Allocation Criteria What suggestions on balance of stabilisation, pension, reserve and savings priorities? We discussed fund stabilisation issues. The revenue collected from regions and states will differ due to the varying quantity of natural resources It s important to have valid data on this, in a transparent and accountable manner. It should be possible to check data on all the sources that revenue comes from and how it is calculated If there is investment, we need to ensure there are safeguard policies, do no harm policies, mitigation measures, risks management and a monitoring and evaluation process The SWF fund would be categorised into four functions: Pension fund for staff; education fund for human resource development; social protection fund; and a disaster risk reduction fund to compensate losses. Group 7: Options for Governance Models, Public Involvement, Inclusive Representation How can inclusiveness and public input be maximised and governance be strong? What would governance looks like? Public participation: Law formulation process should be drafted with full, meaningful public participation at all levels of society. Consensus needed throughout After finalisation, there should be a central executive team of representatives for the decision making process (ministers, central bank, CSOs (lessons learnt from EITI stakeholder selection) experts, women (30%) minimum. Group 8: Overcoming Transparency and Accountability Challenges How can we best improve transparency and accountability on resource revenues? How to make government accountable? Rights to information law formulation would enable the public to reach information Information should be simple, understandable, clear, available to the public. Should cover how much revenue is received, and how much is spent Reporting channel audits must be accessible Action against misconduct should be taken according to anti-corruption laws which also need to be improved The policy formulation process should include consultation at all levels The mechanism should work for the Myanmar context and not just be an adaptation of international principles Regular meeting on any issues should be set up as a communication channel for multi-stakeholder engagement Government from states and regions should propose prioritised development plans and the support they should receive as decentralisation progresses Open Government Partnership (OGP) approaches may be possible and should progress Audits and reporting should be made public. There must be a mechanism to take action against misconduct 31

31 Concluding Comments From the conference, many key messages and themes have emerged that can be captured in the conference report: As we come to the conference close, we summarise again: We already have requests for running a briefing event for ministers and a similar conference event in Nay Pi Taw and to pass on the outcomes of the conference to decision makers A list of strong and useful messages has been formulated, a range of desired policy directions and list of questions is available for policy makers, the relevant Ministries and others concerning policy to consider. These will be summarised in the conference report. There were very clear messages on public concern regarding debt and the budget deficit that need attention, if there is to be progress on a national savings fund NRGI discussed revenue sharing models and the pros and cons of centralised and decentralised models for revenue distribution. This needs further elaboration work. A decision framework for matching the characteristics of resource revenue flows to the types of social spending desired was considered highly relevant, and could be tailored to Myanmar s situation. Delegates were conscious that some relevant actors are not present, particularly the ethnic groups. It is hoped very much for a ceasefire agreement, allowing commencement of a political dialogue process. Those processes would both allow more inclusive fund discussions. We have guidelines for the desired extent of savings intent (20% of resources revenues to be saved, growing to 30% after 10years, and some desiring 35% from now). elements needed as well as the policy and legal requirements. Mechanisms for public input to the National Savings Policy are considered critical. Many thought provoking questions were raised. A small portion are repeated below: Questions were raised about the existing spending of 55% of the oil and gas revenues from the Ministry of Energy. It was learnt that in most countries this would go to the Ministry of Finance. There were clear concerns about such a small portion of jade export income being recorded in national accounts. The extent of the jade revenues not accessible for national development was considered very alarming, with Myanmar reporting less than 10% of mining exports (NRGI). Myanmar s resource revenues can fund major social programs, if managed appropriately. While some considered it is early days to start a National Savings fund or Natural Resource Fund, the conference and its discussions have highlighted that many changes are needed as preparatory steps. If the objectives of a fund are to be realised, practice changes are needed now, or the potential of a fund will not be achieved. This particularly relates to revenue management, budget surplus and national debt levels. Hearty thank you acknowledgements were made to various people assisting with logistics, including the presenters and the sponsors, without whose assistance the conference would not have been possible. Thanks were also given to the participants, without whose input the conference would not have been a success. Models were discussed for moving forward in legislative work, with Excellency Dr Maung Maung Thein describing the hypothetical steps and Vidar Ovesen summarising the key revenue management 32

32 Appendix 1: Excellency U Soe Thane s opening address Towards People-Centred National Savings Conference Last October in Nay Pyi Taw, at the conference together with the EITI board meetings, I spoke of my interest in a Myanmar sovereign wealth fund and in seeing it established as soon as possible. I asked then for advice on how it might be effectively launched. We have dedicated ourselves to transparent and accountable process. We are implementing the Extractive Industry Transparency Initiative (EITI). I have committed myself personally to do all that is humanly possible to meet the EITI process commitments and deadlines. We have also committed to moving forward with the Open Government Partnership (OGP). Both EITI and OGP need the involvement of civil society hand in hand with government and industry for success. We still have a lot of work to do on this. We know the decisions made today will define success for Myanmar s next generation. We must design our policy with the needs both of our citizens and the future generation in mind. Our planning, finance and resource ministries will work towards these goals. characteristics, while mainstreaming participation and involvement. A goal of EITI is that our 51Million people will know about the revenues of natural resources and how it affects their lives. Our ultimate goal is that future generations will see the benefits of these resources as well and think we acted well for them. I welcome the assistance we are receiving on the decisions and preparations we need to make for a national savings fund. I am very pleased that the public and civil society groups are involved in helping give input at this early stage of the design process. I m sorry I can t be with you today. Be assured that we will have a ministerial briefing on the output of the conference, and we look forward to another event in Nay Pyi Taw. I give you best wishes for a successful conference. I remain eager to be able to start a fund as soon as possible. It s clear that there are many factors we must decide systematically to be able to learn from the experience of others. Let us go step by step towards this goal together. I declare the Towards People Centred National Savings Conference Open! We still have capacity gaps. We are undertaking structured reform in our economy to address dependency on resource extraction and are undertaking SOE reform. We ll have to continue reform so that no conflict in our country relates to resources. This is critical. We know a prosperous and diversified economy values knowledge, creativity and hard work. Along with transparency and accountability, we are promoting these 33

33 Appendix 2: Dr Maung Maung Thein s message Hypothetical agenda for SWF in Myanmar The benefits of a Sovereign Wealth Fund and that Myanmar should benefit more from its natural resources are generally acknowledged. The Myanmar government is giving serious consideration to the set up of a fund. If we are to setup a Sovereign Wealth Fund, National Savings Fund or Natural Resource Fund, what should we do? The four hypothetical key steps will be: 1) gaining the political will, 2) formulating the policy, 3) drafting a law, and 4) implementation of the policy. The idea would need to pass first to cabinet, then to parliament. An extensive awareness campaign to the public would be needed. There are four key policy consideration areas apparent: - 1) the Name - Natural Resources Fund or just an Oil and Gas Fund? 3) How we actually set up a fund? - what % of tax resources? - what % of revenues from extractive industries? - what % from oil and gas revenues? 4) the Investment strategy. Without this it will be a dead fund. Should Investment be domestic or International? How should the funds be used? We should look not only at the financial performance, but also consider social factors and returns. This needs consideration before drafting a law that goes to parliament. Implementation of this may take years. For it we would need a special task force, with specialist consultants. This will not be an easy task, but for the sake of the generation to come and macroeconomic stability, we should give it a try! 2) the Control Mechanism Who will control? In some countries, for example Norway and Russia, the Ministry of Finance controls. In others like Korea and Dubai, control mechanisms are more private. 34

34 Appendix 3: Vidar Ovesen s Legal framework Needs 35

35 Appendix 3: Vidar Ovesen s Legal framework Needs 36

36

37 Inside back cover

38 No 9C (ninth floor) Myaynigone Plaza, Yangon, Myanmar & Mytikyina Office, Sitapru SS-112, Sut Ing Road, Mytikyina