Burma on the move

Seven years ago, the government of Burma (Myanmar) started to move the main offices of the civil and military bureaucracy from Yangon north to Nay Pyi Taw. Travelers can take a morning return flight from Yangon. During the rainy season, when flight schedules become unpredictable, the safer recourse is the road.

A 201-mile, four-lane divided tollway connects the two cities. At Mile 115, a rest camp offers travelers a choice among several shops serving food and selling staple provisions—and access to the only bathroom facilities between the two points. Business on a Sunday mid-afternoon was brisk, with buses unloading passengers bound for Nay Pyi Taw or the nearby town of Pyinmana.

Traffic is still relatively light. On a weekday morning drive back to Yangon, we overtook about a dozen 4-wheeled vehicles during the entire stretch of the 4-hour tollway trip. The traffic is bound to increase. The government remains highly centralized. Nay Pyi Taw (“site of the royal country”) is the indispensable stop for diplomats and any organization whose business requires government authorization.

On my first trip to Nay Pyi Taw in 2007, the relocation, officially announced in July 2006, had only started. The government had built staff housing, appropriately differentiated to reflect rank, but many officials had not yet moved their families from Yangon. Five years later, all of the ministries had constructed their own monumental buildings and the infrastructure of shops and schools supported a new community.

Nay Pyi Taw now has its own mall, with a supermarket, restaurants and movie theaters. A number of hotels have opened for business and a couple are still under construction. Residences rival those in Manila’s gated communities. The government had also built a slightly smaller version of the Shwedagon Temple in Yangon, affirming the capital’s connection to the country’s precolonial history and traditions.

More impressive than infrastructure as a sign of the changes taking place in Burma is the emergence of young leaders at the highest level of government. Those whom I met struck me as competent, committed, and confident. They recognized that their country still faced many serious problems. They also knew that they had a narrow window of opportunity to undertake fundamental changes and appeared determined to seize the moment, and they were willing to learn from the experience of others.

Last week, Burma convened a meeting on the mining industry. Some 300 participants reportedly showed up, among them foreigners and Filipinos engaged in the extractive-industries sector in the Philippines. While known to be rich in mineral resources, the Philippines is not the only deal on offer, and Burma clearly intends to join the game.

Our Burmese colleagues were aware of the discussions in the Philippines on a regulatory framework that would promote the sustainable development of the mining industry. We talked about the research that the Asian Institute of Management’s Policy Center is conducting on the sharing of benefits from mining operations between the state and private investors.

For President Aquino’s recent State of the Nation Address, the research staff had supplied the note that the government received only 9 percent of the P145 billion generated by mining activities. The bulk of government collections comes from income taxes, more easily collected from the corporate, large-scale mining sector. The government would receive more if it could more effectively collect taxes from the small-scale mining sector.

The Policy Center’s research is also looking at firm-level costs and benefits. Corporate financial results—and company contributions to government—can differ because of many factors: the kind and quality of their mineral deposits; the scale and efficiency of their operations; the stage of their life cycle. A company could be paying as much as 20 percent of its revenues to the state.

As it is opening up its own mining industry to private investors, the issue of benefit-sharing is also crucial for Burma. Those I talked to seemed to appreciate the need for the equitable sharing of mining benefits between the state and private capital, between the national government and local government units, and between the current and the future generations of citizens.

They acknowledged that the benefits from mining did not come only from the direct company payments to the state. The funds companies pay their suppliers and employees and their corporate social responsibility expenditures also boost the economy of mining communities. But they were also concerned about the environmental costs that come with mining operations. As mines have a finite, productive life span, they realized that the state must try to maximize their share of the benefits they bring.

Throughout its history, Burma has suffered its share of natural and political calamities, and survived. It now values and wants foreign investments, but not at any cost. Potential investors now lining up to enter Burma should be prepared for some tough negotiations.

Edilberto C. de Jesus is president of the Asian Institute of Management.