sustainability impact assessment on the eu-myanmar...
TRANSCRIPT
Civil Society Dialogue on Draft Final Report Tuesday 5th April, 2016
Sustainability Impact Assessment on the EU-Myanmar Investment Protection
Agreement
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
• Context of EU-Myanmar SIA – Data uncertainty
– Focused on IPA
– First stand alone IPA
• Methodology – Qualitative analysis
• Stakeholder consultation
– Quantitative analysis • Modelling
• Key Findings: potential economic, social, human rights and environmental impacts of the IPA
• Timeline
Structure of the presentation
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
• Methodology: Desk research, descriptive modelling and stakeholder consultation (to identify likely variance in sustainability indicators)
– Stakeholder consultation:
Methodology
• 50 face-to-face interviews with relevant stakeholders on the ground in Myanmar
• Civil society dialogues in Brussels in November 2015 and April 2016
• Questionnaire in Myanmar and English (18 respondents)
• Website
Stakeholder Group Number of Respondents inc. interviews and
questionnaire Businesses 18 Civil Society 10
International Organisations
2
Academia/Think Tanks 8 Chambers of Commerce 7
Government 2 Trade Unions 2 Independent Respondent/s
1
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
• A stakeholder workshop held in Yangon on December 17th 2015
Methodology
• 90 attendees from NGOs, government, and business.
• Full workshop report available online, annex II.
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Background: Economic trends
High growth rates, continued economic growth expected • Annual growth rate of 14% p.a. between 2000 and 2013; expected growth 8% p.a.
over 2014-2019 • Myanmar could quadruple the size of its economy from € 41 billion in 2010 to more
than € 270 billion in 2030, creating 10 million non-agricultural jobs and lifting some 18 million people out of poverty expected to transition from low-income to low-middle income economy (IMF)
Rapid urbanisation and emerging consumer class • Urban population to go from 34% in 2014 to 55% (around 32 million people) by
2050 • Expected increase in size and purchasing power of Myanmar’s middle class: from 2.5
million in 2010 to about 16.5 million people by 2030 (mainly urban areas of Yangon, Mandalay and Ayeyarwady regions) domestic consumption could triple, from € 31.8 billion to around € 89.4 billion
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Background: Economic trends Significant FDI increases in recent years… • FDI rose to unprecedented levels in 2015: from € 300 million in 2010 to € 7.4 billion
in 2014-2015 • Myanmar has existing bilateral investment treaties (BITs) with China, India, Japan,
Philippines and Thailand and through ASEAN • Structural and investment climate-oriented reform measures underway
(enforcement uncertain)
…but structural economic problems persist • Foreign investors are still discriminated upon and face barriers (land, certain sectors) • Vulnerability to external shocks • Informal economy/low tax collection rates • One of the lowest GDP per capita levels in ASEAN (€ 999.45 in 2012) • The Kyat, Myanmar’s national currency, has significantly depreciated (inflation),
thus depleting foreign currency reserves • Overreliance on primary (and secondary) sector: Agriculture accounts for 70% of
employment and 40% of GDP, compared to 41% and 12% for ASEAN - low productivity
• Low degree of integration into GVCs
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Background: Economic trends
Source: DICA
0
5000
10000
15000
20000
25000
USD
(m
illio
n)
Foreign Investment by Permitted Enterprises, as of December 31,
2015
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
USD
(m
illio
n)
Foreign investment by partner country, as of December 31,
2015
Source: DICA
EU’s current FDI share
approx. 10%
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Potential Economic trends – questions to ask Can the Myanmar economy cope without increased EU FDI? • Yes, perfectly well (EU is not currently a major investor (@10%)) • Other countries in Asia are investing strongly • FDI generally seen to have a positive economic effect (with some caveats) • Economy has grown very strongly and all signs are this will continue
How important is the IPA for increased FDI from EU countries? • Helps create a level playing field and alleviate some risks of doing business • But other concerns remain (e.g. infrastructure quality, red tape, financial services) • Implications that a successful IPA will not necessarily lead to a rapid rise in EU FDI
Assuming the IPA is successful, in which sectors will the EU FDI be located? • Traditional sectors of agriculture and mining are large but do not connect well • Energy, manufacturing, telecoms and other services are increasingly attractive
Overall effect on Myanmar economy…? • IPA is part of the general opening process of the economy • EU FDI will bring economic benefits, but how much more benefit than investment
that would have taken place anyway is highly uncertain
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Baseline scenario (no IPA): increasing openness of Myanmar to foreign investment leads to a doubling of FDI by 2025, but EU share does not increase any further
IPA Scenarios: assumes that the successful conclusion of the IPA could double the share of EU-sourced FDI into Myanmar by 2025 compared to the baseline (no IPA) scenario
Potential economic trends – modelling results
Recent History Baseline IPA Scenario
2005-15 2015-25 2015-25
EU share of FDI 10 % 10 % 20 %
Myanmar Average Growth ( per cent pa)
Total GVA per capita 4.5 7.3 7.8
Labour productivity 2.7 5.8 6.3
Employment rate 0.5 0.5 0.6
Dependency rate 1.3 1.0 1.0
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Background: Social impacts
Source: ILO, ADB and McKinsey (2013) Myanmar's Moment
0%
10%
20%
30%
40%
50%
60%
Myanmar Thailand Indonesia
Sectoral Employment Shares, 2010 New labour-related laws
Year of adoption
Criminalisation of forced labour 2012
Authorisation of labour unions 2012
Settlement law labour disputes fall within a settlement law
2012
Introduction of compensation for work-related injuries
2012
Minimum wage (differing according to the labour category) has been introduced, including an equal pay clause, making the average salary for unskilled workers reach USD 60-70 per month
2013
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Policy recommendations:
• A robust chapter on labour standards in the IPA.
• Future EU cooperation projects (including through Member States) in Myanmar could address the importance of enforcement of labour standards, inc. through the Myanmar Labour Rights Initiative
Potential social impacts, policy recommendations
Positive impacts Risks
• An increase in FDI from the EU could promote economic stability and growth
• Resulting increases in employment may lead to better living standards and reduced poverty
• EU companies often have a human rights approach in their codes of conduct, which integrate CSR and RBC practices. As a result, better protection for labour standards and human rights could be introduced in Myanmar
• Labour rights issues remain prevalent in Myanmar, EU companies could potentially invest in enterprises with bad practices
• Potential risks appear to be higher in the energy, agriculture and telecommunications sectors
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Policy recommendations:
• A robust chapter on environmental standards in the IPA.
• Complementary measures: direct technical assistance to the Myanmar government and private sector to support better environmental governance (e.g. the Myanmar Sustainable Aquiculture Programme MYSAP), as well as support for multilateral efforts via the UN and other international bodies.
Potential environmental impacts, policy recommendations
Positive impacts Risks
• EU companies may bring high internal environmental standards to their overseas operations and may call on their local suppliers to provide good environmental management as a precondition for commercial engagement.
• Due diligence on the part of EU investors will be key in ensuring that investment is not directed to companies engaging in unsustainable practices.
• In several sectors, such as textiles, food and beverages, there are risks that the scale effect could lead to greater environmental pressures that could outweigh improvements from better environmental management by individual operators.
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Policy recommendations:
• Encouraging due diligence from EU investors, including (for example) analysis of potential human rights issues in supply chains.
Potential human rights impacts and policy recommendations
Positive impacts Risks
• EU companies often have a human rights approach in their codes of conduct, which integrate CSR and RBC practices. As a result, better protection for labour standards and human rights could be introduced in Myanmar
• Human and labour rights issues remain prevalent in Myanmar, EU companies should not be encouraged to invest in enterprises with bad practices
• Investors in sectors where the risk of human rights violations is higher, particularly the extractive industries and agriculture should be especially diligent
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
1. The Myanmar government’s ability to effectively promote and enforce international labour and social standards should be protected.
1. The scope of the provisions on expropriation and fair and equitable treatment (FET) should be carefully limited to protect Myanmar’s right to regulate environmental and social standards
2. The EU should extend the Investment Court System (ICS) to the EU-Myanmar IPA
3. An article expressly excluding the right of companies to claim that Most Favoured Nation (MFN) status entitles them to abide by the same standards as companies operating under IPAs in place with other countries
4. Provisions on sustainable development, including labour and human rights, should not take a selective approach but rather encompass all related issues
5. Objectives of Corporate Social responsibility (CSR) / Responsible Business Conduct (RBC) for European companies operating in Myanmar should be included in the text of the agreement, encouraging companies to hold to similar CSR/RBC practices as are upheld in the EU, tailored to local conditions
Additional policy recommendations I
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
2. The EU should consider what existing mechanisms can be utilised to strengthen social, environmental and human rights implementation by private companies, such as the OECD Guidelines for Multinational Enterprises
3. Ex-post social, labour and human rights impact assessments conducted with regard to this IPA should focus on risks and challenges identified by the SIA team.
4. Considering the weakness of Myanmar’s implementation and enforcement systems with respect to labour and environmental standards, and human rights, capacity building in key areas should be implemented.
Policy recommendations II
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Examples of existing EU initiatives:
– Political dialogues, such as the EU-Myanmar Human Rights Dialogue, (meeting annually since 2014);
– Myanmar Labour Rights Initiative;
– the Multi-Annual Indicative Programme 2014-2020 which includes many relevant EU development cooperation in key areas such as education, rural development, governance, capacity development and rule of law;
– Sector specific projects inc. SMART (support to sustainable garment sector), a project in the Aquaculture sector and the Civil Society Roadmap
Policy recommendations III
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Timeline for SIA project
April 5th Civil Society Dialogue
April 12th Minutes from Civil society dialogue online
April 19th Deadline for comments
May Final Report published online
TRADE2015/B2/B03
SIA on the EU-Myanmar Investment Protection Agreement, Civil Society Dialogue
Discussion and feedback
Feedback can also be submitted via the following e-mail address: [email protected]. Project website: http://www.eu-myanmarsia.com/