Myanmar Extractive Industries Transparency Initiative (Meiti)
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MYANMAR EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (MEITI) FOURTH EITI REPORT FOR THE FISCAL YEAR 2017/18 FORESTRY SECTOR April 2020 This report has been prepared at the request of the Multi-Stakeholder Group (MSG) in charge with the implementation of the Extractive Industries Transparency Initiative in Myanmar (MEITI). The opinion expressed in the report are those of the Independent Administrator and did not reflect the official opinion of the MEITI-MSG. This report has been prepared exclusively for use by EITI Myanmar and must not be used by other parties, nor for any purposes other than those for which it is intended. Neither the authors nor BDO LLP accept or assume any responsibility or duty of care to any third party. TABLE OF CONTENTS INTRODUCTION .................................................................................................................. 6 Extractive Industries Transparency Initiative ............................................................................................. 6 EITI in Myanmar ............................................................................................................................... 8 Objective ...................................................................................................................................... 9 Nature and Extent of our work ............................................................................................................. 9 1. EXECUTIVE SUMMARY ................................................................................................ 10 1.1. Revenue Generated from the Forestry Sector .................................................................................... 10 1.2. Contribution to Myanmar Economy ................................................................................................ 11 1.3. Timber Production .................................................................................................................... 12 1.4. Timber Sales ........................................................................................................................... 12 1.5. Timber Exports ........................................................................................................................ 13 1.6. Comprehensiveness and Reliability of Data ....................................................................................... 13 1.7. Summary of the Reconciliation Results ............................................................................................ 14 1.8. Findings and Recommendations .................................................................................................... 14 2. APPROACH AND METHODOLOGY .................................................................................. 16 2.1. Scoping Study .......................................................................................................................... 16 2.2. Data Collection ........................................................................................................................ 16 2.3. Reconciliation and Investigation of Discrepancies ............................................................................... 17 2.4. Reliability and Credibility of Data Reported ...................................................................................... 17 2.5. Basis and Period of Reporting ....................................................................................................... 19 2.6. Procedures for the Management and Protection of the Data Collected ...................................................... 19 3. NON-FINANCIAL INFORMATION .................................................................................... 20 3.1. Forestry Sector in Myanmar ......................................................................................................... 20 3.2. Legal Framework ...................................................................................................................... 54 3.3. Fiscal Regime .......................................................................................................................... 83 3.4. Budget Process ........................................................................................................................ 86 3.5. Public Finance and Revenues Management Reforms ............................................................................ 91 3.6. Fiscal Devolution ...................................................................................................................... 98 3.7. Revenues Collection .................................................................................................................. 99 3.8. Beneficial Ownership ................................................................................................................ 102 3.9. Audit and Assurance Practices ..................................................................................................... 105 4. DETERMINATION OF THE RECONCILIATION SCOPE ............................................................ 108 4.1. Selection of Payment Flows ........................................................................................................ 108 4.2. Selection of Companies ............................................................................................................. 109 4.3. Selection of SOE ..................................................................................................................... 109 4.4. Selection of Government Agencies ................................................................................................ 109 0 4.5. Fiscal Year............................................................................................................................. 109 4.6. Level of Disaggregation ............................................................................................................. 109 4.7. Other Considerations ................................................................................................................ 110 5. RECONCILIATION RESULTS ......................................................................................... 111 5.1. Forestry Revenues ................................................................................................................... 111 5.2. Breakdown by Government Agencies ............................................................................................. 113 5.3. Breakdown by Taxpayer ............................................................................................................. 113 5.4. Breakdown by Payment Flow ...................................................................................................... 114 5.5. Analysis of Forestry Revenues ..................................................................................................... 115 5.6. Information about other companies .............................................................................................. 123 5.7. Review of Other Accounts .......................................................................................................... 124 6. RECOMMENDATIONS ................................................................................................ 125 6.1. New Recommendations ............................................................................................................. 125 6.2. Follow up of the Previous Recommendations .................................................................................... 132 7. ANNEXES .............................................................................................................. 147 Annex 1: Production of Minor Forest Products (2008/09 to 2017/18) ........................................................... 148 Annex 2: Breakdown of Exports by Product and Destination (2016/17 to 2017/18) .......................................... 149 Annex 3: Employment Data ............................................................................................................ 160 Annex 4: Detail of Production (FY 2017/18) ........................................................................................ 162 Annex 5: Stock balance of Teak and Hardwood (FY 2017/18) .................................................................... 163 Annex 6: Breakdown of Timber Sales (FY 2017/18) ................................................................................ 164 Annex 7: Details of Hardwood species ............................................................................................... 173 Annex 8: Details of Timber seized during the FY 2017/18 by product .......................................................... 174 Annex 9: Contract Templates .......................................................................................................... 176 Annex 10: SEE’s Profit and Loss Statement ........................................................................................ 192 Annex 11: MTE’s Financial Statements ............................................................................................. 193 Annex 12: Payment Flows Description ............................................................................................. 202 Annex 13: Information about other companies ................................................................................... 203 Annex 14: Calendar for Open Tender Sales for the FY 2017/18 (Teak/Hardwood, Logs/Conversions)