Managing FDI for Sustainable Development in Myanmar
Foreign Direct Investment (FDI) in Myanmar’s natural resource base (oil, gas and mineral resources including gems) is rapidly growing and presents an economic opportunity for the country. To ensure sustainable development it is important for the Government of Myanmar to manage FDI in the natural resource sector so that it is socially inclusive and environmentally sustainable. Unfortunately, not all investments work toward the goals of sustainable development and can result in the depletion of natural resources, poor working conditions and few in-country economic benefits (IIED).
One of the tools available to regulate FDI is through International Investment Treaties (IITs), which can be signed multilaterally or bilaterally between states. Developing countries sign IITs to attract foreign investment. An IIT is a legal instrument governing the terms of the FDI, including dispute settlement mechanisms. Depending on the wording and content of the IIT it can impact a broad range of government measures and public policy, including but not limited to:
- Environmental restrictions on the manner in which mining can take place
- Requirements for environmental impact assessments
- Regulations governing health insurance
- Regulations aiming to improve the economic situation of minority populations
IITs are an important component for governments to consider as they aim for pro-poor environmental sustainability and can have a significant impact on government policies over time. In Myanmar’s context, substantial reforms are underway and national legal and regulatory frameworks are expected to change substantially over the coming years. With rapidly increasing FDI in the natural resource base, now is an important time for the government to consider its options and the binding and enforceable commitments it may be making when signing IITs.
Responding to a request from the Government of Myanmar, the UNDP-UNEP Poverty-Environment Initiative (PEI) together with the International Institute for Environment and Development (IIED) and the International Institute for Sustainable Development (IISD) organized two capacity building events focusing on IITs for Government partners in June 2014. Invitees from nine ministries and the parliament met to deepen understanding of IITs and the ways in which they link to sustainable development. Focus was placed on the potential costs and benefits of IITs for Myanmar.
A key message that emerged from the events was that Myanmar must decide what its policy objectives are in signing IITs. In light of current government reforms, careful consideration must be given to the protections and rights that will be granted to foreign investors and the liabilities or policy restrictions that the signing of IITs may imply, in particular within the context of the natural resources sector.
For more information on IITs and sustianable development see: