Second HyalRoute Fiber Optic Cable Network Project

MIGA is considering providing a guarantee to an international lender (to be determined) for an  investment of up to US$110M of non-shareholder loans (including interest) to Myanmar Fiber Optic Communication Network Co., Ltd. (MFOCN or the Company), a subsidiary of HyalRoute Communication Group Ltd. (HyalRoute), for the construction and maintenance of 4,000 km of underground fiber optic cable (FOC) backbone network (including 3,300 km of direct-buried backbone and 700 km of urban communication ducts) (hereafter referred to as the Project). The Project constitutes stage 2 of phase II of a program comprising a total of 32,000 km of fiber optic network to be deployed between 2012 – 2023 (the Program). MFOCN has also received approval to construct 1000 towers as part of the Program. Phase I entailed the construction of 17,401 km of FOC of the Program which was completed in 2016. Phase II of the Program covers the construction of the remaining 14,599 km. As of March 2018, the Company had completed a total of 23,218 km of FOC. MIGA is also currently guaranteeing stage 1 of phase II which comprised the construction of 4,500 km of FOC of the Program, completed in October 2017.

Construction of FOC involves digging a trench approximately 50 cm wide and 1.2 – 1.5 m deep, laying the FOC and then back filling the trench. In urban areas FOC is duct buried, and in urban outskirts and rural areas the FOC is directly buried. The FOC network includes the construction of two types of ‘core facilities’, where FOC connects to communications equipment: type A (200 m2) and type B (60 m2). Both facilities include a base transceiver station (BTS), electricity transformer, backup generator and an area reserved for telecommunication towers (if required). Type A core facilities will also have an equipment laydown area and accommodation for the maintenance teams. Core facilities have a dual purpose: i) to provide greater capacity for the operators in the telecommunication sector and ii) to improve both outdoor and indoor coverage for service providers. FOC route is designed by the MFOCN’s construction planning department. Designs are completed section by section, and submitted to Myanmar’s National telecommunications authority - Post and Telecommunication Department (PTD) and Local Development Committee (and in some places, the municipal construction management department) for approval. Construction is carried out section by section and each section is typically between 1-3 km long. Construction of a section can take up to 3 months from early engagement of local communities to completion. Construction activities are carried out during September-May period to avoid rainy seasons whereby flooding and rains render construction difficult. Where an area may pose problems (e.g. community reluctance), the Company has considerable technical flexibility in planning an alternative route to avoid a potential problem area.

Environmental and Social Categorization

This is a Category B Project according to MIGA’s Policy on Environmental and Social Sustainability (2013) because the environmental and social (E&S) risks and impacts associated with the Project are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. Key potential E&S issues arising from the Project relate to labor and working conditions (including employee and contractor occupational health and safety), stakeholder engagement and pollution prevention and abatement (including hazardous materials management).

While all Performance Standards (PS) are applicable to this Project, based on available current information reviewed it indicates that the Project will have impacts which must be managed in a manner consistent with the following PS:

• PS1:  Assessment and Management of Environmental and Social Risks and Impacts
• PS2:  Labor and Working Conditions
• PS3:  Resource Efficiency and Pollution Prevention
• PS4:  Community Health, Safety and Security

PS 5 Land Acquisition and Involuntary Resettlement does not apply. The majority of the FOC backbone will be routed within the existing Rights of Way (RoW) along existing public utilities, such as roads, water pipelines and energy transmission and distribution lines. Prior to the start of construction MFOCN will acquire permits from the relevant Government authorities to install the FOC within the existing RoW. Where the FOC has to be installed beneath private land, the FOC will be aligned to avoid physical infrastructure. There has been no physical displacement to date. Any potential damage to crops (temporary, during a period of up to three months when FOC are being installed) has been compensated based on an agreed rate with the participation of the village leaders and the crop owners before any trenching is carried out. The compensation paid to date has been typically 3-4 times the prevailing value of crops on the ground, based on surveyed values from local Government authorities and finalized after being agreed to by affected villagers. Upon completion of FOC installation, land users can resume surface agricultural activities. Land for the core facilities is leased on a willing lessee/ willing lessor basis for a period of no less than 15 years unless otherwise mutually agreed. the Company is in the process of updating land acquisition and compensation procedure to ensure that current practices are accurately documented and it aligns with the requirements of PS 5 (Action #1). 

PS 6 and PS 8 do not apply due the inherent flexibility within the Project to shift the alignment of the FOC route and location of the core facilities to avoid significant impact on biodiversity and cultural heritage. The screening process to ensure that the selection of the alignment and location of core facilities avoids impact on biodiversity and cultural heritage is discussed under PS 1 below. In addition, a chance finds procedure is in place, and will be applied in the event of discovering cultural heritage resources during trenching or construction of the core facilities. In areas with known significant cultural heritage (e.g. Bagan), the Company does not commence FOC work until required clearance and permits from local Government cultural departments have been secured.

PS7 is not considered applicable. Although various ethnic groups exist across Myanmar, the construction and maintenance of the FOC is not expected to result in the transformation, encroachment or degradation of indigenous (or ethnic minorities) lands or associated livelihoods.

In addition, World Bank Group (WBG) Environmental, Health and Safety (EHS) General Guidelines and the Telecommunication guidelines are applicable to this Project.

Due-diligence consisted of appraising the technical, environmental, health, safety and social information submitted by MOFCN as well as any information available online about the Project and the telecommunications sector in Myanmar. A site visit was conducted in January 2018, as part of MIGA’s E&S monitoring mission of the existing stage 1 guarantee which doubled as a due-diligence mission for stage 2. The mission included meetings with representatives from MFOCN, one of its construction contractor (MCNC) and one of MFOCN’s customers. The mission also included visits to MFOCN main office, Yangon storage facility, one type B core facility, a recently completed section of the FOC, a section under-construction, MFOCN and MCNC worker accommodation.

The following documents were reviewed by MIGA: Initial Environmental Examination - 1000 Telecommunication Towers and 32,000 km fiber optic cable backbone national network project, Myanmar. ENVIRON September 2015 and updated version March 2017; MFOCN’s environmental and social management system related documents including but not limited to MFOCN’s E&S policy; Health, Safety, Security and Environment (HSSE) management system; training plans; emergency contingency plan, grievance mechanism, annual monitoring report, among others.

PS1:  Assessment and Management of Environmental and Social Risks and Impacts

Identification of Risks and Impacts and Management Programs: An Initial Environmental Examination (IEE) was completed for the entire FOC backbone Program in Myanmar in July 2015 and updated March 2017 in accordance with Myanmar’s Environmental Conservation Law, 2012 and Draft environmental impact assessment (EIA) Procedure, 2014 and approved in December 2017. As per the local regulations, a full environmental and social impact assessment (ESIA) was not required for the Program and the IEE together with the appended environmental management plan (EMP) was deemed adequate to identify potential E&S risks and mitigations. As the specific location of the RoW and core facilities will keep expanding and is unidentified until new sections and exact routings are determined, the EMP provides a framework to avoid, minimize or mitigate potential environmental impacts likely to arise during installation and maintenance. Overall the IEE and EMP adequately assess the risks and impacts of the Project and if implemented properly the EMP adequately mitigates the impacts.

As a result of MIGA’s involvement in stage 1, MFOCN has updated its environmental and social management system (ESMS) to be in line with PS 1 and commensurate to the nature and scale of the Project. MIGA has reviewed and provided comments on the revised ESMS, and MFOCN is in the process of further improving the system to ensure compliance with MIGA’s requirements. MFOCN is also currently developing mechanisms to support implementation of the ESMS such as standard operating practices, work instructions and reporting templates (Action #1)

Prior to the start of construction of each section, the proposed route is surveyed by MFOCN surveyors. During construction, MFOCN’s supervisors monitor work quality compliance of the contractors.  In addition to technical considerations, surveyors record E&S constraints along the route, and when required, the route is altered to avoid areas of concern. Surveyors use MFOCN’s technical standard for design and construction to determine the appropriateness of a proposed route. The technical standard includes specifications on the minimum distances to be kept from structures (property line), trees and utilities. The technical standard has been updated to include additional E&S considerations such as ecologically important habitats (protected areas, wetlands) and physical cultural resources and implementing documents will be prepared (Action #2).

Organizational Capacity and Competency: MFOCN has appointed one person to be the E&S coordinator, responsible for implementing the Company’s E&S management system. In addition, MFOCN is in the process of contracting the services of an E&S consultancy firm to assist in the review and implementation of the ESMS. The consultant will also provide capacity building to the E&S coordinator and training of construction managers and supervisors whose role will be expanded to include monitoring of health, safety and environmental aspects (Action #1).

Monitoring and Review: Day-to-day monitoring is undertaken by construction supervisors. There are 23 construction supervisors, each is assigned a district and is responsible for all construction within that district. Supervisors have received environment, health and safety training. MFOCN is also required to submit semi-annual monitoring reports to the Ministry of Natural Resource and Environment Conservation as per the IEE conditions of approval and an annual monitoring report to MIGA.

PS2:  Labor and Working Conditions

MFOCN employs 395 full-time employees. All employees have an employment contract that is in line with Government of Myanmar Labor laws which also includes relevant aspects of PS2. The employment contract amongst others includes specifications on remuneration, work hours, overtime, leave days, medical treatment, resignation, dismissal offenses and freedom to unionize. The Company restricts employment to those aged 18 and over.

The Company has put together a grievance mechanism procedure for employees and an employee handbook which describe employee rights and obligations including those related to anti-discrimination and equal opportunity. The Company’s policy is to respect any employee’s wish to set up or join labor unions.

MFOCN provides accommodation to both its local and foreign employees. In Yangon and Nay Pi Taw, Company accommodation is optional. In remote areas, where there is need to have maintenance teams on standby, accommodation is included within type A core facilities. At other locations, the Company typically rents local concrete-structured village houses as temporary staff quarters, and as the team on the ground moves from one section to the next, identifies new village houses to rent. Contractors also rent similar village houses for their technical and supervisory employees.

Before a contractor starts work, the Company provides an upfront advance lump sum payment so that the contractor is able to buy food and other supplies and set up labor camps. Contractors also buy local materials (e.g. rattan; wood logs; etc) and use these to set up temporary worker sheds for its laborers. These camps are assembled, disassembled and re-assembled at the next worker camp location as the contractor team moves from one section to the next every few months. The Company will explore options to improve and standardize labor camp accommodation standards (Action #3).

At peak construction, there may be between 8,000 to 10,000 laborers hired by the main contractor. Laborers are engaged through consultation with the village head. The village head is given criteria including must be over 18 years of age. Wages are also negotiated with the village head, but the contractor ensures that all laborers are paid above the minimum wage. Wages and work conditions are not written down and laborers do not receive a written contract.

The nature of the FOC construction work is such that occupational health and safety risks are limited – potential risks are physical in nature (e.g. cables dropping on and injuring workers’ feet/ hands), electrical at core facilities, working at heights if towers are required and minimal risks of chemical, biological or hazardous material exposure. Overall, the main risk is anticipated to be car accidents as much of the work is undertaken adjacent to roads. To date, there have been no lost time accidents or fatalities as recorded by the Company.

Given the geographic spread combined with the large number of workers represent a significant challenge for the management of labor and working conditions among contractor staff. MFOCN has updated its agreements with key contractors to include terms regarding labor and working conditions. MFOCN will monitor compliance with those terms, and will seek if non-compliance is identified. MFOCN will work with contractors to improve human resources such as ensuring that there are written contract for laborers (Action #4) and that the grievance mechanism is extended to contractors; and improve occupational health and safety practice such as ensuring provision and enforcement of appropriate personal protective equipment and HSE training (Action #5).

PS3:  Resource Efficiency and Pollution Prevention

Resource efficiency and pollution impacts associated with the Project are fairly minor. Trenching and backfilling of the FOC creates a small amount of spoil which is typically distributed near the site. Most solid waste is returned to the supplier or sold to secondary users. Remaining solid waste is disposed of in municipal landfills. The key potential pollution issues are associated with hazardous materials handling, storage and disposal (i.e. diesel, waste oil and lead-acid batteries). Hazardous materials are appropriately stored. As part of its ESMS, MFOCN will implement standard operating procedures for management of solid waste and management of hazardous materials and waste.

The main source of air emissions is from internal combustion engines (of vehicles and power generators). Consumption of grid electricity and water by MFOCN operations and facilities is insignificant. Annually about 4.8 million liters of diesel oil is used in mobile vehicles, construction machinery, and in backup generators at MFOCN Project sites. The Project’s annual greenhouse gas emissions attributable to the use of diesel oil is estimated at 13,000 tCO2e.

MFOCN has developed procedures for resource efficiency and pollution prevention during construction and maintenance of the FOC and core facilities, these will be revised and complemented by standard operating practices/ work instructions for effective implementation by Contractors (Action #6).

PS4:  Community Health, Safety and Security

Potential impacts to community health, safety and security will be highest during construction due to increased traffic movement of both light and heavy vehicles along densely populated roads. MFOCN has a vehicle management plan that prescribes minimum requirements on vehicle condition and safe driving practices. To date, no known work-related traffic accidents have transpired. Project activities during operations present minor risk to communities. MFOCN does not currently and has no plans to employ security personnel.

As part of its due diligence process, the Company undertakes background screening (by checking with government officials; village heads; and by scanning publicly available information) to ascertain that a potential construction area: i) does not fall under an area controlled by armed groups where potential security risks cannot be mitigated through good faith discussions/agreement with leaders of the armed groups; and ii) is not potentially land mined. Where a site might fall into such an area, the Company would explore alternative routings by going around the identified problem area to minimize risks. The Company has updated its ESMS to formalize procedures on identifying and removing landmines and unexploded ordnances and staff have been trained in the implementation of the procedure.

MFOCN has obtained the following permits:

• Ministry of Natural Resource and Environmental Conservation Approval and Comment in reply to the revised Initial Environmental Examination Letter.
• Investment Permit from the Myanmar Investment Commission which was provided after screening MFOCN’s proposal by a team composed of relevant Government Authorities, including Ministry of Environmental Conservation and Forestry (MOECAF)
• Approval letter for FOC network construction from the Ministry of Communications and Information Technology (MCIT); and
• Network Facilities Service (Class) License from the MCIT.

MFOCN regularly engages with stakeholders. Stakeholder groups include Government agencies, regional authorities, Non-Governmental Organizations (NGOs) active in Myanmar, local communities in the proximity of the FOC route and telecommunication operators.  As part of the Company’s due diligence process, before entering a new area, it would initiate a community engagement process, which involves initially finding out about local sentiments towards the project by talking with local village leaders and government officials, and estimating crop compensation values. This is followed by community meetings during which the project would be introduced to villagers and information pamphlets handed out. During the same meetings, MFOCN would further gauge local sentiments, initiate discussions about crop compensation for temporary RoW, and solicit community feedback and concerns about the Project. Where concerns are raised, Company and contractor representatives would walk through proposed RoW areas with community members to clarify exact route locations, and discuss and resolve potential issues. The above engagement aims to reach agreement with villagers regarding the Project, without which the Company’s policy is to not proceed further and to seek an alternative route. After commencement of FOC work in an area, local engagement continues and the company would mainly consult with village leaders and local government officials from time to time to identify any ongoing problems and to resolve them in a timely manner. People along the RoW are given MFOCN and the contractor’s contact information, primarily in case someone intends to do some construction / digging near the trench or if someone accidentally hits the cables during construction. Concrete markers along the RoW also include the contact number for MFOCN. If after installation, a particular location needs to be dug up to repair or maintain underground cables, affected villagers and local village leaders would be consulted first. The Company is currently formalizing its stakeholder engagement and grievance management approach by documenting the above into formal procedures, and incorporating these into the overall ESMS (Action 1).

MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.

In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.

Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.

Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:

Compliance Advisor/Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Room F11K-232
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
E-mail: cao-compliance@ifc.org

The following documentation is available electronically as PDF attachment to this ESRS at www.MIGA.org:

• Initial Environmental Examination – 1000 Telecommunication Towers and 32,000 km Fiber Optic Cable Backbone National Network Project Myanmar – March 2017

For additional information, please contact:

• Mr Lin Chao Hsiang (Roye), PR Department  lin.chaohsiang@mfocn.com.mm
• Ms. Li Xuan (Sarah), Legal Department li.xuan@mfocn.com.mm

Mr Stanley Jiang, Project Coordinator stanley.jiang@hyalroute.com