Burma’s paradox of plenty

Military and crony interests remain closely aligned with large-scale extractive projects in Burma. As the country emerges from junta rule and economic isolation, Burma is treading a rocky developmental path.

Hanna Hindstrom
16 August 2013

Nestled beneath the mountainous arcs of India and China, Burma stretches 1,200 miles south across the Bay of Bengal and Andaman coast – a commercial conduit between the West and Far East. Over years of military rule, the country became the focus of its energy-hungry neighbours, including China and Thailand, keen to exploit its vast reserves of natural wealth and strategic location. Now western countries have joined the race, jostling for a foothold in Southeast Asia’s ‘final frontier’. But who will reap the fruits of Burma’s riches?

In late July, a new gas pipeline, which carves through Burma’s tumultuous ethnic minority regions to western China’s Yunnan province, began pumping shipments of gas from the Bay of Bengal. A twin oil pipeline, due for completion next year, will allow China to bypass the hazardous Strait of Malacca, which currently channels up to 80 per cent of its oil imports, and is vulnerable to piracy and US-led naval blockades.

The deal, inked between the former military regime and the state-owned China National Petroleum Corporation (CNPC), is expected to earn Burma US $1.8 billion annually. But the construction of the 793km pipeline, known as the Shwe Gas project, has displaced thousands of villagers, fuelled rapid deforestation and robbed farmers and fishermen of their livelihoods. Only 2 billion cubic feet of gas has been earmarked for domestic consumption, as opposed to 12 billion for China, even though nearly three quarters of Burma’s population live in darkness.

Activists say the project should be put on hold until Burma, which is emerging from five decades of iron-fisted junta rule and economic isolation, introduces serious regulatory reform and transparent revenue-sharing mechanisms. Most of Burma’s resource wealth, including gems, timber, minerals, oil, and offshore natural gas reserves estimated at 10 trillion cubic feet, are found in its volatile border regions. Although the extractive sector accounts for nearly 40 per cent of its export earning, Burma is by far the poorest country in Southeast Asia.

The Shwe gas project has already been blamed for inflaming ethnic tensions from western Arakan state to the north-eastern Shan plateau. En route to China, the pipeline lacerates territories held by ethnic Shan and Kachin rebels, who are fighting the government for greater autonomy and rights. It raises serious security concerns for both the pipeline and local populations, especially as the army steps up operations nearby. It also risks rekindling conflicts with rebels, who say the army has fleeced their lands for decades, leaving contaminated rivers and decapitated mountains behind.

Yet extractive contracts drafted by the military junta continue to be honoured by the incumbent pseudo-civilian regime, which came to power in a deeply flawed 2010 election. Companies are not obligated to carry out environmental and social impact assessments or consult with locals, let alone respect the principle of free, prior and informed consent. It is not uncommon for rural villagers to learn of a new project as the bulldozers roll in to raze their homes.

Earlier this year, a global study on natural resource governance ranked Burma the least transparent country in the entire world, citing reports of rampant corruption, mismanagement and dysfunctional laws. Another report, by the Shwe Gas Movement, recently warned that any new foreign investment is likely to fuel abuses unless “major shortcomings” in Burma’s decrepit legal system are addressed.

Even new laws – introduced since the nominal end of military rule in March 2011 – authorise the arbitrary confiscation of land from farmers, while criminalising the right to protest “without permission”. In Arakan state, where the pipeline starts, ten protesters face prison for staging a peaceful but unauthorised demonstration, after their requests for permission were repeatedly denied. These cases are not isolated. Across Burma, civilians have been charged for holding “unlawful” protests against large-scale development projects. In July, an activist was sentenced to eleven years in jail for protesting the expansion of a notorious Chinese copper mine in Monywa, central Burma.

It follows a controversial government investigation into the military-backed venture, which ruled that the project could not be “unilaterally” suspended, although it recognised that locals had been forcibly evicted from their homes without compensation. The report drew particular ire from locals for refusing to hold police accountable for using phosphorus in a bloody crackdown on peaceful anti-mine protesters in November 2012, leaving dozens of Buddhist monks severely burnt. In fact, democracy icon Aung San Suu Kyi, who led the investigation, later warned that anyone who continued to protest “without permission” would be arrested in accordance with the law.

An independent analysis of the report, conducted by the Asian Human Rights Commission, concluded that the investigation’s mandate had been “primarily” concerned with the interests of the state and its economic relationship with China. In other words, the government had prioritised its own geopolitical agenda over domestic welfare or justice. Following some cosmetic changes to the current contract – including reallocating more revenue shares to the notoriously secretive regime in Naypyidaw – the project is slated to re-open in the next few weeks.

Military and crony interests remain closely aligned with large-scale extractive projects in Burma, with credible reports that large chunks of profits are redirected into offshore bank accounts. A parliamentary investigation into land grabs ruled in July that less than 10 percent of nearly 100,000 hectares of land confiscated by the junta would be returned. This carries enormous ethical implications for western companies, who are quickly lining up to carve a slice of Burma’s natural wealth. An offshore oil and gas tender launched in April attracted bids from a number of American and European firms, including Shell, ConocoPhillips, ExxonMobil, Statoil and Total – of which the latter remained active in Burma even after the introduction of European sanctions in 1996.

Nonetheless, Naypyidaw has made strenuous efforts to assuage western predilections for “responsible investment”. Last year, Thein Sein pledged to join the Extractive Industries Transparency Initiative – a global standard that requires the government and companies to disclose all natural resource revenue payments. But to date, the regime has only completed two out of five steps required to become a candidate country - failing most prominently, and perhaps tellingly, to develop an inclusive multi-stakeholder working group that represents civil society across Burma’s ethnic groups.

Meanwhile, the US (which, to its credit, is the only country to impose reporting requirements on companies looking to invest in Burma) recently extended a ban on gem imports, citing concerns about ongoing abuses in resource-rich minority regions, including Kachin state. This, along with the military’s track record of trampling on civil society voices and siphoning off public funds, should be enough to persuade investors to proceed with caution. Burma may have opened for business, but we still don’t know at what cost.

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