Analysis: Burma’s natural resources curse

Analysis: Burma’s natural resources curse
Zin Linn, Oct 18, 2013

Wealth of oil, gas and mineral resources lies at the heart of continuing civil and economic strife in Burma

Burma (Myanmar) is one of Southeast Asia’s most natural resource-rich countries. It earns billions of dollars yearly exporting natural resources such as oil and gas, teak, gems, and minerals. Sending natural gas overseas is the country’s particular prime source of foreign revenue.

Burma has been exporting gas to Thailand from the Yetagun and Yadana offshore blocks located in Mottama Gulf since 1998 and 2000 respectively. In 2008 BP ranked Burma as the largest gas exporter via pipelines in the Asia-Pacific with gas exports totaling 9.7 bcm in 2007. This made it the 11th largest gas exporter in the world that year, according to the report Burma’s Resource Curse: The case for revenue transparency in the oil and gas sector, issued by Arakan Oil Watch, an independent, community-based, non-governmental organization operating in Burma.

The bulk of profitable resources in Burma, including oil and gas, are unearthed from ethnic states and sold to neighboring countries. Local populations have never been enjoyed the benefits of these deals as the profits wend directly to the military.

Additionally, these states – such as Kachin, Shan, Kayah, Karen and Mon states – have never been repaid for the social and environmental damage that goes with the extraction and export of resources. This remains the main reason behind hostilities between the government and ethnic rebel forces today.

Nobody knows exactly how revenues from the sale of gas resources are spent.  However, it is easy to figure out that government spending for social improvement is stingy, while the military continues to enjoy the lion’s share of  state revenues.

Unfair sharing of resource benefits is also contributing to ethnic conflicts. Although a so-called civilian government is now running day-to-day affairs, the military remains unwaveringly above the law under the 2008 constitution. Many analysts believe that the role of military conglomerates in Burma’s economy and in managing country’s huge oil and gas revenues remains unfettered.

According to the Arakan Oil Watch (AOW), Foreign Oil Companies engaging in Myanma’s oil and gas sector also refuse to publish how much and how they pay the military regime.
The most crucial question surrounding political reform that many foreign governments overlook is the economic monopoly of Burma’s military elite. They have been exploiting the country’s natural resources under the names of the Union of Myanmar Economic Holdings Limited (UMEHL) and the Myanmar Economic Corporation (MEC) while the country’s average population has suffered various social miseries.

President Thein Sein’s reforms hav reached few at grassroots level as farmers and workers struggle to make ends meet and their land and properties are unlawfully confiscated by the military, local authorities and government cronies. As a result, the people are suffering severe unemployment in a country where 5 million unemployed citizens have already migrated to neighboring countries in search of work. Most of these are in Thailand and Malaysia.

(READ MORE: Burma farmers find little relief from land grabs)

Burma remains one of the world’s least developed countries, and was ranked 149 out of 187 countries in the 2011 UN’s Human Development Index concerning health, education and income. Burma was ranked 172 out of 176 of the most corrupt countries in the world by Transparency International’s annual Corruption Perceptions Index in 2012 – fifth from bottom above Sudan, Afghanistan, North Korea and Somalia.

If the President is truly reform-minded, he needs to make sure transparency and first-rate management of the country’s largest source of foreign income – revenues from the export of oil and gas – and cope with military monopoly in the market-based economy. With military involvement in the country’s economy, regardless of good management and sustainable development, the natural resources sector in Burma will draw out the resource curse situation even longer.

In order to control extractive industries’ revenues properly, the government must provide a yardstick for checking the use of those revenues. It’s also necessary to set up a responsible revenue management system. Such a check-and balance system should take the form of a constitutional mandate followed by more specific nationwide legislation that extensively controls the use of the benefits that come out of natural resources.

Although the extractive industries’ foreign earnings are biggest in the country, there has been no revenue transparency under both the previous military regime and the current U Thein Sein government. The government’s credit-and-debit accounts concerning the extractive industries’ foreign earnings are not publicly revealed. The same is true of defense budget spending.

According to the report by the Arakan Oil Watch, billions of dollars in revenues from the sale of natural gas have gone unrecorded in the country’s public accounts and been siphoned off by corrupt military rulers, leaving the nation with some of the worst social indicators in the world and ongoing armed conflicts in ethnic regions.