Burma’s Extractive Industries Not Digging Deep Enough with Reforms: Report

By Andrew D. Kaspar 17 July 2013

RANGOON — Burma’s extractive industries remain plagued by transparency and governance shortcomings, a watchdog said on Wednesday as it released a report attempting to dampen the hype that has surrounded the country’s opening up to foreign investment after decades of isolation and economic stagnation.

The report by the Shwe Gas Movement pummeled the existing regulatory regime as woefully inadequate to address the social and environmental concerns facing Burma as its resource bounty is put up for auction, and said that pending major policy changes, further extractive projects “should be put to a halt.”

With Burma’s large untapped oil and natural gas reserves—and a new foreign investment law that has welcomed firms from abroad—the Shwe Gas Movement urged policy makers to handle newfound interest in the sector responsibly.

“Despite taking superficial steps towards reform, encounters with local populations show that little substantial change in terms of extensive environmental degradation, human rights, and government transparency is actually being witnessed on the ground,” the report said.

The group urged an overhaul of Burma’s legal and regulatory frameworks, including amending the 2008 Constitution to enshrine guarantees on freedom of expression and assembly.

A law forbidding unregistered protests was used in April to arrest and charge 10 people in Arakan State who were speaking out against the Shwe oil and gas pipelines, a project that served as the impetus for the Shwe Gas Movement’s founding. That law, and others that have been used in Burma to stifle dissent, hamper the ability of affected communities to have a say in resource extraction issues, the watchdog said in the report.

Many of the proposed reforms would require engagement from Parliament and the administration of President Thein Sein. Wong Aung, coordinator for the Shwe Gas Movement, said he thought most lawmakers saw the need for the changes recommended in the report, but were not collaborating sufficiently with many of those most affected by the country’s troubled extractive industries.

“They need to engage more with the various stakeholders like the ethnic communities, ethnic leaders and other political stakeholders in various parts of the nation,” he told The Irrawaddy. “It’s really important.”

Ethnic communities concentrated in Burma’s border areas are often disproportionately affected by extractive practices, because most of the country’s remaining natural resources are also located on the fringes of the country. Wong Aung said a desire to secure access to those resources was one factor driving a government push to reach ceasefire agreements with armed rebel ethnic groups nationwide.

Environmental and Social Impact Assessments (EIA/SIA), mandatory in many countries before any project with potential effects on people or the environment is undertaken, are not required under Burmese law. Legislation containing mandatory assessments may be enacted “in the near future,” Wong Aung said, but added that he worried the law might not contain strong enough provisions on public disclosure of EIA/SIA findings.

Another recommendation made by the report advises that Burma join the Extractive Industries Transparency Initiative (EITI), a global standard on transparency in the sector that Thein Sein says his government is actively working to join.

The Shwe Gas Movement said Wednesday that despite the president’s stated EITI ambitions, the sector remains far from meeting the initiative’s governance and regulatory requirements.

The opacity of accounting for resource revenues has helped foster military entrenchment in the extractive industries, according to the report. It pointed to state-owned Myanmar Oil & Gas Enterprise (MOGE) as a primary vehicle through which revenues end up in the military’s pockets.

In May, Revenue Watch Institute ranked Burma dead last among 58 nations evaluated for resource governance, receiving an average score of just four out of 100 across four aspects of the industry assessed.

Burma’s natural resource endowment is substantial, including more than 8.1 trillion cubic feet of proven natural gas reserves and nearly 490 million tons of estimated coal reserves, according to a June report by the Asian Development Bank (ADB) and the consultancy Accenture. The country has 37 oil blocks in operation, with 66 more having been offered up over the last two years, the ADB report said.

Last year Burma’s government took in US$3.5 billion in natural gas exports alone, and that revenue is expected to grow in the coming years.

Shwe Gas Movement was formed in response to work on the dual Shwe oil and gas pipelines in Arakan State. China National Petroleum Corporation (CNPC) has been widely criticized for its handling of the project, accused of forced evictions, inadequate compensation and environmental degradation as it laid the 800-km pipeline, which passes through 21 townships across Burma before terminating in China’s Yunnan Province.

The pipelines have already been constructed and are now undergoing testing, but Wong Aung said oil and gas was not expected to start flowing from the Bay of Bengal until early next year because work on the Chinese side of the border remained.

Chinese companies are the largest investors in Burma’s extractive industries, and their operations have frequently faced protests from local communities. As public discontent has mounted, Chinese executives have sought to assuage the concerns, with some implementing social programs in Burma that have included the provision of schools and medical facilities. Representatives from Chinese companies and the government held a press conference earlier this month at the Chinese Embassy in Rangoon, where they sought to convey their work in the country as mutually advantageous.

“The current Chinese investments in Burma are very important investments for the two countries—these are very beneficial for the development of the countries,” China’s Economic and Commercial Counselor Jin Honggen said.

This week Burma’s government said the Chinese firm Wanbao would renegotiate its contract for the controversial Letpadaung copper mine in Sagaing Division, with a new deal—which has not yet been signed—giving the government a 51 percent share of profits from the venture. The government receives no share of profits under the current contract, which splits earnings between Wanbao and the Burmese military-owned Union of Myanmar Economic Holdings Ltd (UMEHL).

Gao Mingbo, a Chinese Embassy spokesman, told The Irrawaddy that “the Chinese side keeps close contact with the Myanmar side regarding the implementation of bilateral projects.”

“The Embassy has always asked the Chinese companies to strictly follow relevant laws and regulations in Myanmar,” he wrote in an e-mail. “On the other hand, we are happy to see that the Chinese companies have over the past few years stepped up their efforts to fulfill their social responsibilities.

“We would also like to see further outreach efforts by relevant companies to better engage the local community so that the Myanmar public will have a more comprehensive understanding of the win-win cooperation projects between our two countries.”