FDI Could Worsen Burma’s Ethnic Strife, Forest Loss: Report

By Paul Vrieze & saw Yan Naing 21 February 2013

The rise in foreign investment in Burma’s resource-rich border regions risks exacerbating ethnic conflict and environmental destruction, according to a new report, which warns that investment in the areas should be well-planned and benefit ethnic communities.

The report “Developing Disparity: regional investment in Burma’s borderlands,” by the Transnational Institute and the Burma Centre Netherlands, said Burma’s reforms are helping to rapidly integrate it with the burgeoning regional economy and the country’s ethnic areas are likely targets for foreign businesses.

“Foreign investment in these resource-rich yet conflict-ridden ethnic borderlands is likely to be as important as domestic politics in shaping Burma’s future. Such investment is not conflict-neutral and has in some cases fuelled local grievances and stimulated ethnic conflict,” said the report, which was released on Thursday.

Burma’s official foreign direct investment (FDI) figures, although unreliable and incomplete, indicate a sharp rise in FDI, jumping from US $330 million in 2009/10 to $20 billion in 2010/11 and $4.6 billion in 2011/12, according to the report. China and Thailand are the largest investors followed by South Korea and Hong Kong, researchers said, adding that Japan is also becoming a major investor.

This growing regional investment could lead to economic growth and improved living standards for the majority Burmese and ethnic minorities, the report said. It warned however, that “the country has yet to develop the institutional and governance capacity to manage the expected windfall,” adding that “foreign-funded mega projects have not, to date, benefited local communities.”

The report said investors from Thailand and China have a long history of exploiting Burma’s border regions, in such a way that “natural resources are being extracted at low costs and large profits for Chinese and Thai companies and authorities, with very little reinvested into the area.”

The long-time Burma researchers draw on dozens of documented cases of local and foreign investment in ethnic areas in recent years, to show that the projects often lead to environmental degradation, resource-grabbing, militarization of investment areas and tensions with ethnic communities that lose resources to outside investors.

“[T]here need to be new types of investment and processes of implementation. The government should direct investment towards people-centered development that benefits household economies,” researchers said.

President Thein Sein’s spokesman Ye Htut was contacted over the reports’ conclusions but he was not immediately available for comment.

TNI and the Burma Centre Netherlands said there needs to be genuine political dialogue between the central government and armed ethnic groups over how the border regions’ rich resources—such as mineral wealth, timber and hydropower potential—could be exploited in an equitable way, with input from local communities.

Although most ethnic militias currently have ceasefires with the government, the report warns that this situation offers no guarantees that the sides would come to agreements on investment projects in the border regions.

Researchers said the 17-year-long ceasefire in Kachin State had given rise to massive timber logging, an increase in resource-grabbing by locals and outsiders and differences between Kachin rebels and the government over Chinese-backed hydropower dams.

The latter disagreements reignited the Kachin conflict in June 2011, which has since escalated and displaced about 100,000 civilians in northern Burma.

“These experiences provide important lessons about the relationship between the changing dynamics of conflict and the role of foreign business interests that are relevant for the current ceasefire process,” the report said.

In Karen State, ethnic rebel groups and Karen civil society organizations have long expressed concerns over resource grabbing by Burmese firms that ride roughshod over the rights and interests of local Karen communities.

“Some Burmese companies cleverly seized the land belonging to villagers. They forced land owners to accept cheap land prices,” said Saw Htoo Klei, the secretary of the Karen Office of Relief and Development, an NGO that assists villagers in Karen rebel-held areas.

He said that same concerns apply for future foreign investment in Karen State, which is likely to become an important “economic corridor” due to its location between central Burma and northern Thailand.

“We are worried about land confiscation as it has often happened in the past,” Htoo Klei said. “Most Karen villagers are farmers and work in agriculture. So it is hard for them if they lose their land.”