Burma's Opaque Energy Sector Needs to Come Clean

By The Irrawaddy 30 June 2012

For more than two decades, Burma’s former ruling generals relied heavily on the country’s energy sector to keep themselves in power. Even after a year of much-heralded reforms, however, their grip on this key source of national revenue remains intact. This has to change—and it’s up to would-be foreign investors to ensure that it does.

During her just-concluded trip to Europe, opposition leader and democratic icon Aung San Suu Kyi singled out the state-owned Myanmar Oil and Gas Enterprise (MOGE) for criticism, saying it lacked transparency and accountability. Speaking to foreign leaders, she urged them not to allow their country’s companies to form joint ventures with MOGE until it improves its business practices.

As she rightly pointed out: “Lack of transparency leads to all kinds of suspicions that shore up trouble for the future.”

Indeed, Burma’s oil and gas projects have already attracted more than their fair share of “trouble”. They have long been associated with a range of human rights abuses and have well-earned reputation for high-level corruption. Billions of dollars in earnings that belong to Burma’s people have mysteriously disappeared, siphoned off into overseas bank accounts or the bunkers of top-ranking generals.

To address these issues, the new nominally civilian government in Naypyidaw must move to end the era of murky transactions that have characterized the former junta’s way of doing business with the world. As Suu Kyi told the annual conference of the International Labour Organization in Geneva on June 14, “The [Burmese] government needs to apply internationally recognized standards such as the IMF code of good practices on fiscal transparency.”

But this will only happen if Burma’s new international partners put principles before profits. The temptation to do otherwise will be strong, however. At a recent investment conference in Rangoon, Burmese officials announced that the international bidding process for 25 offshore oil and gas blocks will take place “in two or three months time.” Investors are rushing in, especially from China and other Asian countries, and nobody wants to be left behind.

Some may feel that having more Western companies inside Burma will automatically improve the country’s business climate, as most have well-established best-practices policies. But it is worth remembering that US-based Chevron and French energy giant Total—two companies that have long had a foothold in the country—have also been accused of complicity in abuses committed by Burma’s armed forces.

It is encouraging, then, to see that countries that are now moving quickly to end Burma’s isolation are also raising the bar on their own activities in the country. On Tuesday, French President Francois Hollande noted after meeting with Suu Kyi in Paris that “every time we [Total and the French government] set principles, we make sure they are respected. Should that not be the case, Ms. Suu Kyi can join me at any time so we can set things straight.”

The US is also taking pains to assure the Burmese people that it is aware of the problems associated with doing business in Burma, particularly in the energy sector.

“The issue of MOGE is one that we are looking very carefully at,” said senior diplomat Derek Mitchell at a senate hearing to confirm his appointment as the first US ambassador to Burma in two decades. “We have concerns about this enterprise and its transparency and the corruption that is associated with it through reports that we have. … There are particular concerns here with connections to the military,” he said.

It remains to be seen, however, whether Burma’s government will take these remarks to heart and begin to ween its powerful military, and particularly officials close to the former regime, off of oil and gas money that doesn’t belong to them. Whether that happens depends largely on the political will of President Thein Sein and the West’s commitment to respecting its own principles.