Sharing the Wealth: Burma’s Post-Military Rule and Natural Resource Governance

A Historic Opening

Fifty years of military rule, internal conflict, and resource plunder in Burma[1] mainland Southeast Asia’s largest nation, may be coming to an end. Most ethnic minority[2] armies have signed ceasefire agreements, and the ruling generals have begun to loosen their authoritarian grip on power.  But deep-rooted collusion persists between Burma’s leadership, their business partners, and foreign interests in the exploitation of Burma’s natural resources.

Burma experienced relative prosperity in its first 15 years of independence after WWII. The early government administrations built on remaining colonial infrastructure to capitalize on the nation’s rich natural resources, particularly in the agricultural and mining sectors. During this brief period, Burma was Southeast Asia’s second largest rice producer and its literacy rate was among Asia’s highest.

General Ne Win’s 1962 nationalist coup d’état ushered in a half-century long experiment in autarky marked by more of the dispossession, militarism, and corruption that Burma had experienced under colonial rule. His “Burmese Way to Socialism” nationalized teak production, mining and other major industries. The nation receded into isolation, simmering with internal conflict and mired in poverty and underdevelopment. Burma has become a desperately poor country with per capita GDP by purchasing power parity of just USD$822 (Asia Sentinel 2012). In 2011, Burma ranked 149^th out of 187 countries on the UN Human Development Index, and desperation has driven hundreds of thousands of migrants into Thailand.

Defying expectations, the regime’s leaders recently forged cease fire agreements with most ethnic armies, with the notable exception of the Kachin Independence Army. The pivotal event was the participation of the Karen National Union, after a 60-year absence, in peace negotiations. At the same time, hundreds of political prisoners have been freed and fragile signs of democratization occur across Burma’s rapidly evolving political landscape. Opposition leader and Nobel Laureate Aung San Suu Kyi has gone from house arrest to a seat in Parliament. In September 2012 she met with U.S. President Barack Obama at the White House and was presented with the Congressional Gold Medal for her long fight for democracy. Her unexpected rapprochement with President Sein Thein (who, also in September, made his first visit to the U.S. in order to attend the U.N. General Assembly) portends a new era of possibility for Burma’s beleaguered citizenry. Yet Burma’s future depends in large measure on stewardship of its natural resources and greater inclusiveness of its citizens in the benefits from resource exploitation (ADB 2012). Burma’s challenge is in achieving sustainable and equitable development in the face of entrenched vested interests.

Figure 1: Burma's cultural features (source Central Intelligence Agency).

Resources for the Regime: Fifty Years of Militarization and Exploitation (1962-2012)

Burma’s military government has a firm grip on power and control over land, resources and people. Rising profits from resource extraction have generated wealth to build and entrench the interests of many groups connected to the regime. These interests, whether military, government or civilian, will not let go easily. Fortunately, Burma still has enormous natural resource wealth as it tentatively approaches popular rule.

The regime has been consolidating control over large ethnic minority territories through a series of major cease-fire agreements (Brunner et al 1998). After the withdrawal of Chinese support in 1988, the powerful Communist Party of Burma (CPB), with its over 20,000 strong Wa Army, fractured. This implosion led to negotiations between the Karen, Kachin, Shan and other ethnic armies with the Burmese military.

Kevin Woods, a scholar on Burma’s political economy and natural resources, provides a valuable perspective on the role of ceasefires and the military regime’s solidifying control over ethnic minority areas.  Ceasefire agreements between the Burmese government and ethnic insurgent groups have created unique geopolitical spaces (the so-called ceasefire zones). Different territories, and the authorities that control them, overlap to create conditions where national military and state officials both share power and compete with non-state authorities, such as ceasefire political organizations, insurgent groups and paramilitaries. These overlapping authorities all participate in decision-making in the complex, poorly delineated mosaic of political territory that is created through the ceasefire zones. These ceasefire accords legitimize the new territorialized military–state spaces, and therefore hold serious political implications. They are key to understanding the process of military–state-building in the ethnic frontier. Burmese state and military officials are co-opting trans-national capital networks by directing capital flows into these resource-rich zones to form “military-private partnerships”, and convert de jure sovereignty into de facto territorial control (Woods 2011).

The heavy hand of the Tatmadaw, the regime’s 400,000 strong military force, has brought corruption and violence against citizens, including forced labor and relocation, and use of rape as a war tactic (U.S. Department of State 2011), into the areas it occupies.  As it pressed into formerly inaccessible territories it searched for not only for extractive resources, but also prime locations for pipelines and transport infrastructure and prime agricultural real estate. During this period, the Thai military and its business partners initiated logging operations in dozens of concession areas inside Burma. Construction of logging roads provided the military access to formerly off-limits traditional lands. Hydroelectric development provides another vehicle for the regime to extend its control over large swaths of ethnic minority lands and profit from local natural resources (Akimoto, 2004). For example, in the eastern Shan State, the region surrounding the Tasang Dam on the Salween River underwent intensive militarization since the mind 1990s. As a result, over 300,000 members of minority groups have been forcibly relocated and human rights abuses are continually reported in the area (Salween Watch 2010).

While exact information remains difficult to obtain, over the last 20 years, several hundred thousand hectares across Burma have been allocated to hundreds of companies, and converted into a variety of cash crop plantations (Food Security Working Group 2011).  In the same report, the regime identified 16 million acres of national land suitable for cropping and animal husbandry as part of its agricultural commercialization policy. Millions of Burmese have been or stand to be dispossessed of land[i] as a result.

A similar pattern of logging, mining, hydro and agribusiness expansion, which had denuded much of Shan and Karen States, expanded into the more remote, northern Kachin State. Until the logging ban in 1998, the Chinese military had been deeply involved in timber enterprises along its borders. According to a recent report by the watchdog NGO Global Witness, a bilateral clampdown on cross-border timber trade between China and Burma in 2006 led to a substantial decrease in timber trade volume (Global Witness 2009).  The Transnational Institute, an advocacy group, in a recent report, describes the interconnected developments in northern Burma’s Shan and Kachin States, which reflect the powerful and enduring influence of Burma’s neighbors over its natural resource political economy. These include the increase in opium cultivation and Chinese agricultural investments in northern Burma since 2006 and related increases in dispossession of customarily-owned land and livelihoods (Kramer and Woods 2012 p. 2) (Burma’s Wastelands Law and supporting SPDC policies are reminiscent of the doctrine of terra nullius  (no man’s land), a Roman legal concept frequently employed by colonial powers in the 19^th century to justify land grabs from traditional cultures where land was held as a common pool resource. In 1975 the International Court of Justice rejected the doctrine of terra nullius (empty territory) in the Western Sahara Case. This case recognized the validity of government structures based on local, non-western, institutions and processes, representing a fundamental change in international law. The United Nations Covenant on Civil and Political Rights enumerates rights consistent with Western Sahara. In 1989 the International Labor Organization’s Convention on Indigenous and Tribal Peoples guaranteed to protect “the rights of ownership and possession” for those who occupy traditional lands (See Lynch and Talbott 1997). Research indicates that these patterns of industrial-scale, often foreign owned, agricultural investments are on the rise throughout much of Burma, partly as a result of China’s recent opium substitution program.

Burma’s Prospects for Avoiding the ‘Resource Curse’

The scramble for resources by the military and its supporters, and the displacement of populations, has made Burma’s deforestation rate one of the highest in the world.  Can the hemorrhaging be stopped? Or will a ‘resource curse’ fuel a persistent culture of corruption and control of wealth and power by elites?

As multilateral and bilateral aid agencies, humanitarian, conservation, and religious organizations and others race into Burma, each must be aware of the crucial link between governance of Burma’s natural resources and its political and economic future. Burma’s ability to build on recent positive political developments is inextricably linked to the allocation and use of natural resources. Many Southeast Asian experts wonder whether a resource curse will undermine the dawning of Burmese civil society and the institutional capacity building required for fostering an accountable and representative government.

Brookings Institution economist Lex Rieffel argues that Burma “suffers from a resource curse as severe as any other country”, especially in respect to natural gas, timber, and mining. He describes modest recent progress from the new government’s shift from natural resource production solely for export towards domestic consumption. “With foreign exchange reserves above a comfortable level, the benefits of exporting power seem low relative to the benefits of providing a reliable supply to domestic households and industry”(Rieffel 2012).

Signs of improved natural resource governance also have recently emerged. In 2011 the government suspended the 6,000-megawatt Myitsone Dam, which was slated to flood over 700 square miles and displace tens of thousands of people. The largest of a planned $20 billion, seven dam engineering mega-project, this dam galvanized local opposition against increasing Chinese influence. Recent reports, however, question whether, in fact, the project’s suspension is genuine (Schearf 2012). The dam provides a specific indicator of the new government’s commitment to change.

One needs look no further than Shwe gas fields for another litmus test. They hold an approximate U.S. $40 billion value of reserves over 20 years at current prices. China’s National Petroleum Corporation purchased the gas and the rights to build the 1800-kilometer oil and gas pipeline through 900 kilometers of Burmese soil. The government stands to gain an estimated U.S. $24 billion of revenue. Myanmar Gas and Enterprise (MOGE), entirely owned by the government, controls corporate bidding, block allocation and public information dissemination.

Sean Turnell, a respected Australian authority on Burma’s economy, describes how these enormous revenues “make next to no impact on the country’s official fiscal accounts. The reason is simple,” Turnell explains:

Burma’s U.S. dollar gas earnings are recorded in the government’s published accounts at the local currency’s “official” exchange rate of around six kyat to a dollar. This rate overvalues the currency by nearly 200 times its market value and undervalues the local-currency value of Burma’s gas earnings by an equivalent amount…The motivation for this sleight of hand is probably to “quarantine” Burma’s foreign exchange earnings from the country’s public accounts, thereby making them available solely to the regime and its cronies. This accounting is facilitated by Burma’s state-owned Foreign Trade Bank and some willing offshore banks (Turnell 2010).

Ways Forward: Supporting Natural Resource Governance and Benefit Sharing

Today, Burma presents an historic if tenuous opening for reform in the natural resource extraction and management sector, a mainstay of the national economy. Its people need international support that is demand driven and sensitive to the underlying causes behind Burma’s poverty and weak governance. Rather than trying to perfect a former authoritarian and military regime or its corrupt economy, the international community can focus on the ‘low hanging fruit,’ crucial cases of glaring mismanagement and spoliation of Burma’s natural resources and direct its attention there. Recognizing that only the Burmese have the capacity to change course and make government decisions, international investors, donors and NGOs can still support and encourage accountability and transparency in natural resource governance. Responses connect the fundamental principles of balance in rights and responsibilities between the government and its people and the equitably sharing the benefits of managing and exploiting Burma’s vital natural resource wealth.

Recent trends in Burma offer some hope for avoiding the resource curse through the systemic reform of the natural resource accounting and benefit sharing. President Thein Sein recently pledged to work towards “completely transparent financial accounting” and to support the new government’s participation in the Extractive Industry Transparency Initiative (EITI) (Fuller 2012). EITI currently has 35 member countries that agree to basic industry standards and safeguards; it has investigated and resolved over USD $20 billion of identified discrepancies.

Lessons for International Actors in Burma

“Rule of law” invokes the elements of enforcement and compliance. Capacity for law enforcement and compliance depends on robust national and local institutional legal and financial accountability as well as political will. Never easy to establish in any post-conflict situation, particularly one as complex as that of Burma, the rule of law remains an essential component for sustaining peace and building civil society. Contracts, judicial resolution, clear property rights and duties, etc. must be at least minimally enforceable to replace the specter of arbitrary, violent military rule, and to attract long-term investment.

In a landmark six-volume study on “Post-Conflict Peace-building and Natural Resources Management”, the Environmental Law Institute and its partners examined experiences in managing natural resources in more than 60 conflict-affected countries and territories. It identified lessons showing the linkages between effective natural resource management, post-conflict peace-building and the rule of law. These include an enabling environment with an independent judiciary, accountable legislative and executive branches of government, and human and institutional capacity building, particularly in remote and underserved regions (Talbott et al, 2013).

Governance reforms are often played out in the context of natural resources, especially in reforming the management of high-value natural resources, land, water, and resources for sustainable livelihoods. Postponing institution building in the short term, experience shows, “risks destabilizing a country when donor fatigue sets in and political elites and rent-seeking groups attempt to regain power over the resource sector” (Rustad et al 2012). Coordinating and sequencing strategic reforms in the legal system and institutions requires adherence to the basic principles of good governance and decision-making.

Elsewhere in the world, forest has been regenerated where governments, often after a conflict, recognize community rights to forests and land. In India, Nepal, the Philippines, and in several West African nations, for example, governments have implemented new laws and policies to delineate and recognize private and community land rights. By utilizing customary property regimes, local ecosystem management knowledge and practices in concert with national development efforts, long-term environmental management will likely improve. Perhaps the best investment for Burma’s natural resource future lies in securing and enforcing land tenure and property rights and responsibilities.

Steps toward more inclusive natural resource governance include free and prior informed consent from local communities impacted by development schemes, and transparency in all government financial accounting related to natural resources. These are fundamental for a functioning civil society and the socio-economic improvements needed for long-term peace (Batson, et al 2011).

Social agreements and benefit sharing mechanisms constitute increasingly enforceable components of international investments. Environmental and social impact assessments using internationally recognized standards bring local community concerns into the decision making process. And where resource extraction is agreed, revenue-sharing through transparent and equitable mechanisms must be provided. Extant models for such mechanisms are few and most are either imperfect or immature; here Burma has  opportunity to be a global leader. Burma could look to lessons from such revenue-sharing models as Alaska's Permanent Fund and Liberia's post-conflict forest reform process (Waugh and Murombedzi 2013) for examples of ways to transparently distribute a share of revenues from natural resources exploitation with its citizens.

With one of the highest deforestation rates of any tropical forest nation, but significant remaining forests, Burma could become a candidate for forest carbon mitigation investments under the UN Framework Convention for Climate Change’s Reduced Emissions from Deforestation and Forest Degradation (REDD+) program now being negotiated. Significant reforms will be required before counterparties (investors and communities) can determine their realistic return objectives from the REDD+ investment, including legal issues regarding rights and responsibilities to sell carbon credits and forest ownership. Unique circumstances such as biodiversity and socio-economic co-benefits, including special requirements for indigenous communities, need to be addressed. The fiduciary responsibilities and rights associated with the capital invested in the REDD+ portfolio can, if properly executed, give investors and forest communities a mutual stake in a well regulated, fair, and transparent management system. Best financial practices in tandem with progressive land and resource tenure policies, from a long-term investment standpoint, can in fact help to build civil society and strengthen governance of national resources (Lau et al 2012).

The international donor community can assist in building the human and institutional capacity to deliver these protections, while shifting authoritarian, state control to more participatory governance.  Efforts to “bring state to custom” demonstrate the simple but durable steps to build good will between citizens and governments (IIED 2002). Their success relies on transparent judicial proceedings and access to information in forging new partnerships to restore the environment and reconstruct society with trust between former adversaries.

Conclusion

Arguably, the new wave of foreign investment, including the active engagement of Western corporations and donors, can play a pivotal role in Burma’s transition. Now, with Western embassies opening and international corporations rushing into one of Asia’s last natural resource rich countries, leverage to support better resource governance exists. A brighter future rests on the transparent, representative and accountable decision-making by the Burmese government and people on governing, and sharing the benefits of their land, water and resources.  

Yet a resounding caveat rises in Burma, today. A recent Financial Times article, “Rush to Reform Myanmar Creates Burma Burn-Out”, describes an unfortunate consequence of Burma’s political and economic opening. “A long-time expat businessman explains how a ‘tiny handful’ of people are trying to make enormous changes on all fronts. ‘They’re trying to negotiate with ethnic rebels, draw up everything from land reform to financial regulation and liaise with western organizations – while fighting a rearguard action from people who benefited from the status quo’ ”(Robinson 2012).

 In the meantime, the Burmese populace who has struggled and suffered for decades is understandably wary of international organizations arriving in country with their “solutions” and agendas as benign as conservation or humanitarian relief. To foster governance of its natural resource assets for the benefit of the nation, Burma’s citizens need demand-driven support, not supply-driven development.