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Burma has the worst record on natural resource governance in the entire world, according to a new international study, which activists on Thursday described as a “warning” to global investors eyeing oil and gas deals in the former military dictatorship.
The resource-rich Southeast Asian country failed on every criterion listed in the Revenue Watch Institute’s (RWI’s) 2013 resource governance index, scraping together a measly score of four out of 100. It ranked last out of the 58 countries studied, behind Turkmenistan, Libya and Qatar.
According to the report, Burma “performed extremely poorly” across all indicators, citing a prolific lack of transparency and accountability for the extractive industries, including weak legal and regulatory mechanisms.
“It is widely assumed that corruption is rampant in the sector and that much of the country’s resource revenues are diverted to the foreign bank accounts of a few government officials,” warned the report, adding that Burma’s extractives sector accounts for nearly 40 percent of its export earnings.
“The index demonstrates that Myanmar [Burma] still has a long way to go when it comes to responsible natural resource development and indicates to investors that they should tread with great care,” Paul Donowitz, Campaign Director at EarthRights International, told reporters in Chiang Mai, Thailand, on Thursday.
Burma is rich in gems, industrial minerals, oil, and offshore natural gas reserves estimated at 10 trillion cubic feet, which the Ministry of Energy recently acknowledged to have earned them $19 billion in foreign exchange reserves between 2006 and 2013. But activists warn that this income has not entered the national budget and Burma has become a prime example of the so-called “resource-curse”.
“These revenues have not been fully accounted for by the government and they have yet to benefit the people of Burma,” said Donowitz, insisting that the money needs to be urgently reinvested into the country’s lagging health and education systems.
The Burmese government recently opened 30 offshore oil and gas blocks for bidding, which analysts say is likely to attract significant interest from western investors, as the country continues to emerge from five decades of military rule.
But most of the country’s natural resources are found in its volatile ethnic minority regions, including Shan and Kachin states, where violence continues to flare near areas slated for large-scale development projects.
The Shwe Gas pipeline, which will connect western Burma’s Arakan state with China’s Yunnan province, has drawn notable ire from local activists, who say it has caused wide-scale environmental destruction, land confiscations, and human rights abuses across ethnic minority territories, while bringing slight economic benefits to the people.
Donowitz insisted that increased militarisation in these territories is “at least partly motivated by natural resource development projects” and warned investors against fuelling further conflict in Burma’s volatile border regions.
“There are neither structures in place to manage funds transparently nor political reforms to ensure regional benefits and controls for the resource producing states,” added Wong Aung from the Shwe Gas Movement. “The sale of natural resources before comprehensive political agreements is threatening to derail fragile peace negotiations.”
Although Burma has expressed an interest in joining the Extractive Industries Transparency Initiative (EITI) – a multi-stakeholder framework for disclosing payments and revenues around natural resource extraction – activists are worried that the government is using it as a cynical ploy to boost international investment, while persistently ignoring abuses.
“We have some deep concerns that the government is rushing far too quickly to try to become a candidate country before the institutional capacity is in place and there is any real civil society participation,” said Donowitz.
Wong Aung also highlighted the military’s legal right to access unlimited funds from state coffers without parliamentary consent through the controversial Special Funds Law, which was passed just before reformist President Thein Sein took office in March 2011.
Thein Sein has been widely lauded for introducing democratic reforms in Burma and inking peace-deals with ten out of 11 major ethnic armed groups, prompting western countries, including EU members and the US, to drop most economic sanctions against the former pariah state.
But economic analysts have called on international extractive companies to exercise “additional due diligence” before entering business deals in Burma.
“Investors will need to recognise that if they wish to be able to claim that transparent practices are being followed, they are going to have to model this behaviour and help the learning and reform process,” a Rangoon-based analyst told DVB.
– Hanna Hindstrom peer-reviewed the Revenue Watch Institute’s 2013 Resource Governance Index for Burma.