BURMA DIGEST

BURMA DIGEST

01.04.2007

Editorial: Risky Business

_ By Taisamyone

When Middle Eastern countries found their revolutionary identity in the 1970s, nationalisation of oil reserves was one of their key achievements. Even the US-led invasion and constitution writing for Iraq has not been sufficient to overturn Saddam Hussein’s 1972 oil field nationalisation laws. Countries today that have oil reserves are more inclined to enter joint ventures or Production Sharing Agreements to benefit both the country and the oil company. As oil industry events in Venezuela and Russia over the last few years have shown, privatisation of oil production can be reversed if only to counter massive fraud and corruption as well as bring money into the national treasury.

A new government in Burma has these options available for the massive gas business; but it will still need outside expertise and technology to sustain a profitable gas business. Re-negotiation of contracts will start and if that doesn’t achieve the result, then more drastic measures can and probably will be taken by a country so reduced to poverty by years of mismanagement – it will need every gas tax dollar it can get. But as we might expect from big geo-political arena, there is more to negotiation than making a law. Relationships between countries are more complex today as economies are intertwined and interdependent. Negotiation on gas contracts will be affected by parallel diplomatic negotiations on arms and aid, drugs and border trade. Whatever government there is in Burma will want to develop the natural resources and foreign expertise and investment will be needed – the Asian development bank will lend money for development, but will also come under pressure if that government is misappropriating foreign company assets. Obviously, a middle way economic path will need to be followed.

The regime has managed to build up numerous state-owned (or more precisely Tatmadaw-owned) companies in Burma, as part of the Defence Services Institute arrangements to manipulate and control everything in Burma. A democratically elected government should take these companies into civilian government control and take steps to remove the corrupt Tatmadaw officers whose role seems to be to collect large bribes and ‘give instructions’ – usually instructions to siphon cash into their private bank accounts. The new government will also have to ensure that money sent to overseas bank accounts which rightly belongs to the government treasury are returned for inward investment. Burma is going to need all the investment it can get, including the ill-gotten gains that the regime has stashed away in foreign banks against what to them must now seem like the likely overturning of their personal fortunes when they are removed from power.

Rebuilding Burma following the removal of the SPDC will require a great deal of foreign investment as well as humanitarian assistance – companies making investments will want to get shareholder returns, and this means reducing the risk of investment and getting a financial return. Investing in a country that may grab the assets is not a risk that international companies need to make, so threatening seizure of assets will deter investors. Those investing in the large gas fields now know they can turn a profit very quickly over a few years, and I presume that they see the regime being in place for many years to come. Big business has traditionally invested in countries with strong government without too much concern for human rights (US and UK companies even provided fascist European countries with funds in the early 20^th century for weapons to fight communists and so-called ‘scientific research’ into racist theories of white supremacy).

Burma is lucky in this respect that there is considerable international abhorrence of the regime, limited sanctions by the USA, the EU and other democratic countries, and active campaigns such as those run by Burma Campaign UK mean that many companies choose not to invest in Burma while the regime is in power. BCUK have a ‘Dirty List’ of companies who are working in Burma or with Burma’s regime, and also a ‘Clean List’ of companies that have made an ethical statement or decision not to invest in Burma – it helps to know who our friends are for the future. But when we see the enormous investment pouring into China, we can realise that big business isn’t that concerned over human rights abuse as long as the abuses are not too bad or too much in the public eye, the UN doesn’t complain about the country and they don’t have to justify themselves beyond the shareholder meetings.

The recent news that UK clothes retailer MkOne investigated and stopped clothes made in Burma being sold through its shops is good to hear, and a reminder that vigilance is needed by campaigners to identify hidden trade routes. The Ethical Trading Initiative said “In most cases, we say it's vital for companies to work with suppliers to improve conditions but with Burma the regime is so bad we condemn any supplier or retailer for doing business with the state and urge them to pull out.” The Ethical Trading Initiative (ETI) is an alliance of companies, non-governmental organisations (NGOs) and trade union organisations. They exist to promote and improve the implementation of corporate codes of practice which cover supply chain working conditions. Their ultimate goal is to ensure that the working conditions of workers producing for the UK market meet or exceed international labour standards.

Companies who are willingly investing in projects that bring riches to the regime (which means all foreign investment) are operating to make money in a manner that they work with any foreign investment, whatever its political alignment. The wealth to be made from business is reason enough to want to invest. What will be important as the new civilian government comes to power is that the relationship with those companies will change – there can be no kid gloves when dealing with companies who have been prepared to ignore the fact that their investment is supporting a regime that kills and tortures its own people, who use forced labour to build infrastructure facilities for foreign investor projects and force villagers to guard those assets against armed attack from rebel armies. Burma needs the investment from foreign companies not just to provide local jobs but to include the people of Burma in the wealth creation and business ownership. Investor relations will need people trained in economics, negotiation and law – citizens with honesty, diplomacy, integrity and assertiveness to unravel the murky intrigues left behind by a regime that will scuttle away with as much as they can carry. Needless to say, ethical business practices and environmentally aware administration of Burma’s vast natural resources will need to be managed by a government that wishes to build a prosperous nation and foster a prosperous people – catching up with the neighbours is going to take a while.

For Further Information

¨ China's great wall of intransigence

¨ The new Seven Sisters: oil and gas giants dwarf western rivals

¨ India's military aid for Burma under fire

¨ Investing in Destruction: The impact of development projects and economic policies in Burma

¨ Burma: Natural Gas Project Threatens Human Rights

¨ Hydrocarbon Nationalism

¨ Barbed-wire bra protest over Burma investment

¨ New Coalition urges UK Government to stop investment in Burma

¨ India faces Global Protests over Burma Policy

¨ A Review of the Risks for Companies and Investors

¨ Burma Campaign UK – The Dirty List