Burma: The Back Story
1 comment October 4th, 2007
By Rowan Wolf
The current protests in Burma are attributed to a 500% increase in fuel prices which crippled an already struggling population’s ability to survive (BBC). The people of Burma have been descending into deeper and deeper poverty over the last decade. According to Jonathan Head, author of the BBC article, the people of Burma spend an average of 70% of their income on food. The dramatic increase in fuel prices on August 15, 2007 was too much to bear.
It appears that the government of Burma (Myanmar) were reacting to a “suggestion” by the International Monetary Fund, that they needed to phase out the state subsidizing of oil prices. Myanmar is a member nation of the IMF. This makes one wonder at the seeming naivity of this statement by Head:
Like so many decisions made by the reclusive generals, the sudden hike in fuel prices is hard to fathom.
The IMF had advised weaning the population off subsidised fuel, because with rising world oil prices it was becoming an unsustainable burden for Burma, which although rich in natural gas, relies on imports for almost all of its refined petrol and diesel.
But it is unlikely the IMF would have supported such a dramatic, and unannounced price rise.
The IMF indicated in 1998 that Myanmar was an HIPC (Heavily Indebted Poor Country). That debt was to the World Bank. The current information on Myanmar at the World Bank site states:
The World Bank has approved no new lending for Myanmar since 1987, and has no plans to resume its program. The country is currently in arrears to the World Bank, and has failed to enact economic and other reforms.
Myanmar remains a member of the World Bank. The World Bank continues to track data about the country and also remains in contact with the United Nations and other development partners regarding Myanmar. And the Bank also accompanies officials from the International Monetary Fund on their annual visits to assess the country’s economic situation.
In 1998, then Junta Finance Minister for Myanmar reported to the IMF on the governments efforts to apparently meet the demands of structural adjustment reforms to acquire aid from both the IMF and the World Bank:
Let me now touch on some features of Myanmar’s economic development. Since the latter part of 1988, streamlining of foreign trade procedures and liberalization of both internal and external trade had been introduced. Foreign investors are allowed to invest in Myanmar and foreign bankers are permitted to open their representative offices. Myanmar has been participating in regional cooperation programmes and cooperating with both developed and developing countries for its technological advancement. Rural and border areas development activities are being implemented to alleviate poverty and also to reduce gaps in differences between rural and urban populations.
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Myanmar is the land with rich natural resources to be tapped for development purposes. Unfortunately, multilateral financial assistance to Myanmar have been unfairly suspended since 1988. Myanmar has been a legitimate member of the Bank and the Fund since 1952. As a legitimate member, Myanmar is fully eligible for the Bank’s development assistance. However, the Bank has neglected Myanmar’s development efforts and it has failed to assist Myanmar for the past eleven years. However, we have cooperated with the Bank and the Fund and we have been servicing our outstanding payments to the Bank regularly, up to the end of 1997.
In 2003, further economic sanctions were placed on the country, and were protested by Major General Hla Tun - Governor for the Bank of Myanmar. Each year, Mayanmar has reported to the IMF its step by step progress towards the “adjustments” apparently being demanded by the World Bank and the IMF, and has made a plea for economic support. Since the same plea is repeated year after yer (up through 2006), The IMF and World Bank have refused to raise restrictions on lending, or easing the debt burden of Burma.
This is not to excuse the brutality and repression of the Junta government of Burma. However, it is important to acknowledge that the economic situation in Burma is not due simply to the “chronic mismanagement” of the government which is one of the primary issues pointed to by Jonathan Head.
There is of course another aspect of the story. In the process of its structural adjustment, a few in the Junta have pocketed significant amounts of money. The business deals and corruption have siphoned off significant amounts of the wealth of Burma. The elite lives in opulence; the government sequestered itself deep in the forests establishing a new capital. The details of corporations involved are discussed in a report by Human Rights Watch (HRW) titled “Burma: Foreign Investment Finances Regime.”
According to HRW, the State Peace and Development Council (SPDC), allocates only a fraction of the available resources to social programs (for example health and education). This is consistent with the typical structural adjustment program regime which requires significant decreases in spending on social infrastructure - though HRW does not discuss this. Also typical of structural adjustment, massive amounts of the economic resources have been redirected to the military. It is estimated that 50% of the Burma’s funds are designated for the military.
Burma has significant natural gas reserves which have created strong trade relations with both India and China, and there are significant hardwood exports to China as well. This gives China and India (among others) some degree of influence with the Junta. However, it is also likely that the Junta elite are directly beneffiting from these relationships. Whether China and India would do more than “request” the Junta back away from its brutal repression is questionable. After all, their agreements are with the current government. It is not surprising given the dramatically increasing demand for natural gas to fuel the growth in China and India, they (and Russia) have been very active in helping finance the development of Burma’s natural gas reserves. Also involved have been major petrochemical companies. According to HRW:
At present the SPDC receives the bulk of its gas money from the onshore “Yadana” and “Yetagun” gas fields. The Yadana consortium is led by Total of France and includes UNOCAL (now Chevron) of the United States and Thailand’s state-controlled PTT Exploration and Production Co Ltd (PTTEP). The Yetagun consortium, led by Malaysia’s state-owned Petronas, includes Japan’s Nippon Oil as well as PTTEP. PTTEP, a subsidiary of the largely state-owned PTT Public Co Ltd (PTT) of Thailand, buys the gas for export to Thailand.
Major offshore natural gas projects are under development. A consortium of South Korean and Indian firms, in partnership with the Myanmar Oil and Gas Enterprise, has made a large gas find off the coast of Arakan State in western Burma. Known as the “Shwe” gas project, it is expected to produce massive revenues once it is in production. Estimates of the gas yield of the Shwe deposits range between US$37 to US$52 billion, and could lead to a total gain in revenues to the junta or future Burmese governments of US$12 to US$17 billion over 20 years.
The Shwe gas consortium is composed of the South Korean company Daewoo International, state-owned companies from India and South Korea, and the Myanmar Oil and Gas Enterprise. Some of the foreign partners also have separate deals with the Burmese government entity for other concessions.
On September 24, for example, India’s state-controlled Oil and Natural Gas Co (ONGC), whose subsidiary ONGC Videsh is a partner in the Shwe consortium, signed a deal with Myanmar Oil and Gas Enterprise to explore for gas in three more offshore blocks. Under the deal, Oil and Natural Gas Co pledged to invest US$150 million through ONGC Videsh.
India’s Office of the President holds nearly 75 percent of the shares in Oil and Natural Gas Co. India’s minister for oil, Murli Deora, traveled to the Burmese capital last week to sign the agreement as thousands of protesters in Burma took to the streets to call for political freedom, an end to the SPDC’s abuses, and economic improvements.
India, China and Russia have also provided military support to the Junta according to a separate report from HRW.
The money gathering in the pockets of the Burma elite are certainly being kept outside of Burma. Tom Malinowski of HRW testified before the Senate Foreign Relations Committee on October 3, 2007. The transcript is not yet available though the hearing was broadcast on C-Span. Malinowski testified that the strongest international bank relations of the Burma elite has been with Singapore, though certainly they have other international finance connections. He recommended that targeted sanctions freezing the international accounts of the Junta and others might be most effective in pressuring the government to release the political prisoners and relax their response to the protests. This seems like a most reasonable response as broader sanctions against the country would only cause more damage to the population. The Burmese military is a huge organization - second only to China in number of forces. Given the record of the ruling Junta, they would not hesitate to further mobilize against the population.
But there is perhaps a deeper and darker link to U.S. interests in Burma, and why for 40 years the U.S. has shown little concern for the people of Burma. That goes to the Vietnam war. Burma is part of the “Golden Triangle” - the rich opium producing region of Asia. In fact, until recently, Burma was second only Afghanistan in opium production. The French utilized the opium production and support of war lords to finance their covert networks, and when the U.S. stepped into France’s shoes they inherited that lucrative network (Alfred McCoy). The CIA utilized the opium trade, and the network connected to it, in the Golden Triangle to finance covert operations in Laos and Cambodia (the secret wars). They also used it to help fund anti-communitist armies of people such as the Hmong (Djedje and Korff).
Of course that is ancient history (perhaps).
Part of the Burma Junta’s efforts with the IMF and World Bank has recently been anti-drug activities including the elimination of opium production. If a March 7, 2006 Reuters report - War on opium gives Golden Triangle a different hue - is accurate, that war on opium has been largely successful. Of course, that success might be part of the deteriorating economic situation of the people of Burma. Much of the population of Burma lives by agriculture, and there is no more lucrative crop than opium. Look to Afghanistan as a companion example.
It seems odd that the U.S. is taking official attention to the most recent protests and Junta response in Burma. For 40 years the U.S. has largely looked the other way. Similarly, the U.S. continued to work with the Taleban government of Afghanistan despite its repression and abuses - until they also successfully drastically reduced opium production. Perhaps it is just coincidence, and of course both situations are more complex than this.
Regardless, it is well past time to ease the conditions of the people of Burma. It is well past time for us to speak out to end the repression and the resulting displacement of millions of Burmese. It is also time to demand debt relief for Burma. Like all such burdens, it benefits interests outside of Burma while crushing the people of Burma.
Information and Support Efforts
Free Burma!
Witness (Real Media video from Witness)
Of Related Interest
Christopher Wren. 5/11/98. NY Times. Road to Riches Starts In the Golden Triangle
Kieran Cooke. BBC. 12/06/2003. Drug tourism in the Golden Triangle.
CNN. 9/30/07. A look at Myanmar’s insular military leadership.
CNN. 10/04/07. Myanmar troops launch nighttime roundups to intimidate activists.