Sectors to Watch



Natural Resources Sector

Burma’s natural resources sector was ranked the least transparent and most corrupt natural resources sector in the world in Revenue Watch Institute’s 2013 index. Government and military interests control the sector, and profits are non-transparently funneled back into the pockets of government and military leaders and their cronies. Following the money is nearly impossible. Development in Burma's natural resources sector thus necessitates cooperating with a corrupt government system that perpetuates human rights abuses against Burma's rural populations and ethnic minorities who have lived on Burma's most resource-rich land for centuries. The Burmese military continues to wage brutal offensive wars against ethnic peoples for control over natural resources.

According to a June 2013 report from the Asian Development Bank, Burma’s natural resources include over 8.1 trillion cubic feet of verified natural gas reserves and almost 490 million tons of estimated coal reserves. Moreover, Burma's jade, rubies, and other gems have long fueled world markets, with 90% of the world's jade coming from Burma's conflict-torn ethnic regions.

· 2013 Good Governance and the Extractive Industry in Burma: Complications of Burma's Regulatory Framework
· US G8 Partnership with Burma on Extractives
· Read reports on controversial development projects in Burma


During the June 2013 World Economic Forum, Burmese government leaders stressed that the development of the nascent energy sector is a national priority. Foreign investors have been quick to respond. In Burma, far more energy is exported than is used domestically, even though 75% of the country lacks access to electricity. In future years, Burma will need to limit energy exports to feed its domestic market and its own growing industrial sector.

Burma's neighbors, particularly China and Thailand, are the major players in the developing energy sector; the Myanmar Investment Commission shows that most of China's $13.6 billion 2010-2011 fiscal year investment in Burma was in the energy sector. Western investors also have growing stakes in the region, given Burma's largely untapped oil and gas reserves, power-capable river systems, and mining potential. The race to develop Burma's energy sector is fueling a rivalry between China and the US, as China has physically built Burma into its strategic energy infrastructure. Overall Chinese investment in Burma has dropped for the first time in years, signifying China's strained relationship with a Burma that is increasingly looking west.

Asian Development Bank’s June 2013 Report – Energy Sector Critical to Burma’s Transformation
• For a rights-based approach to energy development, read Maw Htun Aung’s report on Burma’s energy sector, "Issues, Options, and Engagement in Myanmar’s Energy Policy Development," which he is delivering to civil society groups, parliamentarians, and policy makers in order to broaden the energy policy discussion. Maw Htun Aung is a USCB partner, Fulbright Scholar, Cornell MPA student, & founder of the Myanmar Transparency Coalition and the Myanmar Green Network (forthcoming)



Oil & Gas

Perhaps the most important sector to watch, the oil and gas sector has led to egregious human rights abuses and increased militarization in Burma. Signing deals with the Burmese government, the international community has helped exacerbate these abuses, not neutralize them. In 2012, the Burmese government made an estimated $3.5 billion in natural gas exports, bids for offshore drilling blocks pit foreign investors against each other in a race for space in Burma's oil and gas sector. 37 oil blocks are currently in operation, and 66 more have been bid on or signed over in the past 2 years. Facing the flurry of new investment, human rights groups, ethnic minorities, and Burmese civil society are urging investors to hold off until Burma enacts a serious overhaul of its legal and regulatory framework.

Aung San Suu Kyi recommended in 2012 at the International Labor Conference that foreign governments prohibit economic engagement with the state-owned Myanma Oil and Gas Enterprise (MOGE), which is essentially a recommendation that foreign governments prohibit investment in the oil and gas sector altogether, given the Burmese government's requirement that all oil and gas investments go through MOGE. But the international community, including the US, has refused to prohibit agreements with MOGE, instead capitalizing on the financial opportunity promised by the exploitation of Burma’s vast oil and gas resources.

Chinese and Thai interests dominate the Burmese oil and gas sector primarily because China and Thailand's own domestic electricity generation has failed to keep up with economic growth. Western sanctions allowed China and Thailand to develop mini-monopolies and sign disproportionately profitable deals with the Burmese government. Chinese influence is seen most clearly through the state-owned China Natural Petroleum Corporation's Shwe Gas Pipeline (in collaboration with Burmese, South Korean, and Indian companies), which along with China's development of a port at Kyaukpyu, will allow China to import oil directly from the Middle East without going through the Strait of Malacca. These projects have incited mass land confiscation, arrests, forced labor, sexual violence, and military attacks in ethnic regions, causing a backlash against Chinese intentions in Burma. Irresponsible western interests in Burma's energy sector also aren’t new – due to a grandfather clause in US sanctions, the US, France, and Thailand have been partnering with MOGE since 1994 in the rights-abusing Yadana Gas Project that transports gas from the Andaman Sea in Burma to Thailand.



Hydroelectric Power - Dams

Huge dam projects predominately funded by China and Thailand have perpetuated human rights abuses and military attacks against ethnic minority groups in Burma. The most infamous example is the Chinese-backed Myistone dam, which was suspended by President Thein Sein in 2011 in response to national and international outrage over associated human rights abuses and environmental destruction. But other dams have been allowed to continue construction, including those part of the extensive Chinese and Thai-backed Salween River Dam Project in Shan State, which led the government to reinforce troops along the west bank of the Salween River - an area belonging to Shan State Army-North (SSA-N) according to their ceasefire agreement. In March 2013, the army began attacks against SSA-N, which still rage on. The army has captured villagers to use as porters, forced villagers to walk ahead as landmine-detectors, and shot at villages near Tangyan with machine guns. Over 2,000 displaced Shan are facing a humanitarian crisis. Unfortunately, this is a common story in Burma. In May 2013, the military also broke ceasefires with Shan State Army-South and Ta'ang National Liberation Army along the Salween River. The Thai-backed Hatgyi dam project in Karen State likewise led the Burmese military to break its ceasefire with the Democratic Karen Benevolent Army (DKBA) in March 2013. Fighting in these areas is ongoing (as of August 2013).




The most important mining projects to watch in Burma include the Chinese-backed Letpadaung copper mine in Sagaing Division, the jade and ruby mines in Kachin State, and the destructive platinum mining in Shan State. The Letpadaung project is part of the wider Monywa Mine Project between the Burmese military's Union of Myanmar Economic Holdings Ltd. and the Chinese state-owned Wan Bao Company. The deal has a storied history: the Canadian company Ivanhoe Mines held a long-term 50% stake in the project until it was sold in 2009 with the help of crony Tay Za to the Burmese regime, which re-sold it to the Chinese state-owned weapons firm Norinco.

The November 2012 crackdown on Letpadaung area protestors demonstrating against land seizures sparked international outrage - during the night, security forces sprayed white phosphorus on a crowd consisting largely of sleeping monks. An egregious government investigative report led by Aung San Suu Kyi into the incident was published in March 2013; essentially a government edict, Suu Kyi's report calls the attack an accident and does not address land rights issues, property destruction, or Burma’s 2012 public demonstration law, which robs people of the right to freely protest government actions. The report concludes that area farmers should forfeit their land because the mine is in the “national interest.” Unfortunately, Burma’s national interest is construed as a function of international relations and military and state business interests, not the livelihood and rights of the citizenry. No one was held accountable for the Letpadaung attacks, and displaced farmers have continued to be abused, arrested, and shot in areas surrounding the mine.

Other mine projects are also backed by the military. Rubies and jade are mined in northeastern Burma where the Burmese military continues to wage war against the Kachin ethnic group. Control of the mines and labor exploitation fuel the war against the Kachin, to whom the rubies are known as blood rubies – not because they are the color of blood, but because of the blood spilt in mining them. The Burmese government uses child labor and forced labor in the ruby and jade mines, which are highly lucrative moneymakers for the Burmese government and its business cronies. The US maintains a ban against the import of gemstones from Burma through the annually renewed Burmese Freedom and Democracy Act of 2003.

· Kachin Civil Society Letter to the US Government to Renew the Ban on Gems, July 2013



Telecommunications/IT Sectors

Only 1% of Burma's population have access to the internet and only 10% have mobile phones. Both are prohibitively expensive and face severe government censorship. The government maintains strict control over internet connectivity and content, earning Burma its "Not Free" status in Freedom House's Freedom on the Net 2012 index. Infamous for its state monopoly over telecommunications, Burma is also perhaps the world's least penetrated mobile phone market due to expense and extreme restrictions on mobile phone ownership. Before the 2010 elections, the price of a single SIM card dropped from US $1,685 to over $600. This price reigned until March 2012, when the Ministry of Communications, Posts, and Telegraphs not-so-generously cut the price in half. (In comparison, a SIM card in Thailand costs about $6.)

The Burmese government announced in January 2013 that it would open up the telecom sector to foreign investment and invited bids for the nation's first telecommunications licenses. In response, Human Rights Watch published a report outlining steps to ensure responsible investment in Burma's telecom sector and to promote protections for Internet and mobile phone users in Burma. Companies investing in the telecom/IT sectors before rights-based reforms and legal protections are in place risk exacerbating illegal surveillance, censorship, and other serious human rights abuses in Burma.

In June 2013, Telenor ASA (TEL) of Norway and Ooredoo QSC (QTEL) of Qatar won the coveted licenses in an international rivalry to expand telecommunications in Burma. Much speculation surrounds the government's licensing selection - many suspect the companies were required to strike deals allowing government censorship in compliance with rules in the draft telecommunications bill published in November 2012. Human Rights Watch subsequently called on the two companies to make public commitments to human rights policies and transparency measures. Complicating matters, Burma has yet to pass its telecommunications law, and the draft bill has been widely criticized for violating freedoms of privacy and expression.

Ironically, US technology security companies are directly benefitting from the internet censorship regime - the Burmese government uses Fortiguard, a product of California-based Fortinet, as its main censoring system. Meanwhile, despite the dire lack of legal safeguards, the US government is actively encouraging US businesses to invest in Burma's nascent telecom/IT sectors. Google has turned toward Burma, launching a country-specific URL and beginning to improve local internet search, maps, and translation services. During a March 2013 visit to Burma, Google Chairman Eric Schmidt said Google's first step would be to "get information into the country." Earlier in March, USAID sponsored a delegation of Cisco Systems, Google, HP, Intel, and Microsoft executives to Burma, attempting to promote investment in Burma's nascent telecommunications and tech sectors. USAID and Cisco have partnered to provide information and communications technology (ICT) skills training to educational institutions in Burma. Still, many US businesses are holding off, including Intel's venture capital wing, Intel Capital, which warned in June 2013 that Burma's legal framework is not advanced or coherent enough for foreign investment in the tech sector to be profitable or even feasible.

· Freedom House's Freedom on the Net 2012 Burma report
· Radio Free Asia's 2013 report, "Internet Access and Openness: Myanmar 2012"
· Human Right Watch's 2013 report, "Reforming Telecommunications in Burma: Human Rights and Responsible Investment in Mobile and the Internet"
· OpenNet Initiative's report, "Internet Filtering in Burma in 2005: A Country Study"



Transportation & Infrastructure Sectors

Burma's lack of infrastructure is proving to be a major obstacle to foreign investment as the lack of roads make it difficult to transport goods within the country. The transportation sector was actually a key sector for US investment in the 1950s when US development companies sent engineers and capital into Burma to improve infrastructure. The Rangoon-Mandalay Road was one of the US' pet projects, and during President Thein Sein's visit to DC with Obama in May 2013, the US pledged to invest once again in major roads in this commercial corridor. US businesses are also bidding for contracts to modernize Rangoon's international airpot. In a fascinating case of conflict of interest, the US State Department’s former Assistant Secretary for East Asian and Pacific Affairs, Kurt Campbell, has teamed up with his former State Department colleague, Nirav Patel, to form a consulting company that is collaborating with the US' ACO Investment Group to bid for infrastructure projects in Burma, including the Rangoon airport. Campbell played a major role in brokering President Obama's controversial re-engagement with Burma and enthusiastically advocated for the US lifting of sanctions. After these sanctions were lifted, Campbell stepped down from his public service position to invest privately.

The ongoing $215 million Indian-funded Kaladan Multi-Modal Transit Transport Project is connecting Mizoram State in northeast India with a Bay of Bengal deep-sea port at Sittwe, Arakan State in western Burma via an inland waterway and highway transportation system as part of India's "Look East" policy. The Kaladan Movement, a group of civil society partners working to make the project people-centered, are calling for transparency and public consultation in the wake of land confiscation, forced relocation, labour discrimination, and destruction of local cultural heritage.

China is also strengthening Burma's transportation infrastructure with the development of a new railway route from China's southern Yunnan Province to Chinese-backed Kyaukphyu oil port in Burma, though talks on railway construction have stalled. China has been meeting its shipping and energy needs through deals with the Burmese government, gaining a strategic trade and military position on the Indian Ocean rim.

· The Kaladan Movement's 2013 report, "One cannot step into the same river twice: making the Kaladan Project people-centered"
· For more information on Burma's transportation sector, read ADB's "Myanmar: Transport Sector Initial Assessment"



Consumer Sector

A June 2013 report by McKinsey Global Institute, "Myanmar's moment: Unique opportunities, major challenges," estimates that only 4% of Burma's population are "consumers," defined as people who regularly have displosable income. More than one-fourth of Burma's population lives below the poverty line, and Burma's economy arguably has a long way to go before the consumer sector will be profitable. Yet it is precisely this sector in which many US businesses - including Coca Cola, Ford, Procter & Gamble, Colgate-Palmolive, and Caterpillar - are beginning to invest in hopes that Asia's last frontier will prove lucrative.

· For more information on Burma's nascent consumer sector, read McKinsey's 2013 "Myanmar's moment: Unique opportunities, major challenges"

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