Call for an ASEAN Framework on Extractive Industries: The case of Burma

Published on Feb 14 2011 // Featured Analysis

By Sam Stubblefield

The amount of foreign direct investment in Burma’s extractive sector has grown significantly over the past decade, with even faster increases coming over the previous year. The vast majority of this investment comes from other ASEAN countries or ASEAN dialogue partners.

According to a recent statement from a grouping of regional environmental NGOs Thailand has been the largest foreign investor in Burma, investing US$7.4 billion during the period 1989 to 2008, while the UK and Singapore were a close second and third investing US$1.8 and US$1.5 billion respectively. China is quickly catching-up to Thailand as Burma’s largest investor, with a reported US$8 billion in new Chinese investment deals being inked this year alone. The vast majority of Chinese investments are in the energy and extractive sectors; with US$5 billion going to hydropower development, US$2 billion going to the oil and gas sector and over US$900 million going to mining.

Official Myanmar government statistics show that between 1988 and 2010 the bulk of foreign investment in Burma has been concentrated in the extractive and energy sectors, with US$13.4 billion going to oil and gas, US$11.3 billion going to electric power generation, US$2.3 billion going to mining, and only US$1.6 billion and US$1 billion going to manufacturing and tourism development respectively.

The military government in Burma has completed these EI development deals without any transparency, and provides no accountability for people living in Burma regarding the use of the revenues generated from the country’s lucrative extractive sector. EI revenues have been the largest source of revenue of the military government, and serves to institutionalize military rule. Past-experience has shown that human rights abuses go hand-in-hand with extractive sector development in Burma, and there are no mechanisms in place to prevent EI related human rights abuses and negative social impacts (land confiscation, loss of livelihoods, cultural degradation, militarization and migration). There are no laws or standards for the monitoring and mitigation of environmental impacts connected to these projects.

Extractive sector development inBurmais a source of instability in the region, and is connected to refugee outflows and other types of migration. The military government in Burma has made no indication that there are any plans to take action to improve the ways that extractive industry development proceeds inBurma.

A similar range of concerns are found with EI development in other ASEAN member states. With approximately a fifth of FDI in ASEAN member states being intra-ASEAN, an EI Framework would provide common legal and procedural standards for both ASEAN states and ASEAN-based companies. The time is right for an ASEAN Framework on Extractive Industry Investments.

Civil society organizations monitoring environmental impacts and human rights abuses connected to EI development face many challenges in ASEAN. Current EI sector investment within ASEAN happens through multiple channels making effective advocacy and lobbying a difficult task. An ASEAN EI Framework would be empowering for CSOs and the communities they work with as it would harmonize EI investment and development standards across the region, and would clarify the roles and responsibilities of governments and companies in all matters related to the EI sector. The call for an ASEAN EI Framework has been made by a coalition of regional civil-society organizations in advance of the Hanoi ASEAN People’s Forum in September 2010.

While the nitty-gritty of the Framework will need to be negotiated at future ASEAN and civil-societies meetings, in broad-strokes the core components of the Framework would include: i) the institution of environmental impact,  human rights and social impact assessment regulations that adhere to global best-practice; ii) the development of common legal mechanisms by which member states must receive the free, prior and informed consent from indigenous communities living in areas of all planned EI development; iii) mechanisms to ensure revenue transparency and accountability and to ensure that revenues are used for the benefit of all people in the country where EI development takes place.

An important recent large-scale EI development in Burma is the Shwe Gas and Trans-Burma Pipelines project. This project is being developed by a consortium of Chinese, Korean and India companies in partnership with the military regime. The project will be lucrative with revenues to the regime estimated at US$1 billion a year for the next 30 years. The Shwe project is expected to begin operation in March 2013, yet even at this early stage increased militarization, human rights abuses and environmental degradation connected to the project have been documented. These abuses include forced eviction and land confiscation, imprisonment of community members who have spoken out in opposition to the project, blocking access to ancestral fishing grounds and destruction of mangrove forests. Based on the experience of the Yadana and Yetagun pipelines, human rights abuses are set to worsen as the construction advances.

Were Burma to develop national laws and standards based on an ASEAN EI Framework it would lead to a variety of positive changes for all people in Burma, especially those living in areas affected by EI development such as the Shwe Gas and Pipelines project. In Burma, some of the notable positive outcomes of an ASEAN EI Framework would be:

• The inclusion of global best practice environmental and human rights impact assessments in all EI sector projects;

• Increased freedom of public participation in all stages of extractive sector investment and development decision-making;

• The provision of full respect for the rights of indigenous people in all EI development decision-making, including the negotiation of free, prior and informed consent; and

• Greater government accountability in the expenditure and distribution of revenues and other payments from the extractive sector.

At present there is no accountability regarding EI revenue in Burma, and massive EI revenue mismanagement and theft has been documented. In the most flagrant example, it has been shown that the military regime deposits EI revenues into the public accounts at the official exchange rate which over-values the Kyat by approximately 200 times without any official record of what happens to the money lost in this currency exchange.

In addition to the crucial social and environmental benefits that will come from an ASEAN EI Framework, the investor confidence and security provided by such a regional initiative would attract new investment to the region, and would ensure that this investment contributes to the sustainable development of all ASEAN member states.

To date, only two governments in the ASEAN region (Timor Leste being an ASEAN Regional Forum member but not yet an ASEAN member country) have taken steps towards EITI implementation. Timor Leste completed the validation process and became an EITI Compliant Country in July of this year, and in October Indonesia became an EITI Candidate Country. The commitment made by the Indonesian government is time-bound; they have one year to complete the 18 steps towards EITI validation. This government-backed movement towards EI revenue transparency can make a big difference to regular people in Timor Leste and Indonesia in terms of revenue and expenditure accountability, as all EI-related payments will be published on a regular basis and can scrutinized by civil society organizations and regular citizens. Extractive sector transparency and accountability is possible in ASEAN.

With Indonesia taking-up the Chairmanship of ASEAN, and President Yudhoyono promising the participation of ‘non-governmental actors’ in ASEAN summits and meetings, 2011 bodes well for real progress to be made towards an ASEAN EI Framework. Beyond the benefits to sustainable social and economic development that will follow from transparency and accountability in the extractive sector, the implementation of a comprehensive ASEAN EI Framework by all member states will lead to significantly fewer negative environmental impacts and human rights abuses connected to EI development in the region. The challenge for civil society and environmental organizations – and the people in the communities they work with – is to continue their important work monitoring EI development while at the same time working together to pressure their governments to put forth the political will to make this vision for an ASEAN EI Framework a reality.

Canadian Council of Southeast Asian Studies Newsletter (Winter 2011)