Treasuring Myanmar’s natural wealth

Equally significant but less well known than Myanmar’s political crossroads is its decision on how to manage the country’s abundant natural resources. The two are intricately related.

The risks associated with mismanagement of natural resources – social unrest, corruption, graft, environmental degradation – are all too familiar. Many developing countries have found that without openness, strong institutions and meaningful safeguards, the exploitation of natural resources has left their communities poorer and more vulnerable than ever. There is a strong correlation between natural resource exploitation and civil conflict – the United Nations estimates that 40% of intrastate conflicts are related to or fuelled by disputes over natural resources. Likewise, an estimated three-quarters of states considered “fragile” or “faled” also hold vast natural resources.

Myanmar possesses a wealth of assets. Endowments of tin, antimony, zinc, copper, tungsten and lead as well as petroleum, timber, coal, marble, limestone, gemstones, natural gas and hydro power are potentially extremely lucrative and transformative. The lion’s share of Myanmar’s economy – 43% – is related to natural resources, whether through agricultural activities, livestock, fisheries and forestry. Natural gas alone accounts for 40% of Myanmar’s total exports. Teak and hardwood exports are valued at US$ 400 million annually – a figure considered vastly underestimated compared to neighbouring countries. Myanmar is also one of the poorest economies in East Asia, with a per capita GDP of US$ 800-1,000.

Like other countries in similar positions, Myanmar faces risks associated with the misuse of its resources, which experience shows can cripple the most noble of aspirations. Some of these risks have already caused unrest, such as when protests at the Letpadaung copper mine in 2012 led to harsh military responses, leaving more than 100 injured. The Kachin and northern Shan states, regions suffering from ongoing political unrest, all hold important natural reserves. In terms of transparency in exploitation of natural resources, in 2013 the Revenue Watch Institute ranked Myanmar in last place. Myanmar urgently needs to explore how it can emulate the world’s natural resource success stories and not become yet another country where nature’s riches cause more harm than good.

Properly managed, these resources can maximize Myanmar’s economic potential, help enrich its people, promote long-term stability and reduce the risks associated with extraction, including armed conflict. Countries such as Chile and Botswana have shown how effectively managed natural resources can contribute to high levels of social and economic progress. Chile employs a sovereign wealth fund based on copper revenues to provide important countercyclical support to government spending. Botswana has used revenues from mineral wealth to fund nature-based tourist attractions and other economic diversification initiatives.

There is no one-size-fits all approach to responsible natural resource management. Each country and society must design its own path to ensure that their natural riches drive development. Broadly speaking, however, Myanmar would do well to adopt a “do-no-harm” approach that balances opportunities with risks. This means taking into account broader development objectives, engaging with international standards and best practices, grounded in transparency and a sound legal framework, and supported by – and in return supporting – sound institutions. Such an approach addresses security and human rights concerns and strives to enable broader social and economic development.

Dialogue

As a first step in this direction, Myanmar should engage in a serious dialogue on natural resource management with all stakeholders that emphasizes consensus, not merely consultation. Countries appear to resolve challenges over natural resources only to the extent that governments, companies, civil society actors and communities come to the table to discuss their joint responsibilities. This includes equitable redistribution of revenues, transparency measures and strong public institutions, working in close partnership with civil society and local communities, as well as investing in local capacity, environment planning and human rights.

The government should focus on inclusive consensus rather than consultation alone. This is easier said than done, but consensus-based decisions ultimately may have greater legitimacy and support, thereby strengthening a reform agenda.

Development strategy

Myanmar must work to build natural resource extraction into a broader national development strategy, of which natural resources are but one element. Such astrategy should focus on making the benefits of resource extraction visible, using resource income to invest rather than relying on it for short-term gains. It should also diversify the foundations of prosperity so that the economy does not rest on resource extraction alone but includes, for example, value-adding activities in the resources supply chain and other economic sectors.

EITI and international standards

Myanmar should also take care to adopt international best practice for the management of its natural resources and foreign investment. Its engagement with the Extractive Industries Transparency Initiative (EITI) and recent developments in foreign investment regulation are a step in the right direction. The country will undoubtedly require extensive assistance to engage with international best practice, especially since many of these initiatives are relatively new, and indeed challenge even the world’s most developed nations. Nevertheless, such a move would go a long way to ensuring a sustainable and equitable natural resource industry.

Institutions, transparency and contracts

 Myanmar should work on developing a sound legal framework for natural resource management, as well as sound public institutions. The legal basis for transparency and accountability, and the way in which contracts are framed, is crucial to ensuring that natural resource revenues are not dilapidated in tax havens, shell companies, or the palaces of corrupt officials.

Care is needed to establish the right legal procedures for transparency and accountability, without which stakeholder consultation is a sham; these should under no circumstances be weaker than current international standards, which should be regarded as establishing the minimum criteria.

Human rights

A “do-no-harm” approach also addresses security and human rights as important elements of natural resource extraction. It respects the human rights of those who live locally, ensuring that security for mining or drilling does not become insecurity for everyone else. As a broad but tenable generalization, natural resource exploitation that is fast, furious and provides benefits to a narrow segment of the population offers a relatively high risk of conflict generation that escalates into violence, especially since in such circumstances, the institutions that can manage conflict have probably not been built.

By contrast, natural resource exploitation that is relatively broadly based and provides benefits to the population as a whole minimizes the risk of violent conflict, especially since in such circumstances, conflict-management institutions almost certainly have been established along the way.

Myanmar has already taken important and promising steps to ensure that its natural resources are responsibly managed. Engagement with the EITI in 2012, the passing of a foreign investment law, a decision to ban unprocessed wood from exportation all demonstrate significant progress towards protecting natural resource wealth.

The pace and depth of progress on natural resources will have an impact on the political transition in Myanmar and the long road to building peace. These riches hold immense potential for the development and prosperity of Myanmar. Through dialogue and collaboration, they can be harnessed for peace, stability and prosperity.

Author: David Harland is the Executive Director of the Humanitarian Dialogue Centre in Switzerland and member of the Global Agenda Council on Conflict Prevention of the World Economic Forum

Image: A worker is seen at a copper mine in Myanmar REUTERS/Soe Zeya Tun