Is Burma the new Cambodia?

By Guy Nicholson / Corporate Knights  | October 15, 2014 / Summer 2013 Issue

Barely two years after a new future appeared within sight, Burma is in danger of losing its way again. 

 

Photo by DiverDave

 

In 1996, a photograph began circulating among the foreign press in Phnom Penh. Sam Rainsy, Cambodia’s liberal opposition leader, was pictured sitting with Nobel laureate Aung San Suu Kyi in Rangoon, Burma, where she was between stints under house arrest. He wore a cloying smile, clearly pleased at the association. But she remained typically inscrutable, with one side of her mouth curled in almost patronizing politeness toward her visitor.

In the newsrooms and watering holes of Phnom Penh, the two expressions were read as a telling contrast between “nice guy who’s trying” and “Nobel Peace Prize winner.” If these two Southeast Asian reformers represented the best hopes for their troubled countries, most would have put their money on Suu Kyi and Burma. Cambodia was just three years removed from a historic United Nations-sponsored election, but it was already sliding into what one scholar notably described as a “vaguely communist free-market state with a relatively authoritarian coalition ruling over a superficial democracy.”

Burma, on the other hand, still seemed to have a political future worth looking forward to (even if it was under the name Myanmar), and the unexploited economic potential to back it. Suu Kyi’s infallible, principled resistance to the thuggish junta made her country a cause célèbre and appeared certain, even then, to put it on track for better things.

Just two years ago, that promise finally felt within sight. Isolated and aging, Burma’s military leadership had begun implementing its “roadmap to democracy,” with reformer Thein Sein emerging as the first civilian president in decades. Suu Kyi and other dissidents were released; she won a seat in parliament and toured foreign capitals in a blaze of publicity and optimism. Ordinary Burmese gained impressive new freedoms and the doors were thrown open to liberalization, investment, currency regulation and the end of foreign sanctions.

To hear their stories told this way, these two countries appear to have emerged from economic and social ruin in very different shape. But while Burma still has prosperous potential, it’s treading perilously close to Cambodia’s path – cronyism, corruption, land grabs, social and environmental exploitation. In the short time since the easing of foreign sanctions and Suu Kyi’s triumphant foreign tour in 2012, elements of “reformed” Burma have begun to resemble that ugly characterization of its neighbour. It may yet end up taking the wrong path unless its foreign partners, including Canadian investors and political leaders, show the resolve to demand better.

Land grab

If a single word can be used to sum up what’s animating the economic and political transitions of both Cambodia and Burma, it is “land.” Cambodians and now Burmese have emerged from their isolation with severely underdeveloped economies and labour forces that will require generations to rebuild, but the value of their underdeveloped land, and what can be extracted from it, is real and immediate.

The paranoid Khmer Rouge shattered the lives and livelihoods of millions of Cambodians, but its experiments in agrarian socialism had the effect of a perverse form of environmental conservation. Burmese military rule left a larger footprint – black-market logging, destructive gem mining and a cavalier attitude toward delicate ecosystems – but much of the country’s prime land emerged underexploited due to sanctions, civil war and the sleepy pace of its ox-cart economy. The sudden embrace of open markets, growth and resource exploitation has inevitably created Wild West conditions in the rush to exploit these two Far Eastern “frontier” states, along with tiny Laos.

Photo by Tang Hpre

Despite years of advocacy by international NGOs, illegal timber exports continue to significantly erode the forest cover of all three countries to feed the needs of neighbouring Thailand and China. In past decades, this trade fuelled civil conflict; today, it largely benefits Burma’s powerful military and business elites, working with the regional rubber firms that have been sweeping across Southeast Asia, acquiring land for plantations to feed global demand.

Resource extraction, which was a tricky business for Western firms in Burma under the watchful eyes of sanctions and Western public opinion, is proceeding apace, with all that entails. Gems and precious metals continue to leave a particularly dirty stain. Working conditions have been widely deplored and the infamous Letpadaung copper mine has tripped up many of those involved in the project – from former Canadian partner firm Ivanhoe, which remains locally reviled, to Suu Kyi, who headed an official committee that allowed the project to proceed against the wishes of local villagers.

Meanwhile, Burma’s government is pushing ahead with a panoply of energy projects, auctioning off oil and natural gas rights to multinational firms and advancing plans for dozens of new hydroelectric dam projects. For a country with chronic power shortages, this should be a no-brainer, but most of the new capacity is for export and the environmental and social costs of the infrastructure have been exorbitant.

Next Cambodia?

Consider the massive Myitsone Dam project at the headwaters of the Irrawaddy River, intended to generate up to 6,000 megawatts of power, most of it for the Chinese province of Yunnan. Thousands of Burmese were forcibly relocated and experts warned of widespread environmental and cultural destruction before the government suspended the project, citing local sentiment. With the government under intense Chinese pressure, it would hardly be a surprise if construction resumes following next year’s elections.

With weak regulations and enforcement practices, immense environmental and human consequences are already evident elsewhere in Burma. Villagers, farmers and remote tribes with traditional land claims, but no formal title, have been forcibly relocated or marginalized with little compensation or sympathy, and the country’s vaunted biodiversity is under threat due to habitat loss and the trade in endangered species. Black-market logging has been reorganized and legitimized through Rangoon-area ports, which observers believe allows for the “laundering” of logs illegally cut in disputed or ethnic-conflict areas – one of the issues fuelling conflict between the government and ethnic minority groups. Even the feel-good tourism industry, which has developed at breakneck speed, has brought unexpected costs, including environmental damage and overdevelopment at Inle Lake, a world-renowned tourist attraction even in the bad old days.

There are many similarities to Cambodia, where land grabbing, forced relocation, exploitative work conditions, corruption and ethnic strife are familiar parts of the landscape.

Burma “stands at a crossroads,” says Ali Hines, a campaigner with British-based environmental NGO Global Witness, which has done high-profile work in both countries for years. “Either it can continue down the path of its neighbours – whose limp efforts at reform do little to mask a de facto policy of land grabbing and cronyism – or it can use its natural resources to drive the sort of equitable national development that is needed to set the counter on a more stable, more sustainable course.”

Getting it right

For Canadians who have or want a stake in Burma, these trend lines should be cause for concern.

Photo courtesy of Brigitte Werner

Will nascent reforms, such as transparency in oil and gas contracts, be strengthened and enforced, or allowed to wither on the vine? Will effective legislation be passed to properly and fairly establish land title and regulate its use and sale? Will pervasive cronyism and corruption be allowed to flourish? Will consultation and popular will play a greater role in weighing the fate of mega-projects like the Myitsone Dam? Will restrictions on Suu Kyi’s path to the presidency, currently blocked by junta-era legislation, be lifted – or have her principles and promise merely been co-opted by a junta with a friendlier face?

The answers to these and other questions are not yet certain. But this is where the outside world Burma has been courting – including Canadian investors, political leaders and even the public – can make a difference.

Like the leaders of many emerging quasi-democracies, Burma’s government, military and oligarchs are walking a fine line with their foreign suitors. In essence, they say: In order to make money with you, we will undertake an amount of reform that satisfies your business and political requirements.

So how badly do we want to make money with Burma? And what amount of reform will satisfy our standards? These are the international community’s bargaining chips.

In Cambodia, where reform has gone so badly off the rails, growth has been high but the amount of money to be made was still relatively small (its economy is defined by agriculture, tourism and low-cost labour). But international standards for reform were similarly low. The defining issue for Cambodia’s foreign suitors was justice for victims of the Khmer Rouge regime, responsibility for which was tangled in regional rivalries and Cold War politics. Prime Minister Hun Sen, in power for nearly 30 years, has a singular talent for delay and obfuscation, and the Khmer Rouge tribunal process has been dispensing justice in a slow trickle for more than 15 years now – just fast enough to keep foreign aid and investment on the hook.

Bar set low

There is no similar defining issue to distract the international community in Burma. But the amount of money to be made is much higher than it was in Cambodia. The Burmese economy is already twice that size, with a much richer resource base and four times the population. And Burma’s sanctions-era business partners (Thailand and China, notably) set a very low bar for reform. Can Western firms with checkered records of their own, such as Canadian resource companies, be counted on to raise it?

“Canadians and Canadian companies are urged to remain vigilant and ensure that they engage with individuals and companies of the highest ethical standard … it remains the responsibility of individual companies to ensure their activities are within legal parameters and beyond reproach with respect to integrity,” Foreign Affairs Minister John Baird and International Trade Minister Ed Fast advised in 2012, as Canada announced its intention to open an embassy in Burma.

To that end, international money has largely been concentrated in high-profile industries such as oil and gas, tourism and telecommunications – foreign investments “are largely contracted on the basis of intentional standards where transparency is not a problem,” says Derek Tonkin, a former British diplomat who now serves as an adviser to investment firm Bagan Capital.

But sustained change will take time and commitment by both investors and governments. Before they make their money, Burma’s new foreign partners need to demand more: clear, fair rules for foreign investment and domestic politics; the disavowal of cronyism and corruption, official and unofficial; consideration of social and environmental impacts of potential investment projects; incorporation of best practices and corporate social responsibility; understanding and accommodation of local context, culture and relationships.

Although some (including Burmese-Canadian democracy advocate Tin Maung Htoo) have argued that the threat of sanctions should be maintained, it’s clear that Burma is now open for business. Economic opportunities abound and Canadians can no longer be expected to stay out on principle or nervousness at dealing with what remains an unsavoury regime. But as they engage, they need to keep pushing back. They could start by asking what kind of Burma they want to deal with in the future: another Cambodia, or something better?

Guy Nicholson is deputy comment editor at The Globe and Mail. He was foreign editor and managing editor of The Cambodia Daily in Phnom Penh from 1996 to 1999.