What Can Gas Transparency do for Burma?

Originally appeared in DVB

May 25, 2010

International pressure continues to mount on the oil companies Total, Chevron, and PTTEP of Thailand to practice complete revenue transparency in connection to the controversial Yadana natural gas pipeline in Burma’s Tenasserim Division. Non-governmental organizations, scholars, labour unions, investment firms, and even world leaders have urged the companies to publish over 18 years of payments to the Burmese military regime, including taxes, fees, royalties, bonuses, and social benefits since the project’s first contracts were signed in 1992.

This raises the question: What will this type of transparency actually do, and not do, for Burma?

Despite its virtues, revenue transparency has limitations. Regardless of any new policies of transparency in Burma’s gas sector, billion-dollar gas revenues will continue to line the pockets of the country’s elite for the foreseeable future, especially as new and lucrative projects come online in the absence of a real democratic transition. The management of billion-dollar revenues from the Shwe gas and oil transport pipelines to China is of particular concern, as these payments, estimated at $US29 billion over the 30 year life-span of the gas project, are set to become the largest sources of revenue for the state.

Moreover, without a novel scheme for managing and distributing gas revenues equitably, even transparent multi-billion dollar gas profits stand to increase inequality between the very few rich and the very many poor in Burma. This inequality is likely to have a disproportionate effect on the country’s ethnic nationalities. The United Nations Development Programme (UNDP) and Burma’s own Central Statistical Organization recently found that more than 30 percent of the entire population had insufficient income to provide for basic survival, a figure that increased to more than 50 percent in non-Burman states and regions, where most of the country’s lucrative natural resources are located and have been mined for decades.

Additionally, there is a serious risk that the continued influx of large amounts of oil and gas revenues, transparent or not, will have adverse impacts on Burma’s already fledgling economy. Burma is principally an agricultural society, and a continued sharp rise in the value of gas exports could exacerbate the regime’s dangerous disincentive against promoting the agricultural sector, to the detriment of huge parts of the farming population.

In the short term, revenue transparency will also do little for the protection of human rights vis-à-vis oil and gas projects. Local land confiscations as a result of gas pipelines will most likely continue, and local people will continue to be forced to work on pipeline-related infrastructure by pipeline security battalions operating on behalf of the oil companies.

Transparency will mean next to nothing to the families of two men recently killed in cold blood by Total, Chevron, and PTTEP’s “pipeline security battalion,” as documented by EarthRights International. For these crimes, the companies and the military regime need to be held accountable. Widespread forced labor, forced portering, and other human rights violations committed by pipeline security forces, directly and indirectly related to the project, will continue until the companies take full responsibility and work toward human rights protections.

However, despite its shortcomings, revenue transparency is still critically important for development and governance in Burma. For starters, it will shed a critical light on a dark corner of some exceedingly undemocratic concentrations of power in the country. This could have positive, long term political implications. Research indicates that states generating revenues from natural resources are less reliant on citizens, and this “independence” can erode the civic relationship between the government and the people, contributing to authoritarianism. Burma appears to be on the far end of this unfortunate spectrum. Revenue transparency can help push it in the other direction.

Second, the people of Burma have an intrinsic right to know what foreign companies have paid to the state for public resources. That is the underlying principle of the revenue transparency norm in the extractive sectors worldwide. Total and Chevron already purport to prioritize transparency and the promotion of human rights. In cooperating with this initiative, they have an opportunity to advance freedom of information and the peoples’ “right to know.”

Revenue transparency will also be important for the thorny process of transitional justice in Burma. Detailed data about the amounts, timing, and delivery of payments from these oil companies to the junta from 1992 to the present day could eventually improve the prospects for holding the junta accountable for the past and present mismanagement of the country’s natural resources. A free Burma will want to know how much money evaded the population, and its location. The longer the companies wait to disclose information about their payments to the state, the more troubled their engagement with future governments of Burma could be.

But beyond these imperatives, there are economic incentives for the companies to cooperate: Revenue transparency is good for business.

For one, transparency will serve Total, Chevron, and PTTEP’s ailing reputational agendas, what some analysts refer to as any oil company’s most important asset. While the companies’ bad reputations for complicity in forced labour, killings, and torture have been well-earned, and in some ways are irreparable, their transparency would demonstrate an overdue regard for freedom of information in Burma, and that would be duly noted by Burmese citizens, shareholders, non-governmental organizations, and others.

Reputational repair is something the companies have already spent considerable resources on in Burma, and to dubious effect. Revenue transparency, on the other hand, is objective and free; surely that must have some resonance in the upper corporate echelons.

Moreover, shareholders in multinational oil and mining companies increasingly understand the straightforward contributions transparency can make to areas such as corruption control, a much-needed outcome in Burma, which was ranked by Transparency International’s recent corruption perceptions index as the world’s third most corrupt country, behind Afghanistan and Somalia.

Revenue transparency also makes sense in terms of open and free markets. It would afford investors and capital providers access to previously unavailable information regarding industry in Burma, including the size and timing of payments made by these oil companies to the authorities. This is information deemed vital for decision-making in the investment community, information oil companies have traditionally withheld.

In other words, transparency is in the interests of even those whose primary concern is maximizing profit.

What is more, revenue transparency is also in the interests of the home states of oil companies around the world, improving governance and contributing to stability in resource-rich states like Burma. This is noteworthy at a time when palpable political risks stand to threaten innocent civilians in Burma, the material assets of some oil companies in the country, and the long-term energy security of their home states. Specifically, the risk of civil war between the Burmese army and non-state armed groups in areas surrounding the Shwe gas and oil pipelines to China stands to threaten not only citizens of Shan state, but also the interests of Daewoo International, the China National Petroleum Corporation, and the government of China.

Stability and energy security through revenue transparency is the rationale behind new bipartisan legislation pending in the US congress, which will require all oil, gas, and mining companies registered with the US securities and exchange commission to publish their payments for oil, gas, and minerals in the countries in which they work, including Burma. If passed, the Energy Security Through Transparency (ESTT) Act would apply to a number of oil companies operating in Burma, including Total and Chevron.

However, despite the international application of this proposed legislation, it will not apply retroactively, meaning it will not require companies to publish past payments to host governments. This makes Total, Chevron, and PTTEP’s voluntary cooperation in publishing their last 18 years of payments to the junta critically important.

The good news is that the companies are not legally restricted from publishing their payments to the junta. Their contracts with Burma’s state-owned oil and gas enterprise were obtained through the Doe v. Unocal [Chevron’s former name] human rights lawsuit in the US and were recently published on the website of EarthRights International. In no way do they prohibit complete revenue transparency.

The time is now for Total, Chevron, and PTTEP to do the right thing and practice complete revenue transparency in Burma. If they want a responsible and level playing field with their Asian competitors, they need to participate in creating it.

Matthew F. Smith is a senior consultant with EarthRights International, and Naing Htoo is a program coordinator with EarthRights International. The organization represented Burmese plaintiffs in the Doe v. Unocal Corp. lawsuit.