Speculation over Myanmar's plans for resource projects | Connect Asia

Speculation over Myanmar's plans for resource projects

Speculation over Myanmar's plans for resource projects

Updated 26 June 2013, 15:41 AEST

A new report assessing the changes underway in Myanmar won't make comfortable reading for some investors in the country.

The New York-based Asia Society has released a report claiming the Myanmar Government is planning to renegotiate all past resource development projects.

Potentially involving billions of dollars, such a move would raise the ire of existing investors - many of them Chinese state-owned companies backed up by the country's military.

Presenter: Karon Snowdon

Speakers: Sean Turnell, Associate Professor in Economics at Macquarie University; Dr Myint Aung, Myanmar Minister for Mines

SNOWDON: The report called Sustaining Myanmar's Transition - Ten Critical Challenges is co-written by the former US Ambassador to Myanmar, Priscilla Clapp.

Given that and the Asia Society's close links to the government it is credible.

The report says: "Apparently, the government is preparing to renegotiate all previously agreed-upon projects to ensure that appropriate safeguards are in place and to subject future projects to stricter social and environmental controls."

Sean Turnell, an Associate Professor in Economics at Macquarie University is an adviser to reformist ministers in the Myanmar Government.

He says the idea if related to past contracts isn't practical.

TURNELL: It's one of those ideas that would be a very good one if it can actually be done, because so much of Myanmar's past economic problems, under the old military regime, came about because of these very badly negotiated contracts, most of them with China. So it would be a great idea if it was possible, but the practical difficulties are pretty severe. So I think one would have to be a little bit doubtful.

SNOWDON: Last month during an interview in Sydney the Minister for Mines Dr Myint Aung didn't go as far as saying past contracts would be renegotiated.

But he pointed to major changes.

AUNG: During this new government regime we are making sure that all these mining sector are now being privatised. The system of management is so much different during the military regime period to that of the democratic regime period. As you know in the military they will do it their own way but in the democratic system we're doing it in a democratic way.

SNOWDON: The government is working on a new mining law - and that's due later this year.

It's going to incorporate international standards of environmental and social protections as well as better financial deals for the country.

Sean Turnell says Myanmar's rich mining and timber resources went to China very cheaply and with often dire consequences for local communities during the military's rule.

TURNELL: A lot of those gas deals with China, for instance, were for the supply of natural gas at prices that were well below the market value, so in a sense, as I say, an implicit subsidy to China for its political support.

SNOWDON: And we'd be talking about projects worth billions of dollars presumably?

TURNELL: We sure would. The main pipeline that I'm thinking of in this context, which was a particularly bad deal, which is going to pump gas from the Bay of Bengal all the way up into China's Yunnan Province. That's a deal that will supply, that's worth about $3 billion a year to Burma, but the gap in pricing between what China pays and what the market pays is upwards of about 50 per cent, so it's some really significant numbers involved.

SNOWDON: Relations with China are already strained after several major projects were cancelled or questioned by the new government.

Myanmar's own state-owned companies - many linked to powerful military and crony business interests would also be in the firing line.

The Asia Society report says the military's desire to control the wealth of resources in Kachin State is a major reason a ceasefire has been difficult to reach.

Sean Turnell says any changes for existing projects will be a wake up call for Chinese companies.

He thinks change will encourage, rather scare off, new foreign investors.

But if one of the aims is to reduce the military's dominance of the economy that's a whole lot tougher.

TURNELL: That's another reason why the plausibility of all this might be a little bit doubtful. So, of course, if it were to do go ahead, it would again give us a signal that this new government is a very different animal indeed.

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