House of Commons - International Development - Appendices to the Minutes of Evidence

Select Committee on International Development Appendices to the Minutes of Evidence

APPENDIX 13

Memorandum submitted by the Democratic Burmese Students' Organisation (UK)

We hope you will take the following points concerning sanctions into account in your International Development Select Committee report. We feel that the case of Burma warrants special attention, particularly since it's elected representatives have called for the free world to sanction Burma. As Parliament is now in recess we are sending this directly to each of the International Development Select Committee members, and can be reached at the above numbers for further discussion.

FOREIGN INVESTMENT HURTS THE POOREST PEOPLE IN BURMA

We find that it is, in fact, foreign direct investment (FDI) that hurts the poorest people in Burma. It maintains the military's hold on power, hence allowing it to continue it's grotesque and relentless human rights violations against the populace. Moreover individual projects directly worsen the lives of those living in the vicinity of the investment, particularly the minor ethnic groups who have suffered forced relocation, forced labour and major military offensives preceding or in conjunction with FDI.

A NOTE ON TRADE AND INVESTMENT SANCTIONS

Herein we are concerned with financial sanctions rather than trade sanctions, primarily due to the small value of exports from Burma compared to the value of FDI in Burma (for example in 1997-98 the UK invested US $47.54 million in Burma, while total exports from Burma in the same period were 6,022 million kyat, approximately US $16.72 million). [6]Secondly, from the perspective of an EU Member State acting unilaterally, Article 73g(2) Treaty of Rome allows Member States to pursue financial sanctions unilaterally, [7]while EU and WTO legislation makes trade sanctions far harder to implement.

THE WISH OF THE DEMOCRATICALLY ELECTED GOVERNMENT OF BURMA

Daw Aung San Suu Kyi, Burma's elected leader yet never allowed to take up office, has called upon the free world to sanction Burma. "We now endorse the idea of international sanctions because we have come to the conclusion that investments in Burma have not in anyway helped the people in general nor has it helped the course of democracy . . . There are a few people who have benefited from those investments. In fact, it has only made the privileged elite even wealthier." [8]

FOREIGN INVESTMENT HAS MAINTAINED A CORRUPT AND CRUEL DICTATORSHIP THAT WAS ON THE VERGE OF BANKRUPTCY

Economic engagement with the military has enabled the State Peace and Development Council (SPDC) to entrench it's grip on power despite catastrophic economic mismanagement. Without such capital inflows from overseas the SPDC could well have been forced into dialogue with the opposition due to bankruptcy, cutting the funds to the massive military machine. The uprising of 1988, when thousands of peaceful protesters were massacred in the streets at the hands of the junta, was sparked by economic hardship. Following the demonstrations the SPDC (then named SLORC) abandoned it's isolationist policies and opened it's doors to foreign investments. Among the first victims were the teak forests and fish stocks, later expanding to oil and gas concessions, notably Premier Oil (UK) and Total (France) and Unocal (USA). Yet despite the US $7.089 billion that has been invested in Burma since then[9] the situation for the countries' poor has worsened.

HOW THE SITUATION HAS WORSENED FOR THE PEOPLE OF BURMA: THE RICE ECONOMY

As a crude measure of development, primary industry has increased as a percentage of GDP relative to both secondary and tertiary industry[10], the converse of what one would expect of a developing nation, and symptomatic of the persistent economic mismanagement which has witnessed the export of resources to arm the junta. The single most important determinant in the living standard of a Burmese family and the economic performance of Burma has been paddy or rice. The price of rice has continued to rise, with the gap between the official and market prices continuing to widen, the gap in 1997 being 123 kyat, from a gap of 13.7 kyat in 1988[11] while wages in the public sector have been held almost constant (with two pay increases between 1988 and 1997) reducing workers to poverty, unable to afford protein foods and basic foodstuffs. Bribery is rife among government employees as a means of coping with such poverty. Energy prices have increased, while blackouts remain common, and the cost of fuelwood for the urban dweller has increased by a factor of five (1998 figures), meaning that those on the minimum daily wage would spend 71 per cent of their wage on fuelwood alone. [12]

Two-thirds of the population are paddy farmers. The state not only controls rice exports, but through a system of state procurement at below market rates, implicitly taxes the farmers. "Though the Karenni farmers had a very low production on crops due to the lack of rain in the year 1998, they were forced to sell five baskets per acre to the troops at a very low price. The troops only gave 150 kyat for a basket of paddy while the price of a basket of paddy was 400 kyat in central Burma. In addition, the farmers need to pay 35 kyat per acre as a tax to the SPDC." [13]Advancing loans to farmers has established a system of quotas which farmers must sell to the state at a predetermined price, radically below the market price of rice. If they cannot meet the quota they must sell their possessions to buy the rice, at the higher price, and risk losing their land. Professor Mya Maung finds that " . . . the implicit tax rate imposed on the farmers by the government was 1,081.4 per cent".[14] The result has been a huge increase in landlessness, indebtedness and poverty. " . . . more than 40 per cent of the population supported by agriculture in 1993 had no land or livestock holdings at all—over and above 4.4 million people living in households with land holdings of less than three acres, generally too small for subsistence even for a small household." [15]Much rice is, in fact, seized by troops in military "black zones" (ethnic "insurgent" controlled areas, deemed free-fire areas by the SPDC) to support the SPDC troops. Spending on health has dwindled to a mere per capita 6.9 kyat 1995-96, from a figure of 18.7 kyat in 1985-86[16], meanwhile the universities remain closed as the junta attempts to breed ignorance and apathy. The reality is that the inflow of FDI has merely prevented Burma from plunging into worse crisis as the situation for the average urban and rural dwellers has deteriorated considerably since the opening of Burma to FDI in 1988.

Financial gains from FDI go straight to the military

Full foreign ownership of companies operating in Burma is forbidden and almost all large investment is carried out through joint ventures with the junta. The Union of Myanmar Economic Holdings, through which much FDI is channelled, is owned and operated by the Ministry of Defence and their families. Premier Oil's investment in a US$ 700 million project in the Yetagun gas field in the Andaman Sea is in partnership with Petronas (Malaysia) Nippon (Japan) and Myanma Oil and Gas Enterprise (MOGE), a state enterprise. Pacrim Energy (Australia) paid US$ 3 million for the commencement fee for it's two oil blocks in Burma[17], funds that flowed directly to the junta. According to IHC Caland's director Bax "the money is of course going to the colonels" (IHC Caland is a Dutch company investing in Burma's gasfields).

The junta spends some 60 per cent of government funds on the military

The money that does reach the state and is not siphoned off by corrupt state officials is spent largely on the military. Military expenditure as a percentage of combined education and health expenditure was an exorbitant 222 per cent in Burma, compared to 49 per cent in Indonesia and 65 per cent in India pre 1997[18]. According to its own figures, the regime spent 50 per cent of it's annual income on defence, compared to 24 per cent on social services, and 14 per cent on education (1996) figures). [19]The military has doubled in size since 1988, and they hope to expand it by a further 100,000 to a total of 500,000 by the end of the year, despite being at war with no-one but itself. The poor are already impoverished under the regime, and FDI merely prolongs their misery by financing military purchases.

Increased militarisation precedes foreign investment

There are obvious links between military offensives in ethnic minority areas that precede the granting of concessions, particularly in the onshore oilwells. This was reported as early as 1992 in the Mya Yadana[20] noting the brutal offensive against the Kachin Independence Organisation in the Hukawng Valley of Kachin State, the site of oil concession Block A. Block A, one of the first areas to be offered, was not taken up despite great potential, due to the renowned military skills of the Kachin that were operating in the area. The opposition has since been brutally crushed. Similar tales can be told elsewhere, such as the Naga tribespeople whose land was granted to Amoco.

Foreign investment has caused further human rights violations

Unocal Corporation is currently facing two lawsuits in the USA over human rights violations for its investments in the Yadana project. "The lawsuit has been brought by Burmese villagers who have suffered human rights abuses as a direct result of the pipeline projects. As part of the project, forced labour has been used on the surrounding infrastructure of the project, and the Burmese military has secured the `pipeline corridor' for the project." [21]Twenty-five thousand people were forcibly relocated to make way for the pipeline[22], and increased military operations in the area, ostensibly to protect foreign investment, has resulted in increased human rights violations perpetrated by the military against the local Karen and Mon people. Refugees fleeing the area tell of forced labour in construction of the pipeline infrastructure, infrastructure which Premier Oil (UK) is using to construct it's own pipeline, parallel to the Unocal/Total pipeline, notably the airstrip and roads. Unocal President John Imle has admitted under oath that porters were conscripted by the military to work on the project. [23]A French all-party delegation, recently returned from investigations of human rights violations in conjunction with the Total/Unocal project has already recognised that at least at the start of the project there was forced labour and forced relocation in the preparation of the pipeline. [24]Undercover investigations have found that Total not only employed Western mercenaries but also paid the SPDC to protect the pipeline.

Foreign Investment is going into unsound development

The case of the Salween dam, currently in pre-feasibility study stage in Shan State, NE Burma, will starve downstream farmers of water, cause a massive increase in disease, forced relocation and human rights violations in the dam area, and devastate the environment, as far south as the delta. The brunt of the loss of land, income and threat from earthquakes and disease will be borne by the ethnic hilltribes peoples that the SPDC is so desperate to subjugate. [25]In the past three years some 300,000 people have been relocated out of the dam area, in January and February alone over 2,000 Shan people sought refuge in Thailand. Originating as a hydro-electric power project, the true objectives became clear in 1998 when the dam was billed to divert water to Thailand, as the "Salween Water Diversion Project." Currently Japanese (MDX development) and Thai (Italian-Thai Development Plc) companies are involved as well as the Thai government, who are thought to be planning to approach the Japanese Myazawa Fund to finance this project. The detrimental impacts will be immense, yet those who will be affected have no voice.

The presence of foreign firms legitimises the dictatorship

While the European Union and other countries denounce the atrocities committed by the SPDC, European firms continue to operate and invest there, claiming that the profit motive clears them of all political considerations. How can such investment be free of any responsibility when it directly supports a genocidal regime? While the British Government does "not encourage trade with Burma"[26] it neither discourages it, nor takes a stand on British companies investing in Burma. Even Daw Aung San Suu Kyi has spoken out against such studied ignorance of companies. "Premier Oil and other companies like it which deal with the military government give it not only financial support, but moral support as well. It makes this government think that it is all right for them to violate human rights as long as there are big companies which will deal with them."

Conclusion

Investment in Burma hurts the poorest, particularly through loss of land and human rights violations perpetrated by the military in conjunction with foreign projects. But on a more general level, foreign investment is supporting a corrupt, cruel and illegitimate dictatorship that is committing genocide but remains unrecognised as such. The ethnic cleansing that occurs in the ethnic minority areas is well documented, and the persistent flow of refugees to Thailand testify to this, although the world seems deaf to their words. Even the democratically elected leader of Burma has called for sanctions to be imposed on Burma. Yet Britain remains one of the biggest investors. Second only to Singapore, Britain has US£1,353 million invested in Burma in 33 projects. [27]Singapore tops the list with US$1,490 million, and Thailand is a close third with US$1,242 million.

We hope you will agree that in the case of Burma, sanctions would push the military into a dialogue that would result in the improvement of the living standards of the populace. Potentially, they are an invaluable tool in the struggle for democracy. Please recommend the use of financial sanctions against Burma until a democratic government is formed, at the unilateral and multilateral levels. As Daw Aung San Suu Kyi has asked, "Please use your liberty to promote ours."

Ko Aung*

Co-ordinator

Rachel Goldwyn, Researcher

Democratic Burmese Students' Organisation (UK)

1 August 1999

*Ko Aung (Kyaw Soe Aung) is a Burmese dissident living in London. He served five years seven months as a political prisoner in Burma's notorious Insein prison, having played a leading role in the uprising of 1988.

End Note: The current status of sanctions against Burma

European Union

1990 Arms embargo.

1991 Suspension of defence co-operation and bilateral aid other than strictly humanitarian.

1996 Visa ban on State Peace and Development (SPDC) members, government, senior military and security officers and their families, suspension of high level governmental visits to Burma.

1997 Generalised System of Preferences privileges withdrawn.

1998 Visa ban widened to include transit visas and tourism officials.

USA

May 1997 Ban on new investment by American companies.

Numerous selective purchasing laws passed by municipal and local government and New York City.

June 1999 Massachusetts State selective purchasing law overturned.

Australia

May 1998 Marrickville Local Council of New South Wales the first of several Australian Councils to enact selective purchasing ordinances.

6 Source: Government of the Union of Myanmar, Salient Economic and Social Indicators, Ministry of National Planning and Economic Development March 1998. NB these were provisional figures at the time of print. The kyat is the Burmese currency. Back

7 Article 73g(2) EC (treaty of Rome) "Without prejudice to Article 224 and as long as the Council has not taken measures pursuant to paragraph 1, a Member State may, for serious political reasons and on the grounds of urgency, take unilateral measures against a third country with regard to capital movements and payments. The Commission and other Member States shall be informed of such measures by the date of their entry into force at the latest." Back

8 Speech of 10 December 1998. Back

9 October 1998 figure, Xinhua News Agency 5 February 1999. Back