Friday, 5 September 2008

Natural gas favours regime, not national interest

By Moe Thu and Htet Win
Tuesday, 02 September 2008

(Mizzima) - While Burma's economy is largely pushed forward by the sale of its natural gas reserves, the military regime has failed to develop gas related industries though there is potential demand for gas consumption in several different sectors.

ႈႈႈIn the fiscal year 2007-2008, Burma earned US$ 2.56 billion, 40 percent of its total export revenue from gas.

Major natural gas finds off the Arakan off-shore in 2004 by South Korea's Daewoo International and more recent discoveries in the Gulf of Mottama by Thailand's PTTEP have put Burma's energy sector in the international spotlight.

Development of Burma's oil and gas fields draws more foreign investment than any other sector of the Burmese economy, although some economists have voiced concerns that the rush for gas comes as other sectors fall behind those of regional competitors.

On March 27, a report by the Asian Development Bank (ADB) said sales of natural gas were creating growing trade surpluses and a valuable buffer for Burma, but warned that national economic reliance on the export market puts the country's economy at risk should global gas prices fall.

However, using the gas primarily to support domestic industries rather than exports would be the best way to supplement long-term economic growth – including job creation, experts said.

Areas that could benefit most from Burma's gas reserves include the agricultural and industrial sectors, which, for instance, could use the gas to power fertiliser or cement factories.

"If we build fertiliser plants we can produce it for our domestic use and sell our surplus abroad," a Rangoon-based academic said, noting that such a move was consistent with import substitution policies, inexhaustibly pursued by the military regime with its inconsistent economic policies.

Only a third of Burma farmers use fertiliser, while the country currently produces just 200,000 tonnes of the 1.6 million tonnes of fertiliser it consumes annually, according to the recent data available from the Union of Myanmar Federation of Chambers of Commerce and Industry.

The military government, which is well aware of the high demand for gas to be used to generate electricity for a wide range of industries, including manufacturing, however fail to utilize the gas.

Manufacturing industries, which need constant supply of energy, is the most favourable for job-creation even compared to agriculture, which is so-called the economic backbone of Burma, for the many young rural people who are increasingly migrating to urban centres in search of jobs.

The lack of consistent and sufficient supply of electricity has been one of the major set-backs to the Burmese economy and use of its natural gas and income from its sales to set up power plants, could be an immediate and first step to solve the electricity needs of manufacturing industries.

Gas power stations in Burma constitute 40 per cent of the total annual generation, while hydropower contributes 50 per cent, steam turbines 9 per cent and diesel engine one per cent, the Ministry of Electric Power No (1) figures indicated.

Though the country has an abundance of gas reserve and enjoys sale of natural gas, a recent Asian Development Bank (ADB) report on Burma's economy indicated that the best use of the resources is important for the country's long-term development.

The report said gas export, if properly utilized, will provide an opportunity to embark on structural reforms, including exchange rate unification, fiscal consolidation, and agricultural liberalization, and to redirect public spending for development of social and physical infrastructures.

"In view of the importance of agriculture and its impact on poverty, strengthening the sector should be a key goal," the report said.

Another possible benefit from natural gas is establishing natural gas revenue funds in the country, which will then help in developing the economy and stabilizing of commodity prices.

"Resources like natural gas are exhaustible. It will be good if we set up a fund with the income from gas sale for our generation and the economy," said a Rangoon-based economist.

Though Burma's trade volume saw an increase due to the export of natural gas, it does not, however, imply that natural gas is a catalyst for long-term economic development of Burma, which still has an agro-based economy. And experts said existing gas reserves are not big enough to rely on like the countries in Middle East and Russia.

This kind of fund will help sustainable economic development of the country as the country can invest the money from the fund in promising businesses and industries to acquire revenue and cope with the devaluation of the funds due to inflation.

Setting up gas revenue funds can help stabilize commodity prices and to keep inflation at bay. Burma, in a little over five years has witnessed skyrocketing of commodity prices, and seen soaring inflation rates.

Setting up funds from petroleum sales has been practiced in the countries such as Norway, Kuwait, Kazakhstan and Azerbaijan with the aim of increasing transparency and better governance, the very things the Burmese military regime does not want.

However, some economists feel it is impossible to set up a gas revenue fund as earning from the natural gas sale cannot match the earning from oil sales in oil-rich countries, citing as a concrete example that Burma has no longer oil revenue.

Putting it bluntly, it is the government, in the first place, that continues to fail creating a 'business environment conducive to investment growth' – regardless of economic sanctions against the country.

It is apparent that the military government has left out the role of business or economic experts, who are crucial to pave the way for reform measures leading to in such a business climate.

But the saddest fact is that the military leaders are happy with cronyism, a scale which they could manage and a cause which continues fundamentally to backpedal the country's economy.

The Generals still pursue cronyism in economic affairs even as they continue to ignore the interest of the people by failing to take up economic reforms.

Therefore, gas in Burma can only entrench the power of the military junta, as long as the policy makers fail to come up with measures to best utilize it.

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