Myanmar to renegotiate huge resource deals

The Myanmar government plans to renegotiate billions of dollars of natural resource deals as it imposes tougher environmental standards and clamps down on corruption, a leading US think-tank said. The country's powerful military and Chinese firms could be most affected by the move as the government pursues a radical reform agenda, turning away from decades of junta rule, according to the Asia Society. Myanmar has huge reserves of resources -- ranging from petroleum to tin, timber and precious gems -- which have become notorious for corruption and crony capitalism. "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," said a report by the society, which has worked closely with the old junta and new government. Chinese firms dominate the foreign presence in Myanmar and could suffer. "Contracts negotiated with the former government need to be reviewed as the new government enacts new policies and signs on to new international standards, so I don't think anyone is immune to that approach," Suzanne DiMaggio, an Asia Society vice-president and co-author of the report, told AFP on Monday. DiMaggio said the value of the deals was probably in the billions of dollars, an estimate agreed by other experts dealing with Myanmar. The halting of the Chinese-backed Myitesone Dam in Kachin state in 2011 was "the first bell indicating that the rules would be changing," said DiMaggio. "Now with the development of new investment laws, we should expect that momentum to continue." Myanmar is a candidate to join the Extractive Industries Transparency Initiative, which seeks to set international standards in countries with major resource revenues. Since the dam was halted, the government has faced new controversy over a Chinese-backed copper mine development near Monywa in northern Myanmar where there were clashes between security forces and local people last year. The Asia Society said the government will have to work with local communities to make sure all share from the resource profits. It also said the government would have to take tougher action to reduce the military clout in the economy and political life. Despite the change of government to a nominally civilian administration, "large military companies maintain access to the lion's share of the country's resources and, along with a handful of crony businessmen, dominate the economy." "Until the military can be removed from its economic domination of the country, both political reconciliation with minority nationalities and economic development are likely to remain elusive," the report warned. The report which set out 10 key obstacles faced by President Thein Sein's reforming administration, also said that rooting out corruption would be essential. DiMaggio said the creation of a state anti-corruption committee was an important first step but it would take time to end the corruption and crony capitalism. "Breaking down those structures, it is not going to happen overnight and I think that is one of the reasons why investors are cautious," she said. DiMaggio said there was still vital momentum behind the government reforms but that it was crucial that they start producing results for the vast majority of the 55 million population who still live in "abject poverty."