The cost of doing business in Burma

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There is an interesting piece in The Economist this week, Forced labour and other customs (reproduced in full below if you don’t have a password), that will provide a fillip to those seeking to dissuade foreign investors from going into Burma. For some time now there have been reports of gross human rights abuses by the Burmese military forcing people to work on a gas pipeline, and now the US energy company, Unocal, confronted with a number of law suits, is settling out of court. Sadly, while pressure to pull out of Burma is producing some positive results, there is still plenty of support for the military junta, particularly within ASEAN. Indeed, Burma is scheduled to chair ASEAN in 2006 and while there has been some subtle pressure on the Burmese regime from neighbouring ASEAN governments, it hasn’t amounted to much so far. One can only live in hope that they will be embarrassed into doing something come 2006.

Forced labour and other customs

Dec 16th 2004 | BANGKOK
From The Economist print edition

The rising costs of doing business with a loathsome regime

LIFE has just got gloomier for the few foreign companies that doggedly do business in Myanmar. On December 13th, Unocal, an American energy firm with a stake in a gas pipeline in the country, agreed in principle to settle several lawsuits related to that investment. The decision will encourage exiles bringing similar cases against Total, Unocal’s partner in the venture, in Belgium and France. It will also galvanise the various boycott campaigns around the world designed to press investors to pull out of Myanmar. But it is unlikely, sadly, to have much effect on Myanmar’s military regime.

In all three suits, the plaintiffs allege that among other abuses government soldiers forced them to work on construction jobs related to the pipeline, and that since such abuses were predictable, the pipeline consortium should bear responsibility for them. Total and Unocal, on the other hand, argue that no forced labour went into the construction of the pipeline itself, and that, in any case, they have no influence over Myanmar’s army and cannot be held responsible for its conduct.

Barry Lane, a spokesman for Unocal, although cagey about the details of the settlement, still maintains that the firm did nothing wrong and is not reconsidering its investment in Myanmar. But it has agreed to compensate the plaintiffs and provide extra funds for development in the pipeline’s area. Total says it will continue to contest its lawsuits, and that it will not withdraw from Myanmar. But following Unocal’s settlement, the notion that investment in Myanmar might turn out to involve a financial liability, as well as merely being a public-relations disaster, is no longer far-fetched.

In 2002, Premier, a British oil firm that was the target of a vociferous disinvestment campaign, decided to sell its stake in another pipeline and cease operations in Myanmar. Other firms, including several travel agencies and garment-makers, have recently succumbed to boycotts. America, meanwhile, bans new investments in Myanmar, and does not allow financial transactions with the country, making life difficult for the remaining multinationals.

But Asian firms, which do not suffer from boycotts at home, and find it easier to get around the American embargo, are still willing to invest in lucrative projects. Petronas, Malaysia’s main state-owned energy firm, snapped up Premier’s pipeline stake.

Moreover, the generals who run Myanmar do not appear to care much about the state of the economy. They fomented a bank run at the beginning of 2003, bringing domestic investment to a standstill. In 2004 they sacked Khin Nyunt, the most dynamic member of the ruling junta, who had brought the internet to Myanmar. They change the tax regime and export regulations arbitrarily and without warning. This is not the behaviour of a group susceptible to economic pressure.