Scott Hickie

November 2014
Stalled hope?
The resource conflict risk to Myanmars
political and economic transition




Published by Open Briefing, 3 November 2014
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Stalled hope#

)he resource conflic ris: o Cy3nm3r;s
poliic3l 3nd economic r3nsiion






























!co 9ic:ie





























Contents






Executive summary 1
I. Introduction 2
II. Myanmars resource conflict flashpoints 6
Myitsone hydroelectric dam project 7
Letpadaung copper mine 8
Shwe oil and gas project 10
III. Drivers of resource conflict in Myanmar 12
a) Increased foreign direct inestment 1!
") Institutional corruption and reenue misappropriation 1#
c) Im"alance in resource reenue distri"ution and "enefit sharing 1$
d) %elay in decentralisation and su"&national goernance reform !0
e) 'nraelling of some ethnic state ceasefire agreements !!
f) Land confiscation and enironmental degradation !(
IV. Conclusion 2
!eferences 2"















#uthors note$ )his "riefing paper uses the official name Myanmar in reference to the country of
*urma+Myanmar, )his usage should not "e interpreted as a position on the legitimacy of the current
goernment or main opposition parties- nor the legitimacy of the name change in 1.8., In some
instances- this paper refers to pre&1.8. names of riers or cities for ease of recognition, /gain-
usage here should not "e interpreted in political terms- and is adopted purely for reader familiarity
and comprehension,
/ll currency figures are in 'S dollars 0'S%) unless stated otherwise,

Stalled hope? 1
Executive summary


This briefing paper assesses the trajectory and significance of resource conflict risks and threat
multipliers in Myanmar. The principal findings include:
. !espite poor institutional settings" increased foreign direct investment is unlikely in of itself
to increase local or regional resource conflict.
i
#nvestment industry" type of local business
partners" ability to secure social licence" and specific project footprints $ill all shape the
contribution of %!# to resource conflict.
&. Select armed ethnic groups demands for a federal political system are highly likely to
intensify in absence of public finance reform" more transparent resource revenue management
and greater fiscal devolution to states hosting projects. This is likely to result in the fracturing of
some ceasefire agreements" increased ethno'religious communal violence" localised project
sabotage and magnified security risks for business investments.
(. Increasing military securitisation of key energy infrastructure assets, such as pipelines and
hydrodams, is highly likely. They are the lifeblood of Myanmar)s fragile economy and $ill
continue to be strategic targets if project revenues are allocated solely to the military and
military'affiliated businesses.
*. Armed ethnic groups, particularly in Kachin and Shan states, are likely to attempt expelling
the Tatmada !"yanmar armed forces# from these positions or engage in project sabotage
in response to land sei+ures" human rights abuses" environmental degradation and arbitrary
arrests.
,. The num$er of internally displaced persons is unlikely to decrease in the next 1% months,
and those trying to return home are likely to experience continued dislocation from land as
a result of opportunistic land grabs.
-. &rotests over land gra$s and particular infrastructure pro'ects are likely to escalate if
parliament does not act on the recommendations of the %arm .and /ommission.
0. (onflation of localised, isolated or pro'ect)$ased resource conflicts ithin $roader ethno)
religious confrontations and communal violence is could possibly $e a threat multiplier and
expand the geographic scope of conflict.
1. Armed ethnic groups or nationalist forces could possibly exploit local conflicts and marshal
existing tensions around religion, nationalism, development disparity and ethno)political
competition to attempt nationalising conflict as a strategy to leverage greater political
po$er. 2o$ever" the ruling *nion Solidarity and +evelopment &arty !*S+&# and elements
of the military could possibly attempt to mitigate this risk through a divide and con,uer
strategy to reduce any existing semblance of ethnic group solidarity.

i
3lease see http:44$$$.openbriefing.org4intelligenceunit4intelligencemethod4 for an explanation
of the $ords of estimative probability that 5pen 6riefing uses in its briefings.
% 5pen 6riefing
Section #
#ntroduction


#n &7" 3resident Thein Sein)s 8uasi'civilian government initiated one of the most ambitious
economic and political transformation campaigns of the last ,7 years. 9one are the days of
international isolation. Sein has painted a vision of Myanmar shedding its pariah status and s$iftly
transitioning from one of the region)s least developed countries :see ta$le 1 belo$; to a dynamic"
emerging <sian Tiger. This is a challenging task after almost five decades of autocratic military rule"
severe impoverishment and destructive armed ethnic conflict.
Ta$le 1. Select social" development and institutional rankings.
"etric -anking
2uman !evelopment #ndex
:=> !evelopment 3rogramme" &7&;
1./ of 10 countries :lo$ human
development;
/ivil and 3olitical %reedom rating
:%reedom 2ouse" &7(;
0ot 1ree :though improving civil and
political rights;
3ress %reedom #ndex
:?eporters $ithout 6orders" &7*;
1.2 of 00 countries :@&* positions from
&7&;
/orruption 3erception #ndex
:Transparency #nternational" &7(;
123 of 00 countries
#ndex of Economic %reedom
:2eritage %oundation" &7*;
14% of 01 :overall score *-., Arepressed)"
@0.( from &7(;
?esource 9overnance #ndex
:?evenue Batch #nstitute" &7(;
,1 of ,1 countries
Myanmar)s estimated - million citi+ens are cogni+ant the country is endo$ed $ith great
geostrategic advantage" sitting bet$een the &st century)s rising economic po$ers" /hina and
#ndia.

Sein and the =S!3 are very a$are of the comparative economic advancement and gro$th of
its neighbours" particularly Thailand" $hose per capita 9!3 :in purchasing po$er parity" 333; is more
than eight times larger than Myanmar)s :see figure 1 opposite;.
The reformist agenda has the potential to steer Myanmar a$ay from historic insecurity and
economic stagnation. Bith sanctions either removed or eased" ne$ comprehensive aid packages
signed" diplomatic relations rebooted and ne$ bilateral defence ties on the table" a space has
opened for Myanmar to build rule of la$" initiate civil and political rights reform and develop a more
inclusive and e8uitable economic gro$th trajectory.
Stalled hope? 5

1igure 1. 9!3 per capita :333; in =S dollars. !ata from the Borld 6ank and Trading Economics.
These rags to riches aspirations give great hope after false starts in breaking from military
dictatorship. 6ut they also conceal complex" multidimensional political and economic challenges.
.everaging significant endo$ments of natural resources to achieve sustainable security" lasting
political settlements $ith ethnic states and economic gro$th that supports human development
$ill be difficult.
The transition process involves a risk that unsatisfactory institutional settings" development
asymmetry bet$een central Myanmar and its ethnic periphery and fractured political identities $ill
conspire to reignite inter$oven resource" intercommunal and ethnic conflict.
ii
?esource conflict
poses an ongoing challenge to Myanmar)s reform process. Bhile it is unlikely to permanently derail
Myanmar)s political reform" it is likely to fuel continued" episodic armed conflict bet$een some
ethnic armed groups and temporarily stall future political negotiations. The capability of >aypyita$
to successfully manage resource development in a post'conflict society $ill be central pillar of a
peaceful transition.
Myanmar is divided into seven states along the resource'rich border areas" each named after one of
the seven largest ethnic minority groups" and seven regions :formally divisions;" $hich are largely
inhabited by the majority 6amar :see figure % overleaf;. >atural resource governance and conflict
over resources play a particularly critical role in shaping ethnic state grievances and political
demands" but also exacerbate $idespread public dissent over land sei+ures and contribute to armed
conflict :see figure 5 overleaf;. Establishing appropriate institutional" operational" cultural and
regulatory settings for natural resource governance $ill be fundamental to >aypyita$)s political
dialogue $ith ethnic states and addressing economic and infrastructure development ine8uity.

ii
The ongoing intercommunal violence in ?akhine4<rakan state" though having some dimensions of
a conflict rooted in land issues" is beyond the scope of this report.
7
"777
&"777
("777
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,"777
-"777
0"777
1"777
C"777
&771 &77C &77 &7 &7&
Myanmar
/ambodia
.aos
#ndia
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3hilippines
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Thailand
. 5pen 6riefing

1igure %. State and region boundaries of Myanmar. /opyright E 5xford 6urma <lliance.

1igure 5. The links bet$een natural resource governance and critical reform issues.
<llocation of
resource
o$nership and
management
roles
.and
management
and confiscation
<llocation of
resource
revenues and
project benefits
/easefire
agreements and
political
dialogue
>atural resource
governance
3ublic finance
reform" anti'
corruption and
fiscal devolution
#!3s" human
insecurity"
protests"
business
Stalled hope? 2
The key drivers of resource conflict risk in Myanmar include: increasing foreign direct investment
:%!#;" institutional corruption and revenue misappropriation" imbalances in revenue distribution"
delays in political system decentralisation" unravelling of some ethnic state ceasefire agreements"
and land confiscation and environmental degradation. This briefing paper assesses the trajectory
and significance :see ta$le % belo$; of these macro'level risks and threat multipliers of resource
conflict. 6y $ay of context" it first explores three major resource conflict flashpoints in the country:
the Myitsone hydroelectric dam project" the .etpadaung copper mine and the Sh$e oil and gas
project.
Ta$le %. ?isk analysis of drivers impacting on resource conflict. :The overall risk ?<9 status F red"
amber" green F is sho$n in left'hand column.;
-isk &ro$a$ility Impact
#ncreased foreign direct
investment
2igh .o$
#nstitutional corruption and
revenue misappropriation
Medium 2igh
#mbalance in resource revenue
distribution and benefit sharing
2igh Medium
!elay in decentralisation and sub'
national governance reform
Medium 2igh
=nravelling of some ethnic state
ceasefire agreements
Medium Dery 2igh
.and confiscation and
environmental degradation
Dery high 2igh

4 5pen 6riefing
Section ##
Myanmar)s resource conflict flashpoints


!ue to Myanmar)s historical international isolation" $eak institutions" anaemic economic
development and previously military'controlled government" natural resource development has not
been balanced or used as leverage for social and economic development.
>atural resource exploitation cannot be ignored in examining Myanmar)s armed conflict and
insecurity" particularly after the C11 uprising. Teak and jade trade and export"
&
often illicit in
nature" provided a financing mechanism for arms and $eapons procurement.
(
Major oil and gas
revenues have under$ritten the gro$th of the Tatmada$ :armed forces; both in terms of helping
Myanmar build an army of almost half a million personnel" one of <sia)s largest" and by providing
capital for military and business ventures.
#n a climate of international sanctions" many resource exploitation and export activities $ere
considered illegal for international importers and investors. ?esource exploitation $as a means to
an end for the junta" $ith the end being financing superior military and arms capability. The race to
the bottom in terms of resource extraction" resource curse affected economy and general instability
created a type of natural resource fatalism. >atural resource management $as totally unregulated"
leaving excessive environmental degradation" diminished capacity for rural livelihoods and local
resentment.
5ver the last decade" a number of large extractive and energy infrastructure projects have resulted
in isolated" sporadic protests" dissent and violence.
*
Schemes such as the Myitsone hydroelectric
dam project" the .etpadaung copper mine and the Sh$e oil and gas project receive occasional
coverage in the international media" partly because disruption" conflict and political challenge is
perceived as a $eather vane for Myanmar'Sino relations and the progress of Sino energy security
strategies.
,
2o$ever" project sabotage" securitisation and protest are an e8ually viable gauge for
ethnic group po$er dynamics vis'G'vis >aypyita$ and broader political grievance.
The follo$ing pages explore the three major projects mentioned above" as they are significant
resource conflict flashpoints. 2o$ever" a proliferation in small' to medium'si+ed hydroelectric dam
projects and industrial'scale agriculture is likely to d$arf the big name mega projects as market
accessibility for Myanmar)s natural resource riches improves. The proliferation of smaller'scale
natural resource sector activities could have positive economic distribution effects. 2o$ever" if
businesses do not improve the standard of living of local communities" conflict and violence could
become more disaggregated" rather than centralised around large resource project flashpoints.
Stalled hope? 3
Myitsone hydroelectric dam project
The proposed H(.- billion -"777 mega$att Myitsone hydroelectric dam project is located at the start
of the <yeyar$addy4#rra$addy ?iver in Iachin state" *& kilometres north of the state capital"
Myitkyina :see figure . belo$;. #t is being developed by /hina)s state'o$ned /hina 3o$er
#nvestment /orporation :/3#; and Myanmar)s <sia Borld /ompany. Myitsone dam is the largest and
highest profile of a proposed H&7 billion seven dam cascade slated for construction along the
<yeyar$ady" Mali and >)Mai rivers.

1igure .. .ocation of the Myitsone hydroelectric dam project. /opyright E 9oogle Earth" &7*.
>ational civil society groups" Iachin authorities" local communities and international >95s have
consistently opposed dam construction in the area. Serious concerns have been raised over
upstream and do$nstream environmental degradation" safety issues" local community dislocation
and destruction of cultural heritage. #t has also been criticised over unfair project'benefit sharing
because the majority of electricity generation is destined for /hina)s transmission system :it is
anticipated that the project $ill generate C7J of Kunnan 3rovince)s electricity;.

6 5pen 6riefing
The reservoir surface area is anticipated to be 0-- s8uare kilometres. <ccording to environmental
assessment documentation"
-
building the dam could necessitate the relocation of over ,"777
mostly ethnic Iachin residents. ?eports suggest over (77 households from Tanphye" 3adan and
Myitsone villages have been relocated to date F some forcibly by the Myanmar military F $ith many
relocated residents expressing deep dissatisfaction $ith the compensation received.
!am construction has sparked consistent protests $ithin Iachin state and at /hinese embassies
around the $orld. #n <pril &77" three bombs $ere detonated at the <sia Borld /ompany $orker
camp" killing four $orkers. #n March &7" Iachin #ndependent 5rganisation :I#5; published an open
letter to then /hinese 3resident 2u Lintao $arning that civil $ar could erupt in the region if the dam
project $as to go ahead. < delegation of the <rakan >ational 3arty :<>3; and the Iachin chapter of
the >ational !emocratic %orce :>!%; visited 6eijing in Lune &7* at the same time as Sein at the
invitation of /hinese leaders. The delegation clearly indicated that resumption of the dam $ould
harm ties bet$een the /hina and Myanmar.
#n September &7" Sein suspended dam construction until the &7, election" $ith significant
domestic and international implications. !omestically" it presented Sein as a president $ho listens
to the people and gave $eight to the idea that things $ere changing in Myanmar. Some analysts
interpreted the suspension as a popularist response to rising anti'/hinese sentiment and a means
for Sein to demonstrate to po$ers such as the E=" =nited States and #ndia greater Myanmar
autonomy in international relations. The =S embassy in Kangon had provided some financial support
to organisations opposing the dam" and the Bashington $elcomed the decision to suspend
construction. #n contrast" /hinese diplomats and state media expressed significant disappointment
$ith Sein)s announcement. !uring Sein)s Lune &7* visit to 6eijing" /hinese leaders are highly likely
to have pressed Sein on a number of stalled /hinese'Myanmar projects" including the Myitsone dam.
#n 5ctober &7*" a coalition of environmental groups" Sal$een Batch" suggested that the recent
escalation in fighting bet$een Iaren state groups and the Myanmar <rmy and local 6order 9uard
%orce is a result of the =nion government trying to clear the $ay for dam construction at multiple
sites along the Sal$een ?iver. Sal$een Batch suspects that the armed conflict is aimed at moving
populations a$ay from the 2ut 9yi dam area" the site of one of the major hydropo$er projects
slated for the Sal$een ?iver in Shan" Iayah and Iayin :Iaren; states.
.etpadaung copper mine
The .epandaung copper mine is a joint venture project bet$een /hinese state'o$ned company
Banbao Mining" Myanmar state'o$ned company =nion of Myanmar Economic 2oldings .imited
:=ME2.; and the Myanmar government. The .etpadaung deposit is one of four significant copper
deposits located in $est central Myanmar" approximately &* kilometres from Mony$a in Sagaing
region :see figure 2 opposite;. The deposit is estimated to hold as much as (.1 million tonnes of
copper F enough to produce &,"777 tonnes a year for &, years.
Stalled hope? /

1igure 2. Site of the .etpadaung copper mine. /opyright E 9oogle Earth" &7*.
The mine has been criticised by some after more than ("777 hectares of land $as confiscated from
an estimated &- villages. #n late &7&" local farmers and 6uddhists led an 'day occupation of the
mine over issues related to land compensation" degradation and destruction of religious sites and
pollution from the mine. The government ordered riot police to disperse the protestors $ho used
$hite phosphorus on protestors" $hich resulted in more than 07 protestors being injured. The
government response $as criticised" and in the aftermath of the confrontation" mine operations
$ere suspended and a parliamentary commission established to investigate the project.
The parliamentary committee" led by opposition leader <ung San Suu Iyi" revie$ed the project and
determined the mine operations could proceed if the company addressed the social and
environmental impacts. Some limited mine operations $ere resumed in September &7( after ne$
agreements $ere signed bet$een the mine operators" Banboa and =ME2." and the central
government" $hich gave the government a much larger stake in revenues from the mine. Most of
this $ork is focused on Banbao undertaking ne$ environmental and social impact assessments $ith
communities in early &7*. #t is not clear $hether Banbao corporate social responsibility :/S?;
programmes are arresting community concerns. #n May &7*" activists purportedly from Kangon
3ublic Service >et$ork kidnapped three Banbao $orkers and made demands relating to Banbao)s
operations. The last report from the => special rapporteur on the situation of human rights in
Myanmar noted that Banbao had not implemented the recommendations of the parliamentary
committee.
0


17 5pen 6riefing
Sh$e oil and gas project
The Sh$e oil and gas project incorporates natural gas and crude oil processing facilities and a dual
&",774&"177 kilometre respectively oil and gas pipeline corridor from <rakan state in $estern 6urma
to Kunnan 3rovince and 9uangxi Mhuang <utonomous ?egion in /hina. The pipeline corridor
traverses <rakan state" Mag$ay region" Mandalay region and Shan state.
The project involves the exploitation of natural gas reserves estimated at *., trillion cubic feet :tcf;
off the coast of <rakan state and the transport of Middle Eastern and <frican oil from port facilities
in <rakan. The export of natural gas has historically delivered almost C7J of foreign exchange for
Myanmar. #t is estimated that the production and sale of natural gas $ill generate over H,* billion
for the Myanmar regime over the next (7 years.
The establishment of a special economic +one has encouraged complementary industrial
development around the deep'sea port and natural gas and crude oil processing plants. The use of
such +ones has been highly contested in Myanmar and in the Sh$e oil and gas project in particular"
as they include concessional income tax rates for companies and necessitate extensive government
security protection.
1

Many grievances over the project are similar to other large'scale infrastructure projects in Myanmar.
#n the same $ay lack of local electricity in Iachin state enflames grievances about considerable
hydroelectricity export to Kunnan 3rovince in /hina" the priority given to exporting natural gas from
the Sh$e project ahead of domestic use has inflamed local tensions. .and confiscation" forced
relocation" environmental damage and military occupation along the pipeline corridor has led to
sporadic" lo$'level conflict. /ontinued conflict is possible" as the pipeline corridor crosses contested
areas in the northern Shan state and areas occupied by the Iachin #ndependence <rmy :I#<;" the
Iachin !efence <rmy :I!<; and the Shan State <rmy'>orth :SS<'>; :see figure 4 opposite;.
Myanmar ranks as (Cth in the $orld in terms of proven natural gas reserves and 0&nd in proven oil
reserves" despite considerable underinvestment in exploration. Myanmar has released over 77 ne$
onshore and offshore oil and gas blocks for exploration. <t present" approximately && companies
are operating across &7 offshore and 0 onshore blocks. The Sh$e oil and gas project is not the first
large'scale extractive'industry project to trigger conflict. The Kadana offshore gas fields in the
<ndaman Sea contain more than , trillion cubic feet :*7 billion cubic metres; of natural gas" $ith an
expected field life of (7 years. 6oth offshore and onshore pipelines transport natural gas through
Mon and Iayin :Iaren; areas in southern Myanmar and into Thailand. These projects have also been
subject to limited claims of human rights abuses" land confiscation" poor labour practices and
environmental degradation.





Stalled hope? 11

1igure 4. Sh$e oil and gas pipelines and military positions. /opyright E Sh$e 9as Movement.

1% 5pen 6riefing
Section ###
!rivers of resource conflict in Myanmar


#ssues surrounding the exploitation of natural resources are closely interlinked $ith the national
political economy in Myanmar. >atural resources are critical for national government balance
sheets" emerging political identities and claims to self'autonomy staked on resource o$nership or
ste$ardship.
Iey drivers influencing potential resource conflict are increased foreign direct investment"
institutional corruption and revenue misappropriation" imbalance in revenue distribution" delay in
political system decentralisation" unravelling of fragile ethnic state ceasefire agreements" and land
confiscation and environmental degradation. There is feedback loop bet$een these key drivers of
resource conflict risk and actual resource conflictN the majority of key resource conflict drivers are
reciprocally influenced by the presence of resource conflict. The findings of a risk assessment of
these principal drivers are outlined in the follo$ing pages.
a; #ncreased foreign direct investment
-isk &ro$a$ility Impact
#ncreased foreign direct
investment
2igh .o$
The pro$a$ility of increased foreign direct investment occurring is assessed as high, $ut the
impact on resource conflict is assessed as low. The overall risk of increased foreign direct
investment is therefore medium.
Myanmar opened up limited sectors for foreign investment in C11. The State .a$ and 5rder
?estoration /ouncil :S.5?/; maintained strong administrative oversight of %!# authorisations.
Sanctions imposed by Bestern countries after the military junta)s violent response to the C11
popular uprising led to limited diversity among foreign investors and provided uncontested
opportunities for /hinese and <SE<> investment. /hinese and Thai %!# has dominated investment
inflo$s :see figure 3 opposite;. Thailand and /hina :including the special administrative regions; are
also key importers of Myanmar goods and services" to the tune of *.-J and &.J respectively
:&77 figures;.
C


Stalled hope? 15
The dominance of /hinese investment in Myanmar has" in part" led to national political concerns and
strong anti'/hinese sentiment $ithin major project footprints. Sein)s suspension of the Myitsone
dam project until &7, tapped into nationalistic rhetoric on unpopular /hinese investment and
concern over strategic dependency on 6eijing. 3roblems $ith major projects" including the three
discussed in the previous section of this report" and increasing %!# competition resulting from the
easing and removal of sanctions are likely to temper /hinese investment flo$s in future.
iii


1igure 3. Share of total Apermitted) %!# in Myanmar by country :C1C'&7&;.
7

Speculation that a series of bombing across Kangon" Mandalay" Taungoo" Sagaing and >anhkan in
5ctober &7( $as aimed at scaring a$ay foreign investors" $hether rumour or reality" does point to
the sensitivities around foreign direct investment. 2o$ever" it is uncertain $hether local
communities have reservations over foreign direct investment generally or $hether objections are
based on recent experiences $ith Thai and /hinese %!# specifically.
Bhether the nationality of the investor alters local reception of %!# or not" the particular terms of
investment are important" particularly $here foreign firms are provided tax free periods. Social
licence" tangible returns for local communities and project'related community development are all
important. <s such" =S" /anadian" Lapanese and European investors claim that social" environmental
and human rights benchmarks $ill give their investment proposals a competitive edge over existing
market participants and mitigate the negative social impacts associated $ith a number of major
/hinese infrastructure projects in Myanmar.


iii
/hinese investment fell dramatically in the fiscal year &7&'( to just H*70 million" compared to
H& billion for the period &771'" of $hich H0., billion $as disbursed in &7.
1. 5pen 6riefing
Even those foreign investors $ith genuine intentions to apply strong investment ethics may be
foiled by institutional corruption and cronyism $ithin key public service agencies and departments.
#nvestors could also risk becoming involved $ith =S!3'associated business partners and companies
that then become entangled in anti'=S!3 political dissent. #nvestment partnerships that appear to
predominately enrich the =S!3 political elite may be particularly exposed to local disruption.
<nother factor to consider is $hether community opposition could be linked to the type of sectors
dra$ing investments. #n Myanmar this is predominantly the primary and extractive industry
sectors.
iv
<ccording to Myanmar #nvestment /ommission data" the accumulated %!# totals H(-
billion up to May &7* :including pre'C11 %!#;" $ith approximately (-J of %!# going to the po$er
industry and (0J directed into the oil and gas sector.

!isproportionate investment in large'scale

resource projects and export'orientated commodity production is likely to create inflationary
pressures" currency appreciation and potential resource curse dynamics. These economic impacts
have a disproportionate effect on those already living belo$ the poverty line" and thus inflame local
tensions.
b; #nstitutional corruption and revenue misappropriation
-isk &ro$a$ility Impact
#nstitutional corruption and
revenue misappropriation
Medium 2igh
The pro$a$ility of institutional corruption and revenue misappropriation occurring is assessed
as medium, and the impact on resource conflict is assessed as high. The overall risk of
institutional corruption and revenue misappropriation is therefore high.
<necdotal evidence suggests that corruption and misappropriation pervades many Myanmar
institutions" from the highest levels of public finance management to the coalface of government
administration. Transparency #nternational reports predating the beginning of reforms in &7'&
suggest that corruption is endemic $ithin the government bureaucracy and the judiciary.
&
#t seems
one of the main objectives of public office holders is to enrich members of the armed forces and
their families. #n his inaugural speech" Sein clearly recognised the link bet$een addressing
corruption and the provision of fundamental human rightsN the president committed the ne$
regime to Afighting corruption in cooperation $ith the people). !espite improvement" there is likely
to be ongoing high levels of institutional corruption in Myanmar F as evidenced in the &7*
Myanmar business survey from the => Economic and Social /ommission for <sia and the 3acific.
(


iv
Bhile some indicators sho$ that tourism and manufacturing are capturing a higher than expected
share of %!#" it is anticipated that the natural resources and primary industry sectors" particularly
mining" forestry" large'scale agriculture and oil and gas" $ill be dominant %!# targets.
Stalled hope? 12
?eports of alleged corruption are reflected in Myanmar)s consistently poor ranking in Transparency
#nternational)s /orruption 3erception #ndex. Bhile Myanmar still ranked poorly in the &7( index
:,0 of 00" $ith an overall score of &477;" there is significant improvement in reduced
perceptions of corruption from the &7& index :0& of 0-" $ith an overall score of ,477; and
&7 index :17 out of 1&" $ith an overall score of .,47;. 2o$ever" consistently poor rankings in
the index reflect major discrepancies in and unaccountable use of resource revenues.
?evenue earnings from exports from the Ketagun and Kadana offshore gas fields to Thailand
generated since CC1 and &777 respectively have accounted for approximately *,J of total
exports" and is Myanmar)s largest foreign income source. <ccording to civil society groups such as
<rakan 5il Batch" these revenues do not enter the public accounts and are not managed in the
national budget.
*
#nstead" the speculation is that state'o$ned corporations" including the Myanmar
5il and 9as Enterprise :M59E;
v
and the =nion of Myanmar Economic 2olding .imited" hold the
majority of gas revenues in offshore third'party accounts in Singapore" /hina and !ubai. #t is
suggested that Myanmar authorities make direct transfers from offshore accounts to procure goods
and services for import" in particular military e8uipment and $eapons.
,

The non'disclosure of historical gas revenues and suspicion that funds are used to support the
modernisation of the Tatmada$ is likely to reinforce the position of resource industries as high'
value targets for armed ethnic groups and underscore anti'=S!3 sentiment. Ethnic groups and
communities that experience the negative impacts of projects $ithout sufficient compensation are
further antagonised by the reinforcement of outstanding political grievances.
%or a country $here conservative estimates place approximately a third of the population belo$ the
poverty line of H.&, a day" large'scale corruption $ill erode the legitimacy of reform efforts in the
eyes of both domestic and international stakeholders. %urthermore" the everyday experiences of
citi+ens $ith corruption and cronyism $ithin government agencies can be e8ually corrosive.
6ureaucratic corruption involving land" licences and citi+enship" though more difficult to 8uantify
and measure" leads to sporadic and isolated incidents of communal violence.
< secondary dimension of the failure to insulate public financing and fiscal management from
corruption is the further $arping of Myanmar)s tax'to'9!3 ratio F $ith tax standing at (.&J of 9!3
:excluding resource revenues;.
-
The disproportionately small tax revenue is further diminished by
corrupt practices. #t also creates po$erful ministerial fiefdoms that spend as they please and remit
the remainder to a consolidated national account.
!espite the scale of corruption and revenue misappropriation there has been some positive reform
likely to improve national revenue and transparency in budgetary accounting. The floating of the
national currency :kyat; $ill reduce the historical variance bet$een official :fixed; exchange rates
and market exchange" thereby removing the dual exchange rate system" $hich led to large portions
of government revenue being unaccounted for.
0


v
Myanmar 5il and 9as Enterprise :M59E; is the only company authorised to partner $ith foreign
companies for oil and gas exploration and production in Myanmar.
14 5pen 6riefing
#n !ecember &7&" Sein publically announced that Myanmar $ould take steps to implement the
Extractive #ndustries Transparency #nitiative :E#T#;. The E#T# board)s approval of Myanmar)s E#T#
candidate status in Luly &7* is a positive sign that the president)s office has follo$ed through $ith
the early stages of the E#T# implementation process" and is no$ obligated to implement greater
revenue transparency measures and public finance reforms. This $ill resolve some of the systemic
$eaknesses that enable broad'scale corruption and represents a significant change from the
management of resources during the military'government era" $hich has remained a political sore
point. The formal creation of the <nti'/orruption /ommission as mandated by the &7( <nti'
/orruption <ct $ould indicate that some M3s are serious about addressing institutional corruption.
Ludiciary independence from the executive branch of government could also mitigate institutional
corruption risks and give a clear indication to the Myanmar citi+enry that there are non'violent"
official avenues to pursue government and public sector corruption. 2o$ever" in September &7("
the => special rapporteur on the situation of human rights in Myanmar" TomOs 5jea Puintana"
reported that there is little evidence of judiciary independence emerging.
1
< legal community de'
skilled by years of military targeting further compounds the lack of an independent judiciary.
c; #mbalance in resource revenue distribution and benefit sharing
-isk &ro$a$ility Impact
#mbalance in resource revenue
distribution and benefit sharing
2igh Medium
The pro$a$ility of an im$alance in resource revenue distri$ution and $enefit sharing occurring
is assessed as high, and the impact on resource conflict is assessed as medium. The overall risk
of an im$alance in resource revenue distri$ution and $enefit sharing is therefore high.
/orruption and misappropriation are one obvious element of poor public finance management and
resource governance. More insidious perhaps than $holesale expropriation can be extreme
imbalances in revenue distribution" $hich can just as e8ually foster political grievances that
translate into violence" dissent" sabotage and" in extremis" insurgency.
The sharing and distribution of resource revenues are often highly contested in Myanmar" given the
presence of disputed internal borders" asymmetries in development and resource impacts" and
insurgency and potential 6alkanisation. #mbalances in the distribution of resource revenue to
resource'rich ethnic states that host large'scale extractive industry projects become political capital
to empo$er dissent and conflict. This is particularly so in the context of development ine8uity"
limited civil rights" suppressed media and military elite patronage net$orks.
The management of extractive industries exists $ithin a virtual institutional vacuum" delivering
major financial resources to =S!3' and military'affiliated patronage net$orks and the central
Myanmar states. #n fact" ?esource Batch #nstitute ranked Myanmar last :,1th out of ,1; in the &7(
?esource 9overnance #ndex.
C
Myanmar rated extremely poor on the index due to high'level
corruption" extremely limited accountability of expenditure of resource revenues" ineffectual
regulation and the absence of institutional oversight of natural resource projects.

Stalled hope? 13
Myanmar)s 9!3 gro$th has increased significantly across the &777s $ith increasing mineral sales
and major increases in sales of natural gas. The percentage of 9!3 spent on the Myanmar military
has also increased" from .-J in &77, to *.,J in &7(. #n of itself this increase does not sound
significant" but $hen understood in the context of significant 9!3 gro$th represents a notable
increase in military spending. The average percentage of 9!3 spent on the military bet$een CC,
and &77, $as &.&JN bet$een &7 and &7(
vi
the average $as (.CJ.
&7

That arms procurement as a component of gross military expenditure has increased :absolute value
terms; is evident in arms import data from the Stockholm #nternational 3eace ?esearch #nstitute
:S#3?#;" $hich sho$s an increase in &7 and higher :though declining; than previous import levels in
&7& and &7( :see figure 6 belo$;.
&
Bhile the trend'indicator value :T#D; for arms imports as a
ratio of 9!3 $as historically larger bet$een &77& and &77-" the absolute value of T#D is much larger
bet$een &7 and &7(. The fact that arms procurement $as more significant as a ratio to 9!3
$hen the overall military expenditure to 9!3 $as relatively lo$er bet$een &77 and &77, could
indicate a number of scenarios. 5ne scenario could have been opportunistic $eapons procurement
contracts $ith key trading partners achieved on concessional terms of deferred payment. There
may also be scenarios under $hich procurement outstripped military $ages and maintenance
budgets.

1igure 6. 9!3 compared $ith total trend'indicator value :T#D; of arms imports.
!ata from Trading Economics and the S#3?# <rms Transfer !atabase.
&&



vi
>ote" the availability of data has affected the years selected for comparison" as there is no reliable
data for &77-'7. Spending on military forces bet$een &77- and &77 may have been significant"
and if included" there may not have been an increase in military expenditure as a percentage of 9!3
bet$een CC,'&77, and &7 on$ards.
16 5pen 6riefing
Expenditure of natural resource revenues on military imports and procurement has underscored the
militarisation of major asset protection" as demonstrated in the case of the Sh$e oil and gas
pipelines" and intensified the lethality of armed conflict. =nsurprisingly" major investors in
infrastructure in Myanmar have also been important arms exporters to the country" $ith /hina
providing *,J" -CJ and ,1J of total arms exports in &7" &7& and &7( respectively. <s major
projects have become the economic lifeblood of the incumbent regime" armed ethnic groups have
focussed their attacks on infrastructure as a $ay of disrupting Tatmada$ military modernisation
and advantage.
&(

6eneath this macro'level grievance over revenue sharing exists e8ually potent localised
dissatisfaction $ith >aypyita$. Myanmar faces significant infrastructure deficit that compounds
economic disadvantage and poor development outcomes in health and education. %or example" less
than &7J of Myanmar)s ,&"777'kilometre road net$ork is paved" only .J of the population are
internet users" and &J of the rural population are $ithout improved $ater access. >ot only does
this infrastructure deficit hamper further investment" but it means that people experience the
results of imbalanced resource revenue distribution and benefit sharing in their everyday lives.
State or region
?ural poverty
incidence :J;
=rban poverty
incidence :J;
Total poverty
incidence :J;
Iayin :Iaren; & 1 &
Kangon 0 * ,
Mon & &( &&
Sagaing &0 && &0
<yeyar$addy (7 &* &C
6ago :E; (7 (, (
6ago :B; (* &( ((
Iayah (1 &- (*
Taninharyi (0 & (*
?akhine * &- (1
Mandalay *, &* (C
Shan :S; ** &- *7
Mag$e ** &- *&
Iachin *0 (1 **
Shan :>; ,, (, ,
Shan :E; ,- (0 ,&
/hin 1 *- 0(
Ta$le 5. 3overty headcount index :J;.
&*

Stalled hope? 1/
Economic disadvantage" corruption and infrastructure deficit are likely to be understood as
components of ethnic competition and rising 6urmese nationalism. This is particularly evident in the
disproportionate poverty incidence rate in the ethnic states" in particular /hin" Shan and Iayin
:Iaren; :see ta$le 5 opposite;.
?esource projects to date have only amplified these dynamics. %or example" projects such as the
Sh$e processing plants and Myitsone dam have created community expectations around social
development" particularly electrification. The Myitsone dam project $as primarily intended to
export approximately C7J of the electricity generated to the neighbouring Kunnan 3rovince in
/hina. Ket there is staggering demand for industrial and residential electrification $ithin Myanmar"
$ith 0*J of the population lacking access to po$er.
&,
The country consumed 7 kilo$att hours
:IBh; per capita in &7 $as at 7 IBh F far lo$er than many of its South and South East <sian
neighbours :see figure / belo$;.
1igure /. IBh per capita in select South and Southeast <sian /ountries :&77*';.
Borld 6ank data.
&-

2ighly contested employment opportunities associated $ith ne$ international investment and the
ancillary sectors benefiting from major projects have also caused social tension. 5fficial estimates
of *J unemployment are likely to grossly underestimate $hat >ational .eague for !emocracy
:>.!; opposition leader Suu Iyi described to the Borld Economic %orum an Aunemployment time
bomb).
&0
< parliamentary committee income and employment survey reported in Lanuary &7( that
Myanmar)s unemployment rate is approximately (0J.
&1
The combination of systemic
unemployment" une8ual development opportunities and an emerging youth bulge $ho $ere born
after the unsuccessful C11 uprising :an estimated &,'&0J of the population are under * years old;
is likely to exacerbate existing social and political fissures.
&C
#n some of the poorest ethnic states"
lack of legitimate industry" poverty" need for arms funding and general absence of national la$
enforcement has given rise to illicit drug cultivation :see figure 17 overleaf;.
(7

%7 5pen 6riefing

1igure 17. Map of poppy gro$ing fields in Myanmar :&7(;. /opyright E Myanmar 3eace Monitor.
d; !elay in decentralisation and sub'national governance reform
-isk &ro$a$ility Impact
!elay in decentralisation and sub'
national governance reform
Medium 2igh
The pro$a$ility of a delay in decentralisation and su$)national governance reform occurring is
assessed as medium, and the impact on resource conflict is assessed as high. The overall risk of
a delay in decentralisation and su$)national governance reform is therefore high.
3arliamentary representation and constitutional reform have dominated dialogue on Myanmar
democratic reforms. 3rovisions reserving &,J of parliamentary seats for the military and
constitutional restrictions preventing candidates $ith foreign family members from assuming the
presidency F $ith the implication that >.! leader Suu Iyi is ineligible F remain intact. %or
international audiences and stakeholders" these elements are the litmus test for Myanmar
democratic reform. The use of existing ethno'communal conflicts for political ends in the first half
of &7* indicates ongoing tensions over >.! parliamentary representation after the &7, elections.
#n early Luly &7*" a fake memo purported to be authored by the >.! $as circulated on social media
by unconfirmed sources" $hich claimed that the >.! $ould be using clashes in Mandalay bet$een
Muslims and 6uddhists as a pretext to protect Muslim populations.
(


Stalled hope? %1
2arder to measure for international observers" but of e8ual importance" are decentralisation"
devolution and sub'national governance reform. These are critical components of political
settlements $ith ethnic states" particularly in states $ith an abundance of resources and that host
major infrastructure projects. 2o$ever" there are a number of constraints on increasing sub'
national capacity to govern. %irstly" the &771 constitution provides a less than ideal governance
model for devolution to sub'national governments. Secondly" there has been very limited fiscal
devolution to date" $hich severely restricts the functionality of sub'national governments.
Transfers from the =nion to the states and regions represent approximately only (.-J of total
central government expenditure :see figure 11 belo$;.
(&
Bithout a federal structure through $hich
=nion revenues can be apportioned and distributed" local resentment to$ards >aypyita$ is likely to
continue.

1igure 11. Share of the =nion budget transferred to state and region budgets :&7('*;.
!ata from the <sia %oundation.
((

/easefire agreements focused on cessation of armed conflict have consistently failed to include a
roadmap for political reform. #n fact" political settlements on issues such as regional autonomy"
parliamentary representation" intergovernmental income transfers and governmental
responsibilities are intentionally excluded from most ceasefire agreements. 3roblematically"
Myanmar cannot move for$ard $ithout negotiating some form of limited ethnic state autonomy
sufficient to allo$ these states to determine the management of natural resources and receive a
greater dividend from resource projects. 5f e8ual importance is space for ethnic states to reflect
religious and cultural differences" particularly those $ith significant /hristian and Muslim
communities.

C-.*7J
(.*7J
7.&7J
=nion budget for central institutions
Transfer to states and regions :QaidQ4QgrantsQ;
Transfer to states and regions :QloansQ;
%% 5pen 6riefing
2o$ever" The =S!3 and military are high likely to harbour trepidation at such Afederalist)
arrangements. They continue to cast any federalism project in Myanmar as a slippery slope to$ards
regional succession and the dissolution of Myanmar into independent states.
(*
Specifically" they fear
that local militias seeking ne$ income streams from resource revenues to rearm and pursue full
independence $ill capture state'level political institutions. Some may also fear potential threats to
territorial integrity in the border regions if armed ethnic groups become proxies for neighbouring
po$ers" for example the =nited Ba State <rmy and /hina. <s such" developing the rule of la$ more
generally is critical to the national government finding a balanced form of federalism for Myanmar.
e; =nravelling of some ethnic state ceasefire agreements
-isk &ro$a$ility Impact
=nravelling of some ethnic state
ceasefire agreements
Medium Dery 2igh
The pro$a$ility of the unravelling of some ethnic state ceasefire agreements occurring is
assessed as medium, and the impact on resource conflict is assessed as very high. The overall
risk of the unravelling of some ethnic state ceasefire agreements is therefore high.
Myanmar has experienced multiple attempts to deliver lasting ceasefires $ith armed ethnic groups
since independence. %rom the C-('-* peace parley under 9eneral >e Bin to the C1C S.5?/'
sponsored ceasefires and Sein)s =nion peace'making initiative" no peace and reconciliation process
has delivered sustainable and lasting peace. #n some cases" borderlands under the control of over &7
armed ethnic forces have actively prevented any military control or government authority in post'
colonial times.
!espite the laudable progress under Sein" Myanmar remains divided by historical legacies of
colonial partitioning" military campaigns of A6urmanisation) and the economic and social
marginalisation of ethnic minorities. Such minorities make up (7'*7J of the total population and
occupy ,0J of Myanmar by land mass. 3rior to &7" successive regimes had habitually understood
minority economic and political grievance as a security threat that could only be suppressed $ith an
armed response. %ive decades of sporadic armed conflict bet$een ethnic armies and the Tatmada$
have solidified divisions. The relationship bet$een the central regions and periphery ethnic states is
likely to remain an accelerant for political and armed conflict. 1igure 1% opposite sho$s that key
conflict hotspots bet$een &777 and &7 have been in Iayin :Iaren; and Shan states" and figure 15
opposite sho$s internally displaced person :#!3; camps" $hich are generally aligned $ith key
conflict +ones. #t should be noted that figure * does not capture significant conflict in Iachin State
that has occurred since &7. The locations of #!3 camps in figure , does provide some insight into
recent conflict in Iachin State" in particular the large number of armed group #!3s in the southeast
of the state" near the Shan State border.
Stalled hope? %5

1igure 1%. 9eographic information from the 3?#5 <rmed /onflict !ataset :&777';
overlaid on a 9oogle Earth map of Myanmar. The red dots indicate conflict eventsN
multiple conflict event +ones are highlighted in blue.


1igure 15. Map of #!3 camps in Myanmar :&7&;.
/opyright E Myanmar 3eace Monitor.

%. 5pen 6riefing
The unpredictable" fragile and tenuous nature of the ceasefire agreements has been demonstrated
by the protracted" high'intensity armed conflict bet$een the Iachin #ndependence <rmy :I#<; and
the Tatmada$. Iachin state had experienced almost 0 years of ceasefire until the Sein government
came to po$er F taking the reins of the 8uasi'civilian government on a platform of reform and
reconciliation.
(,
2o$ever" bet$een Lune &7 and Lanuary &7(" regular clashes bet$een the I#<
and the Tatmada$ resulted in allegations of serious and systematic human rights violations and
over 77"777 internally displaced persons
(-
throughout Iachin and the northern'most part of Shan
state. %ifty thousand people are still displaced $ithin Iachin state according to an <ugust &7( =>
special rapporteur report.
(0
Bhile more recent conflict is not as regular as previous armed
confrontation" reports indicate ongoing campaigns by both sides in Iachin and northern parts of
Shan State.
(1

The most troubling aspect for both domestic and international observers $as the continual and
disproportionate sho$ of force from the Tatmada$ despite several announcements from Sein that
military operations had temporarily ceased F sparking speculation over Sein)s ability to control the
military. /hinese mediation of Iachin'>aypyita$ talks in %ebruary &7( and =S" 6ritish and E=
interest in mediation efforts suggest that major po$ers are $ary about the potential unravelling of
ceasefire agreements.
%urthermore" the intensity of the conflict in Shan and Iachin states may undermine the military)s
capacity to employ divide and rule tactics. #f the military pushes too hard against particular ethnic
groups in armed conflict" other groups $ith ceasefire agreements may 8uestion their o$n positions
$ith the central government. The result $ould undercut a divide and rule approach and enhance a
degree of ethnic state unity of purpose.
Bhile these trends bring into 8uestion the long'term sustainability of ceasefire agreements in
Myanmar" recent movements by >aypyita$ to$ards the signing of a national ceasefire agreement
may indicate improved prospects for peace.
(C
.eaders from 0 ethnic armed groups have held a
series of meetings in Thailand and Myanmar attempting to map out the critical elements of such a
ceasefire. Signing a national ceasefire agreement $ould help solidify the progress made on the (
existing ceasefire agreements negotiated bet$een the =nion 3eacemaking /entral /ommittee and
individual armed ethnic groups. 2o$ever" previous efforts at building upon ceasefire agreements
indicate that ethnic armies $ill not give up arms until key political demands are addressed. ?eports
suggest that groups from /hin" Iachin and Shan states do not have confidence in the sustainability
of the ceasefire or the ability of ceasefire negotiations to address their federalist ambitions.
!espite positive government comments on May and Lune &7* bilateral negotiations bet$een the
I#< and government officials and the setting up of a peace monitoring commission" there has been
no lasting de'escalation to enable #!3s to return home.
< national ceasefire agreement may deliver a pause in armed conflict" but to establish a trajectory
of lasting security is unlikely $ithout >aypyita$ finding $ays to balance the expectations of rapid
economic gro$th $ith the need to avoid excessive" ine8uitable and unsustainable exploitation of
the rich natural resources in ethnic states. < failure to secure a lasting ceasefire and initiate a
political dialogue $ill likely result in armed ethnic groups targeting critical energy infrastructure"
such as pipelines" and the Tatmada$ taking countermeasures to secure the integrity of government
projects" $hich could include the military autonomously initiating pre'emptive strikes.
Stalled hope? %2
f; .and confiscation and environmental degradation
-isk &ro$a$ility Impact
.and confiscation and
environmental degradation
Dery high 2igh
The pro$a$ility of land confiscation and environmental degradation occurring is assessed as
very high, and the impact on resource conflict is assessed as very high. The overall risk of land
confiscation and environmental degradation is therefore very high.
5ver -,J of Myanmar)s population live in rural areas and depend upon subsistence farming and
forest resources to meet their basic needs. <griculture" fisheries and forestry F mostly small to
medium scale F contribute (CJ to the country)s 9!3 and employ approximately 07J of the labour
force.
*7
=pscaling rubber" palm oil and rice plantations is part of Myanmar)s agricultural
modernisation from subsistence agrarian livelihoods to large'scale cultivation of cash crops.
%urthermore" Myanmar)s river net$ork" including the Sal$een and <yeyar$addy :#rra$addy; rivers"
supports a huge array of ecological systems" community livelihoods" tourism" agriculture"
transportation and energy production.
Self'determination" federalism and local autonomy are repeatedly framed in the context of ethnic
states taking control of managing land and rivers.
*
This is at odds $ith the unitary constitution)s
dictates of state o$nership of all natural resources. .and confiscation and environmental
degradation" particularly by companies associated $ith the military elite" are likely construed as
denials of self'determination.
< number of => and civil society reports have highlighted an increase in land confiscation across
Myanmar.
*&
The sei+ure of land from #!3s and subsistence farmers is facilitated by la$s that enable
the reallocation of farms and forest land to domestic and foreign businesses and projects in the
national interest. The lack of a land titling system in an economic climate of rapid business
development is a significant risk for both farmers and businesses. The broad discretion afforded to
>ayphita$)s departments and institutions to condone or support land confiscation $ithout
ade8uate compensation has inflamed sporadic" local community protest.
Bhile estimates vary greatly" it is thought that there are currently over &-7 farmers in prison and
over "777 facing charges in relation to protesting against land confiscations. Some protest leaders
face long sentences" $ith the notable case of Io <ung Soe" a member of the Kangon 3eopleQs
Support >et$ork" sentenced to ., years in prison for playing a role in the .etpadaung mine
protests. The use of penal code provisions to manage usually peaceful protests by farmers over land
confiscation indicates the sensitivity of state agencies to land confiscation issues and the strong
desire to 8uell farmer dissent. #n a &7( address to /hatham 2ouse" Sein ackno$ledged that
challenges like land o$nership are immense and extremely complex.
*(


%4 5pen 6riefing
#n &7(" the 3arliamentary %armland #nvestigation /ommission delivered its first report to
parliament outlining the extent of land sei+ure by the military over recent years. The commission
received approximately ,-, complaints alleging the forced sei+ure of land by the military. <ccording
to the report most allegations related to the <yeyar$addy4#rra$addy region. 2o$ever" there is no
pressure from parliament for the return of unused confiscated land. The international audience is
presented $ith an image of reform and progress on national ceasefire agreements" yet land
confiscation blights the on'the'ground reality.
#n addition to losing land through confiscation" rural subsistence farmers also face losing land
through environmental degradation. Bhile not capturing the same level of attention as land
sei+ures" environmental degradation remains an issue for communities hosting small' to large'scale
hydrodam developments" large'scale commercial agriculture plantations :palm oil and rubber; and
extractives industries" such as mining" petroleum and forestry. Bhile grievances over environmental
degradation are hard to disaggregate from broader political and economic grievances" protests
against multi'stage dam developments highlight the impacts on fishing activities and buildings of
significant cultural and religious significance in particular.
.ocal and international environmental >95s have raised particular concerns about hydrodam
proposals on the <yeyar$addy. These groups suggest that multiple dams $ill prevent river
sediment moving do$nstream to enrich significant rice production areas on the deltas. <ccording to
data from the %ood and <griculture 5rganisation of the =nited >ations :%<5;" the <yeyar$addy
!ivision contains approximately ((J of the total rice harvesting area in Myanmar.
**
6et$een &77&
and &7&" Myanmar produced on average &C million tonnes of rice according to the %<5)s statistics
division.
*,
<lteration of river flo$ levels may also impact on the level of salt $ater inundation in lo$
lying deltas" $hich increases salinity in irrigation $ater" reducing productivity. 3roposed dams $ould
also have an impact on inland river fisheries and subsistence fishing.
Existing copper mining projects at Mony$a :Sabetaung" Sabetaung South and Iyisintaung;"
approximately 7 kilometres north$est of .etpadaung copper mine" continue to create community
grievances over health impacts caused by acid mine drainage :<M!;. The logging and clearing of
forest areas" $hich has been relatively high :bet$een CC7 and &77," 1J of all forested areas $ere
logged
*-
;" is likely to escalate as larger'scale agricultural activities" such as palm oil and rubber
plantations" are established. Bithout appropriate environmental controls and governance" these
projects are likely to impact on subsistence agricultural activities and informal market agricultural
production. 5n a broader scale" Myanmar has already $itnessed significant mangrove loss in the
<yeyar$ady !elta" $hich according to remote sensing data has declined from &"-&( s8uare
kilometres in C01 to less than "777 s8uare kilometres in &7.
*0
These environmental pressures
resulting from a lack of environmental management reduce the natural resilience of highly'
productive agricultural areas to natural disasters similar to /yclone >argis.

Stalled hope? %3
Section #D
/onclusion


Myanmar)s reform process is attracting significant international attention. < range of international
actors" from international state'o$ned corporations and multinational corporations to development
banks and diplomats" see the strategic" human development and business opportunities presented
by Myanmar)s opening up.
%or the all the positivity" there are stark challenges. -esource conflict remains a significant risk
for the country due to its high impact and its potential to interact ith other threats, such as
socio)communal violence. <lthough the improved economic outlook and some reform initiatives
are tempering the potential likelihood of key resource conflict drivers occurring" the severity of the
potential impacts should they occur remains.
#n most instances" resource conflict is likely to occur on the periphery of $hat the =S!3 perceive as
Myanmar)s future urban development and modernisation centre. 2o$ever" if a peripheral ethnic
state is beset $ith poverty and resource conflict" it is likely to eventually reach into all the divisions
$ith broader implications for >aypyita$. Bhat may start as lo$'level local resource conflict F $ith
sporadic armed conflict" protests and project sabotage F could transfer into geographically'broader
conflict under certain conditions.
%uture =nion governments $ill face the challenge of delivering a certain pace of economic gro$th"
infrastructure development and poverty alleviation. This may manifest in pressure to offer
favourable investment conditions" embark on s$eeping land reform or roll out large'scale projects
that do not account for local conditions. #n a post'conflict society Atoo much" too 8uickly) in terms of
resource development is likely to antagonise ethnic groups and local communities. #t is a challenging
and delicate balancing act.
#n addition to balancing the speed of economic development" =nion governments $ill also need to
address demands from ethnic states for financial and governance devolution. ?apid opening up of
Myanmar to natural resource exploitation $ithout sharing the $indfalls $ill intensify calls from
ethnic states for a federalist structure. %rom a =S!3 perspective" providing increased revenue to
areas that have not experienced the presence of central government for decades is a significant
risk. 2o$ever" the risks inherent in not providing greater financial autonomy to the states are
e8ually problematic for the =S!3.

%6 5pen 6riefing
8ven in the event of resource conflict increasing, it is only a limited possi$ility that it ould $e
of such a magnitude as to stunt or derail "yanmars economic and political transition. The
Tatmada$)s increasing advantage in military procurement and the =S!3)s divide and rule strategy
means armed ethnic groups are going to be increasingly disadvantaged $hen it comes to armed
conflict. The political opening up of Myanmar has provided ne$ opportunities for the Tatmada$ to
bring conflict $ith ethnic armies to an end or at least establish a viable containment strategy.
2o$ever" the economic lifeblood of Myanmar" in terms of natural resource projects" $ould remain
exposed to the evolving tactics of armed ethnic groups and their ability to inflict financial losses on
the central government.
Sein may have delivered a degree of stability through suspending projects such as the Myitsone dam
and has calmed the $aters by maintaining dialogue $ith most ethnic groups. 2o$ever" it is possible
that both the =S!3 and the military are consolidating their economic and military position in order
to develop a stronger hand against demands from the ethnic states for federalism and fiscal
devolution. #n this sense" the cost of short'term stability is the possibility of lo$'intensity but
ongoing future violence.

















Stalled hope? %/

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Stalled hope? 51

&1
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(0
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5% 5pen 6riefing

(C
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**
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