Burmese regime is "privatising to retain control of resources"

Regime privatizing to retain control of resources - Wai Moe

The Irawaddy

7 January 2010

As Burma gears up for elections to be held sometime later this year, the country's military junta is moving ahead with plans to transfer ownership of key industries to business firms closely associated with the ruling generals.

On Wednesday, state-run newspapers reported that the No. 2 Mining Enterprise, operating under the Ministry of Mines, signed a contract with the privately owned DELCO Co Ltd on apportionment of tin and tungsten quotas at the Kanpauk Mine in southern Burma.

Although little is known about the ownership of DELCO, the company is on the UK's financial sanctions list, along with 1,225 other businesses run by senior military officials or their cronies. It is also one of four private firms that recently received a Build-Operate-Transfer agreement for hydro-power projects in Burma.

Some analysts have suggested that the junta has begun to privatize energy generation as a way to address the country's electricity shortages.

Despite abundant energy resources, domestic power consumption lags far behind neighboring countries due to a lack of infrastructure and decades of economic mismanagement.

Increasing access to electricity is key to Burma's economic development. At present, however, households in Rangoon and Mandalay receive just six hours of electricity per day, while factories have power 12 hours a day. People and businesses in other areas generally rely on their own diesel-powered generators to meet their electricity needs.

On Dec. 31, the state-owned newspaper Myanma Ahlin reported that the regime had awarded a major contract for construction of two hydro-power plants to a company owned by Tay Za, Burma's richest businessman and a close associate of Snr-Gen Than Shwe, head of the ruling regime.

On the same day, the official English-language mouthpiece, The New Light of Myanmar, trumpeted the junta's far-sighted energy plans: "With the aims of increasing the supply of more electricity and contributing to building the industrialized nation, the Ministry of Electric Power No. 1 had adopted the 30-year long-term electricity development strategic plan and is implementing the hydro-power projects in line with the five-year short-term plans."

However, some observers say they suspect that the recent effort to increase the country's energy capacity has more to do with the junta's short-term goal of ensuring victory in this year's election.

"People are fed up with the electricity shortage. They can't even get enough tap water because of the lack of electricity. If the military government can solve this problem, people would appreciate it," said a Rangoon-based journalist who spoke on condition of anonymity.

Privatization of Burma's energy resources will also help to ensure that the current elite is able to retain control of a key sector of the economy after the election, when, under the new Constitution, elected local governments will be allowed to manage and distribute electricity from small- and medium-sized power plants.

By transferring ownership of these plants to companies run by leading military figures or others closely connected with them, "the generals will make sure that state firms are firmly in their grip before the election and transition," according to a Rangoon-based businessman.

The 2008 Constitution contains similar provisions granting states and divisions the right to manage their mining and forestry resources. However, since 2006, a growing number of state-run enterprises in these two sectors have been handed over to private businesses.

According to official statistics, 380 small gold mines have been partly or totally privatized in recent years, while more than 500 ruby and jade mines in Shan State, Kachin State, Sagaing Division and Mandalay Division, including the well-known Mogok and Mongshu mines, have come under private ownership.

"Generally speaking, releasing the state's grip on business is good for the market economy and a part of Burma's economic liberalization. But the problem is that everything is going into the hands of military enterprises and cronies of the generals," said a Burmese economic researcher in Rangoon who asked to remain anonymous.

By retaining control over major enterprises in the post-election period,the generals will also be able to exercise a huge influence over their political successors, he added.

"For example, if the companies of the generals and their associates can manipulate the electrical power sector, it will give them a stranglehold over future governments," he said.

With the generals running everything from airlines and media companies to mines and hydro-power plants, many Burmese observers are skeptical about the regime's claims that it is liberalizing the economy. They also point to a lack of transparency as a further impediment to any improvement in the country's long-term economic prospects.

"There is no systematic law regulating privatization. In every case, the generals have simply issued orders granting ownership to a junta crony," said Aung Thu Nyein, a Burmese economic researcher based in Thailand.

This has invited comparisons to the situation in Russia, where post-Soviet privatization 20 years ago concentrated the country's wealth in the hands of a few dozen well-connected oligarchs.

"Privatization in Burma? Who is getting these companies? We must learn from the lessons of Russia," said a well-known economist in Rangoon.