Balancing the Burma issue

Australian Financial Review, November  15 2010

There is a new flag hanging outside the government buildings in Nay Pyi Taw, Burma’s obscure and expensive new capital five hours north of Rangoon. It was hoisted just last month ahead of last Sunday’s landmark elections, the first in 20 years; its three stripes, the government says, represent solidarity, peace and courage.

New flag or not, the election was hardly a revolution for democracy. Observers were not allowed in, foreign journalists were banned, the main democratic party boycotted it and a quarter of the seats were reserved for the military before a single vote was cast. Burma (formally Myanmar) is among the most loathed of Asia’s governments, brutal and oppressive, with a long list of sins from the incarceration of elected leader Aung San Suu Kyi for most of the last 20 years to the indiscriminate killing of protesting monks in 2007.

And so the question remains a familiar one: what to do about it.

This is the article as originally filed before Aung San Suu Kyi’s release. To see it as it ran in the AFR, click here: burma wright final

In this debate Australia stands in an interesting position. Attitudes worldwide vary from sanctions and outright trading bans to unabashed indifference, with the vigour of the response tending to be strongest in the countries furthest away (the USA and EU) and most disinterested in near neighbours (China and southeast Asian countries).

Australia is somewhat in the middle. Apart from a ban on defence exports that has been in place since 1991, there is no outright bar on Australian companies doing business with the country. “The government’s policy is neither to encourage nor discourage trade with or investment in Burma,” says a spokesperson from the Department of Foreign Affairs and Trade. “We consider that our current targeted measures are the most effective way to place pressure on the regime.”

Those targeted measures are chiefly about individuals. Members of Burma’s ruling regime, including the cabinet, top military, business associates and their families, are barred from visiting Australia, and since the 2007 protests 463 of them have been put on a financial sanctions list administered by the Reserve Bank of Australia to stop international fund transfers. “The Burmese authorities are very resistant to pressure of any sort from the international community, but sanctions do have a role to play,” DFAT says, arguing that the sanctions – reviewed again in October 2008 – “registered strongly with the regime in Nay Pyi Taw.” Australia does, however, maintain “limited engagement” with the junta “in order to convey messages on human rights and political reform.”

Commentators on Australia-Burma policy in recent years say there are other considerations too. Policy starts with the premise that there is no point in sanctions that hurt ordinary people in the country on the receiving end. And there is a feeling that Australia, with such close economic and social ties to Asean nations, simply cannot take the hardline approach that the US has. “It would be impractical, and totally unconstructive, for us to go in behaving like a 200-pound gorilla,” says a foreign policy observer.

For some activists, this is not enough. The Burma Campaign for Australia, for example, while supportive of some of Australia’s actions in recent  years, says “there is more we can be doing in terms of making sure we are not funding military regimes,” according to spokeswoman Zetty Brake. For example, BCA would like to see sanctions applied to the oil and gas industry, “a great example of an industry which directly funds the military.”

While trade numbers between Australia and Burma have been increasing – exports grew 84.3% from 2008 to 2009, and overall trade 59.4% – they are very small in any real sense. Australia exported A$59 million worth of goods in 2009, A$39 million of it wheat, and imported A$26 million, mostly clothing. Australia accounts for just 0.3% of Burma’s exports and provides 0.4% of its imports, vastly behind countries like Thailand, China and Singapore. China, for example, has put in US$10.48 billion of foreign direct investment in the first seven months of 2010 alone.

Few Australian companies have much to do with the place, and many of those that did have exposures have since ended them: advocacy groups cite QBE – which cancelled some incidental exposures in 2009 – and Downer EDI, which canned a contract for a Singapore subsidiary to design an airport there the same year, as victories for their cause. Even those companies claim they were never heavily involved. “QBE has always had a policy that the company does not fund the current ruling party in Burma,” said CEO Frank O’Halloran in a statement.

There are, however, some big exceptions. Although Australia has no obvious heavyweight villain in the manner of France’s Total or the USA’s Chevron, both of which are heavily involved in oil and gas field development in cooperation with the state, there is a company in Western Australia, Twinza Oil, which signed a production sharing contract with Burma’s state oil contract in the Yetagun East Block off Burma’s far south coast in 2006. Campaigners have argued that the overall project could make as much as US$2.5 billion for the junta, though this is impossible to confirm without knowing the precise reserves it is able to exploit. Twinza, which is run by businessman Bill Clough and has been linked with an IPO, did not return calls made from the AFR.

Other Australian companies that turn up on activist blacklists include Andaman Teak, a Crestmead, Queensland-based company that supplies teak to the marine sector, runs a timber mill in Yangon (Rangoon), and bills itself “the largest stockiest of Myanmar teak in Australia”; and Barrett Communications, which manufactures long distance high frequency communication equipment that lobby groups say is used by the Burmese military. Barrett CEO Peter Bradshaw declined to comment.

But most Australian companies with engagement with Burma are within one of the trickiest parts of the engagement debate: tourism. Among them are Qantas and Lonely Planet, Qantas because its 49% subsidiary, Jetstar Asia, flies to Rangoon from Singapore; and Lonely Planet because it publishes a highly detailed guidebook on Burma.

Nothing quite polarizes opinion like tourism does. While it is easy to see a gas refinery joint venture as an endorsement and financial prop of the government, it is hard to see tourism in such clinical terms. NGOs argue that visiting Myanmar lends legitimacy to the government, gives it financial support, and directly contravenes the request of Aung San Suu Kyi ahead of Visit Myanmar year in 1996 that tourists should not come to the country. The opposite position is that tourism, practised carefully, can put money directly into the hands of ordinary people, acts as a deterrent against abuses on the ground, and creates a positive image of foreign countries in a place that might otherwise be suspicious of them.

If you go to Burma, you hear much more of the latter view from ordinary people. “If tourists do not come, it costs the government very little. They can get what they need from teak and gas,” says one member of the local tourism industry. “But it costs me everything.” But that’s not the only reason: many see in tourism a type of security, the safety net of foreigners watching. “It is like a protection for us,” says one. “If tourists do not come there is nobody to see what happens.” But the corollary of this argument is that foreigners only ever speak to people working in tourism, and that a true picture can only be gained by witnessing forced labour, political prisoners, and the preposterously unequal wealth of the generals.

Tony Wheeler, founder of Lonely Planet, is quite clear where he stands. “The company policy is: we don’t say ‘go’, we say ‘here is the information and make your own decision’,” he says. “But personally, standing back from the company, I’d say: go.”

Wheeler has visited 14 or 15 times and says the impression he has always had from local people – including some who have undergone imprisonment for dissent or political belief – is that they want tourists to come. “There’s no question that if you spend money in the country then some of it is going to go to the government,” he admits. “But not much, and you can minimize that. I can think of numerous ordinary people I have met there over the years where the money you spend goes straight into their pockets then back out again at the markets, or to repair a roof that leaks. They’d be amazed if you said you thought this money was going somewhere to support the military.”

Lonely Planet prefaces its guidebook with a studious 14-page analysis of the engagement argument entitled “should you go?” The book argues that 80% of independent tourist spending – that is, not those on package holidays staying in government hotels – stays in private and individual hands, and estimates that 300,000 people are employed in the tourism sector, not counting indirect beneficiaries such as trishaw drivers and handicraft makers.

Activists, though, disagree. “Even if you are as careful as you can be, you are still giving 12% of your money to the regime” through taxes, says Brake, whose BCA group blacklists Lonely Planet. “If you’re not careful, it will be a lot higher. A lot of infrastructure tourists use has been built using forced labour and by displacing people from their homes. An industry that was built on human rights abuses is not one that we should be supporting.”

As for Jetstar Asia, CEO Chong Phit Lian sees nothing wrong with providing a service from Singapore to a fellow Asean country, which it has been operating since 2005, and argues there are humanitarian benefits despite the fact that landing fees go to the state. “We facilitate quite a number of charitable organizations doing work in Yangon and beyond, we employ people from Myanmar, and we give people the opportunity to come to Singapore for their schools. I do not see the need to make a change.” But she is very clear: “It’s a commercial decision.”

Brake is scathing of Jetstar’s reasoning. “Jetstar flights are about making a profit out of a market,” she says. “Australian companies should not be profiting from deals with a military dictatorship. And that’s what Jetstar is doing.”

Others, though, make an argument for far greater corporate engagement. Luc de Waegh runs an advisory firm called West Indochina which builds businesses in Myanmar. For him, the creation of a private sector and new jobs is as important as political reform, and lack of progress on one should not hold back the other. “From my experience on the ground, I believe that people’s main aspiration remains an improvement of their everyday material life: better education for their children, electricity, better healthcare. If you go there and create jobs and start a business you change the lives of people.”

He helped British American Tobacco set up there in 1993, a move that he says created 500 jobs by 2003 when sanctions forced it to pull out. He does not conduct joint ventures with the government and stays out of oil and gas, but does not condemn those who do participate in that sector. “If Total are forced to pull out, what’s going to happen? It will be taken over by a Chinese or local company, and employment standards will change.”

At the heart of any discussion about Burma is Aung San Suu Kyi: charismatic, heroic, iconic. Her name appears in any discussion of the sanctions debate and the ideal for the west would be to see her at the head of a government, finally honouring the wishes of the 1990 general election. But there is also a view, privately and uncomfortably expressed by some both inside and outside the country, that after two decades of on-and-off incarceration and separation from the people she has sacrificed her adult life to represent, she may no longer be in the best position to know what is best for her country.

Even some of her staunchest supporters have their doubts about the tourism boycott. Zarni, founder of the Free Burma Coalition, changed his position in 2003 and has called the boycott campaign “a major strategic mistake.”

Perhaps the election will bring some change: a small first step. Few southeast Asian nations go straight from military rule to full civilian democracy. Indonesia is now championed for its democracy but is still run by a former general; prosperous Singapore has elections in which no change is ever expected and has a prime minister whose formal title is “Brigadier General”; Vietnam remains a Communist, undemocratic state but has nevertheless become a darling both of tourism and foreign direct investment.

In the meantime, make no mistake that foreign businesses are amassing on the sidelines ready for the opportunity that would come from a Myanmar with acceptance in the eyes of the world community. But the more they look at it, the more puzzled they may be. “When you first go there you think you have an understanding of the place,” says De Waegh. “Those who have been there four or five times get confused. Those who live there are very confused. In fact the only people who think they have a very clear understanding of the place have never been there.”