Burma economy: Chasing riches? Mind the Karen guerrillas

Eager American investor, meet battle-hardened ethnic rebel.    

By Patrick Winn, February 29, 2012 06:23    ....
KAREN STATE, Burma — Blessed with fertile soil and deep veins of unearthed gold, this verdant expanse of Burma is, by most measures, well suited for foreign investment.

There is a drawback: it’s riven by the world’s longest-running civil war, a conflict between Burmese troops and the Karen, a largely Christian tribe with US ties.

But even six decades of war are unlikely to keep Burma’s development boom from these land mine-studded hills. Despite the presence of a 6,000-soldier resistance army, varied interests have designs on the group’s turf.

Soldiers in the Karen National Liberation Army share a newspaper at an outpost in Burma on Feb. 22, 2012. The ethnic militia, which controls vast stretches of eastern Burma, has insisted that Burma's army must withdraw all troops from its claimed territory before it can proceed with a cease-fire. The conflict between the Karen tribe and Burma's army is the world's longest-running civil war. (Patrick Winn/GlobalPost)

Among them: government “industrial zones,” lucrative rubber plantations and quarries extracting high-value minerals. In coming years, thoroughfares will link their terrain to a $50 billion port receiving shipments bound for every major Southeast Asian city.

The group’s leadership, however, has a message for prospectors both foreign and domestic.
“We’re not ready,” said Hla Ngwe, a joint secretary with the Karen National Union, the group’s political wing. “No fishing in troubled waters.”

The bespectacled leader, flanked by uniformed men armed with US-made M-16s and M-79 grenade launchers, conceded that his people would welcome Western firms someday. But for now, amid fragile peace talks with the government, multinationals are not welcome.
 
“Our land is filled with mines. Our people are fleeing through the jungle or running to other countries,” he said. “Everyone should stay out for now.”

Staying out of Burma, however, is no longer en vogue.

The former British colony (officially titled Myanmar) remains a no-go zone for Western investors. Since the 1990s, US, UK and European interests have been held back by heavy sanctions designed to punish ruling generals who’ve hoarded Burma’s wealth as the masses suffered. The nation’s economy is, by all accounts, chaotic and steeped in corruption.

But in many boardrooms, the old perspective has been largely upturned, thanks to a reform-minded parliament taking power last year and a flurry of top-tier US diplomatic visits.

Speculation that the US Congress and the White House will peel back sanctions this year is running hot. According to the UK-based Maplecroft risk analysis firm, it has “now become clear that 2012 will be the year for sanctions to be lifted.”

Emerging markets gurus, such as American investor Jim Rogers, are eager to unlock Burma’s promise. “If I could put all of my money into Myanmar, I would,” Rogers told a conference in Singapore last week, according to Bloomberg. “They have metals, they have energy, they have everything.”
 
For multinational firms, Burma has much to drool over. It’s squeezed between economic behemoths India and China. Its labor force is eager and, by some estimates, one-fifth the cost of China’s. Its hinterlands are filled with natural gas, exquisite teak forests, gems and rare minerals needed for high-end electronics.
But much of that natural bounty happens to lie within regions claimed by ethnic minorities, which inhabit 60 percent of Burma’s land.

Though the central government has secured tenuous cease-fires with most armed groups, many areas are still defended by guerrillas skilled in jungle warfare. Still, investors like Rogers contend Burma’s rise is inevitable.

“I worry about everything when I invest somewhere,” Rogers told GlobalPost. “I suspect these problems will calm and eventually go away, but even if they do not, there are still great opportunities there.”

“The ethnic groups are not going to take over Myanmar,” he said, “but even if they did, there would then be peace and plenty of opportunities.”

Of Burma’s 10-plus armed ethnic groups, there are the Karen, funded in part by a network of American Baptists. To the north, there are Shan, Burma’s second-largest ethnicity. Their turf is rich in rubies, zinc and opium. Further northward, a bloody war still rages between state forces and the Kachin, whose terrain shares a long border with China.

If American and European projects spring up across Burma as predicted, these mini-armies are unlikely to idly watch foreigners grow rich off their land.

Consider the $50 billion planned deep-sea port and refinery planned for Tavoy, a city south of Karen territory. The Karen army has sporadically blocked trucks owned by the developer, the Bangkok-based Ital-Thai construction conglomerate. Among their demands: run more surveys to prove the giant port project won’t wreck the environment.

“We have a clear policy on development,” said Zipporah Sein, the Karen National Union’s general secretary. “They have to guarantee our livelihood. And they have to limit the environmental impact.”

With more outsiders eyeing Karen territory — local media reports claim the country’s largest gold reserves were discovered there in January — investors are now aware that brokering with the group is essential to doing business there. This is hardly a new phenomenon in Burma: mining and timber interests in neighboring China have a long history of cutting deals with armed factions.

Almost no one expects the Karen, or any of the armed ethnic groups, to willfully surrender their chief bargaining chip: weapons. While desperately poor, the tribe must be careful not to go soft at the prospect of jobs, said A Ganemy Kunoo, a former Karen National Liberation Army operations commander.

Standing in the shade at a riverside outpost, where baby chicks scamper to dodge the footfall of patrolling Karen troops, he vowed that his people would never surrender their ability to fight. In official wounded-and-killed reports, the tribe’s army boasts of slaying 70 Burmese troops for every fallen guerrilla.

“Don’t forget that we’re lions,” A Gameny Kunoo said. “We’ll never eat grass.”

Other senior leaders concede that development will soon be welcome, so long as villagers benefit. “We know companies are looking at our land for projects and plantations,” Zipporah Sein said. “If there is peace and stability, that will be OK. The Karen people just want to see sustainable, responsible development.”

No matter how responsible, Western investors setting up government-blessed operations should brace for “reputational risks” and scrutiny from international watchdogs, said Alyson Warhurst, CEO of Maplecroft, the risk analysis firm.

Any project tied to the government or the military — Burma’s traditional source of power — is exposed to an “extreme risk of complicity.” But there is an opportunity, Warhurst said, for Western entities to carry out what Burma’s pro-democracy icon Aung San Suu Kyi has described as “ethical, new and innovative” development.

Critics can be offset with social programs that fill the education and healthcare spending void unanswered by the army-supervised regime. Western companies could offer an alternative to China’s mega-projects, condemned by many Burmese for hiring too few locals and causing too much environmental harm.

But Karen leaders insist that all talk of investment in their territory must follow a total withdrawal of the Burmese forces they’ve fought off since 1949, one year after British colonial troops retreated. For now, any incoming project running counter to Karen interests — from within Burma or from distant shores — could very well meet resistance.

“Never underestimate us,” A Ganemy Kunoo said. “There’s the one who walks into an area and there’s the one who is waiting in stealth. Who do you think will win?”

http://www.globalpost.com/dispatch/news/regions/asia-pacific/120228/burma-karen-state-economy-reforms-myanmar