Global Crisis Hits Junta’s Pockets as Gas Prices Fall

By WILLIAM BOOT

The Burmese military government’s lucrative income from selling natural gas abroad is likely to suffer dramatically from falling prices triggered by the global financial crisis, an expert on the country’s economy has predicted.

Income from gas sales—mostly to Thailand—has already slumped in the first nine months of the current financial year, the Burmese Ministry of National Planning and Development disclosed this week as it announced the latest import-export trade figures.

The ministry said gas exports, which account for about 40 percent of all export income, fell 28.5 percent in value between April and December—a loss of US $670 million compared with the same period a year earlier.

At the same time the cost of imports rose, resulting in a 39 percent drop in trade surplus.

But economist Sean Turnell, a professor at Australia’s Macquarie University who specializes in monitoring Burma’s economy, said the situation is likely to get worse in the coming months.

“These numbers likely underplay the effects of the global financial crisis on Burma’s export revenues for the full financial year, since only part of the reported period includes the steep dive in international commodity prices and demand since November,” he told The Irrawaddy.

“Extrapolating this trend until the end of March will deliver a fall in the trade surplus for the full year of about 55 to 60 percent.”

However, losses from gas sales will most likely hurt the military leadership more than Burma’s ordinary citizens, Turnell says, because much of the revenue from the country’s natural resources goes into weapons or is spent on grandiose projects of little or no benefit to the population.

“The ruling regime has little understanding of the dynamics of a market economy, and mistakes the building of roads, bridges and dams and other physical infrastructure as constituting economic development,” Turnell said in a recent report for his university’s Burma Economic Watch.

Burma’s large natural gas reserves offered an opportunity for the country to lift itself off the economic floor where it was already languishing before Cyclone Nargis hit.

But Turnell said gas is turning into a “resources curse” for Burma.

“Burma’s gas earnings are already causing problems. Almost invisible in the country’s public accounts, so far they seem to be earmarked for the type of wasteful and grandiose spending projects that have been a characteristic of Burma’s military regimes for nearly five decades.”

Almost 50 percent of households in Burma were in debt before Cyclone Nargis devastated the country’s core rice and fishing industries.

Despite Burma’s gas and likely oil resources, agriculture still accounts for 47 percent of gross domestic product.

The military regime’s insistence on providing loans at 17 percent to thousands of farmers who needed new seed and equipment after Nargis has added to the indebtedness, and in many cases will sustain a cycle of permanent debt and poverty.

Providing interest-free grants is the “normal option taken in the wake of natural disasters by governments elsewhere,” noted Turnell.

“Burma’s state is almost wholly predatory, and is not so much parasitic of its host as all consuming,” he added.