Junta has 'stolen billions' in gas revenue

An environment group accuses Myanmar's generals of siphoning $5 billion from the Yadana project into their own pockets.

BANGKOK // Myanmar's military leaders have siphoned billions of dollars into offshore accounts in Singapore over the past nine years, according to a report just published by the US-based environmental group Earth Rights International (ERI). The money comes from the Yadana gas project in Myanmar, once known as Burma, and involves energy giants Chevron of the United States, France's Total and Thailand's PTTEP. More than 60 per cent of the gas is pumped through a pipeline into Thailand.

"Since 2000, some $5 billion [Dh18.3bn] from the Yadana gas pipeline has been stolen from the Burmese people," Mathew Smith, the main author of the report said in an interview. "Rather than contribute to Burma's economic development, the billion-dollar revenues from the project have gone into the pockets of the top generals." The money has been put in two Singapore banks, the Overseas Chinese Banking Corp and the DBS Group, according to ERI. The monitor has sent the report's findings to the banks involved and the Singaporean government. Both banks have issued statements dismissing the accusations and disclaim any involvement in the Yadana project. The Singapore government is looking into the case, a senior government official said.

"The revenue from this pipeline is the regime's lifeline," Mr Smith said. "As long as the regime has easy access to these funds there will be little incentive to change. But it also provides a critical leverage point for the international community to use to support the people of Burma." Myanmar earns $150 million (Dh551m) a month from gas exports, and that is set to rise substantially in the future, according to Sean Turnell, an Australian academic at Macquarie University in Sydney and an expert on Myanmar's banks and economy.

"Foreign reserves have now just passed $5 billion. Meanwhile, the international community is being berated over its failure to stump up for the government's post-Nargis reconstruction funding proposals," he said. While the gas revenues are the most substantial part of the regime's schemes, according to diplomats in Yangon who monitor the economy, they are only the tip of the iceberg. "Every deal done with foreign companies involves a cash-back component," a European diplomat familiar with the government's business practices.

"The industry minister, Aung Thaung, always asks foreign businesses which approach him for government approval for 25 per cent of the projects value as a kickback," according to a German entrepreneur who has been dealing with the regime for more than a decade. Most European businesses baulk at this request, but Asian firms are much more compliant, seeing it as an acceptable cost of doing business with the generals. The former minister for post and telecommunications, Brig Gen Thein Zaw, benefited substantially from a deal with the major Chinese mobile phone company ZTE, according to a Myanmar businessman familiar with the deal done four years ago. Under the contract, the Chinese provided a $150m loan for the infrastructure to provide 300,000 telephone lines, more than 10 times the real cost of the project, according to industry experts. In a ZTE contract for a million phone lines in another south-east Asian country the cost was $30m.

China's largest oil and gas producer, the China National Petroleum Corp, is scheduled to start constructing nearly 4,000km of pipeline from Myanmar's western Arakan state to China's Yunnan province next month. The deal is expected to provide the military government, which has ruled the country since a 1962 coup, with at least $29bn over 30 years. "Corruption in Burma is endemic," Mr Turnell said. "Every aspect of the economic food chain involves bribery and payoffs. From the clerk who gets a tip for processing application forms for passports, telephones, business registration and so on to the big deals involving senior government officials and ministers, who demand much more."

Transparency International rates Myanmar as the second most corrupt country in the world based on its corruption perceptions index. Only Somalia rates worse. ERI estimated that the military government had received 75 per cent of the revenue generated by the Yadana pipeline, which runs from the Andaman Sea to western Thailand. The junta managed to keep the $4.83bn off its national budget accounts by using a 30-year-old exchange rate from dollars to the local kyat currency, which produced a sum in kyat that was a mere fraction of the real amount generated, according to ERI.

"Singapore has very tight laws regarding corruption and misappropriation of public funds," Mr Smith said. "These accounts should be red-flagged until the banks have the opportunity to co-operate with the authorities." The group called on the international community to take steps to end high-level corruption in an effort to divert money into government programmes, especially health and education.

"If there isn't a local response, then countries like the US could act and call for secondary-boycott financial sanctions," Mr Turnell, from Macquarie University in Australia, said. "These ban not just Burma's banks from access to the US financial system [which is what current US financial sanctions do], but any bank that allows Burmese banks, leaders or connected parties to maintain accounts with them - or conduct other services on their behalf."