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"Trouble in the Pipeline" from The

Subject: "Trouble in the Pipeline" from The Economist

The Economist
January 18, 1997


Trouble in the pipeline

IN THE past couple of years, a stream of western companies have stopped
doing business in Myanmar. But the demurrings of companies like Heineken, a
Dutch brewer, and Macy's, a New York department store, are mere pinpricks.
Arguably, there is only one project that really matters to the military
junta that runs the county. That is the pipeline being built by two oil
companies, Unocal of California and Total of France. Their $1 billion  joint
venture with state owned companies from both Myanmar and Thailand, to pipe
gas from the Andaman Sea to Thailand, accounts for about a third of all
foreign investment committed in Myanmar. The gas sold to Thailand will, on
conservative estimates, earn Myanmar $200m a year -- equivalent to a quarter
of the country's total 1996 export earnings. Gas used domestically would
increase Myanmar's generating capacity by 30%. Small wonder the pipeline is
known as Yadana, "treasure". 

The pipeline may be a treasure to the junta but it is an increasing worry to
the western companies involved. Late last year, Bill Clinton signed
legislation giving him the power to ban all new American investment in
Myanmar. Unocal, whose investment is already under way; may not be directly
affected. But it could still get fed up with the hassle associated with its
involvement. The company says it would have no trouble finding a buyer,
probably in Asia, for its 28.26% stake in the project. 

Unocal and Total (the pipeline's operator) see themselves as victims of a
concerted disinformation campaign. At first they were attacked for the
environmental consequences of the project; then attention turned to alleged
mistreatment of the locals. They are fighting back, taking journalists and
American congressmen on tours of the pipeline area. 

Work is proceeding steadily, on schedule for production to start in July
1998.  Thousands of lengths of pipe have already been shipped in. Many lie
ready for welding and burying.  In the next few months, the dry season, the
way will be cleared through hilly jungle to the Thai border. The pipeline
will have to be heavily protected because it has become a target for the
junta's enemies,. including a rebel ethnic group the Karen National Union.
In March 1995, a Total survey team, guarded by soldiers, was ambushed by
guerrillas from this group. Five of Total's local employees were killed.
Total denies reports of 
three further attacks, the most recent last October. But its workers and
subcontractors now move by bullet-proof jeep and helicopter within a
"security corridor" along the proposed route.  In theory, they stay inside
the corridor, and the government's soldiers stay out. 

Reality is messier than that. The government of Myanmar is contractually
obliged to provide access to Total's corridor and to protect it. Two
lawsuits brought by human rights activists in America allege that, in
securing access to the pipeline, the army has indulged in a range of brutal
behaviour. One suit includes evidence from local inhabitants. If its backers
can establish jurisdiction in America, they say they will have to prove only
"proximate cause" -- that the project's sponsors should have foreseen that
there would be brutality.  Refugees who have fled the area for the Thai
border say some villagers have been forcibly uprooted, and that conscript
labour is widely used for building roads and for a north-south railway line
that will cross the pipeline. 

Total says that, to win local support, it gives generous compensation for
land acquired for the route, and pays, by Myanmar's standards, high wages to
its workers, whom it hires directly.  It also pays for a $2m a-year
"socio-economic programme". It has brought generators to villages that had
no electricity, and provided schools, doctors, hospitals and even a church
roof.  It also gives seed money for shrimp, pig, cattle, poultry and goat

Because of all this, says Total, the 35,000 people in the 13 villages in its
corridor welcome the project. And indeed, when confronted by a delegation of
oil-company managers and journalists, local residents confirm this. But in
one tea-shop the jolly music blaring from a cassette player is a Karen
National Union campaign song. 

The social budget has another use:  paying local inhabitants conscripted by
the army for forced labour. Total officials reason that, since the practice
cannot be stopped altogether even in "their" area, its effects should at
least be mitigated. In one six week period last dry season, 463 villagers
were paid for conscripted labour, even though Total says the tasks they
performed had nothing to do with their project. 

Such payments sum up the debate about foreign investment in Myanmar. Do they
show how foreign money can help improve life? Or do they, rather show how it
helps prop up a repellent system? Myanmar's opposition leader, Aung San Suu
Kyi has no doubt. She has repeatedly asked foreigners, to wait before
investing. In 1990, her party easily won a free election so she is more than
just a carping dissident.  Foreign businesses naturally resist taking sides
in domestic political disputes. Miss Suu Kyi, however has left them no choice.