Dealing with the Resource Curse in Myanmar: UN Global Compact and Institutional Capacity

Memo #276

By Yves Tiberghien – yves.tiberghien [at] ubc.ca

Since it began its gradual opening and domestic process of change, Myanmar has become a great target of opportunity for a myriad of foreign players, especially global investors interested in its vast energy potential and other resources. The challenge for the country is how to turn these blessings into welfare improvement for its people and avoid falling into the notorious “resource curse.” Myanmar is seeking to use its latecomer advantage and to develop some innovative responses.

Myanmar owns great resources indeed: oil and gas, timber, minerals, diamonds, agricultural commodities, to name a few. And in an age of growing resource competition, Myanmar is being increasingly viewed as the new “El Dorado.” Yet, resources are hard to harness into a development program. They tend to create enclave sub-economies that suffer from volatile world market prices. In addition, a country like Myanmar faces a formidable information asymmetry dilemma when it faces global investors. The resource curse usually entails corruption, poor diffusion of benefits, a process of resource pull away from manufacturing, weak institution-building, and threats to democracy.

Under the leadership of Professor Aung Thun Thet, one of the Myanmar president’s senior economic advisers, former UN official and member of the powerful Myanmar Investment Commission (MIC), Myanmar is seeking to develop a robust domestic interface with Foreign Direct Investment (FDI). The MIC is demanding that all foreign investors into resources (and beyond) adhere to the UN Global Compact, adopt Corporate Social Responsibility commitments, and engage in partnerships with local communities and civil society. The MIC also requires both an environmental impact assessment (EIA) and a social impact assessment (SIA). It imposes minimum wage conditions and requirements to nurture local management capacity.

The success of this effort will depend on the capacity of educational institutions and the government to rapidly generate public policy capacity. It will also require the stabilization of legitimate governance and community engagement in minority areas (where resources are abundant). Ultimately, the management of the resource curse and of interface with the global economy will have a large impact on Myanmar’s democratic transition. Myanmar’s initiatives represent a strong case of diffusion of global practices and should be encouraged.

Yves Tiberghien is the Director of the Institute of Asian Research and Associate Professor of Political Science at the University of British Columbia; Executive Director of the China Council, and a Senior Fellow with the Global Summitry Project at the Munk School, University of Toronto.

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