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Cablegate: Energy Giants Fund Burmese Model Villages

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 RANGOON 000574

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV, EB
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: EAID ECON EPET PGOV BM
SUBJECT: ENERGY GIANTS FUND BURMESE MODEL VILLAGES

REF: RANGOON 71

1. (SBU) Summary: A visit to the Total/UNOCAL pipeline zone
in Tanintharyi Division revealed an impressive level of
socio-economic development. A lack of government
interference, and the determination of well-funded corporate
citizens to push the envelope, have allowed for decent living
standards, comparative religious freedom, and the development
of nascent democratic institutions. Considering these
companies' ambitious and progressive policies, and the GOB's
apathy toward funding basic services, the significant
potential we witnessed would certainly dwindle if the firms
left. End summary.

Unprecedented Independence

2. (SBU) COM, Pol Officer, Econ Officer, and PAO traveled
with TotalFinaElf and UNOCAL (the "partners") representatives
to the area surrounding their 63 km onshore gas pipeline in
Burma's southernmost Tanintharyi Division. The partners have
established a corridor around the pipeline encompassing 23
villages, the largest of which is Kanbauk, located about 150
miles as the crow flies southeast of Rangoon. Twenty of the
villages are Burman majority, while the other three are
Karen. The partners have been allowed unprecedented
independence in providing and managing development funds,
with $1.2 million budgeted for 2003, for a total of $10
million since the projects began in 1995, into these
villages. This has led to an undeniably superior level of
economic and social development in the pipeline zone compared
to other villages in the area and elsewhere in Burma (even in
other "model villages" assisted by NGO or UN entities). The
whole zone had a strong, but positive, feel of a company
town; organized, funded, and operated by the energy
consortium.

3. (U) The partners do not rely on INGOs or the government to
carry out their projects. Instead, they use their own local
staff of 25 doctors, agronomists, safety experts, and
teachers, as well as several dozen laborers for road
maintenance.

4. (SBU) The partners claim that the government keeps a very
light hand on the 23 villages under the partners'
"protection," providing only security for the area. The
military, which is the primary government entity in the area,
allegedly leaves all of the economic enterprises alone and
does not harass the schools or hospitals operated with the
assistance of the partners. Rare abuses by individual
soldiers are reported to the partners via elected village
councils and a complaint is passed on to the regional
commanders. According to Total, these few complaints have
been resolved satisfactorily.

5. (SBU) Though there is no way to completely verify the
predictably rosy claims of the partners, there is no question
that the economic and social standards of living for
residents of the pipeline zone appear comparatively high.
Further circumstantial evidence of a light GOB presence: in
our travels, we saw only one or two soldiers, one small army
base in Kanbauk, and one small USDA office tucked behind a
well-stocked general store in Kanbauk.

Economic Development: Opportunity and Access

6. (SBU) The partners' strategy for economic development in
the pipeline zone has two elements: economic opportunity and
infrastructure development. The partners have been allowed
to carry out both with the explicit and implicit approval of
the government, but apparently with no interference.

7. (U) The partners have provided numerous economic
opportunities, mostly agricultural diversification and
expansion projects. In one case, using an agronomist hired
away from the Ministry of Forestry, the partners built a
nursery to grow 30,000-40,000 indigenous seedlings per year
(mostly cashews, but also a wide range of other cash crops,
such as black pepper, lime, rambutan, and durian) for
distribution to local farmers. Other economic development
projects include pig and chicken breeding centers (complete
with veterinarian and vaccination program) and a large
pineapple and rubber plantation within which farmers are
given deeds to plots after a probationary period.

8. (SBU) On the infrastructure side the partners'
achievements are remarkable. Without government
interference, the partners have built a 63 km sealed road
that tracks the pipeline (which is buried two meters
underground). They have also constructed numerous all-season
dirt roads that branch off the main road into the villages
being served. We witnessed these roads being scrupulously
maintained by staff and equipment provided by the partners.
9. (SBU) Socio-economic infrastructure is encouraged through
education and health assistance, as well as a rare
micro-credit program. The partners have been allowed to
build and stock seven new clinics in various villages, and
provide medicine, equipment, and personnel to the
pre-existing government hospital in Kanbauk. Aside from
offering free treatment to villagers, the clinics focus on
childhood vaccinations, family planning, and testing for and
treatment of malaria, TB, and other endemic diseases.
Likewise, the partners have been allowed to build and
renovate 44 schools, provide learning materials, computers,
and supplement the meager income of the 250 local government
teachers (thus discouraging the supplemental "tuition"
classes that most public school teachers across the country
operate). The partners have also been allowed to set up a
private remedial tuition school aimed at those students who
have failed their matriculation exams. This latter project
is most notable as the government is traditionally very
reluctant to allow new private schools, and very heavy-handed
on those that are permitted to exist.

10. (U) Total's statistics show impressive results from these
investments. In education, Total indicates an 18 percent
increase in enrollment since the 2000-01 school year. In
health, infant mortality is down 65 percent since 1997 (to a
rate well below the national average), and mortality from
malaria, water and foodborne diseases, and respiratory
infections down 70 percent, 99 percent, and 90 percent
respectively.

11. (SBU) The micro-credit program is another important
success, as banking laws generally make such schemes illegal
in Burma. Another exception is made for the UN, which
carries out small micro-credit programs (using INGOs) in some
areas in which it operates. The partners admitted that
they'd never received explicit permission from the GOB to run
this program; however, neither have government authorities
interfered with the program (or tried to hijack funds) since
its inception in 1997. According to Total statistics, in
2002 560 local people took loans (up to a maximum of $500)
worth 25.2 million kyat (roughly $25,000 at current exchange
rates). The loans, which an elected village committee of
four people, mostly teachers, distributes, are for a 6-month
term, with interest due for 5 months at 2 percent per month.
Since 1997, according to Total, there have been no defaults.

12. (U) We saw one example of the micro-credit program at
work. A small businessman in a Karen village was putting the
finishing touches on a small cashew nut processing "factory."
When completed, the factory will employee eight women and
produce roughly 150 kg of shelled cashews per day. When
producing at top capacity, the women will be paid about
1000-2000 kyat ($1-$2) per day, a very generous paycheck when
the average factory laborer earns about 500-1000 kyat per
day. More encouragingly, the owner had a rudimentary
business plan, envisioning early sales to Dawei, the largest
city nearby, and Kanbauk, then Rangoon, and hopefully someday
for export over the nearby Thai border.

Free Religion and Democracy in Burma?

13. (SBU) The partners have also made surprising progress
encouraging and developing democratic and religious
institutions in the pipeline zone. In one of the Karen
villages, the partners funded the reconstruction of the
village's 40-year old Baptist church. The partners have
built or renovated four other churches as well as two
Buddhist pagodas. Under the current regime, renovation or
construction of new non-Buddhist religious buildings is not
generally allowed; a complaint we've heard loud and clear
from the Christian community and one that resonates in
Burma's annual religious freedom report.

14. (SBU) The pipeline zone villages are also nurturing very
primitive democratic institutions, again seemingly without
government opposition. The partners have worked with each
village to establish elected "Village Communication
Committees" (VCC) that liaise between the residents and the
partners' local representatives. Though some of these
Committees include the government's village Peace and
Development Council designate, Total claims that these bodies
operate freely and complain readily if there is government
malfeasance. As noted earlier, there is also a democratic
element to the micro-credit program, which is run by a
committee of four people, elected each year by the various
VCCs. Again, though this committee's membership is often
mostly teachers (government employees), Total asserted that
funds are not misdirected or misused.

Little Things Mean A Lot, If the Environment is Ripe

15. (SBU) At first glance, there are two key reasons for the
success of the pipeline zone. First, the partners' programs
can focus on the whole development picture, not just offering
assistance but ensuring that locals have access to it. We've
seen other similar economic development projects founder
because of access problems. Second, the partners, though
consulting with GOB officials as necessary, are able to
independently manage their ambitious and aggressive
programming.

16. (SBU) Another lesson learned is the ability, if there is
a receptive environment, to do much with little in a country
as starved for everything as Burma. We define "receptive
environment" as one which allows adequate political and
managerial freedom by the implementing organization, and
which has adequate transportation infrastructure. If such an
environment exists, $1 million-$2 million spread annually
over a broad range of activities can have impressive success
in improving living standards. Without such an environment a
program ten times as large will have only half the impact.
Unfortunately at this time, as we've reported (see reftel),
the poor environment for aid in most of the country makes
successes like UNOCAL-Total's a rarity.

17. (SBU) One problem with the overall strategy is that much
of it is not self-sustaining. The extant small businesses
and agricultural and breeding projects already underway would
presumably continue to some degree. However, the health
clinics, schools, roads, livestock care, and micro-credit
programs would likely deteriorate without the annual cash
infusions from outside. The partners are acting as a
surrogate, and seemingly beneficent, government, so unless
the GOB decides to start funding basic services and
infrastructure (unlikely in the visible future), this is a
problem if Total and/or UNOCAL pull out of Burma. Should
this occur, unless their successors have the same pressure
from stockholders and human rights groups to "do the right
thing," the projects and programs funded by the partners
might dissipate.
Martinez

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