Daewoo invest $5.6 billion in Burma gas

(DVB)–South Korean company Daewoo International is waiting for the go-ahead from the Burmese government to invest nearly $US5.6 billion in Burma's gas fields, with the produce destined for China.

If approved, the deal will see Daewoo supplying the China National Petroleum Corp (CNPC) over the course of 30 years with around seven percent of the country's current gas consumption, although this is expected to grow rapidly.

Burma has huge offshore natural gas reserves in the Bay of Bengal which already cater for much of Thailand's energy needs.

Advocacy groups have complained that the vast majority of Burma's natural energy is being shipped out of the country, despite many of the major cities suffering frequent blackouts.

Daewoo will be leading a consortium of companies, which includes India's Oil and Natural Gas Corp and GAIL company, the Myanmar Oil & Gas Enterprise, and the Korea Gas Corp.

The project includes the construction of 2,800 kilometer oil and gas pipelines, known as the Shwe Gas Project, running from Burma's western Arakan state to China's southwestern Yunnan province.

Until now China has relied on the congested Strait of Malacca, between Singapore and Indonesia’s Sumatra peninsular, to transport oil from the Middle East to its energy-hungry population. According to Reuters, Burma will be able to tap the pipelines once they are in operation.

In June the Korean government rejected a complaint from two environmental advocacy groups, EarthRights International (ERI) and Shwe Gas Movement, that allegedly exposed human rights abuses surrounding the project.

China and Korea are two of only a handful of countries that still invest substantially in Burma, with China being its main trading partner and political ally.

Burma is subject to sanctions from a number of Western countries, including the United States and European Union, although these do not block investment in Burma's natural energy.

The EU recently ratcheted up its sanctions package on Burma, following the detention of opposition leader Aung San Suu Kyi earlier this month.

The United States is currently reviewing its policy towards Burma, following comments from some senior officials, including Secretary of State Hillary Clinton, that sanctions had failed.

Reporting by Francis Wade

READ MORE---> Daewoo invest $5.6 billion in Burma gas...

Total Chief: Critics Can ‘Go to Hell’

Christophe de Margerie, CEO of Total. (Photo: Bullsoil.com)

By THE IRRAWADDY

The CEO of the French energy giant Total said critics of the company’s operations in Burma “can go to hell,” according to an interview published by Newsweek magazine on August 3.

“I am bringing gas to Thailand. Bangkok was the world’s most polluted city. They switched from oil fuel to gas. Bangkok is clean now. We are proud of being part of this,” Christophe de Margerie, CEO of Total, told the US weekly magazine.

Thailand pipes about one billion cubic feet of gas per day from Burma’s offshore reserves in the southeastern Andaman Sea through the controversial Yadana gas pipeline, which human rights campaigners say has been a site of widespread abuses since its inception.

Total has been involved in the Yadana project since the 1990s, working in partnership with the US-based Unocal (now a wholly owned subsidiary of Chevron), Burma’s state-owned Myanmar Oil and Gas Enterprise and Thailand’s PTT Exploration and Production Co.

Total and its partners have long been accused of turning a blind eye to serious human rights abuses committed by Burmese security forces guarding the pipeline, including forced labor, land confiscation, forced relocation, rape, torture and murder.

A brutal crackdown on monk-led protests in 2007 and the current trial of Burmese pro-democracy leader Aung San Suu Kyi have brought renewed pressure on investors in Burma’s gas and oil sector, the single largest source of hard currency for the ruling regime. Burmese pro-democracy activists say energy companies should think twice about their investments in Burma.

“Today, [rights campaigners] are trying to tell us you have no right to speak. They can go to hell. If you want to ask somebody, don’t ask Total. Ask the government of Thailand, which buys Burmese gas,” de Margerie said.

“Or ask the government of India why they have companies investing in Burma, when we froze investment. Why is South Korea, ally of the United States of America, investing in Burma? Why Total?” he added.

However, de Margerie’s claims that Total has been unfairly singled out ignores actions taken against other major investors in Burma’s energy industry.

Recently, US-based NGO EarthRights International (ERI) filed a 43-page complaint to the Organization for Economic Cooperation and Development (OECD) calling for an investigation of the South Korean government’s respect for OECD guidelines.

The complaint, made on behalf of the Shwe Gas Movement and nine Korean-based organizations, is related to investments in Burma by Daewoo International and the Korea Gas Corporation.

Complaining that “Total is a punching bag while other companies invest without criticism is simply untrue,” said ERI project coordinator Matthew Smith, speaking to The Irrawaddy on Tuesday.

“He (de Margerie) claims that Total is proud to provide natural gas to Bangkok but at the same time he tries to deflect negative criticism to Thailand. This strategy is consistent with the way Total has handled most of the negative outcry about its presence in Burma: deny and reject any and all negative criticism.

“Total’s project has generated billions of dollars for the military regime from the peoples’ natural resources. It’s dubious at best to claim that is a positive thing for the country,” Smith said.

“Elsewhere Total has touted respect for fiscal transparency but at the same time it has not published the payments it has made to the Burmese regime—that raises serious questions,” he added.

READ MORE---> Total Chief: Critics Can ‘Go to Hell’...

Sticks or Carrots?

By AUNG ZAW
The Irrawaddy News
AUGUST, 2009 - VOLUME 17 NO.5

The new US administration has sent a strong signal that it wants to take a more active role in dealing with Burma

US Secretary of State Hillary Clinton’s message to Burma was loud and clear, but it is still uncertain what direction exactly the US will take in trying to engage the troubled country.

Upon arriving in Bangkok to attend the Asean Regional Forum (ARF) held in Phuket, Thailand, Clinton wasted no time in commenting on Burma’s troubles. She said that the US was deeply concerned by reports of continuing human rights abuses in Burma, and was particularly appalled by the rape and abuse of young women by members of the Burmese armed forces.

It was anticipated that the US would condemn Burma’s poor human rights record, the ongoing trial of Aung San Suu Kyi and the slow process of democratization. But Clinton’s emphasis of the abuse of women’s rights was a new part of Washington’s message.

Clinton is no stranger to Burma, since her husband, former President Bill Clinton, was the first world leader to impose economic sanctions on the country’s rulers in 1997. Today, Burma’s ruling junta is still the most recalcitrant regime in the region, regularly putting its allies and partners in the hot seat of world opinion.

The latest cause for concern is the growing military partnership that is forming between Burma and North Korea. Before Clinton’s arrival, there were persistent reports of a secret military mission to Pyongyang by high-ranking Burmese officials and Naypyidaw’s keen interest in buying North Korean ballistic missiles.

“We know that there are also growing concerns about military cooperation between North Korea and Burma, which we take very seriously,” Clinton said. “It would be destabilizing for the region. It would pose a direct threat to Burma’s neighbors.”

US officials even expressed concerns about a possible nuclear technology transfer from North Korea to Burma.

Her remarks won’t go down well with Burma’s main backers, China and Russia, who insist that Burma doesn’t pose a direct threat to regional peace and security—a position made less tenable by the release of a secret internal document detailing Naypyidaw’s dealings with Pyongyang.

The leaked 37-page document with photographs of the regime’s No 3 man, Gen Shwe Mann, who made a secret mission to Pyongyang in November via China, evidently show that the clandestine military ties between the two nations are well-advanced.

Informed sources confirmed that US and Japanese intelligence agencies already knew about Burma’s secret mission to North Korea long before the story broke in the exiled media. Last month, Japanese police arrested a North Korean and two Japanese nationals for allegedly trying to export a magnetic measuring device to Burma that could be used in missile development.

In any case, Clinton’s clearly worded message will definitely set off alarm bells in Naypyidaw. It’s also known that the paranoid generals have sought advice from North Korea on how to build tunnels and military facilities to fend off a foreign invasion or proxy war. The regime is also actively seeking jet fighters, sophisticated air-defense systems and anti-aircraft weapons in order to bolster its defensive and offensive military capabilities.

Reflecting the sensitivity of Burma’s efforts to substantially strengthen its military might, several Burmese civilians and military officials were arrested recently in connection with the leaking of the secret document.

Since the current regime came into power in the bloody coup of 1988, the US has been a strong supporter of Burma’s democracy movement and political opposition groups.

Under President Barack Obama, US policy on Burma is undergoing a review. State Department officials said that the ongoing trial of Suu Kyi will affect the policy review, which is expected to be a mixture of carrots and sticks. The US would like to exercise more diplomatic leverage to engage the hermit-like regime while maintaining targeted sanctions as sticks. The US is also interested in developing a more concentrated regional approach, involving the key countries in Southeast Asia.

Some believed, perhaps too optimistically, that the generals might want to seek a more normal relationship with the West once Obama came to power. However, the bizarre trial of Suu Kyi and the North Korean military connection show how little the junta cares about what leaders in the US, the EU or most Asean countries think.

The absence of active US engagement in trying to solve the complicated problems of the region during the Bush administration paved the way for China’s rise in influence. The good news, then, is that Clinton’s broader message is that the US is ready to resume an active leadership role in the region, working in cooperation with Asian nations.

Clinton is already offering some carrots to Burma. “Our position is that we are willing to have a more productive partnership with Burma if they take steps that are self-evident,” she said, adding that if the regime released Suu Kyi, Burma would benefit from better relations with the US, including investment. It is now up to the regime to choose.

If Clinton wants to help Burma, she needs to look at the country’s problems clinically and realize that dealing with the junta is like coping with an infectious disease. If it is not handled carefully, the regime is capable of spreading the contagion of instability to other countries.

The US must therefore use its influence to persuade other countries in the region that it is in their best interests to tackle the problem proactively, instead of merely trying to contain it in the hope that things will somehow get better on their own.

READ MORE---> Sticks or Carrots?...

Burmese Regime Deliberately Depresses Economy

By SAW YAN NAING
The Irrawaddy News

Burma is ranked as one of the world’s most undeveloped countries because of intentional mismanagement by its own leaders, says a leading regional activist, Debbie Stothard, the coordinator of the Alternative Asean Network on Burma (Altsean).

Many developing countries in Southeast Asia such as Malaysia, Singapore and Thailand lack the abundant natural resources of Burma, Stothard noted. However, Burma is poorer than each of these neighboring countries.

Many Burma observers say the country has become the poorest country in region because the military regime lacks any interest in a plan to develop the economy and to integrate with the international community. One result is that almost all of Burma’s natural resources are sold to neighboring countries, say observers.

Stothard and economic specialist Sean Turnell of McQuarie University in Australia said Burma’s generals have completely lost touch with economic reality, making the country a “very, very high-risk environment” for potential foreign investors.

In the past, Burma was at the top of Southeast Asian countries in terms of economic development and natural resources and had one of the region’s best education systems, Stothard noted.

“People wanted to go to Burma to study because of its universities,” she said. “Think about that. But, in a few decades the Burmese regime has turned the situation completely around.”

Stothard said Burmese people are among the poorest in the world due to the military government’s policy of preventing the development of a functioning economy and a professional education system.

“The regime intentionally twists the education system and squeezes the ordinary people,” she said.

Due to the broken education system, many of the brightest young Burmese leave the country and many never return.

Stothard noted that many regional businesspeople would not dare to set up a business in Burma.

“The only companies that dare go into Burma are the ones who are going to export the natural resources. They just go in, grab the natural resources and run,” said Stothard.

Turnell said that the regime’s economic policies have done far more damage to the country’s economic prospects than global economic sanctions, put in place because of the regime’s anti-democratic policies and human rights abuses.

“The biggest sanction on Burma is the Burmese regime itself,” said Turnell, who added that the regime’s “determined mismanagement” of the country’s economy, including its refusal to respect property rights, is the main obstacle to Burma’s economic development.

Stothard said, “Singaporean businessmen have told me, those generals don’t know anything.

They don’t want to know anything. It is not about the generals being stupid. It is about generals who refuse to listen to the advice of their own technocrats.”

Burma has been designated one of the world’s least developed countries by the United Nations for more than 20 years. On a UN Web site, Burma is described as “a resource-rich country that suffers from government controls and abject rural poverty.”

A former Burmese intelligence official in exile, Maj Aung Lynn Htut, wrote in a recent assessment of the country that the junta’s chief, Snr-Gen Than Shwe, is adept at using dirty tricks as a result of his background in psychological warfare.

Aung Lynn Htut wrote, “He [Than Shwe] understands very well that if the public is allowed to have a better life it will gain a progressive outlook and become interested in politics.”

In the Human Development Index 2008 Update, Burma’s per capita GDP (US$881 in 2006) was ranked 163rd out of 178 countries in the world.

READ MORE---> Burmese Regime Deliberately Depresses Economy...

Energy investments ‘at expense’ of Burma population

(DVB)–Civil society groups have criticised ASEAN’s energy investments in Burma that only benefit neighbouring countries whilst leaving the majority of the Burmese population in the dark.

A joint statement released by three groups coincides with the Association of Southeast Asian Nations (ASEAN) Ministers for Energy Meeting which is underway in Burma’s second city of Mandalay this week.

The Burma Rivers Network (BRN), the Shwe Gas Movement (SGM) and the Ethnic Community Development Forum (ECDF) in their statement addressed the lack of electricity being provided to the Burmese population.

The groups highlight that the electricity consumption rate of Burma is only 5 percent of that in Thailand yet the Burmese government continues to export energy to its energy hungry neighbours.

“Burma’s military regime is steaming ahead with plans to export even more energy resources to its neighbors,” said the statement.

“These include plans for over 20 large hydroelectric dams to power Thailand, China and ASEAN power grid, and trans-Burma oil and gas pipelines to China set to begin in September this year.”

It is reported that exported gas from Burma’s controversial Yadana and Yetagun fields’ fuels 20 percent of Thailand’s electricity needs while none fuels its own households.

The statement voices concerns that more energy investments will only increase human rights violations and make the population angrier at the lack of electricity.

“Energy projects in Burma should be for the benefit of Burmese people and not at their expense,” the statement said.

Wong Aung, from the Shwe Gas Movement, said that the ASEAN energy meeting will only “further enrage” the Burmese population.

“The generals are pocketing huge amounts from the projects but we are left in the dark,” he said.

Oilwatch Southeast Asia, a network of Southeast Asian environmental NGOs, has similarly expressed concern that previous projects have led to the loss of livelihood as fishing communities face fishing restrictions.

The organisation states that oil projects increase human rights abuses due to the presence of soldiers safeguarding the sites, who have reportedly used forced labour and forced relocation. Instances of rape by soldiers have also been reported.

“It’s very important that the ASEAN Energy Ministers review their investment policies with Burma,” Penchom Tang, spokesman of Oilwatch SEA said.

“They must wait for a democratically elected government so that investments are beneficial for the local people and the environment”.

Reporting by Alex Ellgee

READ MORE---> Energy investments ‘at expense’ of Burma population...

Energy Meeting in Mandalay

By The Irrawaddy

Thailand’s Energy Minister Wannarat Charnnukul will emphasize his country’s strength as a regional hub of alternative energy at a meeting with energy ministers from Asian +3 and Asean +6 in Mandalay on July 29-30, according to a report in the Thailand-based news service The Nation on Monday.

Thailand will join the Asean energy action plan during 2010-2015, which highlights cooperation in seven areas including clean coal technology, the regional power transmission grid, gas pipelines, energy conservation, recycliable energy and nuclear power.

Minister Charnnukul also said that Thailand would also seek a bilateral talk with Burma on further cooperation in natural gas investment, according to the report.

According to a source close to the Thai ministry official, Thailand is concerned that Burma’s gas fields will be monopolized by Chinese state oil firms.

Thailand imports over 50 percent of Burma’s gas, which the French energy conglomerate Total extracts from the Yadana gas field in the Andaman Sea.

Total is one of the world’s six biggest so-called “supermajor” oil and energy companies and is the only large European business still operating in Burma.

In May, the French government said that if tougher trade curbs were introduced against Burma over the regime’s treatment of Aung San Suu Kyi, it would have damaging repercussions for one of France’s biggest companies and possibly for Southeast Asia.

French Foreign Minister Bernard Kouchner also warned that any pullout by Total would have a limited effect because Chinese state oil firms would be quick to move in.

The EU has urged Burma’s neighbors—notably China and India—to also threaten sanctions to persuade the regime to halt its political repression.

The 25 EU countries are barred from importing timber, minerals, gems and metals from Burma, and prohibited from exporting weapons and weapons-related equipment. Various restrictions on junta members are also in place.

However, both India and China continue to expand their business interests with the Burmese junta and supply it with weapons.

READ MORE---> Energy Meeting in Mandalay...

Free Suu Kyi and the US May Invest in Burma: Clinton

what a carrot...!!!

By WAI MOE
The Irrawaddy News

PHUKET, Thailand—The United States would be willing to expand its relations with Burma if the country's military junta released opposition leader Aung San Suu Kyi, US Secretary of State Hillary Clinton said on Wednesday in Phuket.

US Secretary of State Hillary Clinton (C) waves as she arrives for the Association of Southeast Asian Nations (Asean) Regional Forum on the Thai island of Phuket. (Photo: AFP)

“We are calling for the release of Aung San Suu Kyi, which we believe is very important," she told reporters at a press conference.

“And if she were released, that would open up opportunities, at least for my country, to expand our relationship with Burma, including investments in Burma. But it is up to the Burmese leadership," Clinton added.

The US has imposed economic sanctions on Burma since 1997, preventing new US investment in the military-ruled country. The US set tighter economic sanctions that banned importing goods from Burma in 2003, following an attack on Suu Kyi's convoy by regime-backed thugs at Depayin in northern Burma.

At Wednesday's press conference, Clinton repeated US concerns over the military cooperation between Burma and North Korea, and the pursuit of "offensive weapons including nuclear weapons."

“There are a lot of issues that Burma raises for the entire region, not just the United States," she said. "I think it is important to encourage the Burmese leadership to begin to open up, to pursue the model other Asean countries are following."

Clinton told reporters at the press conference in Bangkok on Tuesday that the Obama administration is concerned about the increasing military ties between North Korea and Burma.

“We know that there are also growing concerns about military cooperation between North Korea and Burma, which we take very seriously. It would be destabilizing for the region," Clinton said. "It would pose a direct threat to Burma’s neighbors. And it is something, as a treaty ally of Thailand, that we are taking very seriously."

Clinton, who is now attending the Asean Regional Forum in Phuket, said that Burma is moving in the opposite direction from other Southeast Asian countries, which, like the United States, want the Burmese military government to change their behavior.

Clinton added that the Burmese junta would have a better future by turning away from isolation and treating their own people better.

During an interview on The Nation Thai television network, Clinton said Asean should consider expelling Burma from the regional bloc if the junta fails to release pro-democracy leader Suu Kyi.

Before flying to Phuket, Clinton met several activists in Bangkok, including Dr Cynthia Maung, founder of the Mae Tao Clinic for Burmese migrants and refugees in the Thai-Burmese town of Mae Sot.

After fleeing the 1988 uprising, Cynthia Maung set up a clinic in Mae Sot where she and her medical workers treat refugees and migrant workers. The former US first lady Laura Bush visited her clinic in August 2008.

READ MORE---> Free Suu Kyi and the US May Invest in Burma: Clinton...

Soaring investment in Burma 'could hurt' population

(DVB)–Foreign investment in Burma has soared in the past year, with China’s ramped up economic interest in the country accounting for the majority of the rise, said a Burmese government report yesterday.

According to the report, released by the Ministry of Planning and Development, investment leaped from $US172.7 million in the 2007/08 fiscal year to $US984.9m.

The ministry announced that 87 percent of the total investment had come from China, with the majority of its investment focused on the extractive sector.

Reports show that small Chinese companies are focusing on Burma’s hydropower, mining and oil industries.

Economic analysts are concerned however that the extra investment will have no valued impact on the economy as Chinese companies attempt to yield quick results.

Burma expert and economist Sean Turnell, from Macquarie University in Australia, said that the Burmese economy is too risky for investment in infrastructure sectors, with the level of poverty in Burma so extensive that there is no attraction to consumer sectors.

“Burma attracts wild cat companies who come in and out to make dirty money,” said Turnell.

“Burma is at the grip of a resource curse; the extra investment will help the generals stay in power but will not benefit the local people.”

Environmental groups are also concerned that the increased investment will further worsen human rights violations occurring as a result of the resource extraction project.

It is believed that a large chunk of the investment will be going to build the Shwe Gas fields over the coming years.

Spokespeson for anti-pipeline campaign group Shwe Gas Movement, Win Aung, believes that the extra investment from China is only adding to the difficult situation that many people in Arakan state, where the pipeline will begin, already face.

A significant proportion of the Arakan population rely on fishing, and in times of gas or oil exploration, the government often cuts off fishing areas.

“Fishermen are restrained from fishing so they are unable to feed their families,” said Win Aung.

“Military battalions are sent into protect the construction and they create many problems as they confiscate land.

“The government should be directing foreign investment into education and health so the people of Burma will benefit in the future”.

Reporting by Alex Ellgee

READ MORE---> Soaring investment in Burma 'could hurt' population...

LAWLESS China shuts the door on diplomats

By Michael Sainsbury and Mark Dodd
The Australian

CHINA has rebuffed the Rudd government and may force Australian officials to wait a further month for a second visit to detained Rio Tinto iron ore executive Stern Hu.

As senior Australian ministers warned that China risked damaging its international trade relations over Mr Hu's arrest, reports emerged that Rio Tinto was seeking as much as $9 billion in compensation for breach of contracts from Chinese steel mills.

Foreign Minister Stephen Smith yesterday criticised Chinese efforts to communicate with the Rudd government over the Hu case.

"We would have preferred that much of the information we have gleaned would have come from Chinese officials in the usual and normal diplomatic way, rather than it coming from the public statements of the spokesperson from the Ministry for Foreign Affairs and from an official Chinese government website detailing the advice of the Shanghai Bureau of State Security," Mr Smith said.

Chinese-born Mr Hu, the head of Rio Tinto's iron ore operations in China, and three other senior company officials were arrested in Shanghai by secret police and have been detained for a week without charge or legal representation.

Chinese officials have accused Mr Hu of espionage and stealing state secrets, sparking the most serious diplomatic challenge faced by the Rudd government since it came to office in November 2007.

It is now clear that the allegations against Mr Hu and his colleagues are directly related to prolonged and unresolved negotiations over benchmark prices for iron ore being sold by Australian miners to Chinese steel mills.

Chinese media reports said Rio - and possibly its one-time rival and new joint venture partner BHP Billiton - had been approaching Chinese steel mills in the past month, seeking compensation for broken contracts after the steel makers allegedly reneged on promises to buy certain volumes of iron ore.

"From the middle of June, Rio visited Chinese mills one by one, asking for compensation for contracts which were not fulfilled due to the financial crisis," the 21st Century Business Herald quoted an unnamed senior steel executive as saying.

"Rio calculated that they lost $5 billion in iron ore, and $4bn in shipments in the previous eight months due to the fact that Chinese mills postponed or even cancelled ships."

A Rio spokesperson declined to comment.

Mr Smith played down hopes of an early release for Mr Hu, warning that he was preparing for the "long haul".

"I am deliberately and advisedly making the point that under Chinese law and Chinese practice, Mr Hu is now subject to those processes," he said.

The month-long wait for another consular visit comes after Trade Minister Simon Crean, visiting Shanghai on Saturday, was granted access only to a mid-level official, Sha Hailin, the deputy secretary-general of the Shanghai government, to express his "strong concern" about the Hu case.

Mr Smith, asked if Mr Hu's detention could scare off foreign investors in China, said Beijing needed to "think very carefully about what implications, if any, it has for the international business community and the international investment community's view of China".

"I think one of the issues for the Chinese government to contemplate is the extent to which the circumstances of this case will cause the international business community any cause for concern," the Foreign Minister said.

The opposition continued to attack the government's response to Mr Hu's detention.
Opposition foreign affairs spokeswoman Julie Bishop said China had effectively "snubbed" Australia.

She accused Mr Smith of failing to act decisively with the Chinese and said he was now being treated with disrespect by Beijing.

"The government ministers must get personally involved and not just leave this to the bureaucrats and say that this is just a consular matter," she said.

Mr Smith defended the government's handling of the Hu case, saying it continued to press Chinese authorities for more information in a "firm but appropriately diplomatic way". The Foreign Minister admitted he had not called his Chinese counterpart, Yang Jiechi, but might do so in the future.

"I'll make a judgment about it if and when it becomes appropriate for me to raise this matter with my counterpart so will the Prime Minister and the Prime Minister made that clear last week," Mr Smith said.

In their first meeting with Mr Hu on Friday, Australian consular officials said the iron ore salesman was in good health.

China's 21st Century Business Herald reported that the evidence against Mr Hu included "an interior meeting memorandum provided by China Iron and Steel Association personnel".

Another source revealed that a senior executive at state-owned Shougong Steel, Tan Yixin, provided production information to Mr Hu.

Other Chinese news reports said executives from a raft of major steel mills across China, as well as executives from the CISA, which has been conducting the discussions, have been hauled in for questioning by authorities. As well as Shougang, Laigang and Jigang mills in Shandong, Baosteel in Shanghai and other mills in Hebei and Liaoning provinces are rumoured to be under investigation.

A senior executive of Baosteel, China's biggest steelmaker, has been reported to have been taken by police for interrogation. It has also been reported that the manager in charge of shipment at a large mill in Shandong as well as the executive of a large trader were also taken for interrogation.

Last year's iron ore contracts were struck at record prices of about $US90 a tonne, a 40 per cent lift on the previous year. China has been demanding a cut of between 40 and 45 per cent but Rio and BHP have insisted on a discount of only 33 per cent - the same agreed by Japanese and South Korean mills in May. The pricing of iron ore, the biggest input to the steel making process, has long been a delicate issue with China, which now consumes half of the iron ore mined each year and more than 60 per cent of seaborne volumes, which mainly come from Australia and Brazil.

Rio's iron ore chief Sam Walsh said at the weekend that the company remained surprised and concerned over the detention of its employees.

The company had still not been told by Chinese authorities of any charges against the employees.

Chinese lawyers who spoke to The Australian on the condition of anonymity said that, as no specific evidence against Mr Hu had yet been provided, it was not easy to judge what jail term he might face if found guilty. "Six months to 15 years, it depends on the evidence," one said. (JEG's: and if there is no evidence will there be a DASSK's casse here? without evidence will Mr Hu be charged?)

Additional reporting: Debbie Guest

READ MORE---> LAWLESS China shuts the door on diplomats...

President backed Rio spy probe

By John Garnaut
SMH-Herald Correspondent in Beijing

THE Chinese President, Hu Jintao, personally endorsed the Ministry of State Security investigation into Rio Tinto that led to the detention of the Australian iron ore executive, Stern Hu, and three staff, Chinese Government sources say.

The investigation appears to be part of a big realignment of how China manages its economy, with spy and security agencies promoted to top strategy-making bodies.

The ministry and the Public Security Bureau have significant new roles - the former focusing more on international economic dealings and the latter on domestic political unrest that might flow from economic instability.

The Communist Party's nine-member standing committee, led by the President, has also taken more control over economic decisions at the expense of the State Council, led by the Premier, Wen Jiabao, Chinese economic advisers say.

The sources, who say they are familiar with details of the Rio Tinto case that have not been made public, say the inquiry began before Rio Tinto broke off its $US19.5 billion ($25 billion) investment deal with Chinalco and joined iron ore production forces with BHP Billiton on June 5.

"This is certainly not 'revenge' for the Chinalco deal not going through," said a Chinese Government source. "It is part of a considered, all-of-government response to the general resources question that was made after considering the likely international response."

The collapse of the Chinalco deal was immediately followed by the establishment of a high-level, all-of-government group that will assess the political and economic risks of big outbound investment deals. The outbound investment assessment group, which features vice-minister level representatives of security agencies, is yet to be given a name and no details have been made public.

"That unfortunate ending to the Chinalco-Rio deal was a kind of wake-up call for policymakers that the external environment can be much more complicated than just managing trade relations," said Huang Yiping, a professor of economics at Peking University and Citigroup's former chief Asia economist.

"The group of people who will be managing these policies will be much more diverse … there will be security people and [political] risk managers, and I think more policy uncertainties."

The Australian Government declined to comment last night on the revelation that President Hu had endorsed Mr Hu's arrest.

Australian officials in Canberra and Beijing will seek more details from Chinese authorities today about the circumstances of his arrest eight days ago. He is accused of bribery and undermining China's economic security.

The Foreign Affairs Minister, Stephen Smith, said:

"China needs to think very carefully what implications, if any, this has for the international business community and the international network's view of China."

The elevation of Chinese economic policy to a top national security concern began late last year with the collapse of the Shanghai and Shenzhen sharemarkets, the weakening of the real estate market and difficulties with manufacturing exports in coastal regions. The process accelerated with the full onset of the financial crisis since September.

"It probably reflects that Chinese leaders are much more worried about the economy than everybody else," said Michael Pettis, professor of finance at Peking University's Guanghua School of Management.

The economy has stabilised with Beijing's huge fiscal and monetary stimulus policy, and many believe the economy will hit the Government's growth target in gross domestic product of 8 per cent this year.

Many economists believe a sustainable recovery requires Beijing to loosen rather than tighten controls.

The top-level support for the Rio inquiry makes it even more unlikely the Shanghai State Security Bureau will reverse its decision to detain Mr Hu and his Chinese citizen colleagues, Liu Caikui, Wang Yong and Ge Minqiang.

In Australia the Opposition said Mr Hu's detention deserved a more serious response.

"He's being taken by the Chinese secret police, and there are accusations of espionage," the foreign affairs spokeswoman, Julie Bishop, told ABC TV.

"That elevates this matter to a Beijing-to-Canberra issue."

Mr Smith rejected Opposition suggestions the case could be resolved by a phone call to Chinese leaders from him or the Prime Minister, Kevin Rudd.

with Brendan Nicholson and AAP

READ MORE---> President backed Rio spy probe...

Foreign Investment in Burma: Analysing the statistics

by Derek Tonkin

(Mizzima News) -The article by Solomon in Mizzima on 6 July highlights the latest data about foreign investment in Burma. Perhaps I might try to interpret them from the perspective of a former investment director.

The figures quoted are taken from investments licensed by the Myanmar Investment Commission (MIC) set up under the 1988 Foreign Investment Law (FIL). However, it is not obligatory for foreign investors to invest under the FIL and many investments of US$ 250,000 to US$ 1 million made in SMEs (small to medium sized enterprises) will have been made, quite legally, outside the FIL. The benefits of investment licensed by the MIC are mainly in the incentives and guarantees provided under the FIL. But investors in SMEs may well feel that the procedure for securing an MIC licence are time-consuming, and they are perfectly content to conclude investment contracts outside the FIL.

This particularly applies to Thai and Chinese entrepreneurs, but European investors with close connections in Burma or long residence there may well choose to invest in this way. This situation is not unique to Burma, but applies throughout South East Asia and further afield. The incentives available under the foreign investment legislation may be attractive to larger investors, but less so perhaps to smaller investors who recognise that profits and business expansion can only come through trading operations, and the sooner these start, the better. So the US$ 15 billion investment licensed by the MIC under the FIL is by no means the whole picture, and I would not be surprised if non-MIC authorised foreign investment were to be as great, though I simply do not know and am reluctant even to hazard a guess.

Another important qualification is that this US$ 15 billion is only approved, that is, contracted investment registered with the MIC. Realised or completed investment by its nature will not be as large, for a number of reasons. In the case of Western investment in the 1990s, notably in the oil, gas and extractive industries, funds actually invested in Burma appear to have been at least 80 per cent of contracted value, while the realisation of Asian investment appears to have been rather lower, perhaps as low as 60 per cent. In any case, contracted investment is frequently based on two or more phases of investment, and though the first phase may in due course be completed, delays in the second phase may occur, for market or funding reasons. However, the contracted total remains, and it is sensible to contract for all phases at the start because this avoids the need to apply for additional investment authority from the MIC should a second phase of investment not covered by the original licence be agreed at a later date. Furthermore, investments, although approved, may be deferred or abandoned.

A particular difficulty is pin-pointing the nationality of the beneficial owner. An investment made in Burma by a company incorporated in a particular country is not necessarily a guide to the nationality of the beneficial owner, unless the company is a well-known multinational. The preferred and recommended structure for an overseas investment in any country in South East Asia is through a single-purpose off-shore company which could be incorporated in jurisdictions as different as the British Virgin Islands (BVI), Luxembourg, Labuan, Delaware, Netherlands Antilles or Gibraltar. The BVI is especially popular, and though it is a British Overseas Territory, almost all current investments in Burma made by a company incorporated in the BVI do not have mainland UK beneficial interests, but are made by companies incorporated in such diverse countries as Hong Kong, Singapore, China, Malaysia, Russia, and Canada. However these BVI companies are registered with the MIC as "UK" because the BVI is a British Overseas Territory. In point of fact, mainland UK investment mostly by oil and gas companies in the 1990s has in almost all cases been sold on to other non-UK beneficial owners.

Investments made by companies incorporated in the BVI are rarely channelled through the BVI itself, and dividends and other financial operations connected with the investment in Burma are also generally handled outside the BVI. But such off-shore companies are invaluable for beneficial owners to "park" their equity (shareholding) for the tax advantages (which vary from jurisdiction to jurisdiction) and for flexibility in managing the share structure. Thus a Malaysian company using a BVI company to register its investment in Burma can without difficulty sell part of the equity of the BVI company to, say, a Singapore company without having to renegotiate the original foreign investment licence. When Rothmans of Pall Mall Singapore (owned by British-American Tobacco in the UK) were persuaded to pull out of Burma in 2003, it was only necessary for them to sell their holding in a Singapore Joint Venture company to their Singapore partners Distinction Investment Holdings. The Joint Venture in Burma with Union of Myanmar Economic Holdings, Rothmans of Pall Mall Myanmar, remained essentially unchanged and licensed production of "London" and "State Express 555" brands continued.

Countries in South East Asia have little alternative when reporting the sources of foreign investment but to note the location of the investing company, whose beneficial owners may well change within a very short time of signature of contract. This is particularly true where promotional entrepreneurs make an investment with the deliberate intention of selling on at a profit as soon as possible. They have the expertise in the market or in the sector, and investors will pay a premium for access to a well structured investment which is fully licensed.

So when you read that the UK and colonies have invested US$ 1.8 billion in Burma, I have no reason to contest that figure, but I would add that the beneficial mainland UK ownership of those investments today is in my estimate less than 1 per cent of that total. The UK Government discourages investment in Burma, but would be most reluctant to exert undue pressure on the BVI Government to confront companies from Hong Kong, Singapore, China, Malaysia, Russia and Canada which use BVI-based financial service facilities, the main source of the islands' GDP.

Derek Tonkin is the Chairman Beta Mekong Fund Limited 1994-2000

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Foreign investments soar in Burma despite economic sanctions

by Solomon

New Delhi (mizzima) - Economic sanctions imposed by the West – United States and the European Union – notwithstanding, foreign investments in Burma, since 1988, accounts for a total of US dollar 15 billion.

The energy sector, which includes oil and gas, and hydroelectric power plants, is the single largest domain that attracted foreign investments, said an official of the Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

The present military rulers of Burma, in power since 1988, opened its doors to neighbours including China, Thailand, and India and welcomed investments in oil and gas and hydropower-projects.

“The Hat Gyi hydroelectric power project alone attracted over US$ 6 billion in 2006-2007,” said the official. The Hat Gyi hydro-project is to be built in eastern Burma’s Karen state in collaboration with Thailand.

“Thailand is the leading investor in the energy sector,” the official added.

Both Thailand and China have made multi-billion dollar investments in hydroelectricity projects in Eastern and Northern parts of Burma.

Burma’s military regime, riding on the crest of foreign investments, has planned to construct several dams along the Salween River, which will produce an estimated 14,000 megawatts of power at an approximate budget of US$ 20 billion.

A report in a local journal in Rangoon, the Weekly Eleven states that Thailand is the leading investor in Burma with an estimated investment of USD 7.41 billion, followed by the United Kingdom which has invested USD 1.8 billion, despite imposing economic and financial sanctions against the ruling junta.

Singapore is in the third spot with an investment of USD 1.55 billion, followed by China in the fourth position with 1.33 billion U.S. dollars.

The four are followed by Malaysia with USD 660.75 million, Hong Kong SAR with USD 504.22 million, France USD 469 million, the United States USD 243,565 million, Indonesia USD 241.50 million and South Korea USD 239.32 million.

The Weekly said, investments were made by 31 countries and regions in 424 projects, in 12 economic sectors, including electricity, oil and gas, manufacturing, real estate, hotels and tourism, mining, transport and communications, livestock breeding and fisheries, industry, construction, agriculture and the services sector.

Khin Maung Kyi, a Singapore-based Burmese economist said despite sanctions by western nations against the ruling regime, foreign investments in Burma are likely to grow further.

“It is not a surprise because China alone is into a great number of investments especially in oil and gas sectors,” said Khin Maung Kyi.

However, he said, sadly the investments, which he estimates would be over USD 15 billion, has never been spent on social development of the country or used for the uplift of the living standards of the people.

“I really doubt that these foreign investments have benefited the people and have contributed to the development of the country,” he said.

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Myanmar Oil Markets Investment Opportunities, Market Analysis and Forecasts to 2020

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Foreign Companies in Burma Must Review Their Involvement

By YENI
The Irrawaddy News

As the Burmese regime brutally increases its isolation of opposition leader Aung San Suu Kyi, the US and countries of the European Union remain steadfast in applying their pressure on the junta. US President Barack Obama formally extended his administration’s sanctions, while the EU is considering whether to step up its own measures.

Burma's stubborn, thuggish military leaders can shrug off Western pressure, however, knowing they can rely on support from such friendly and powerful neighbors as China and India. While neither Beijing nor New Delhi has officially commented on the latest moves against Suu Kyi, many Southeast Asian countries, some of whom have significant trade and investment links with Burma, are also inclined to follow a live-and-let-live policy towards the regime.

However, both camps—supporters of sanctions and proponents of engagement— acknowledge failure in their efforts to influence Burma’s military leaders. That is why US Secretary of State Hillary Clinton in February correctly said that sanctions applied by the US and the European Union, as well as the policy of constructive engagement by the Association of Southeast Asian Nations (Asean) and Burma’s neighbors, were not working.

So the question remains: who can influence the Burmese generals to listen to world opinion?

Many observers agree that a start could be made on at least ending ongoing human rights abuses if oil and gas companies operating in Burma use their influence with Burma's ruling junta, the State Peace and Development Council (SPDC).

Current investors in Burma’s oil and gas industry include companies from Australia, the British Virgin Islands, China, France, India, Japan, Malaysia, Singapore, South Korea, Thailand, Russia and the US.

Those companies are funding the Burmese dictatorship. At the height of the monk-led demonstrations in September 2007, Marco Simons, US legal director at EarthRights International, an environmental and human rights group with offices in Thailand and Washington, declared: "The oil and gas companies have been one of the major industries keeping the regime in power."

The concept of "corporate social responsibility" is often advanced by companies operating in Burma, although that’s usually just a shield behind which they campaign against international environmental and human rights regulations.

For instance, there have been documented abuses connected to the Yadana project operated by the French company Total and the US-based Unocal, including land confiscation, forced labor, rape, torture and killings within the communities along the pipeline. Compensation was paid to some victims after human rights groups filed legal actions against the companies before a federal court in the US.

Foreign investment in Burma’s oil and natural gas sector is significant. But there is no transparency in Burma about how much the government receives in oil and gas payments, nor clarity about how the funds are spent.

The military receives the largest share of the official budget and the Burmese regime allocates little to public sectors such as health and education. Instead, hundreds of millions of dollars disappear annually into the pockets of the ruling generals, their cronies and their pet projects, such as the new administrative capital, Naypyidaw, the cyber city, Yadanabon, and even a nuclear research reactor.

The latest action against Suu Kyi, following the regime’s criminal mismanagement of Cyclone Nargis relief and its crackdown on the September 2007 demonstrations should lead companies to search their consciences when contemplating deals with the regime.

ERI Project Coordinator Matthew Smith believes there are also business reasons to think twice about accepting Burma contracts. "Financing the Burmese regime in this way can only reflect poorly on a company’s reputation and that will ultimately affect their bottom line and ability to capitalize on deals in the future,” he says. “It’s simply bad business.”

Of course, good business must come with ethics, morality and responsibility. This is the time for shareholders of global and regional oil and gas companies operating in Burma not only to think about maximizing profits but also to face up to their responsibilities by evaluating the human rights impact and the criteria for continuing to invest there.

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