Episode #231: Riches, Resources, and Revolutions
“Natural resources are a relatively new part of the economy in Myanmar,” explains Guillaume de Langre, adding that this is contrary to how the usual narrative is framed about the country. A former adviser to the Myanmar Ministry of Electricity and Energy (MOEE), this is de Langre’s third appearance on the podcast: in the first discussion he described why the power grid has fallen into such disarray, and in the second interview, he talked about the limited options available to meet the country’s desperate energy requirements.
He starts this conversation off by expanding on the quote above, saying that the military has not always relied on its natural resources to retain power. That is a fairly new development, and one which can be traced to the crony capitalism that emerged in the 1990s after decades of failed socialist policies. “We're basically at the end of that bubble, or you can call it a cycle that is coming somewhat to an end, but for very different reasons, from one natural resource to another,” he explains. “I don't want to say that all these natural resources are the same, as they all follow their own kind of incentive structures, and have their own political economy. It's all a bit different, but the trend is that the natural resource extraction that boomed under the Than Shwe regime reached a peak in the late 2000s until 2015, and has been gradually declining.”
de Langre ticks off an array of natural resources mined in Myanmar—gold, silver, lithium, natural gas, nickel, tin, copper, oil, rare metals, rare earth, and jade—and notes that as reliance on these as sources of income have increased, they “conquered” the rest of the economy. But the key fact to note is that these resources are sold as raw materials. “What you're making there is a rent, you're not really making a pure profit, you are extracting something from the ground and selling it almost unrefined, just as it is, to someone else, and making a profit just from the fact that you own the land,” he says, adding that one of the devastating results of the 2021 military coup was ending the hopes that many had that the country’s economy would finally become more diversified and equitable, one that provided opportunities to more than just those at the very top. Instead, the worst possible outcome landed, with the military again controlling these vast riches, while foreign investment has almost entirely dried up due to the country’s instability.
Even before the coup, there was no easy road map for a country trying to undergo such a dramatic transformation, says de Langre. “It requires massive investment effectively in diversification, investing in human capital, investing in rural infrastructure, all of this stuff that will incentivize people to work in other parts of the economy. That’s why we keep seeing in various parts of the world, countries that have a lot of natural resources, and yet somehow, we wonder, ‘Why aren't they richer? Why aren't they the richest countries in the world? Why are they also the countries that seem to be plagued by conflict and by inequality, poor infrastructure, and corruption?’”
To make matters worse, there is no discernible benefit for any community living where these resources are mined, and actually, they usually face far more in the way of oppression, health concerns from environmental degradation, and limited access to infrastructure. “In terms of what has actually been generated from what has been taken out of the ground, what has actually been transformed into investment in the people, in rural infrastructure, rural roads, basic access to electricity and drinking water, that process of transforming something in the ground into long term development has never really happened! And I think it's very clear who the culprit is.” For the military, he sees no other viable option when the country’s natural resources run out, given their inability to manage anything else than a rent economy.
“The key to understanding the situation of the junta today is that they took power precisely at the moment when natural resources, and particularly natural gas production, was about to plummet, and desperately needed to be replaced by something else,” de Langre states. Given this, he describes how especially devastating the coup was, as it occurred during that pivotal moment when the NLD was attempting to transition the economy, while also taking steps to address the energy crisis, with the ultimate aim of transitioning to a more diversified economy. “The coup hits just at the worst possible moment, from an energy perspective, and the NLD knew this,” he explains, noting that all the large-scale investment projects that were in place beforehand have since been scratched. As for Myanmar’s substantial offshore oil and gas fields, they can only be exploited with massive foreign investment, which, given the circumstances, cannot be expected. So a source of much potential revenue remains untapped.
Ticking off the situation with the country’s various natural resources, de Langre first explains that the Wa have banned tin mining, and there has also been “a total collapse of production of the highest value rare earths,” though the reasons for this remain a mystery. Copper is a very high value commodity, an essential mineral for creating the electrical components necessary for the “green transition” being promoted around the world; however, the country’s main concentrations of copper are found mainly in the Magwe area, which is now ridden by conflict, and so is all but inaccessible at this point. As a result, copper exports to China have dropped a whopping 94%! And while gold mining has increased manyfold in northern Sagaing, de Langre points out that the environmental cost has been catastrophic. “You can see it from space!” he exclaims. “It's a lunar area, and the level of water pollution that they have done in that area is probably going to have very long term effects.” Similar to offshore gas and oil, deep mining for ores such as gold, nickel, copper, and lithium requires the right kind of expertise and infrastructure, which are neither easy to acquire nor cheap, and so presently out of reach for Myanmar.
With the exploitation of the country’s natural reserves gradually decreasing overall, de Langre notes how the SAC has been floating the country’s currency to at least keep it on life support, a topic that Sean Turnell addressed on a recent podcast episode. de Langre feels that everything will come crashing down sooner rather than later. “It seems that the people in power in Naypyidaw have this under control, but then you look at all those key parameters regarding the health of public finances, their ability to deliver basic public services, all these things are actually at a kind of failed state level!” he says, adding that he views the decreased revenue from natural resources as a great a threat to the regime’s survival as the recent gains made by the resistance on the battlefield. “It's a network, and as with any network that exerts some kind of gravitational pull, it has a lot of a lot of organisms around it, that feed on it, and that feed on the money that trickle down.”
At least as distressing is the fact that the military has not shown competence in any other endeavor; de Langre labels the previous attempts at state economic enterprise a “financial black hole,” in which large factories were set up as tools for providing state-sponsored employment with the eventual goal of self-sufficiency… but which produced items no one ever wanted to buy! “They live within their own military economy, which is sort of this parallel world in which you can say, ‘An apple is worth this amount of money, period.’ And that can be dictated because ultimately, the Ministry of Defense will foot the bill for whatever the price differences, but the real economy doesn't function in that way.” For that reason, the ongoing conflict is so devastating for the regime in an economic sense because their usual revenue sources aren’t producing, and there is nothing else they can do! “[For them,] it's not only about sovereignty, it's about fundamentally, ‘We need access to these locations where we can extract something from the ground, sell it make money, buy more weapons, pay our soldiers, and so on, so forth.’”
Former partners are certainly noticing this, as de Langre has perceived a subtle shift already evident from Beijing and Bangkok, for example, as they realize that “without natural resources, Myanmar can really now become a completely failed state, and that becomes a regional problem in terms of drugs… and massive migration flows.” He also calls attention to Singapore, whose banks have long been the preferred landing spot for crony money, although now, many are also rethinking their relationship, given the lower cash flows combined with huge reputational risk for associating with such pariahs. “One thing that the SAC has signaled to the outside world repeatedly, particularly to ASEAN, is that in the hierarchy of priorities, stability is just not high up there! Dominance winning, that's at the top,” he explains, noting that the regime is far more concerned about punishing its enemies than assuring foreign partners with greater stability. “They may talk about elections, they may talk about a ceasefire, but at the end of the day, if they feel like they can show their dominance by executing activists, they will do it, and they won't even think about it.”
On the sanctions front, de Langre addresses a common concern, that if Western companies were prohibited from doing business in Myanmar, less scrupulous regional actors would just step in to fill the void. But this hasn’t happened; indeed, it has been quite the opposite: “There isn't a single new Chinese company operating a gas field in Myanmar since February 1, 2021! There isn't a single new Chinese company operating a major mine in Myanmar. If anything, these big mines have become huge liabilities on [the regime’s] balance sheets, because they have the asset, but they can't operate them because of conflict!”
Moving to how things may continue to unfold for the Burmese people, de Langre sees no end to worsening power cuts if the junta retains its grip, and even if they are defeated, he doesn’t see a possibility of reversing course until at least 2026. “Whoever takes control will be in a tricky position, because from a natural resources perspective, energy projects take a very long time to build, there's always a long kind of inertia to them,” he says. “All the power cuts that you're seeing today in Myanmar are far worse than anything that happened before.” Compounding the complexity of the situation is the fact that the main gas and oil fields have largely dried up, and much of the remaining minerals are on ethnic lands.
This also opens up many questions as to what shape any future resource-sharing would take; de Langre envisions a new social contract having to be drawn up. “The talk about federalism and decentralization, post-SAC, is not going to be just a political thing,” he says. “It'll be a political necessity. If you want to keep the country together, to come up with some kind of new arrangement for how to distribute natural resources, and distribute that wealth between the lowlands and the ethnic areas, that's going to be a major conversation.” Central to this, too, are questions about how to move away from the present “rent economy,” and restore an infrastructure and government services.
Still, de Langre is hopeful, viewing a post-SAC world as an opportunity. “How can we generate wealth to get people out of poverty, without destroying what makes this country so incredibly beautiful, [where there] are all of these incredible forests, beautiful mountains, and phenomenal rivers?” he asks. Given the devastation that more than three years of conflict has wrought, these are fundamental, almost existential questions for the country; de Langre suggests that new leadership might look to develop a state-led development strategy, perhaps a 100-day plan to set things right. He points to successful historical precedents, such as France following World War II or Vietnam following that war. And if it is handled correctly, he imagines that foreign investment to Myanmar could return fairly soon, but “on the condition that you make it very clear that you're being transparent, that it's all above board, and that you know that a contract means a contract, and that you as a government are here to foster development… It's only a matter of time for them, they will be back. They want to be back. It won't take much for Western countries.”
“Myanmar is not doomed! There is a path, but it will be tricky,” de Langre says in closing. “It'll be very imperfect, and probably unequal. But there is a path,” he says. “This is a moment of flux. It's a moment to propose things, and if you have an expertise… I'm sure that there are hundreds of people out there who have very specific knowledge about things that are essential to understand about development in Myanmar, and how to get out of this situation… We don't have to wait to be given permission to imagine the future.”