US embassy cable - 03RANGOON574

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, Economy 
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