Mining in Myanmar: Kidnapped (The Economist – May 24, 2014)

A Chinese miner tries to be nice

LETPADAUNG, MYANMAR – THE Letpadaung copper-mine project in northern Myanmar has an image problem. The kidnapping by opponents of the mine on May 18th of three men working for a contractor to its Chinese developer, Wanbao, added to the impression of an unpopular project imposed on resentful locals by a greedy foreign firm.

This is unfair. But the episode illustrates the difficulty of implementing large-scale investments in Myanmar, especially if they involve displacing farmers, and if the investor is Chinese.

The kidnappers, who quickly freed their victims unharmed, had demanded the cancellation of a project that was already notorious. In November 2012 the authorities used white phosphorus, a chemical that causes burns and choking, to disperse protests against the mine, on the eve of a visit by Aung San Suu Kyi, the opposition leader.

A few months later the wildly popular Miss Suu Kyi unprecedentedly faced hostile crowds there (see picture), for chairing a parliamentary committee that approved the project. Protesters worry about environmental damage and say those displaced have not been fully compensated. The project is still stalled because some have refused to move. Only a few hundred families will lose their homes, but 26,000 people in over 30 villages are in the area.

Wanbao, a subsidiary of Norinco, a big arms manufacturer, bought into the project in 2011 after Ivanhoe, a Canadian miner, had divested. The stigma of being in partnership with the former military junta in Myanmar was complicating Ivanhoe’s business elsewhere. Chinese firms had no inhibitions about dealing with a regime subject to Western sanctions, and became resented for it.

One of the most popular acts of the “civilian” government, dominated by former generals, elected in 2010 was to suspend a big Chinese dam project. At Letpadaung, a contract revised after the protests in 2012 gives Wanbao a 30% share of the eventual profits, with 19% going to its local partner, a firm owned by the army, and 51% to Myanmar’s government.

Wanbao is trying hard to get on with local people. Geng Yi, its local boss, says the firm spent $1.8m on “corporate social responsibility” work last year—more than the $1m its contract commits it to each year. This is tiny compared with the project’s cost of over $1 billion, but goes a long way in Myanmar.

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