Extractive industries in Myanmar: Fostering development without fomenting conflict
Extractive industries are an important source of economic activity in many poor countries. Mining projects provide direct investment in rural areas, infrastructure development, employment, and increased tax revenues. Poor and post-conflict countries struggle to borrow internationally and often lack the capacity to raise money through income taxes. For these governments, mining royalties and licensing fees can fund essential public services.
However, the reality of mining investments in poor and weak states is often more grim. Our research in other contexts, such as Peru and sub-Saharan Africa, finds that mining projects regularly provoke protest and other social conflicts. Where enforcement is lacking, mining can pollute water and soil. If politicians are not accountable to citizens, they may pocket mining revenues rather than supporting local services. Mining can, then, impose real costs on host communities that exceed its potential benefits.
We ask two research questions to illuminate the costs, benefits and best methods of managing of new mining investments:
- What are the consequences of mining investments for local economic development, social change, and conflict?
- Can providing credible information and community consultations reduce conflict and increase the extent to which mining contributes to local development?
To address these questions, we are considering a quasi-experimental design that exploits exogenous variation in the location and quality of ore deposits, and also a field experiment to assess whether providing information and community consultation in mining areas can reduce conflicts and increase the share of benefits flowing to host communities. Many practitioners and scholars argue that transparency and community engagement can help companies secure a more stable operating environment and also help prevent the violence, corruption, and political capture that can result from mishandled mining investments.
To assess the feasibility of these research designs, we are first carrying out a scoping and administrative data collection exercise. During this initial stage, we will build local partnerships, tailor the intervention to local circumstances, and assess the challenges of implementing a randomised trial and administering large-scale surveys in this post-conflict setting. By mid 2017, we will have a baseline understanding of the sector and its challenges, as well as a practical understanding of the project implementation environment in Myanmar.
These questions are especially salient in Myanmar, which has recently become a popular destination for international mining companies. Before its 2011 reforms, the country was closed to the world, its government eschewed foreign investment, and civil conflict deterred entry. Since then, Myanmar has received a wave of applications for minerals exploration. The country faces decisions about how to regulate these investments and how to distribute any mining revenues.
This project addresses IGC’s research priorities related to state effectiveness. At the country-level, our proposed observational research evaluates whether the country’s approach to natural resource management fosters stable and inclusive growth. Our prospective field experiment then asks whether greater transparency and consultation in communities hosting projects can amplify local economic development or mitigate the harms of mining. Our work will help assess the extent to which new investments in mining generate conflict in weak states. We also plan to evaluate whether information provision and community consultation - interventions promoted in many contexts to empower citizens - actually increase companies’ or local officials’ accountability to regulations or commitment to community development.