Myanmar Needs Sovereign Wealth Fund to Avoid Resources Curse: Stiglitz
Myanmar would benefit from securing the revenue accumulated through its oil and natural gas sales into a sovereign wealth fund, helping the fledgling democracy avoid the "resources curse" and distributing wealth more equitably, Former World Bank Chief Economist Joseph Stiglitz told CNBC.
“Many countries with large natural resources have not done well. They've not done well in terms of growth, equity, poverty reduction and so much so that this is called the natural resource curse and we've studied the causes and what can be done about it,” the Nobel prize-winning economist said during an interview on the sidelines of the World Economic Forum on East Asia in Bangkok.
“One of the imperatives is that the funds be used well for the benefit of all the citizens and that's part of the inclusive growth agenda,” Stiglitz said.
He added that, however, mismanagement of the fund could lead to depreciation of the currency. Currency depreciation “makes it difficult for farmers to sell their goods internationally, imports come in and destroy jobs in the country,” Stiglitz warned. “So managing the exchange rate is very important and the stabilization fund can be part of the mechanism for managing the exchange rate.”
Myanmar’s oil and gas income is expected to rise significantly as the country's neighbors – which include regional economic powerhouses China and India – spend millions on developing natural gas fields to extract the fuel vital for their own growth.
In January, Myanmar’s energy ministry pegged natural gas reserves at 22.5 trillion cubic feet, almost double the 11.8 trillion estimated by oil major BP last year.
Revenue from natural gas exports from Myanmar’s M9 block has netted an estimated profit of $3.86 billion, while the Shwe Gas pipeline to southern China, which is due to be completed in 2013, would earn state firms $29 billion over a 30-year period, plus an annual transit fee of $150 million, Reuters reported.
Stiglitz said given volatile oil and gas prices, a stabilization fund could also help Myanmar manage wild swings in energy prices.
But details of how much revenue the country is making from oil and gas, its biggest source of income, is being hidden from the public and kept off the national budget, just as it was under the military junta that ceded power last year, Reuters reported on March 22, citing the Arakan Oil Watch group.
“Military leaders have been exporting these resources for over a decade, leaving the people to suffer from chronic energy shortages and some of the lowest development indicators in the world,” the group said in a report titled Burma's Resource Curse.
Persistent power shortages in the country have triggered protests in several cities in Myanmar last month, a fact not lost on Nobel laureate Aung San Suu Kyi, who called for an energy policy when she addressed delegates at the World Economic Forum in the Thai capital last week, in her first trip outside the country in more than 24 years.