Thursday, August 14, 2008

The Caribbean Connection By WILLIAM BOOT

Gas and oil companies are using offshore tax havens to disguise their investments in Burma

BANGKOK — GAS and oil companies are using British offshore tax havens in the Caribbean and Bermuda to disguise their investments in Burma, avoiding international sanctions and public attention.

Despite US and EU sanctions, intended to isolate the military regime and force democratic change, Burma’s natural gas industry in particular is booming.

Some of the investment comes from neighboring China, Thailand and India, countries that oppose sanctions. However, human rights campaigners say there is still considerable financial involvement by Western companies—and much of it is camouflaged.

Burma’s Ministry of National Planning and Development has reported that more than 90 percent of US $505 million invested in the country in 2007 went into gas and oil development.
The sum of $475 million that went into energy exploration and production was over three and a half times more than in 2006, according to the ministry figures.

Burma claims that almost 40 percent of the 2007 oil and gas investment came from Britain—a country whose government has been vociferously campaigning against the military regime and calling for tighter sanctions.

The London government insists that British investment has been reduced to less than $300,000 a year because of public and state pressure on companies and EU-led initiatives.

No figures coming out of Burma can be 100 percent trusted because the country’s economy is a black hole. Even the World Bank and the International Monetary Fund have crossed the country off their developing countries loan aid lists because the ruling junta has defaulted on repayments and refuses to present the minimum accounting necessary to qualify for financial help.

But the money still flows into Burma from other sources, which are now revealed to include offshore tax havens Bermuda and the British Virgin Islands.

A number of oil and gas industry businesses have registered in these British dependencies as a way of flouting sanctions imposed by their own countries—such as Britain and the US—or in an attempt to disguise the sourcing of investments in Burma.

“As far as we can tell this isn’t British companies investing in Burma, it is foreign companies setting up subsidiaries in the BVI (British Virgin Islands) or Bermuda and investing in Burma via those subsidiaries,” Mark Farmaner, director of the Burma Campaign UK in London told The Irrawaddy.

“As BVI and Bermuda count as UK territories, it gets registered [by the Burmese regime] as UK investment. For 10 years, we have been calling on the UK government to close this avenue and stop the UK being used in this way, but they refuse, saying they want the EU to move as a whole.

“[French oil company] Total and [US oil company] Unocal/Chevron invested via Bermuda. All this gets counted as UK investment in the regime’s figures.”

Burma Campaign UK publishes a “name-and-shame” list of companies it identifies as doing business with Burma.

The so-called “dirty list” names 154 foreign companies and the latest identifies 33 firms investing in oil and gas exploration and production, either directly or as ancillary service providers.

“New companies added to the list are the result of new information and an influx of new investment in Burma’s gas sector,” said the campaign’s coordinator Johnny Chatterton.

The latest list identifies 14 new companies moving into oil, gas and other energy-related activities such as hydroelectric projects.

Foreign companies linked to the camouflage include MPRL E&P Limited, headquartered in Singapore but registered in BVI.

MPRL E&P has invested more than $100 million, mostly in the onshore Mann oil field but also recently in the A-6 block off the Arakan coast, said the Burma Campaign.

Another firm investing in Burma via the tax havens is Focus Energy, drilling for onshore oil.

The Focus Energy offices are in Rangoon but the UK campaigners identify the company as British and registered in BVI.

Rimbunan Hijau group, a large Malaysian logging company accused by human rights activists of labor abuses in Burma and other Asian countries, has also recently used the BVI to register its subsidiary Rimbunan Petrogas to enter the oil and gas sectors in Burma.

“The likes of the BVI and Bermuda are British territories. Bermuda is so small, and so wealthy because of its offshore financial business that it could afford to have the whole country carpeted,” Hong Kong-based money-laundering expert and financial risk assessor Peter Gallo told The Irrawaddy.

“The cynical explanation is that [the British] government encouraged these little Caribbean territories to get into the tax fiddling business. Having started down that road, however, the problem now is that it is very difficult to put the brakes on them.

“These small countries have built their economies on the quirks of company law. The offshore services business, however, is vulnerable to abuse.”

Other oil and gas industry firms on the “dirty list” are openly based in Scotland, Denmark, Germany, the Netherlands and the US and simply flout their countries’ support for sanctions.

The desperate hunt for more oil and gas as demand and prices rocket means that some companies and countries put profit and national interest first.

China has a reputation for putting self-interest above all else and is increasingly investing in, and politically supporting, Burma. Thailand also has a long record of buying gas from the generals, and now India is following suit.

But in the light of military atrocities against unarmed civilians in Burma and the widely recorded callous indifference of the regime following the devastating cyclone in May, some disturbing statistics should at least make investors pause for thought.

The regime spends half its declared national budget on the armed forces and just 1.4 percent of gross domestic product on health and education, less than half that spent by Cambodia, the next poorest country in Asia. Burma is the only country in Asia whose defense budget is greater than that of health and education combined. Burma has the fourth highest child mortality rate in the world.




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