SYDNEY — Burma, once the richest countries in Southeast Asia, today is mired in deep poverty — its economy ruined by nearly 50 years of economic mismanagement under military rule. And yet, over the last few years Burma has also emerged as a significant producer of energy in Southeast Asia. Thanks to large fields of recoverable natural gas located offshore, Burma now earns substantial foreign exchange revenues. At present, most of these revenues ($1 billion to 1.5 billion per year, depending on price fluctuations) come from Thailand. Gas from Burma, piped onshore from the Gulf of Martaban, generates around 20 percent of Bangkok's electricity supply.

If all goes well, new gas fields recently discovered in the Bay of Bengal will provide even more gas for China's Yunnan Province. To get the gas into Yunnan, a much longer pipeline — running the length of Burma — must be built. The project will be as difficult as it will be controversial. But, with no environmental or labor standards to contend with, few doubt that the pipeline will proceed.

So, given its newfound energy riches, one might expect Burma's public finances to be rather flush, with surpluses aplenty to spend on health, education and much else that the country so desperately needs. Alas, almost none of Burma's gas revenues actually feed into its budget, owing to a rather ingenious device employed by the Burmese junta. The device is simple. Like many countries ruled by authoritarian regimes, Burma has a dual exchange rate system. The official exchange rate pegs Burma's currency, the kyat, at a rate of six to one against the U.S. dollar.