With investment in Burma's energy sector set to increase dramatically in the coming years, there is a growing danger that corruption in the country will also worsen, according to a new report released by a watchdog group on Thursday.

The report, by Thailand-based Arakan Oil Watch, warns that a lack of laws and safeguards to ensure that export revenues are properly accounted for could exacerbate Burma's already severe problems with  corruption.

“In Burma, selling oil and gas is the country's largest source of income, so when there is no report on this, rampant corruption is very possible,” said Arakan Oil Watch's Jockai Khaing at a press conference to launch the new report.

Titled “Burma’s resource curse: The case for revenue transparency in the oil and gas sector,” the report said that the country's revenues are set to increase by 60 percent as new gas exports to China and Thailand begin as early as 2013. In addition, 41 oil and gas blocks are currently under exploration by various foreign companies, said the report.

According to official statistics, natural gas exports are the biggest foreign income earner for Burma, amounting to over US $2 billion in sales per year since 2006.

The Arakan Oil Watch report states that billions of dollars in revenues from the sale of natural gas have gone unrecorded in Burma’s public accounts and been siphoned off by corrupt military rulers, leaving Burma with some of the worst social indicators in the world and embroiled in conflicts over natural resources.

Earlier this month, the government's auditor general submitted a report to Parliament providing evidence of widespread corruption in six key ministries under the former junta. 

The six ministries—all of which were led by prominent members of the current administration—were accused of misusing billions of kyat in government funds and engaging in a variety of illegal transactions. 

The ministries singled out by the report were the Ministry of Information; the Ministry of Co-operatives; the Ministry of Agriculture and Irrigation; the Ministry of Mining; and the Ministries of Industry No (1) and No (2).

The Arakan Oil Watch report calls for the establishment of laws and institutions which will manage oil and gas revenues transparently before further extraction of natural resources by foreign investors. Laws that require impact assessments and the free, prior and informed consent of affected communities are also needed to ensure the protection of rights and the environment, said the report.

Despite recent moves by the new government to improve the budgetary process, detailed income and disbursement of oil and gas revenues remain undisclosed. The role of military enterprises in controlling gas revenues is also opaque, the watchdog group reported. 

According to his research in Arakan State, Jockai said that local residents in Arakan State complained that they didn’t benefit from resources produced in their region, while the Burmese government is earning billions of dollars from the gas trade in Arakan State.

Also, a separate statement released on Thursday by the Burma Environmental Working Group, an alliance of grassroots-based organizations, reported that local communities, especially women and children in those communities, have long paid the price for investment in Burma through forced labor, land confiscation, illegal taxes, loss of life and other human rights abuse—with very little and often ineffective outlets for raising grievances or obtaining redress for abuses.

It also said that the increasing investments since late 1980s, especially from resource-hungry Asian neighbors—including through the establishment of Special Economic Zones—has increased violent conflict, led to human rights abuses against local communities, threatened traditional livelihoods and ways of life, and caused irreparable environmental damage.