YANGON, Myanmar —
Signs of a boom abound in Myanmar. Flights to Yangon are full, hotel
rooms booked solid. Foreign bars are packed with well-fed Westerners in
khakis and jeans, 21st century prospectors drawn to this golden
frontier.
Myanmar got a further boost this week from President Barack Obama,
who became the first serving U.S. president to visit the long-isolated
nation, an endorsement that has not gone unnoticed by global investors.
But despite America’s leadership in welcoming Myanmar back into the
international community, U.S. companies have so far not signed any big
deals — a situation few expect to change soon.
Washington is unwinding its web of sanctions against Myanmar, but the
suspension of most legal barriers to business in this nation of 60
million is unlikely to be a gold rush for American firms. Rolling back
sanctions will take time, and concerns about corruption and political
blowback at home complicate efforts by U.S. companies to move in big and
fast. There is confusion about what is permitted, as well as onerous
new reporting requirements, and lingering doubt about whether the
changes, both in Myanmar and in U.S. policy, will stick.
What’s at stake is one of the last big untapped consumer markets, as
well as access to significant natural resources, including oil and gas,
hydropower, timber, gems and some of the most fertile land on earth.
Sandwiched between India and China —the world’s fastest growing major
economies — Myanmar today has some of the world’s lowest levels of
Internet and cellphone use, as well as a dearth of good roads, ports,
hotels, hospitals, schools and electricity.
Underlying the debate about sanctions, which many companies would
like to see lifted more decisively, are questions about what role
American business should play in Southeast Asia’s poorest country.
Speaking Monday at the University of Yangon, Obama said American
companies must “lead by example.” His administration has sought to
reinforce good business practices, encouraging transparency by requiring
companies that invest more than $500,000 in Myanmar to report details
to the State Department, which will make some of the information public.
And Washington is banning U.S. firms from doing business with the
country’s biggest, and most corrupt, businessmen.
Whether those strictures — which put American firms at a competitive
disadvantage — will achieve their desired aim is a matter of debate, but
the ideas they enshrine may prove valuable in the long run.
Thant Myint-U, an author and adviser to Myanmar’s reformist president
Thein Sein, said that the biggest challenge facing Myanmar is finding a
new economic model to support reform momentum.
“No one knows how to fix the economy after a half century of misrule
in a way that’s going to raise incomes and create jobs in the way we
have to to keep the reform process on track,” he said. Neither of the
two dominant business models in Myanmar today — alliances between crony
businessmen and largely Chinese investors or leftist isolationism —
offers a good path forward for the country, he said. He hopes American
businesses will help forge a third way.
The United States has taken a calibrated approach to easing
sanctions, renewing or expanding some strictures even as it unwinds
others. While this gives the administration leverage should Myanmar’s
political reform lose momentum, it creates confusion for investors.
The United States first sanctioned Myanmar in September 1988, the
month after the military junta brutally cracked down on popular
protests. Over the next two decades, Congress and the president
responded to human rights violations and the suppression of Myanmar’s
democratic opposition by expanding the network of sanctions. All told,
Myanmar specific sanctions are enshrined in six federal laws and a
series of executive orders, often with overlapping provisions, according
to a detailed study by Asian affairs specialist Michael Martin for the
Congressional Research Service. In addition, there are so-called
functional bans — laws that, for example, prohibit the U.S. from
providing military training and selling arms to any country deemed, like
Myanmar, to use child soldiers.
Washington has been quick to respond to reform efforts in Myanmar. As
Myanmar released political prisoners and held elections which saw
opposition leader Aung San Suu Kyi take a seat in Parliament, Washington
suspended restrictions on new investment, financial services,
multilateral assistance, and most recently, imports from Myanmar.
Now, the biggest remaining legal block for U.S. companies is a list
of “specially designated nationals” and companies that U.S. firms are
barred from doing business with because of their alleged links to
violence, oppression and corrupt practices. U.S. companies complain that
it’s difficult to comply with this list, given the challenges of due
diligence in Myanmar and the habit of cronies to pick up aliases and
create complex subsidiaries.
“We’re encouraging reform in the government, we can’t encourage
reform in individuals?” said Richard Vuylsteke, president of the
American Chamber of Commerce in Hong Kong. He urges Washington to pare
the list as fast as possible and “give these guys an incentive to
integrate into the system.”
Rather than revoke sanctions — which for some would require an act of
Congress — the administration has suspended them, meaning they could be
reinstated if Myanmar’s reform momentum is broken. In addition, with
each step forward, Washington has taken one small step back.
Three days before Obama landed in Yangon, Washington suspended its
ban on most imports, a move that’s expected to revitalize Myanmar’s
garment industry. At the same time, the administration added seven
companies to the list of entities U.S. firms can’t do business with. In
July, when Washington suspended the ban on new investment and the
provision of financial services, it also instated reporting requirements
and expanded sanctions to include individuals who undermine reform,
engage in human rights abuses or engage in military trade with North
Korea. The White House said it was offering a clear message:
“individuals who continue to engage in abusive, corrupt or destabilizing
behavior going forward will not reap the rewards of reform.”
Aside from sanctions, U.S. companies are subject to strict
anti-corruption laws and reputational risk at home, should they choose
the wrong business partner in Myanmar.
“The country is rife with corrupt business practices which would be
illegal here,” said Priscilla Clapp, who served as charge d ‘affairs at
the U.S. Embassy in Yangon from 1999 to 2002. “U.S. businesses are held
to those rules. They have to condition their Burmese business partners
to our rules. That’s not easy because you’re changing centuries of bad
behavior.”
In the meantime, companies from other countries are sweeping into Myanmar.
“It’s been a vacuum for U.S. companies for a couple of decades,” said
John Goyer, senior director for Southeast Asia at the U.S. Chamber of
Commerce in Washington. “They have a lot to learn about the market and
the operating environment, whereas companies from China, Thailand,
Malaysia know the players, they know the environment. It’s home field
advantage.”
The U.S. is also at a disadvantage when trying to compete with
companies from, for example, Japan, which can offer package deals of
investment, aid and debt forgiveness padded with government money.
“Companies from Asia can come in with financing packages all wrapped
up as part of the deal,” Goyer said. In America, he added, “there’s not
unlimited government backing for private companies to go in and provide
ports or railways or infrastructure.”
Anthony Nelson, associate director for Myanmar at the U.S-ASEAN
Business Council, said that for many U.S. companies, Myanmar is the
largest country in the world where they don’t have a presence. “That
kind of thing doesn’t come along very often,” he said. “It’s never going
to come again.”
But even Nelson is not talking of a gold rush.
“Take a look at Vietnam,” he said. “When we normalized relations with
Vietnam, companies came in and looked around. They maybe opened
representative offices, but it was 10 or 15 years before the big boom of
investment from U.S. companies. When U.S. companies move, they move in a
big way, but there’s time that people need to look at what they’re
doing.”
source: JAPANTODAY
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