British firms are staying out of Burma because they are sceptical of
President Thein Sein’s reform process despite the end of EU sanctions
and concerned about continuing military influences in business.
That’s the conclusion of the human rights NGO Burma Campaign UK after
talking to a number of companies in the manufacturing and retail
sectors.
Although firms are being encouraged by the British government to
invest in Burma, the consensus seems to be to stay out until after the
2015 elections, Mark Farmaner, a Burma Campaign UK director, told The
Irrawaddy.
“Some of the British companies we have spoken to, especially retailers, have told us the risks outweigh the benefits,” he said.
“Burma is not significantly cheaper to source from and it is very
hard to be sure that any factory they are doing business with is not
associated with cronies or the military, and that workers’ rights will
be respected.”
He said some British firms that have visited Burma since the lifting
of sanctions have decided that “they’ll take a look at Burma again after
the 2015 elections.”
“I have been surprised by how few British companies have gone into
Burma, especially as the British government is actively lobbying them
to,” he said.
“They are also very aware that human rights problems have not gone
away and that the future and direction of the reform process is
uncertain.”
These views seem to reflect recent studies by international business
risks monitoring company Maplecroft warning of the potential problems of
investing in Burma.
In its report on Burma for the third quarter of this year, Maplecroft
said the lifting of additional international sanctions in mid-2013, and
the continued opening of the economy to foreign direct investment
(FDI), were positive trends.
“The country’s underexploited oil and gas, mining, forestry and
agro-commodities sectors combined with its geographic location near key
Asian markets offer a range of investment opportunities,” it said.
But it added, “Despite the country’s significant growth potential,
[Burma’s] business environment is still fraught with risks, particularly
given the still-changing nature of investment regulations.
“Although investors have welcomed the adoption of a new FDI law in
November 2012 the continued discretionary powers of the Myanmar
Investment Commission (MIC) is a concern.
“The MIC is dominated by officials close to the military who, in many
cases, are likely to favour businesses owned by the military.
Reformists amongst the political elite are keen to demonstrate improved
governance to create a more favourable foreign investment climate for
western investors. However, a sudden influx of capital and
donor-financing is likely to increase the scope for corrupt practices,
which will require consistent monitoring and risk mitigation
mechanisms.”
The Burma Campaign UK is one of a number of European human rights
NGOs which have argued that improved trading relations with Burma should
be conditional on improved human rights in the country.
The international NGO Avaaz recently raised more than 1 million names
on a petition sent to both the French and British government leaders.
Human Rights Watch and Fortify Rights International have both
expressed concern about the lack of action by the Thein Sein government
to deal with basic problems in Burma.
“[The British government] appears to believe that if people in Burma
don’t start to see economic benefits from the reforms then they won’t
support the process,” Farmaner told The Irrawaddy. “So as well as seeing
Burma as a place where British companies can make a profit, they also
think more trade and investment will increase public support for Thein
Sein and his reforms.
“The fact that many people in Burma are sceptical about Thein Sein
and his reforms because of ongoing human rights abuses, and issues like
his spending five times more on the military than on health, don’t seem
to have occurred to the [British] Foreign Office.”
However, companies in Asia now investing in Burma do not share the
apparent concerns of British firms, nor do their governments subject
them to the close scrutiny that US companies face from Washington.
Japan is at the forefront of seeking investment opportunities in
Burma, although some big corporations have complained about the slowness
of progress in obtaining approvals to start projects—notably the
Thilawa special economic zone on the outskirts of Rangoon.
Japan’s Trade Minister Toshimitsu Motegi is set to visit Naypyidaw
and Rangoon on Wednesday and Thursday as part of his government’s
efforts to “encourage Japanese companies to move into [Burma].”
News of his visit comes days after the major Japanese technology
conglomerate NEC Corporation formally opened offices in Rangoon and
Naypyidaw.
“There is tremendous growth potential in [Burma] and this is an
opportune moment for NEC to contribute to the country’s IT needs,” said
NEC senior vice president Takayuki Morita.
But major oil and gas company PTTEP of Thailand has found itself
embroiled in exactly the kind of controversy which Maplecroft has warned
about.
PTTEP chief executive Tevin Vongvanich was this week obliged to issue
a statement denying a Burmese media report alleging underhand practices
in connection with the Thai government-owned company’s acquisition of
two offshore exploration blocks, the MD-7 and MD-8 in the Gulf of
Martaban.
“PTTEP would like to deny the intransparency (sic) and bribery of the
MD-7 and MD-8 acquisition and would like to clarify that the process of
direct negotiation for both blocks started in early 2010 before the
current Offshore Exploration Block Bidding Round,” PTTEP said in a
statement on Tuesday.
“The company has had a long-term relationship with the Government of
Myanmar for more than 20 years. PTTEP is a state-owned and national oil
company.”
Complaints were reported in The Myanmar Times newspaper earlier this
month that PTTEP had bypassed a competitive bidding process to acquire
the two blocks, and that this had led to the sacking of Than Htay as
minister of energy in July.
Whatever the rights or wrongs, the issue underlines the reputational problems foreign firms may face in Burma.
source: The Irrawaddy
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