YANGON, Burma (AP) — Signs of a boom abound in Burma. Flights to
Yangon are full, hotel rooms booked solid. Foreign bars are packed with
well-fed Westerners in khakis and jeans, twenty-first century prospectors drawn
to this golden frontier.
Burma got a further boost this
week from President Barack Obama, who became the first serving U.S. president
to visit the long-isolated state, an endorsement that has not gone unnoticed by
global investors. But despite America’s political leadership welcoming Burma
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 Burma, 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 Burma 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 — Burma 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 Burma 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 Burma’s reformist president Thein Sein, said that the biggest
challenge facing Burma 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 Burma 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
Burma’s political reform lose momentum, it creates confusion for investors.
The United States first
sanctioned Burma 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 Burma’s
democratic opposition by expanding the network of sanctions. All told, Burma
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 Burma, to use child soldiers.
Washington has been quick to
respond to reform efforts in Burma. As Burma 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 Burma.
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 Burma 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 down the list as fast as possible and “give these guys an incentive to
integrate into the system.”
Rather than revoke sanctions —
which in some cases would require an act of Congress — the administration has
suspended them, meaning they could be reinstated if Burma’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 Burma’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 Burma.
“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 Burma.
“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 Burma at the U.S-ASEAN Business Council, said that for many U.S.
companies, Burma 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 may be 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.”
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