US Business Faces Confused Signals from Washington on Burma

By William Boot 28 February 2013

The sudden recognition by Washington of four Burmese banks—one owned by a man accused by the US of arms and drugs trade—appears to have been more than coincidence immediately before a top-level American business team arrived in Rangoon.

It may have eased the handshake meeting on Monday between US Assistant Secretary of State for Economic and Business Affairs Jose Fernandez, and Win Aung, the president of the Union of Myanmar Federation of Chamber of Commerce and Industry (UMFCCI).

Win Aung is on a US government blacklist of Burmese company leaders dubbed cronies of the former military regime who benefited financially from close relationships with army-controlled businesses.

That blacklist got a little whiter just ahead of the visit by Fernandez, who heads up a 50-strong US business delegation in Burma this week. One of the four private banks approved by Washington for use by American business, Asia Green Development Bank, is owned by Tay Za, who in the past has been accused by the US of involvement in weapons, drugs and money laundering, and remains on the Washington blacklist.

Tay Za heads the conglomerate Htoo Trading, whose business interests range through mining, agriculture, hotels and an airline.

Win Aung is boss of the Dagon Group of Companies, which is heavily engaged in natural resource extraction, including rubber and timber, plus construction, property and retailing.

Both tycoons and others who built their business empires on the back of a tightly controlled economy run by army generals are advantageously placed as the country’s economy now opens up to foreign investment.

The Fernandez-led business group, which will spend this week touring the country and meeting business and government leaders, includes executives and managers from two major oil companies, Chevron and ConocoPhillips, plus General Motors, General Electric, Honeywell, Caterpillar, Fedex and Target, a discount retailer similar to Walmart.

Although the US government suspended economic sanctions against Burma in May of last year, this is the first large American trade delegation to visit the country.

Chevron and ConocoPhillips took part in an energy industry opportunities seminar in Rangoon last September, but few American firms have registered for a third energy conference being organized by the Ministry of Energy on March 4-6. The continued presence of the military-linked state agency Myanma Oil & Gas Enterprise (MOGE) in the sector has been widely criticized.

European Union economic sanctions were also suspended indefinitely last year, except for a continuing ban on the sale of “arms and equipment that can be used for internal repression.” This restriction comes up for review in April.

Some of the business leaders in the US delegation, as well as Win Aung, expressed concern on Monday that Washington’s sanctions remain only suspended, the Voice of America (VOA) reported.

The radio quoted Caterpillar’s Asia Pacific senior legal counsel Darren Brooks as saying, “We would like to see more reliability or more stability in the fact that the sanctions have been lifted.

“[The sanctions] are of course temporarily or conditionally lifted … so it’s not like you can come in and invest US $100 million right now. The sanctions could come back tomorrow and we’d be right back where we were a couple of years ago,” Brooks told VOA.

Win Aung told VOA: “It is to be noted that total lifting of sanctions can only enable investors to come and invest without any hesitation in our new era of new economic development.”

Fernandez told a meeting between the US group and Burmese business leaders in Rangoon that American companies would “bring international business standards for transparency, labor rights [and] environmental protection.”

Opposition leader Aung San Suu Kyi is among those who have criticized the state oil and gas agency MOGE, which is a partner with China National Petroleum Corporation in the pipelines. Their construction across Burma, under heavy army security, has been associated with frequent reports of rights abuses including farmers’ loss of land without proper compensation.

Suu Kyi called for MOGE to be reformed and become more transparent. There is no evidence that this has happened. In January in Naypyidaw during parliamentary sessions she said that military-linked crony business leaders should be investigated for any evidence of wrongdoing during the regime years.

The US group’s visit coincides with a new risk assessment of doing business in Burma by the British firm Maplecroft, which listed potential problems in particular for the oil and gas sector as well as human rights issues surrounding the Kachin conflict.

“Businesses face serious reputational risks from being associated with security forces engaging in human rights violations while protecting commercial assets,” said Maplecroft in its assessment published on Feb. 25. “Constitutional powers grant the military the ability to block legislation, limiting the scope of reforms that elected officials can implement without military approval.

“Military leaders also hold significant power over the oil and gas sector, and risk destabilizing the security situation while acquiring land for further investment.

“Furthermore, China is worried that the Shwe oil and gas pipelines could be affected by any growing instability [in Kachin]. While current scope for direct Chinese military intervention in Myanmar is low, this could change in the event of a serious escalation in the conflict.”