US Caught in Awkward Embrace of Burmese Crony

By Erika Kinetz 26 February 2013

RANGOON — The image was meant to convey growing friendship between the United States and Burma, the world’s hottest frontier market. Flanked by national flags, Win Aung, the president of Burma’s main business association, and US Assistant Secretary of State Jose Fernandez shook hands in Rangoon and agreed to deepen business ties between their countries.

The awkward part? The United States still dubs Win Aung a “crony” who allegedly used his close ties to Burma’s old military rulers to build one of the country’s biggest business conglomerates. He remains on a blacklist of entities US citizens and companies are banned from doing business with.

Their handshake on Monday illustrates the complex and sometimes contradictory path the US is forging as it tries to encourage new business ties with Burma while retaining moral sway over powerful economic, political and military interests it has long censured. Many praise the ethical stance taken by US policymakers and hope that the entry of US companies will help forge a more transparent, less corrupt corporate culture. But some question the effectiveness of Washington’s chosen tools and the impact they have on the ability of US investors to compete in what has quickly become a hot market.

Unlike the European Union and Australia, which lifted their travel and financial sanctions against Burma, the United States has taken what US officials call a “calibrated” approach to retain leverage in case Burma’s political and economic reforms get derailed. While Washington has suspended most restrictions, the US still maintains its list of targeted sanctions, bans some people from traveling to the US and blocks imports of specific products, such as jade and rubies, for which trade has been dominated by state and military interests.

Fernandez was in Burma as part of a US business delegation, the first since President Barack Obama’s historic November visit. The delegation was organized by the US Chamber of Commerce and hosted by Win Aung’s group, the Union of Myanmar Federation of Chambers of Commerce and Industry. Over 50 representatives of US companies including Chevron, General Motors, Target Corp., ConocoPhillips, Caterpillar, General Electric International, Honeywell and eBay are scheduled to spend the week meeting with leading businesspeople and government officials in Burma.

Fernandez, in an interview, declined to comment on Win Aung’s inclusion in the list of so-called “Specially Designated Nationals.” The list forms the backbone of US sanctions against Burma now that general restrictions on investment, imports and financial services have been suspended in response to the sweeping economic and political reforms instated since Burma’s president, Thein Sein, took office in March 2011.

Fernandez conceded that “maybe some adjustments need to be made” to the list, but praised it as an important foreign policy tool for encouraging responsible investment.

“The value of the list is we continue to have concerns about human rights abuses, as well as continued political prisoners, continued military ties to North Korea and corruption. That list is a valuable tool for addressing those concerns,” he said.

Win Aung, who also heads the Dagon Group of Companies, with interests in timber, rubber, energy and construction, urged the United States to remove all its sanctions against Burma.

“We request your government to support us with a total lifting of sanctions for the benefit of the majority of our people,” Win Aung said.

US companies have welcomed the easing of sanctions, but many say the fact that sanctions have been suspended, rather than eliminated, discourages long-term investment and that the welter of remaining regulations is a drain on time and resources.

“You can’t do a lot of direct investment if there’s the specter of it being taken away tomorrow,” said Darren Brooks, senior corporate counsel for Caterpillar Asia. “It’s a little bit of a minefield. We’re trying to tiptoe around it and do things correctly.”

The latest sign of the ambivalence of US foreign policy came on Friday, when the government responded to pressure from US business groups by allowing US companies to transact with four Burmese banks that are still on the US sanction list. Two of the banks, Myanma Economic Bank and Myanma Investment and Commercial Bank, are state owned. Asia Green Development Bank and Ayeyarwady Bank are privately owned.

Asia Green Development Bank is owned by Tay Za, who was described by the US Treasury in 2008 as an arms dealer and financial henchman of the former military regime. Ayeyarwady Bank is owned by Zaw Zaw, who was described as “one of Burma’s up-and-coming cronies” in a June 2009 leaked diplomatic cable from the US embassy in Rangoon. He has not been publicly linked to arms or drug dealing.

“American corporations are very late in every business sector,” said businessman Aung Aung, whose oil and gas and hotel companies have alliances with Korean, Indian and Russian partners. “Asian countries, like India and especially China, have already dominated the market. It’s difficult for American companies to compete.”

The US ranked 13th in foreign investment in Burma as of Jan. 31, according to the country’s Directorate of Investment and Company Administration. The US accounted for just 0.6 percent of approvals by dollar volume—less than the Netherlands, France and Vietnam. China ranked number one with a 33.9 percent share of foreign investment approvals, followed by Thailand.