US Poised to Allow Investment in Burma

By Matthew Pennington 11 July 2012

WASHINGTON DC—The United States is poised to allow US companies to invest with Burma’s state oil and gas enterprise as the Obama administration takes its biggest step yet to roll back sanctions, marking a rare break from democracy icon Aung San Suu Kyi.

Suu Kyi, the Nobel Peace Laureate who has long been the guiding force on US policies toward Burma, last month advised against investment by foreign companies with the state Myanma Oil and Gas Enterprise (MOGE) because of concerns over its accountability and transparency.

Her comments reflected the growing disagreement between human rights groups and business advocates over how the US should proceed in easing restrictions. While Suu Kyi has cautiously supported suspending sanctions as a reward for Burma’s shift from five decades of authoritarian rule, she and other democracy advocates are wary about investment in MOGE, which had been an economic lifeline for the former ruling junta.

But doing business with MOGE is the only way to gain access to Myanmar’s potentially lucrative energy resources and US companies fear they will lose out to foreign competitors if the restrictions are not lifted.

Recognizing continuing concerns over corruption and rights abuses in Burma, the administration is expected to require US companies to report on their investments in the country, which is now officially known as Myanmar.

Secretary of State Hillary Clinton said in May that US companies would be allowed to invest in all sectors of the Burmese economy, though not firms owned or operated by the military. She also announced the suspension of a ban on the export of US financial services, seen as vital for starting to do business there.

The administration is expected to take the next step this week, when it announces the issuance of a general license that finally opens the door for American firms to operate in one of Asia’s last untapped markets.

Clinton is currently traveling through Southeast Asia on a trip centered on a meeting in Cambodia of the region’s foreign ministers but also underscoring US efforts to deepen trade and investment ties with a region of rising prosperity and importance as an export market.

An announcement on easing sanctions would also coincide with the arrival in Burma of Derek Mitchell, the first US ambassador to the country in 22 years, as Washington normalizes its diplomatic relations with the former pariah state.

In a further sign of US efforts to forge closer ties, Robert Hormats, undersecretary of state for economic growth, energy and the environment, and Francisco Sanchez, undersecretary of commerce for international trade, will travel to Burma this weekend to promote economic and business engagement.

Western governments are eager to reward reformist President Thein Sein for reconciling with Suu Kyi, who has been elected to Parliament after spending 15 years under house arrest. The investment sanctions, in place since 1997, have contributed to Burma missing out on the region’s economic boom.

The US Chamber of Commerce and some US lawmakers have been pressing the administration to expedite the general license, so American companies can compete with those from Asia and Europe already free to operate there.

A senior administration official said on Monday that while Clinton is in Siem Reap, Cambodia, accompanied by a US business delegation, she will be laying out plans of how the process of sanctions easing will proceed.

The official, who spoke on condition of anonymity to brief reporters traveling with Clinton, said she will engage with US businesspeople “who are anxious and interested in the prospect of participating in the economic opening.”

Advocates argue that allowing investment would give a valuable boost to Thein Sein in winning over military hardliners to his reform agenda. US companies also face more legal constraints on their foreign operations than Asian and European firms and could have a positive influence in opening up the nation’s crony economy.

But human rights groups and many Myanmar activists argue that the administration is moving too fast to reward Burma and will lose leverage in pressing for more reforms. The country is still plagued by ethnic and communal violence. Despite the releases of hundreds of political prisoners in the past year, hundreds more reportedly remain in detention.

Aung Din, executive director of the US Campaign for Burma, who opposes allowing new US investment and has been briefed by the administration during its deliberations, said he expected it would allow investment in all sectors, including with MOGE.

A likely caveat is that companies would be required to submit official reports on their business dealings in Burma, particularly those working with MOGE.

Lisa Misol, a senior researcher on business issues at the New York-based group Human Rights Watch, said if the US government allows “across-the-board investment” it could undercut reforms and potentially fuel rights abuses and corruption.

“Requiring disclosures by companies would be better than nothing, but greater transparency isn’t enough and certainly doesn’t justify opening the floodgates to business in a country with Burma’s track record,” she said.