Promise, peril for U.S. companies in Myanmar

It’s one of the last unexplored frontiers for American business, but the opening of the once-sealed economy of Myanmar as the country’s military makes democratic reforms has both peril and promise for U.S. companies looking to invest there.

Obama administration officials announced earlier this month that Myanmar, also widely known as Burma, will be open to U.S. business for the first time since 1997, but some have concerns about getting involved in the resource-rich country, which has a history of human rights abuses.

The U.S., which banned investment in Myanmar in 1997, has had sanctions on imports and assistance to the country since 1988. While the sanctions on imports remain in place, experts say the combination of natural resources and very little infrastructure will present opportunities for communications and construction companies.

“Those kind of companies that are in the infrastructure-building business, whether it’s telecommunications or whether it’s highway construction or whether it’s oil and gas development, will all benefit,” said Richard Sawaya, director of the USA Engage program for the National Foreign Trade Council.

Many U.S. companies have already begun to take advantage of the new opportunities. The U.S.-ASEAN Business Council organized a trip for executives from 38 companies, including Chevron, Google and Visa, to learn about the business environment and government economic programs. General Electric has already agreed to supply medical equipment to two hospitals.

“This is the beginning of the process,” Alexander Feldman, president of the U.S.-ASEAN Business Council, said in a statement. “Both sides have much to learn about working together, so the Council intends to continue working closely with the Myanmar government to build the long term U.S.-Myanmar business relationship.”

The U.S. first sanctioned Myanmar in 1988 when an repressive military junta seized power and suspended the constitution. When free elections were held in 1990, the ruling party refused to recognize the results and imprisoned opposition leader and Nobel Peace Prize winner, Aung San Suu Kyi. There were no elections for the next 20 years. In addition to the political turmoil, the majority-Buddhist nation has a history of violence against ethnic minorities in the country, particularly Rakhine Muslims.

Talk of easing sanctions began when Myanmar held nominally free elections in 2010, although they were not open to outside inspection, and adopted a new constitution in 2011. It released Ms. Suu Kyi in 2011. As a result, the U.S. sent its first ambassador in more than 20 years but remains cautious. There are strict reporting requirements in place for companies doing business in Myanmar and bans on doing business with the military.

The opening of Myanmar for business will end years of U.S. disadvantage in the region, according to the U.S. Chamber of Commerce. China has a large presence in the country, investing $9.6 billion between January and March 2011, according to ASEAN-China Free Trade Area. However, the government has been vocal about encouraging U.S. and European investment.

“Every other major economy, including Australia, Canada, and the European Union, has moved more swiftly than the U.S. to allow their companies to do business in Burma,” John Murphy, vice president of international affairs at the U.S. Chamber of Commerce, said in a statement. “Continuing U.S. sanctions would only add to the head start Asian and European companies have seized in the Burmese market.”

Others, however, say the U.S. is moving too fast. Sen. John McCain, Arizona Republican, and Sen. Joe Lieberman, Connecticut independent, signed a letter July 3 urging Secretary of State Hillary Rodham Clinton to reconsider allowing companies to invest in the Myanmar Oil and Gas Enterprise, whose revenue supports the military.

While the two men supported easing sanctions, they said there must be limitations on where companies are allowed to invest and greater oversight of investment in government-owned companies.

Human rights groups have other concerns, saying the easing of sanctions will offset the political reform in the country. In a letter to the president in April, Human Rights Watch, Freedom House and seven other groups said the administration is moving too quickly on Myanmar, and should wait until tangible reforms have been implemented to further ease sanctions.

“In the medium term, the U.S. needs to work with civil society and ethnic nationality leaders in Burma to develop binding standards for U.S. companies doing business in Burma, and then lift restrictions for only a few sectors, carefully selected with participation of the U.S. Treasury Department as well as Burmese civil society, democratic opposition groups, and ethnic nationality leaders,” the letter stated.

However, the Chamber of Commerce asserted that the presence of U.S. business will help political reform in Myanmar.

“It’s a false choice to say we have to choose between human rights and business interests in Burma,” Mr. Murphy said. “Ensuring U.S. companies have a strong presence in Burma will help raise labor and environmental practices and corporate social responsibility.”