With the end of remaining US economic sanctions, Myanmar urgently needs an overhaul of its investment laws.
FOR MANY, the decision to lift remaining US executive-imposed sanctions gives reason to cheer. But the political justification for doing so is unconvincing, flying in the face of previous benchmarks set for their removal.
As recently as May – shortly after President Obama renewed sanctions authority for another year – US Secretary of State John Kerry told reporters in Nay Pyi Taw that sanctions relief was contingent on further democratic reforms. Daw Aung San Suu Kyi supported this stance, saying that her government welcomed the additional scrutiny brought on those individuals and firms still on the list.
Nothing has happened in the intervening months to address this structural democratic deficit. While relations between the top military brass and the civilian leadership appear to be at a high point, the Tatmadaw still retains its outsized and outdated political role. Constitutional reform has been put on ice. People can still go to prison for a Facebook post or for failing to notify ward administrators that they’re staying outside of their homes overnight (and will continue to do so, if the National League for Democracy bloc in the Lower House of parliament has its way).
And yet, last week President Obama announced the imminent end of executive sanctions, with Aung San Suu Kyi’s support, leaving in place only congressional restrictions on the military: in practice, a ban on arms sales and military personnel being given visas to enter the US.
There are reasons to lend qualified support to this decision, however distasteful it may seem to lift a punishment imposed on those responsible for this country’s tragic decline. Sanctions were undoubtedly a crude policy tool. Their role in prompting political reforms remains a matter of debate. That of their collateral damage is not. No one on the list will die in poverty, but the same cannot be said for the untold thousands of people who could have otherwise benefited from American trade and investment.
Looking to the future, Myanmar can expect a dramatic rise in Western investment that earlier sanctions relief, including recent exemptions on port traffic and local transport, failed to deliver. The current investment framework is unprepared for this prospect, and legal reform is a matter of urgency.
Many businesses have seen the virtues of improving corporate transparency beyond the outdated requirements of the century-old Companies Act. This move to corporate openness has been furthered by the public disclosure requirements needed for listing on the Yangon Stock Exchange, which opened earlier this year. But as a step forward it is limited; only three firms have listed so far, and the disclosure standards demanded by the regulator seem relatively low.
While many other firms have baulked at providing any additional scrutiny of their business practices, there is a bright spot on the horizon. An update to the Companies Act, expected to pass through parliament in the coming months, will significantly raise disclosure requirements. With proper implementation, it could become an important corruption-fighting tool.
Proposed changes to foreign investment laws also need to raise disclosure standards among international investment partners. The Myanmar Centre for Responsible Business has suggested requiring large investors to file annual reports to the Myanmar Investment Commission under a system modelled on the reporting requirements used by the US State Department, which will lapse with the lifting of remaining executive sanctions.
Making these reporting requirements mandatory for all international investors of a certain size would be a welcome move: after all, it is largely regional investors, particularly from China and Thailand, that have consistently failed to meet international standards of probity while operating here.
Even with these reforms, enforcement will remain an issue. The MCRB last week sounded the alarm over the development of a cottage industry of local consultancies to help firms navigate the requirements of the Environmental Impact Assessment procedures introduced late last year. Offering bargain-basement prices, these firms know how to negotiate the government’s regulatory hurdles. But it’s doubtful they have the capacity to provide a rigorous study of an investment’s likely consequences.
Speaking in Washington last week, Aung San Suu Kyi said she had every confidence the country could now stand on its own two feet. We hope her statement is vindicated, but much remains to be done. A flood of foreign money is not a panacea for this country’s problems. As Myitsone, Letpadaung and countless other projects have shown, poorly considered investment projects can make the problems that much worse.
This editorial originally appeared in the September 22 edition of Frontier.