Business community pins sanction hopes on State Counsellor’s visit to US

With State Counsellor Daw Aung San Suu Kyi set to meet US President Barack Obama in Washington today, many in Myanmar’s business community will be watching closely. The two are set to discuss US sanctions that have been in place for decades, and that investors are rearing to have removed.

By Chan Mya Htwe and Daniel de Carteret ,  MyanmarTimes, Sept 14

Businesses have long called for lifting sanctions they say cripple the economy, with an adverse impact stretching beyond those companies and individuals blacklisted. Rights groups insist that targeted sanctions must remain to curb rights abuses by the Tamadaw and to apply pressure on the military’s hold over the 2008 constitution.

U Khin Shwe, chair of the Zaykabar company, said that the US must consider its strategic role in providing a counterbalance to China’s influence in the region.

The prominent real estate tycoon, who remains blacklisted by the US, said the local economy was in danger of becoming “lopsided” and dependant on its largest trading partner, China.

“This is the right time to ease sanctions against Myanmar. If they [the US] really want to help Myanmar, they need to invest in Myanmar and redress the balance, they will have to ease sanctions,” he said.

Other Western countries were likely to follow the US lead into Myanmar, creating job opportunities for the local economy, U Khin Shwe said.

“But maintaining sanctions will leave China in place as our main business partner. Poverty will be entrenched. If sanctions are not lifted under this democratic government, when will they be lifted?” he asked.

Businesses appear to have a reason to be hopeful.

At a press briefing at the recent ASEAN summits in Laos, Ben Rhodes, Obama’s deputy national security advisor for strategic communications, said the US would continue to seek trade opportunities with Myanmar, which involves sanctions relief.

“It’s something that we continue to look at because the purpose of the sanctions regime was to support a democratic transition, and some of the sanctions even were tied to the treatment of Suu Kyi specifically,” he said.

The US applies sanctions on Myanmar via the International Emergency Powers Act (IEEPA), which gives the US Treasury power to blacklist individuals and companies. The penalties began easing in 2011, when the government, led by then-President U Thein Sein, initiated reforms that set the country upon a path of democratic transition. The US decided to maintain the sanctions following the National League for Democracy’s election victory in 2015, but has removed a few state-owned enterprises from the blacklist. Most of the remaining sanctions target companies and individuals tied to the military, and the country’s multi-billion-dollar jade industry.

Myanmar’s fledging garment industry is hoping that the US will grant access to the Generalized System of Preferences, which will pave the way for tax privileges on exports to the world’s largest economy and in turn fuel foreign investment into the industrial sector.

“Currently investors are not interested in investing in our business because we don’t have US GSP status,” said U Aung Win, vice-chair of Myanmar Garment Manufacturers Association.

Local factories are struggling to compete with other garment manufacturing nations that have benefitted from tax preferences on US exports in the past, he said.

“We are all eagerly waiting to hear the news about the GSP during State Counsellor Daw Aung San Suu Kyi’s trip to the US.”

But the garment sector is just one of many industries economy-wide that is stifled by the US restrictions, said Eric Rose, lead director at Herzfeld Rubin Mayer & Rose Law Firm in Yangon.

“The effect of the US-Burma sanctions, imposed at different times by four different US administrations, on Myanmar’s economy has been enormous,” he said in an email. “These sanctions have resulted, since 1989, in the loss of hundreds of thousands of jobs, especially in the garment industry, and mostly for women workers, the impoverishment of farmers who could not export their crops and seafood to the US, the under-education of Myanmar’s youth who were barred from studying abroad, and, mostly, from the lack of American investment, know-how and business ethics.”

Yet much will depend on how far the Obama administration determines Myanmar’s democratic transition to have come. Visiting Secretary of State John Kerry indicated earlier this year that any further relief to the sanctions would be tied to amendments to the military-drafted 2008 constitution, which blocks Daw Aung San Suu Kyi from becoming president because her children are British.

“The key to the lifting of the sanctions is really the progress that is made within Myanmar in continuing to move down the road of democratisation … It’s very difficult to complete that journey – in fact, impossible to complete that journey – with the current constitution,” Mr Kerry said during a joint press conference with Daw Aung San Suu Kyi at the time.

U Myat Thin Aung, chair of the Hlaing Tharyar Industrial Zone Administration Committee and of the AA Group of Companies, cautioned that businesses will need to be patient, as the US was still wary of a democratic reversal while the military maintains a hold on significant political power.

“They’re afraid the military might resume control if all sanctions are lifted,” he said. “Sanctions will be removed only when the government is completely democratically elected,” he said.

Rights groups are advocating for the sanctions to remain.

“The US imposed sanctions in response to human rights violations, and they are still taking place,” Zoya Phan, a political activist from the Burma Campaign UK, told The Myanmar Times. “Lifting sanctions will just encourage the Myanmar military to think they can keep committing human rights abuses and keep blocking constitutional reform and get away with it,” she said.

Human Rights Watch last week released a statement cautioning that removing the penalties could derail the gains made since 2011.

“US sanctions are focused on the Burmese generals and their cronies in order to encourage democratic reforms,” John Sifton, Asia advocacy director at Human Rights Watch, wasquoted as saying in the statement. “The sanctions are crucial for pressing the military to end rights abuses and transfer power to a civilian government. They shouldn’t be fully lifted until the democratic transition is irreversible.”

Global Witness has warned that rolling back the sanctions will undermine pressure applied to the country’s notorious jade industry. The UK-based transparency watchdog says this is tied to the peace process, and easing of sanctions will reverse the efforts made to reduce tension in ethnic areas.

But business leaders are confident that improvements have been made and the country is opening up.

U Myo Thet, deputy chair of the Union of Myanmar Federation of Chambers of Commerce, said a positive response from President Obama would send a strong signal of trust in Myanmar’s economy.

“As his presidency comes to an end, he might want to take the opportunity to help the leader of a new democracy,” he said.

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