of nearly all economic sanctions imposed on Myanmar's previous
military regime has not yet sparked an inrush of US investment
Asia Times, Feb 15, 2017 by: Peter Janssen
Automated teller machine maker Diebold Nixdorf’s opening of a
permanent office in Yangon on February 2 marked the first
significant US investment in Myanmar since former US President
Barack Obama last October terminated nearly all of the remaining
sanctions Washington imposed for decades on its previous
rights-abusing military regime.
Obama’s executive order meant that US entities no longer need
to seek permission from the US Treasury Department’s Office of
Foreign Assets Control (OFAC) to make investments exceeding
US$500,000 in Myanmar. A blacklist of Specially Designated
Nationals (SDN) of military cronies was also dropped, with a few
exceptions, along with the penalties US firms would face if
caught doing business with them.
While Obama’s order ended most sanctions against Myanmar’s
current elected government, it has not yet sparked an inrush of
US investments. One reason, analysts say, is that Myanmar is not
yet completely sanction-free. Although Obama ended most
sanctions, Article 312 of the Patriot Act remains in place, a
measure that demands a high degree of due diligence against
possible money laundering by US banks doing business in Myanmar.
That scrutiny means US banks likely won’t be entering Myanmar
any time soon. That will necessarily stunt the underdeveloped
banking sector’s international engagement, including for money
transfers, trade finance and other financial services US
companies require to make foreign investments. No other large
country in Southeast Asia is similarly penalized under the
Patriot Act. And it is unlikely that scrapping the measure will
be high on President Donald Trump’s policy agenda.
Corporate America has been burned before in Myanmar. The country
first opened its doors to foreign direct investment (FDI) in the
late 1980s following a bloody military crackdown on the
pro-democracy movement of 1988 that left an estimated 3,000
dead, but also put the nail in the coffin of the disastrous
“Burmese Way to Socialism,” the state ideology under former
military strongman Ne Win who ruled from 1962 to 1988.
Encouraged by the passage of a foreign investment law and
promises of a transition to democracy, some US multinationals
rushed in. PepsiCo, for example, inked a joint venture in
Myanmar to produce their soft drinks for the Burmese masses in
1991. PepsiCo was forced to sell a 40% stake in the joint
venture to its local partner and withdrew from Myanmar in 1997,
after it became the target of consumer boycotts in the US as
outrage with the then-military regime grew overseas.
Other US firms that pulled out of Myanmar included Eddie Bauer,
Levi Strauss and oil giants Amoco and Texaco, as Myanmar became
a pariah among Western democracies and more sanctions were piled
on in response to continued rights abuses.
“The sanctions imposed by the US had an enormous chilling effect
on American investment here and continue to have a residual
effect today, primarily due to the remaining financial sanctions
under Section 312 of the USA Patriot Act,” said Eric Rose, a
founding partner in Herzfeld Rubin Meyer & Rose Law Firm Ltd,
the first US law firm to establish in the country in 2013.
“Furthermore, they have created for many public companies
interested in Myanmar trade and investment a public relations
The military’s ongoing crackdown on the Rohingya Muslim minority
in Rakhine State, which has drawn widespread condemnation even
from the Vatican, doesn’t help matters, even if apologists will
point to the lack of control de facto national leader Aung San
Suu Kyi has over the military.
Under the 2008 Constitution, the military maintains autonomous
control over four powerful ministries, including the defense and
border affairs portfolios, and appoints 25% of seats in
parliament. “Not having the Tatmadaw (military) under civilian
control continues to remain an issue,” Rose said.
Still, US companies have been pragmatic about Myanmar’s many
under-developed markets, which are often referred to as
“last-frontier” by prospective investors. Big brand
corporations, including General Electric, Coca Cola and PepsiCo,
all opened token operations in Myanmar shortly after Obama
initially “suspended” sanctions in 2012. Others have taken a
wait-and-see approach, but that hasn’t stopped them from
pioneering the Myanmar market.
“Most American companies would be manufacturing in Thailand and
then importing to Myanmar, so they don’t need to set up an
operation here,” said Aung Htun, managing director of Myanmar
Investments, a private investment company. Just because US
sanctions were finally lifted (not just suspended) in October
does not mean these firms need to rush in, not when important
considerations, including the passage of new accompanying rules
to the Myanmar Investment Law, have yet to be finalized.
Dielbold Nixdorf, one of the world’s largest manufacturers of
automated teller machines (ATMs), is showing that there are big
opportunities for companies willing to take the capital risk.
The company, the result of a merger in December between US-based
Diebold and Germany-based Nixdorf, inked a deal in January to
sell Myanmar’s Co-Operative Bank Ltd 500 new ATMs.
The two ATM suppliers already claimed about 70% of the Myanmar
market, having worked through local dealerships prior to setting
up a permanent office. “We are here purely to support the banks
because they are expanding rapidly and being here locally was
the only way we could do that,” said Diebold Nixdorf Myanmar
Manager Piers Leach. “In Myanmar 90% of the population is
unbanked and the banks are trying to address this.”
Peter Janssen is a Bangkok-based journalist who has been
covering Laos, Myanmar and Thailand for the past 36 years
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