Reporting rules for US firms revealed

By Victoria Bruce
Volume 32, No. 635
July 16 - 22, 2012

AMERICAN companies were given approval to invest in Myanmar by the United States government last week but will have to adhere to strict reporting guidelines, the White House said in a statement.

The reporting guidelines have been put in place to ensure transparent, accountable and responsible investment, the July 12 statement said.

The much-anticipated announcement presents the legal framework for US investment and companies such as Chevron, Proctor & Gamble, Google, Boeing, Coca Cola and Pepsi are due to visit Yangon at the weekend, US embassy officials in Yangon said.

“We’ve essentially moved from broad to targeted sanctions,” US embassy deputy head of mission Eleanor Nagy told The Myanmar Times.

The move is a demonstra-tion of support for President U Thein Sein’s government and will encourage continued progress toward democracy, Ms Nagy said.

“We recognise that the Myanmar government’s reform process is ongoing but is not complete,” she said.

She added that the two governments were engaged in a dialogue on other areas where the US would like to see progress, including the military’s human rights record, corruption, ethnic conflict and its relations with North Korea.

Economic engagement by US companies would encourage the government’s reform progress and benefit the population, Ms Nagy said. She added that the reporting requirements would encourage greater responsibility and transparency.

US firms investing more than US$500,000 in new projects will be required to report on their policies and procedures with respect to human rights, worker’s rights, land acquisition, as well as report any payments exceeding $10,000 to Myanmar government entities.

The two general licences announced by the White House last week permit the export of financial services to Myanmar and will allow US firms to invest in all sectors, except defence, and engage with all entities, except the two military-owned companies – Myanmar Economic Corporation and Union of Myanmar Economic Holdings Ltd, as well as people listed on the US Government’s targeted sanctions list on individuals. A Congress-imposed ban on imports from Myanmar to the US was recently renewed, however.

The reporting require-ments for new investment were cautiously welcomed by experts, including Sean Turnell, an associate professor of economics at Australia’s Macquarie University.

“It is really hard to see any reasonable argument against such transparency and I am somewhat hopeful they might even provoke a sort of ‘transparency contagion’ with respect to other country investors,” he said.

By allowing new invest-ment, the US government had ignored Daw Aung San Suu Kyi’s concerns about doing business with state-run energy company Myanmar Oil and Gas Enterprise (MOGE), rights groups said.

“The US looks like it caved to industry pressure and undercut Daw Aung San Suu Kyi and others in Burma who are promoting government accountability,” Human Rights Watch business and human rights director Arvind Ganesan said in a statement on July 11.

However, some experts doubted that the legal framework would prompt a rush of US investment. The US maintains substantial sanctions against Myanmar, said Mr Derek Tonkin, a former British ambassador to Thailand and Vietnam and chairman of non-profit group Network Myanmar.

He said major international financial institutions such as the IMF, World Bank and ADB are still limited to providing advice and assessments, rather than funding for projects.

“The easing of sanctions is to be welcomed as a substantive step by the US in the right direction,” Mr Tonkin said. But new “smart sanctions” would have little effect and were a symbolic response to recent changes and reforms in Myanmar, he added.

“The link between lifting economic sanctions and seeing actual economic progress is lengthy and complicated,” said Australian economics professor at UNSW Tim Harcourt, who is also a former chief economist with Austrade, the Australian government’s trade and investment arm.

“Lifting sanctions is necessary but not sufficient … the economic evidence shows that there is a lag between lifting the legal sanction and when companies are actually brave enough to stick their toe in,” Mr Harcourt said.

Some notable US companies have already announced their intention to operate in Myanmar, including Coca-Cola and Apple.

Pepsi Cola is hot on its heels, having recently signed a joint venture with local soft drink company called Diamond Star, who will be its local distributor, according to business sources. Both drinks are already widely available.