The United States government is mulling how to demonstrate Myanmar’s democratic transition is not complete with the fact that the Washington does not want to shut itself and responsible investment out of the country.
As Myanmar State Counselor Aung San Suu Kyi was about to fly from the UK to the United States for an official state visit, the Center for Strategic and International Studies held an important programme to discuss the next step in US-Myanmar relations.
The meeting entitled “The United States and Myanmar: Next Steps Conference” was held in Washington DC, at the CSIS headquarters on September 12. Key speaker was Ben Rhodes, Assistant to the President and Deputy National Security Adviser for Strategic Communications and Speechwriting, Executive Office of the President.
Mr Rhodes told the gathering about what he termed the “enormous transformation” that has taken place in Myanmar over the last few years.
As he said, Aung San Suu Kyi will be meeting with US President Barack Obama, Vice President Joe Biden, members of the US Congress and the business community, the latter with an eye to greater investment in Myanmar. The Myanmar leader arrives in Washington today.
Mr Rhodes said Washington had initiated a review of US policy concerning Myanmar shortly after the first Obama administration came into office in 2009.
“Over the course of the next several years, we began to ease our sanctions. We began to engage the government. There was a sense of things opening up, of political prisoners being released, of there a desire for there to be greater investment and interconnectivity with the global economy. Clearly, that was something that had been desired by the Burmese people, by the NLD, by Aung San Suu Kyi, but also some of the military leadership was clearly indicating that they wanted to move in a different direction,” he said.
“I remember when I visited Burma for the first time with President Obama. You had a sense of an overwhelming thirst for this engagement with the United States. We had never really seen crowds like that greet a motorcade, even in all the travels that President Obama had done around the world,” said Mr Rhodes.
As he said, there was a real desire for engagement and the US recognized the need for capacity building and how to attract investment.
Now we are at a critical juncture, said Mr Rhodes. He acknowledged that there was a peaceful transition of power facilitated by the November 2015 elections, with the former government and military respecting the outcome, but noted that this transition is by no means complete.
As he said, the new Myanmar government faces enormous challenges including economic issues, bringing the ethnic armed groups into the fold, and the controversial situation in Rakhine State.
“One sensitive issue in this area has been the role of different countries, including China, you know, given their relations with a number of the different ethnic groups. We have encouraged positive relations between the NLD-led government and China, and we see it as a positive step that Aung San Suu Kyi has pursued that outreach. We believe that this is not a zero-sum circumstance, and that ultimately the U.S., China, India, our European allies, Japan, many other countries have an interest in a stable and democratic Myanmar.
“Another issue that we’ve focused on with the new government is labour rights, which is important to our capacity to promote greater investment in the country. And so we’ve supported efforts to establish independent labor unions, a minimum wage, and overtime and severance pay standards in Myanmar. Now, these will be difficult to implement, but we see the government setting out a clear action plan, and pursuing legislative changes in the parliament as well. This is aided by the fact that some of the political prisoners I spoke of who are in the parliament were once labor leaders and imprisoned for those efforts. And so this is an area that also holds promise for Burma’s future, and we feel compelled to support the government’s efforts so that workers are a part of building the economy in a place where corruption too often in the past has enriched a handful of cronies to the exclusion of broader-based economic growth.
“We also see the government pursuing economic policies that try to promote a greater climate for investment that can facilitate job creation and economic growth. For instance, the government is implementing major financial sector reforms, including a new financial services law and the new digital financial services regulation. And on August 30th, the government approved major microfinancere forms that have the potential to bring in larger amounts of funding into rural agricultural areas.
“Again, all of this is critical to showing that democracy can bring a dividend – that democracy can bring, again, not just a greater political voice for the people of Myanmar, but ultimately improve livelihoods. And this is going to be a critical focus in our engagement with the government over the next several days and going forward.”
Mr Rhodes acknowledged the negative effect of US sanctions.
“We hear frequently that the ongoing sanctions regime serves as a chill on investment from the United States, in some cases other international firms. And so we want to make sure that our sanctions are not preventing the type of economic development and investment that we believe can improve the livelihoods of the people of Burma. And in this discussion, and in these decisions, we want to be guided, again, by consultation with Aung San Suu Kyi and the NLD-led government.
“We do frequently encourage the business community, again, to share with us not just concerns about sanctions but ways in which the government can build capacity to facilitate investment, to improve labour standards and anti-corruption initiatives. So this is not just a process of reviewing sanctions, it’s also a process of reviewing what more can be done to facilitate more transparent and successful development inside of the country,” he said.
Mr Rhodes said “there’s no scenario under which there are not going to be certain restrictions and limitations in our relationship with Burma. For instance, at the very least, we will, you know, have restrictions on the military and our engagement with the military for some time, given their continued outsized role on politics.”
He noted the need for caution.
“We also I think have to understand that there’s a limitation to how much easing of sanctions can open up investment because, at the end of the day, companies are going to make decisions based o nrisk. And if they see a risk of being crosswise with our sanctions regime, particularly in a country where certain individuals have significant assets, you know, that is going to be a chill on investment and they’re going to make different decisions. And ultimately, that could restrict the flow of investment that we believe can create broader economic prosperity.”
Mr Rhodes told the audience that the success of democracy inside of Myanmar would be good for the people of the country, but it would also be good for the region and the world. It is setting an example that we hope other countries follow.
One member of the audience raised the question of sanctions.
Mr Melvin Pun, Chief Executive Officer and Executive Director of Yoma Strategic Holdings Limited, a company with interests in Myanmar and Singapore, raised the question of practical problems under the current US sanctions regime.
“Going back to the point on the sanctions, there are certain strict requirements on the KYC in relation to international banks. And it’s caused a number of issues in terms of chilling of activities. One example I would give is I was trying to make a payment to the British Council in Myanmar, and that was blocked by an international bank on the basis that they don’t really want to figure out who is making the payment or who the payment is being made to. Is any thought of how the unblocking of the international banking activities can be achieved in parallel with the sanction discussions?” said Mr Melvin Pun.
Mr Rhodes replied that there were two approaches. “One is, how can you make adjustments to the existing sanctions regime? And two is, how can you fundamentally alter the existing sanctions regime. You know, I’ve heard a lot of these stories. And let me be clear, I’ve heard these from large U.S. businesses. You know, you go and you meet the chamber out in Yangon. But I’ve also heard it from ordinary Burmese. I remember (former US Ambassador) Derek (Mitchell) and I had a meeting in Yangon with entrepreneurs who were just trying to attract investment for startups and small businesses from Singapore. And they were having enormous difficulties accessing international financial transactions. And if you’re, you know, a venture capital fund in Singapore, and you’re making decisions about where to put money, you’re going to weigh that risk.
“The two ways in which we’ve gone about it, one is what can we do through general licensing to indicating that there’s essentially a clean bill of health to work through elements of the financial system, or to work with some of the larger entities in the country that might otherwise be tied up in our sanctions regime. We’ve tried to calibrate our sanctions, including the latest round of easing in May, to clarify what types of activities are allowed. But at the same time, as long as you have the executive order in place, there is going to be some degree of uncertainty, particularly in a country where there’s a fairly opaque banking sector and very large entities that touch many different elements of the economy.
Mr Rhodes said this was exactly the question that they are weighing, how much can they do through licensing and delisting of certain entities to clarify that this is permitted activity? And at what point, in consultation with the government, do they want to more comprehensively lift restrictions so there is greater clarity for businesses and ultimately greater investment? And that’s going to be a focus of discussions with Myanmar State Counselor Aung San Suu Kyi on her visit.