Eased Myanmar sanctions no gold rush for US firms

Associated Press Modified: November 22, 2012 at 8:01 pm •  Published: November 22, 2012

Now, the biggest remaining legal block for U.S. companies is a list of "specially designated nationals" and companies that U.S. firms are barred from doing business with because of their alleged links to violence, oppression and corrupt practices. U.S. companies complain that it's difficult to comply with this list, given the challenges of due diligence in Myanmar and the habit of cronies to pick up aliases and create complex subsidiaries.

"We're encouraging reform in the government, we can't encourage reform in individuals?" said Richard Vuylsteke, president of the American Chamber of Commerce in Hong Kong. He urges Washington to pare the list as fast as possible and "give these guys an incentive to integrate into the system."

Rather than revoke sanctions — which for some would require an act of Congress — the administration has suspended them, meaning they could be reinstated if Myanmar's reform momentum is broken. In addition, with each step forward, Washington has taken one small step back.

Three days before Obama landed in Yangon, Washington suspended its ban on most imports, a move that's expected to revitalize Myanmar's garment industry. At the same time, the administration added seven companies to the list of entities U.S. firms can't do business with. In July, when Washington suspended the ban on new investment and the provision of financial services, it also instated reporting requirements and expanded sanctions to include individuals who undermine reform, engage in human rights abuses or engage in military trade with North Korea. The White House said it was offering a clear message: "individuals who continue to engage in abusive, corrupt or destabilizing behavior going forward will not reap the rewards of reform."

Aside from sanctions, U.S. companies are subject to strict anti-corruption laws and reputational risk at home, should they choose the wrong business partner in Myanmar.

"The country is rife with corrupt business practices which would be illegal here," said Priscilla Clapp, who served as charge d 'affairs at the U.S. Embassy in Yangon from 1999 to 2002. "U.S. businesses are held to those rules. They have to condition their Burmese business partners to our rules. That's not easy because you're changing centuries of bad behavior."

In the meantime, companies from other countries are sweeping into Myanmar.

"It's been a vacuum for U.S. companies for a couple of decades," said John Goyer, senior director for Southeast Asia at the U.S. Chamber of Commerce in Washington. "They have a lot to learn about the market and the operating environment, whereas companies from China, Thailand, Malaysia know the players, they know the environment. It's home field advantage."

The U.S. is also at a disadvantage when trying to compete with companies from, for example, Japan, which can offer package deals of investment, aid and debt forgiveness padded with government money.

"Companies from Asia can come in with financing packages all wrapped up as part of the deal," Goyer said. In America, he added, "there's not unlimited government backing for private companies to go in and provide ports or railways or infrastructure."

Anthony Nelson, associate director for Myanmar at the U.S-ASEAN Business Council, said that for many U.S. companies, Myanmar is the largest country in the world where they don't have a presence. "That kind of thing doesn't come along very often," he said. "It's never going to come again."

But even Nelson is not talking of a gold rush.

"Take a look at Vietnam," he said. "When we normalized relations with Vietnam, companies came in and looked around. They maybe opened representative offices, but it was 10 or 15 years before the big boom of investment from U.S. companies. When U.S. companies move, they move in a big way, but there's time that people need to look at what they're doing."