Myanmar: Invest at your own risk
July 10th, 2013
06:45 AM ET

Myanmar: Invest at your own risk

By Lisa Misol, Special to CNN

Editor’s note: Lisa Misol is a senior researcher on business and human rights with Human Rights Watch in New York. The views expressed are her own.

Emerging from diplomatic isolation and Western economic sanctions, Myanmar wants to be the “it” destination for foreign investors.

Last month, foreign business leaders flocked to the capital, Naypyidaw, for the World Economic Forum on East Asia, a regional version of the powerhouse gathering. Major global brands have been enticed by Myanmar’s largely untapped potential, and the momentum is still picking up: General Electric, the first American company to sign a deal after U.S. sanctions were lifted last July, formally launched its Myanmar office in late May. On June 4, Coca-Cola opened its first bottling plant in the country in 60 years, on the heels of Carlsberg and Heineken. Then, on June 27, Myanmar’s government awarded highly anticipated licenses to extend cell phone and Internet service to telecommunications firms from Norway and Qatar.

More investors are lining up. In the petroleum sector, dozens of companies from around the world reportedly bid on 30 sought-after offshore oil and natural gas fields last month. A shortlist has not been announced, but prominent American, Asian, and European oil firms are seen as likely contenders. At least 20 more fields are to be offered next.

It is clear, then, that opportunities abound – but so do pitfalls. The reforms introduced since the quasi-civilian government of President Thein Sein took over from Myanmar’s military junta in 2010 remain far from complete, and key concerns for companies include the high risks associated with human rights abuses, security and corruption.

More from GPS: 10 steps Myanmar must take

One potential flashpoint is the absence of community consultation and consent for projects. Laws regulating land tenure and environmental controls are weak and poorly implemented, meaning trouble can arise when securing access to land and other resources, particularly in ethnic minority areas where preliminary ceasefires have been signed after decades of civil war. Indeed, foreign investment projects have been enmeshed in land grabbing controversies on a number of occasions.

Compounding these problems, Myanmar authorities have increasingly used intimidation and criminal prosecutions to clamp down on peaceful protests against international projects. In April, several hundred villagers in western Myanmar’s Rakhine State reportedly raised grievances that they received little or no compensation when their farmlands were taken for a major oil and gas project and that they will bear the brunt of the project’s potential negative impact without seeing any benefit. The authorities responded by using a so-called reform law that ostensibly guarantees the right to peaceful assembly to prosecute 10 villagers for holding an unauthorized protest.

In November, at least 40 protesters were injured when the government used excessive force to disperse Buddhist monks and others who had camped out to protest the expansion of a controversial copper mine in Sagaing Region.

Poor laws and the risk of involvement in abuses affect many kinds of companies. The winners of the telecommunications tender, for example, could risk involvement in human rights violations because of Myanmar’s inadequate legal protections for privacy and free expression. Poor rule of law in Myanmar means communities and workers have few effective means to raise grievances and those who do so can face retaliation.

Security issues present another major business risk. Pipelines to transport petroleum across Myanmar to China were completed in May, but their use has been delayed amid clashes between government and ethnic armed groups in Shan State near China. Two oil workers were reportedly killed in a May 13 attack on a company compound near the China border for which the government blames Shan rebels.

Sectarian violence beginning last June between majority Buddhists and minority Muslims has included killings, beatings and property destruction in several parts of the country. In Rakhine State, local leaders backed by state security forces carried out a campaign of ethnic cleansing targeting Muslims. Businesses that rely on Myanmar’s unreformed security forces to protect assets or personnel face potential complicity in abuse.

Finding local business associates whose hands are clean of corruption or abuse presents another challenge. Myanmar is considered one of the world’s most corrupt countries, and many potential partners trace their success to their ties to the former military junta. Indeed, vested interests connected to state or military controlled companies are active in many sectors that are drawing foreign investment. One military-owned business partners with a Chinese firm in the copper mine where protesters were violently dispersed. And another recently entered Myanmar’s telecommunications sector under unclear regulatory terms.

All this means that to protect themselves and their reputations, as well as the people their business might impact, companies must take care when dealing with Myanmar. The widely endorsed practice of corporate “human rights due diligence” – taking concrete steps to prevent and address any abuses – is an important starting point. Companies would also be wise to protect their investments by maximizing transparency.

Under a new U.S. rule that took effect July 1, American companies investing $500,000 or more in Myanmar have begun to publicly report on their policies and procedures to address human rights, labor, environment, land, corruption and security risks in the country.

Additional steps that could help spare U.S. and other global companies from being associated with human rights abuses include carefully vetting local partners, commissioning independent and credible risk assessments, undertaking thorough consultations with affected communities, developing clear plans to minimize risk factors and remedy problems, and publishing the results of social and environmental impact assessments as well as remediation plans. To capture ongoing risks, companies would also do well to conduct frequent human rights reviews and create mechanisms for communities to address any grievances that arise.

If foreign investment is to advance progress, the rewards need to outweigh the risks both for the companies involved and for the people of Myanmar.

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Topics: Asia • Business • Economy • Myanmar

soundoff (3 Responses)
  1. j. von hettlingen

    For many foreign investors Myanmar is not better or worse than many African nations. Perhaps Myanmar might still be a better choice.
    What is important is to educate young Burmese and make them aware of corruptions and graft. Once they realise how crucial it is to have at least half of the country's population out of poverty, instead of having the classical 1% versus the rest.

    July 11, 2013 at 11:25 am | Reply
    • j. von hettlingen

      Aung San Suu Kyi has high ideals and ethics. She should pass them on to the young generation of Burmese.

      July 12, 2013 at 3:01 am | Reply
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