Chris Nolan, Manager, Advisory Services, BSR
An unthinkable sight one year ago: General Electric stood alongside the Government of Myanmar on July 14 to ink a deal to provide healthcare equipment to two hospitals. Billed by the Obama Administration as a “framework for responsible investment,” the U.S. suspension of economic sanctions on July 11 opened the flood gates for U.S. companies to join other international competitors in search of business opportunities in Asia’s newest high growth destination.
Most notably for the oil and gas industry, the new policy doesn’t restrict U.S. companies from partnering with state-owned Myanma Oil and Gas Enterprise (MOGE), a central source of revenue for the previous military government and the target of concern among domestic and international stakeholders.
Prominent human rights and policy advocacy organizations have decried the U.S. government’s decision. In a recent joint letter, nine advocacy groups, including the AFL-CIO, Human Rights Watch, Orion Strategies, and United to End Genocide, proclaimed, “despite holding by-elections and taking other positive steps, the government [of Myanmar] has yet to institute the reforms necessary to move Burma toward democracy, and basic political power remains with the military.”
Some stakeholders believe businesses from the U.S. and European Union have used the suspension of sanctions to quickly pivot focus away from human rights in order to avoid compromising potential business deals. In a transitional environment marked by vastly underdeveloped public institutions, weak law enforcement, and still-simmering ethic and social tensions, companies have to do more than pay lip service to human rights issues and broader social, economic, and governance concerns.
Unlike their European competitors, U.S. companies will be required to do more. In parallel with the sanctions announcement, the U.S. State Department released requirements for companies investing in Myanmar to report on investment activities including:
- Overview of operations in Myanmar
- Summary of investment-related human rights, labor rights, anti-corruption, and environmental policies and procedures
- Arrangements with security providers (if applicable)
- Acquistion of property/land, including processes to identify land rights and address resettlement practices, if the property is worth more than US$500,000 or over 30 acres
- Payments to the Government of Myanmar, sub-national authorities, and state-owned enterprises if the aggregate annual amount exceeds US$10,000
- Summary of human rights, labor rights, and environmental due diligence conducted by the company
The first five requirements will be made publicly available. Though the policy doesn’t require companies to have these systems in place as a pre-requisite for investment, they are a constructive first step for responsible investment.
As we highlighted in a recent BSR Insight article, "Entering Responsibly in Risky Markets: A Look at Myanmar," responsible investment in Myanmar will take more than positive rhetoric between new friends, public commitments by the Myanmar and foreign governments, and reporting requirements. And for business, a "tick the box" approach won't suffice. The following steps should be considered as a starting point only:
- Invest early and robustly in understanding the social and environmental risks and opportunities (and be prepared to manage them if responsible investment is deemed possible)
- Uphold the highest standards of transparency and respect for human rights
- Identify ways to meaningfully support national development
Companies cannot just ride on the coattails of positive change– they must proactively support it. Business should promote commitments to international standards with the Myanmar government and support legal reforms and enforcement mechanisms that back them up. And when national leaders take a step sideways or backwards, business shouldn’t look the other way but rather hold them accountable and actively look for ways to support the implementation of reforms by government. This isn’t the time for business as usual. The responsibility for continued positive change and overcoming immense challenges that lie ahead can’t fall solely on governments and civil society.
After all, the proof that this positive shift by the country’s leaders is for the long term interest of the country will be found in substantive action and positive outcomes, first and foremost for the people of Myanmar.