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Investment bids (and bombs) are set to boom in Burma

By Christine Ly, American University STAND and National Media Task Force

With the lifting of the import ban on Burma on September 27, the last bit of trade-based leverage that the US had on the authoritarian country was gone. This on top of this past June’s lifting of the investment ban by the Obama administration is reason for much criticism that it’s just too soon to reward the Burmese government for reversible reforms. However, citing a statement from the White House, President Obama says that “easing sanctions is a strong signal of our support for reform, and will provide immediate incentives for reformers and significant benefits to the people of Burma”. In the same statement, the US Government also expresses concerns “about the lack of transparency in Burma’s investment environment and the military’s role in the economy”. To elaborate on these truly vital concerns, it’s important to understand the relationship between the Burmese economy and its deep-rooted ties to government cronies and the military elite.

A 1-minute retelling of the Tatmadaw (aka the Burmese Army): the military junta ruled Burma from 1962 to 2011. Elections in 2010 saw the installation of a “civilian” government led by ex-General Thein Sein. However, due to the 2008 Constitution, the military still occupies 25% of the Parliament’s seats. This fact in particular has many Burma-watchers suspicious of the independence of the legislature from the military.

The economy during military rule was pretty much a disaster. Mismanaged state-owned firms dominated the economy. The military imposed as many as 22 simultaneous import tariffs as high as 500%. It also stunted its own economic growth by banning the export of its highest-earning commodities including rice, teak, oil, and gems.

The economy as it is now is still in shambles. In terms of corruption, Burma is ranked 180 out of 184 according to Transparency International’s 2011 Corruption Perceptions Index. Together the military and state own hundreds of major assets including airports and gas pipelines. The recent privatization rush should not be taken as a positive reform, considering that most of the buyers are also linked to the military. For example, the top buyers are military-run corporations such as “Union of Myanmar Economic Holdings, which controls the army’s pension fund, and the Myanmar Economic Corporation, which oversees funds from the sale of state-owned enterprises” according to Voice of America. The former is actually already on the US Government’s sanctions blacklist.

When the US lifts the investment ban on Burma, they could potentially give a boost to the wealth of the Tatmadaw. This is because the most attractive sectors for foreign investors are in the extractive industries including oil, gas, precious stones, metals, and teak wood. These are all controlled by state firms such as the Myanmar Oil and Gas Enterprise that monopolize corporations through mandatory majority stakes, sidelining any foreign investors. In other sectors, incoming investors are required to partner up with domestic firms for up to 50% ownership.

Like the conflict minerals of the Congo and oil in Sudan, Burma’s military exploits its natural resources to fund its operations. The Tatmadaw commits human rights abuses with impunity and natural resource extraction and other development projects are often the site of such violence. There are constant reports from on-the-ground civil society groups of villagers being forced to move to make way for construction, incidents of civilians forced to work on gas pipelines, the overall destruction of the environment as companies drill for oil, mine for metals and gems, etc. It’s not uncommon to also hear testimonies of villagers of shootings, mortar attacks, intimidation, and physical threats by the military who claim that they are “guarding” the construction site. Without barriers to investment, FDI will increase and in turn development projects will proliferate. Looking at the correlation between development projects and the perpetuation of human rights violations, there are doubts that it was the right time for the US to lift sanctions.

Next up: More corruption! The State Department is imposing reporting requirements for businesses that invest in Burma, but are they too weak?

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