U.S. to demand disclosures as it eases Myanmar sanctions

Reuters News
Posted: Jul 11, 2012 1:29 AM
U.S. to demand disclosures as it eases Myanmar sanctions

By Arshad Mohammed

VIENTIANE (Reuters) - The United States on Wednesday eased sanctions to allow its companies to invest in and provide financial services to Myanmar but will require them to make detailed disclosures about their dealings, the White House said.

The unusual reporting requirement aims to promote greater transparency in the country - among the world's most corrupt according to watchdog Transparency International - as it emerges from nearly half century of military rule.

In a development first reported by Reuters early on Wednesday, President Barack Obama directed the U.S. Treasury Department to issue two general licenses, one giving general permission for investment in Myanmar and the other allowing financial services.

"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," Obama said, using the traditional name of the Southeast Asian country.

But the president added that the unfinished state of reforms left the United States "deeply concerned about the lack of transparency in Burma's investment environment and the military's role in the economy."

"U.S. companies will be asked to report on their activities in line with international corporate governance standards," Obama added.

The rules require U.S. individuals and entities making new investments of more than $500,000 to submit annual reports to the State Department on issues such as human rights, workers' rights and environmental stewardship, the department said.

Annual payments exceeding $10,000 made to Myanmar government entities including state-owned enterprises must also be reported, while those investing in the Myanma Oil and Gas Enterprise must notify the State Department within 60 days.

"The purpose of the public report is to promote greater transparency and encourage civil society to partner with our companies toward responsible investment," the departments of State and Treasury said in a fact sheet explaining the policies.

White House spokesman Tommy Vietor told reporters the new investment "does not authorize investment with Burmese Ministry of Defense, state or non-state armed groups, or entities owned by the foregoing."


The moves fulfill a May 17 announcement made by U.S. Secretary of State Hillary Clinton to ease U.S. sanctions on investment and financial services in recognition of Myanmar's startling political reforms over the last 15 months.

The Obama administration left the sanctions laws on the books, giving Washington leverage should Myanmar start to backslide on its reforms.

Obama added a new Executive Order expanding sanctions to cover "those who undermine the reform process, engage in human rights abuses, contribute to ethnic conflict, or participate in military trade with North Korea," he said.

This order underscored that "individuals who continue to engage in abusive, corrupt, or destabilizing behavior going forward will not reap the rewards of reform," said Obama.

Clarification of the rules for investment could prompt a rush of U.S. companies into the country.

Coca-Cola Co, for instance, said last month it wanted to work in Myanmar as soon as the government allowed it. It is one of just three countries in the world where the soft drinks giant does not operate. The other two are North Korea and Cuba.

Conglomerate General Electric Co has also expressed strong interest in the country, particularly in the healthcare and electricity sectors. In the face of street protests over power outages, Myanmar's government promised in May it would buy two 25-megawatt gas turbines from the company.

Sanctions have also been suspended or lifted by other developed countries, including Canada, Australia, Japan and European Union states.

The British government's trade promotion body, UK Trade & Investment, opened an office in Myanmar's commercial capital, Yangon, on Wednesday.


Myanmar's quasi-civilian government took office in March 2011 and has started overhauling its economy, easing media censorship, legalizing trade unions and protests and freeing political prisoners.

The United States has responded with diplomatic and economic gestures, sending Clinton to Myanmar last year as the first U.S. secretary of state to visit in more than 50 years, as well as tentatively easing sanctions this year.

One source said the long delay between Clinton making her announcement and the Treasury issuing the licenses was partly because of a debate among officials over how much disclosure to require.

In a land of widespread poverty but rich in timber, gems, and gas, Myanmar's crony capitalists - a clique of fewer than 20 families - grew rich with help from Than Shwe, a military dictator who ruled from 1992 until he stepped aside last year.

"The central point of all of this is to focus on transparency, the theory being that the more information the greater the incentive to comply with responsible norms and practices," the source said.

This source said that some disclosures would be to the public while others would be in confidence to the U.S. government to protect proprietary business information. The State Department said it would announce a public comment period for the private sector to study the reporting requirements and to flag any problems.

Human rights groups and exiled Burmese democracy activists remained skeptical that military officials and army-linked businessmen could be prevented from profiting from U.S. deals.

"The U.S. government has acknowledged that there are many unacceptable business partners in Burma. However, the government has failed in its responsibility to clarify who these actors are, or to prohibit U.S. companies from conducting business with these problematic entities," said a joint statement by the U.S. Campaign For Burma and three other advocacy groups.

The latest step in easing sanctions came a day after Derek Mitchell, an Asia expert with long think tank and Pentagon experience, presented his credentials as the first U.S. ambassador to the country in decades.

(Additional reporting by Matt Spetalnick, Doug Palmer and Paul Eckert in Washington; Editing by Jonathan Thatcher, Cynthia Osterman and Jackie Frank)