Guidelines needed for the run on Myanmar

Myanmar Inle-See
Market scene in the early morning hours at Lake Inlé.
Article as analysis
Investors sense a new El Dorado in commodity-rich Myanmar. Switzerland too is rapidly expanding its economic relations. How can the course be so set that the influx of capital contributes to sustainable development?

During the World Economic Forum in Davos, Switzerland and Myanmar (Burma) signed an agreement to expand their mutual economic relations. In November the Head of the State Secretariat for Economic Affairs (Seco) Marie-Gabrielle Ineichen visits Myanmar. These are pieces being added to the mosaic of Switzerland's charm offensive towards that country, which has been undergoing a remarkable process of political and economic reform for the past two years.

In the wake of the EU decision, Switzerland too decided in May 2012 to lift the sanctions imposed on Myanmar in 2000, except for military items. In June, Opposition Leader Aung San Suu Kyi honoured Switzerland by making it the first stop in her tour of Europe. In November, Foreign Minister Burkhalter opened an «integrated» Swiss Embassy in Rangoon (Yangon) – a pilot project under which diplomacy, development cooperation (SDC), peace and human rights policy and economic development (Seco) are to be coordinated.

In the Department of Foreign Affairs in Berne there is talk of «betting on Burma’s future». Two aims are being pursued here. On the one hand there is the wish to support the transition to greater democracy, peace and economic integration, to which end economic cooperation for 2013 to 2016 has been stepped up from 6 million to 25 million francs per year. On the other, there is interest in benefiting from Burma's economic and tourist potential, which Foreign Minister Burkhalter describes as «enormous». Last August, the Asian Development Bank predicted annual growth of 8 per cent over the next ten years.

A country with many advantages

Investment conditions are anything but optimal, however. Political stability is shaky, legal certainty virtually zero. Yet with its 60 million inhabitants Myanmar has many advantages to offer: abundant raw material reserves (oil, gas, precious stones, etc.), a young and cheap workforce, and a strategic location between key markets (China, India, South-East Asia). After 50 years of ruinous military rule and ethnic strife, the country has a lot of catching-up to do in many fields such as infrastructure building, establishing a banking system, tourism development and much more.

There is commensurately huge interest on the part of companies (including Swiss ones). Each week the Swiss Embassy receives about a dozen enquiries from companies and there are two to three visits by interested business people. To quote Barbara Möckli-Schneider of the Swiss-Asian Chamber of Commerce: «Now is the time to go to Burma. Whoever waits, will be too late» (Handelszeitung, 8 October 2012).

Preventing a chaotic gold rush

How can we prevent the run on Burma from becoming a chaotic «gold rush» in which multinational corporations and regime bosses garner fat profits while the people are left empty-handed and the environment is neglected? The danger is considerable in a country ranked by Transparency International as the fifth most corrupt, and where countermeasures are insufficient. According to the Transnational Institute,  recently adopted laws have opened the floodgates to land grabbing by permitting 70-year leases. They are also granting foreign investors tax breaks of five years. The Swiss Ambassador to Rangoon Christoph Burgener said in the February 17th, 2013 edition of Le Matin, a newspaper in Western Switzerland: «Those who invest massively and with the sole idea of a quick profit can do immense harm. Our concern is that this should take place with respect for the society and the environment.»

A respectful approach presupposes the cooperation of all involved. The same conclusion was reached by a recent roundtable on Myanmar organized by the Swiss Peace Foundation (swisspeace). In Myanmar, President Thein Sein, Opposition Leader Aung San Su Kyi, company representatives and civil society organizations are calling for ethically correct investments. The UN Global Compact has also become active, and the Government is preparing to join the Extractive Industries Transparency Initiative (EITI). Yet many, including the International League for Human Rights, doubt that the Government's institutional capacity will suffice in the coming years to channel investments such that they benefit the people.

Impose due diligence on investors

Foreign companies therefore have a critical role to play in shaping Burma’s future. Salil Tripathi, one of the directors of the Institute for Human Rights and Business in London, had this to say: «The challenges investors face in making sure their investments are not only profitable but also based on internationally accepted principles are going to be formidable.» In particular, they must comply with the UN Guiding Principles on Business and Human Rights as called for by the EU when lifting its sanctions. What this means in practice is that investors must display due diligence in avoiding direct and indirect harmful repercussions from their business activities. They must consult the people concerned, recognize their right to land, guarantee decent working conditions, respect trade union rights, and monitor the behaviour of their partners. To help companies in this, the Institute for Human Rights and Business is working with the Danish Institute for Human Rights and the British Council on tools tailored specifically to suit Myanmar.

But not all investors will voluntarily follow these guidelines. This is where the responsibility of investors' home states comes in. They must formulate clearly what they expect of the investors. The USA has recognized this and is drafting transparency guidelines for investors (see below). The same call was made in a motion submitted in mid-February by David Martin, rapporteur of the International Trade Committee of the European Parliament.

Switzerland would do well to emulate this. FDP Member of Parliament Doris Fiala, who took part in a Swissaid fact-finding tour to Myanmar in February, also had this to say: «It is crucially important for Swiss politicians to realize that Swiss companies keen to invest must absolutely respect human rights in Myanmar.»