West hurting only itself with economic sanctions on Myanmar

Myanmar’s opening up has attracted much interest, not only from its Asian neighbours but also those in the West that once considered the country a pariah state.

Recent events, however, suggest that Naypyidaw’s honeymoon with the United States and Europe may be waning over political issues. In contrast, China and others remain ready to engage, provided business conditions improve.

In May, the Americans extended some economic sanctions rather than ease restrictions, as some had hoped. The Obama administration noted the progress made by Myanmar, such as the release of more than 1,100 political prisoners, steps towards a nationwide ceasefire with armed ethnic minorities and greater freedom of expression for individuals and the press.

But other concerns remain, including conflict and human rights abuses in ethnic minority areas.

Just this month, religious clashes in Mandalay triggered not only a curfew in Myanmar’s second-largest city but wider concerns about conflict between the country’s Buddhist majority and Muslim minority.

More questions are now being asked by Western leaders about Myanmar’s political stability and the consequential risks to businesses.

Take, for example, the treatment of the Muslim minority in Rakhine State. European governments and the US have emphasised their concern over the plight of the Rohingyas. This is to be expected, given the importance the West places on human rights.

During our recent trip to Washington DC, we found that the Americans were more critical about Myanmar’s reform than a year before. Yet in Myanmar, some support the view that the extension of economic sanctions makes little difference to the status quo since most American restrictions have not been lifted.

Responding to the American decision, the Myanmar government says the US’ extension of economic sanctions would have limited impact. Government spokesman Ye Htut said in a recent interview: “I do not think Myanmar’s development will be harmed because of it.”

ASIA STEPS CLOSER

Myanmar’s attitude could be due to the fact that while Western governments continue to place political conditions on their engagement with Myanmar, others have less compunction.

China’s President Xi Jinping reassured its neighbour recently that Beijing remains committed to a policy of non-interference with regard to Myanmar’s internal affairs.

To warm up relations with Myanmar, China dug into its history books and pulled out an almost forgotten 60-year-old agreement signed between Myanmar, India and China in the early days of the Cold War. This spells out Five Principles of Peaceful Coexistence among the three countries and was the excuse for a big anniversary celebration last month. To receive Myanmar President Thein Sein, Beijing rolled out the red carpet and awarded the former general full military honours.

China is not alone in deepening ties with Myanmar. Anecdotal evidence and some surveys show that Asian countries, such as Japan, South Korea, India and neighbours from the Association of Southeast Asian Nations (ASEAN), are keen to forge closer relations with Myanmar.

A recent survey of more than 100 companies by Singapore’s United Overseas Bank found that more than 70 per cent have plans to expand in Myanmar in the next year. Similarly keen interest was shown at a business and investment conference organised in Yangon by the Singapore Institute of International Affairs, together with the Union of Myanmar Federation of Chambers of Commerce and Industry and two advisory firms from Singapore — KPMG and WongPartnership law firm.

From the perspective of many Asian businesses, American economic sanctions and the political issues that led to their renewal are not main considerations. Instead, their concern is with issues on the ground — predominantly, the lack of capacity and infrastructure, as well as continuing uncertainty over rules and decision-making.

WHAT MYANMAR NEEDS TO DO

These business issues — rather than perceptions about the politics — are the choke points that prevent investors’ interest from translating into real investments. The Myanmar government would do well to give priority to easing these obstacles, especially for investment projects in the country’s much talked about special economic zones.

Another government priority should be to help the country’s small and medium enterprises. With the ASEAN economic community approaching next year, trade and market access will increase and local Myanmar businesses fear they cannot compete. Unless they get help, they could form a constituency to resist the economic opening.

At present, a number of the business groups in Myanmar emphasise that they do not support protectionist measures. Rather, small and medium enterprises would like to seek foreign partnerships to improve access to better technology, markets and finance.

With elections due next year, the current government has a limited runway to consolidate the conditions for economic growth before the political climate heats up.

The leadership in Myanmar made a bold step to open up and reach out to the US and Europe.

The reality, however, is that reforming Myanmar is not an overnight project and expectations need to be tempered with a view to the longer term.

If the US and Europe will not sustain and deepen their engagements with Myanmar, then others will be ready to offer themselves.

ABOUT THE AUTHORS: \

Associate Professor Simon Tay and Cheryl Tan are, respectively, chairman and assistant director (Media and Policy Research) of the Singapore Institute of International Affairs (SIIA). SIIA’s annual flagship event — the 7th ASEAN and Asia Forum on Aug 1 — will feature a panel discussion on reform in Myanmar.