Thursday, July 12, 2012

U.S. companies now free to invest in Burma

Thursday, 12 July 2012 12:32 Mizzima News

American companies can now begin investing in Burma, following the official lifting of U.S. investment sanctions against Burma on Wednesday. For the past 15 years, U.S. companies were prohibited to make investments in the country.

U.S. President Barrack Obama  Photo:

U.S. firms are still prohibited from business dealings with Burma's military and industries controlled by the Ministry of Defense. Also, trade imports are prohibited in a wide range of goods.

Observers said U.S. energy companies are now likely to show interest in Burma’s rich natural resources, especially oil and gas in offshore areas of the Andaman Sea. Many U.S. companies, including Coca Cola, have already announced an interest in setting up operations in Burma.

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

Aung San Suu Kyi, Burma’s opposition leader, has warned foreign companies to be cautious in investing in the oil and gas industries, which would require working with the state-run Myanma Oil and Gas Enterprise (MOGE), which she said lacks accountability and transparency. Doing deals with MOGE is the only way to gain access to energy resources.

Her comments reflected a disagreement between human rights groups and business advocates over how foreign governments should ease investment restrictions.

Recognizing concerns over corruption, transparency and rights abuses in Burma, the Obama administration said it will require U.S. companies to give detailed reports on their investments in Burma.

The Obama administration has stipulated that U.S. companies must file regular reports on their investments in the country. Any U.S. legal person, which includes individuals and entities, engaging in investment that total more than $500,000, will have to report annually to the State Department on their investment. Further, the reports will be required to include information on any payments totaling more than $10,000 to Burmese government entities, including state-owned enterprises, said a fact sheet.

Secretary of State Hillary Rodham Clinton said in May that U.S. companies would be allowed to invest in all sectors of Burma's economy, though not businesses owned or operated by the military. She also announced the suspension of a ban on the export of U.S. financial services, seen as vital for starting to do business in the country.

At the same time, President Barrack Obama also signed a new executive order that expands the Treasury secretary’s existing sanctions authority to those who undermine the reform process, engage in human-rights abuses, contribute to ethnic conflict, or participate in military trade with North Korea.

“This order is a clear message to Burmese government and military officials: those individuals who continue to engage in abusive, corrupt, or destabilizing behavior going forward will not reap the rewards of reform,” Obama said.

Also, on Wednesday the U.S. imposed sanctions on Burma's Directorate of Defense Industries (DDI), which carries out missile research and development, for its engagement with North Korea. The U.S. said the DDI has a memo of understanding with North Korea to provide assistance to Burma to build medium-range, liquid-fueled ballistic missiles.

The Treasury Department also said it placed sanctions on Innwa Bank for being a financial institution owned or controlled by Myanmar Economic Corp., which was previously designated for sanctions in July 2008 under an executive order. The Myanmar Economic Corp. is a conglomerate owned by the defense ministry that has interests in a variety of economic sectors.

The announcement comes upon the arrival in Burma of Ambassador Derek Mitchell, who on Wednesday presented his credentials to become the first U.S. ambassador to the country in 22 years as Washington normalizes its diplomatic relations.

In a further sign of closer ties, Robert Hormats, the undersecretary of state for economic growth, energy and the environment, and Francisco Sanchez, the undersecretary of commerce for international trade, will arrive in Burma this weekend to promote economic and business engagement.

In a press statement, U.S. Sen. Jim Webb, a long-time advocate of engagement with Burma, said, “The steps taken today will incentivize positive conduct, while ensuring that so called ‘bad actors’ from the previous military junta or those who resist reforms will not benefit from economic relations with the United States.

“It is important to note that the European Union suspended all sanctions on Burma in April, except for the arms embargo, and that all major U.S. partners including Australia, Japan and Canada have suspended sanctions and are offering assistance for economic development in the country. It is essential that the United States continue to use executive authorities to ease all economic sanctions on Burma, such as suspending the ban on imports.”

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