As sanctions begin easing, Burma’s economy under scrutiny

Monday, 09 April 2012 12:46 Ron Corben

The election success of Burma's opposition has led to the easing of some sanctions imposed by the United States and pressure from neighboring countries to drop them entirely. Although there is a surge in interest in Burma's economy from foreign investors, analysts warn there remain major economic and political challenges.

This week, the United States dropped travel bans against some senior Burmese officials and eased restrictions on some U.S. investment and financial services.

Positive reaction

The moves were welcomed by the chief executive of the investment house Leopard Capital, Douglas Clayton.

"We’re very bullish on the development and we believe that this is the beginning of Myanmar’s [Burma's] transformation into a modern economy and that there will be a role for foreign investors to play in that. Sanctions in the past should be unwound because the reasons for sanctions have been largely met," he said.

Although the United States has said it is preparing to nominate an ambassador to the country, Secretary of State Hillary Clinton says the reform process still has a long way to go.

Asean divided

That position remains at odds with Burma’s neighbors in the Association of Southeast Asia Nations, who has called for an end to all sanctions.

Despite that show of support from Asean, not all members are in agreement. Asean politicians within the Asean Inter-parliamentary Myanmar Caucus say the lifting of all sanctions could be premature, inviting instability within the country.

Kraisak Choonhavan, Thailand representative within the Caucus, says ending fighting in ethnic minority regions should be the priority before sanctions are fully lifted.

"These pressures [to ease sanctions] are strong and much stronger still, as it is represented by the Asean call for the lifting of sanctions to please the regime - which remains very much a vicious and undaunting regime on the maintenance of its absolute power over Shan State, Karen State, Kachin State [and] Mon State," said Kraisak Choonhavan.

Human rights

The Burmese government has been holding ceasefire talks with the Kachin and Karen in recent days. Rights organizations say on-going military operations have led to human rights abuses and attacks on civilians in Kachin state in recent months.

Kraisak fears the NLD, Burma's main opposition party, having secured seats in the national parliament in the by-election, may turn its back on ethnic minority communities’ concerns.

Other pro-democracy groups say sanctions should be lifted only after all political detainees are released.

The Thailand based Assistance Association for Political Prisoners (AAPP) says there are still 900 political prisoners in jail. Human Rights Watch, in a release, called for caution in any easing of sanctions, saying while positive steps by Burma’s government should be matched by the European Union, there should be no “wholesale withdrawal of sanctions”.

The rights group says a further easing on visa bans and increases in humanitarian and development assistance should be considered by European Union foreign ministers. While the sanctions may remain for now, there already has been a surge in tourism from foreigners eager for a first hand look at the country.

Sean Turnell, an associate professor of economics at Australia’s Macquarie University, says Asian investors are already trying to capitalize on the foreign interest.

"Asian investors have always been there of course. But some of them are getting excited about potential Western interest in the sense that if they see a great advance of Western tourists into the country then I think there’s a lot of Asian investors interested in hotels and tourist infrastructure," said Turnell.

Burma’s economy in recent years has grown up with the sanctions, which has led to pain for some industries but benefits for others.

Uneven benefits

Academics and rights workers have argued the trade and financial sanctions hit workers in export-oriented industries such as textiles, forcing many who would prefer factory jobs into informal sectors such as entertainment or the sex industry.

Aung Zaw, editor of the newsmagazine The Irrawaddy, says there are many businessmen and state-owned enterprises that have benefited from the restricted economic competition resulting from the foreign sanctions.

"There are some tycoons, those ministers, whose [business] is not competitive; particular those billionaires inside the country," he said. "They are not competitive enough, and they don’t want to see sanctions being lifted because they are enjoying so much with the monopoly – they monopolize everything."

But all analysts agree Burma faces major challenges and opportunities as it tries to rebuild an economy long mismanaged after five decades of military rule.


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