History & Current EventsThe OppositionImportant Issues |
Foreign Investment in Burma Image courtesy of Reuters
Burma is a country rich in natural resources such as precious stones, oil, natural gas, timber and other minerals, but also, thanks to its years of economic isolation from the rest of the world, has seen little investment from foreign businesses. With the prospect of lifting trade sanctions, Burma is starting to open up to the global market, and this new influence offers hope of accelerating Burma’s modernisation and development, but also has the potential to provide a new way for the people and their natural resources to be exploited, and it remains to be seen whether both the Burmese government and international investors will follow up on their promises with meaningful commitments.
As of 16 May 2012, the EU and the UK suspended much of their trade sanctions until 20th April 2013.[1] The Burmese government also seems to have relaxed its laws regulating foreign businesses within the country - a recent new draft for an investment law states that foreigners will no longer need a local partner to set up businesses in Myanmar and may be granted a five-year tax holiday from the start of commercial operations.[2] [1] https://www.gov.uk/arms-embargo-on-burma [2] http://www.reuters.com/article/2012/03/16/us-myanmar-investment-idUSBRE82F0IY20120316 |
Asian countries have been quick to make a move on the Burmese markets, but many western companies are more reluctant. Many companies are wary of the sectarian fighting going on in Rakhine state and other areas of the country, while others are waiting until the suspension of sanctions is re-reviewed, since immediate investment would run the risk of massive loss if their governments were to re-impose sanctions after the trial period. The few companies which have already invested include Caterpillar (who have been providing equipment to Burma for some years, according to a previous agreement), General Electric (who have applied to open an office in Myanmar after concluding deals in the healthcare and energy sectors), Coca Cola, PepsiCo, and several oil and gas companies (including Esso (also known as Exxon Mobile), Chevron, ConocoPhillips, Statoil and Shell, and other European and Japanese companies) have been engaged in discussions and are competing for contracts.[1]
At the World Economic Forum in Bangkok (May 30 to June 1, 2012), Aung San Suu Kyi used her prominent platform to urge caution to foreign businesses: while acknowledging that they had the potential to provide much needed jobs and training to very many unemployed people in Burma, she warned potential investors not to be too hasty in setting up in a country with an inadequate judicial system, widespread corruption, and a government which reserves a proportion of its parliamentary seats for the military. She said: “These days I’m coming across a lot of what I call ‘reckless optimism’ . . . I think some healthy scepticism is in order.”[2]
[1] http://www.ft.com/cms/s/0/93fe823c-b070-11e1-a79b-00144feabdc0.html#axzz1xiEhhyjy
[2] http://www.ft.com/cms/s/0/157eecac-aba8-11e1-a8da-00144feabdc0.html#axzz2JNv6d5lk
[1] http://www.ft.com/cms/s/0/93fe823c-b070-11e1-a79b-00144feabdc0.html#axzz1xiEhhyjy
[2] http://www.ft.com/cms/s/0/157eecac-aba8-11e1-a8da-00144feabdc0.html#axzz2JNv6d5lk
HSBC
HSBC’s recent activities have been a prime example of the potential threat of aggressive foreign businesses, although Burma is only one of the many countries involved. A series of massive failures in its anti-money laundering protocols, which were intended to prevent dealings with Burma, Iran and North Korea, allowed the bank to be used by criminal organisations without repercussions: accounts linked to suspicious activity were not closed; large amounts of travellers' checks over a number of years were cleared in Japan and Russia, despite evidence of suspicious activity; and it is suggested that money-laundering was carried out on behalf of drug-barons.
The chairman of the senate subcommittee (which had conducted a year-long investigation into HSBC’s activities), Sen. Carl Levin, said: “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions.’ The subcommittee also stated that actions taken to get around these safeguards in the system ‘may have facilitated transactions on half of terrorists, drug traffickers or other wrongdoers’.
This activity resulted in the largest ever fine a bank has received: $1.9 billion ($1.25bn in a 'forfeiture' and $655m in civil penalties, although, of course, this is only a few weeks’ worth of HSBC’s income).[1]
[1] http://www.hsgac.senate.gov/subcommittees/investigations/media/hsbc-exposed-us-finacial-system-to-money-laundering-drug-terrorist-financing-risks
http://www.thetimes.co.uk/tto/business/industries/banking/article3627473.ece).
http://www.bbc.co.uk/news/business-18880269
The chairman of the senate subcommittee (which had conducted a year-long investigation into HSBC’s activities), Sen. Carl Levin, said: “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions.’ The subcommittee also stated that actions taken to get around these safeguards in the system ‘may have facilitated transactions on half of terrorists, drug traffickers or other wrongdoers’.
This activity resulted in the largest ever fine a bank has received: $1.9 billion ($1.25bn in a 'forfeiture' and $655m in civil penalties, although, of course, this is only a few weeks’ worth of HSBC’s income).[1]
[1] http://www.hsgac.senate.gov/subcommittees/investigations/media/hsbc-exposed-us-finacial-system-to-money-laundering-drug-terrorist-financing-risks
http://www.thetimes.co.uk/tto/business/industries/banking/article3627473.ece).
http://www.bbc.co.uk/news/business-18880269
Investment as a vehicle for social change
Foreign investment can also act as a significant force in accelerating the pace of future developments in Burma, not only by creating jobs for the large numbers of unemployed, but also by using their influence and size in order to incentivise the government to bring about meaningful change. The NGO ‘Walk Free’ is hoping potential multi-national investors such as Google, Apple, Microsoft, HSBC and Coca-Cola can exert their influence to challenge human trafficking, and seek to improve the conditions of its workers by imposing minimum standards and safeguards for their workers.
They stated that: ‘Business has always been a key driver of social change, shaping modern life through innovation and new technology. If corporate giants – 25 of the world's top businesses whose net worth makes up $5 trillion – prioritise the abolition of modern slavery as their next major innovation, we could quickly deal a major blow to the slavery industry in this generation.’[1]
Businesses also have other tools which can provide mutual benefit to themselves and their workers. For example, in June 2012, alongside its previously stated plans to manufacture and distribute within the country, Coca Cola announced a $3 million grant from its charitable foundation to Pact, a non-governmental organization who work to promote health, economic empowerment and food security. The money has been targeted for the development of a WORTH program in Burma: this program will allow groups of women, across hundreds of villages, to develop community banks that lend money to fund new businesses and entrepreneurial efforts.[2]
[1] http://www.guardian.co.uk/global-development/2012/dec/24/women-burma-human-trafficking
[2] http://www.reuters.com/article/2012/09/10/us-cocacola-myanmar-idUSBRE8890MW20120910
http://www.coca-colacompany.com/media-center/press-releases/the-coca-cola-foundation-announces-plans-for-community-economic-investments-in-myanmar
They stated that: ‘Business has always been a key driver of social change, shaping modern life through innovation and new technology. If corporate giants – 25 of the world's top businesses whose net worth makes up $5 trillion – prioritise the abolition of modern slavery as their next major innovation, we could quickly deal a major blow to the slavery industry in this generation.’[1]
Businesses also have other tools which can provide mutual benefit to themselves and their workers. For example, in June 2012, alongside its previously stated plans to manufacture and distribute within the country, Coca Cola announced a $3 million grant from its charitable foundation to Pact, a non-governmental organization who work to promote health, economic empowerment and food security. The money has been targeted for the development of a WORTH program in Burma: this program will allow groups of women, across hundreds of villages, to develop community banks that lend money to fund new businesses and entrepreneurial efforts.[2]
[1] http://www.guardian.co.uk/global-development/2012/dec/24/women-burma-human-trafficking
[2] http://www.reuters.com/article/2012/09/10/us-cocacola-myanmar-idUSBRE8890MW20120910
http://www.coca-colacompany.com/media-center/press-releases/the-coca-cola-foundation-announces-plans-for-community-economic-investments-in-myanmar
