Myanmar Anticipates West Easing Sanctions

Myanmar President Thein Sein is seeking to reconcile with political opponents to expand the economy and prompt Western nations to reconsider sanctions that have hurt the country’s poor, one of his advisers said.

Relations with the U.S. and Europe have "improved in a short span of time and they will consider lifting sanctions soon," Nay Zin Latt, a political adviser to Thein Sein, said in an e-mail interview. "It’s just a matter of time. Sanctions don’t have enough strength for regime change but seriously hit the middle class and grassroots rather than the elite."

Thein Sein has released hundreds of political prisoners, eased censorship and sought peace talks with ethnic groups seeking independence since taking power nine months ago after an election that ended five decades of military rule. Hillary Clinton this week will become the first U.S. Secretary of State in 56 years to visit the country formerly known as Burma.

Myanmar’s steps toward democracy follow uprisings in the Middle East and North Africa that felled dictators, and as support for parties in Malaysia and Singapore that have ruled for decades declines. The measures aim to avoid a repeat of 1988 student protests during which soldiers killed about 3,000 demonstrators, according to an estimate by Human Rights Watch.

‘Top-Down’

"Our change model is ‘top-down,’ not ‘bottom-up,’ which happened in 1988," said Nay Zin Latt, 57, a businessman and writer who joined Thein Sein’s advisory team in April after being convinced of his commitment to democratic change. "We actually are much behind other Asean countries and the president wants to set a pretty good pace in democratization."

The 10-member Association of Southeast Asian Nations voted this month to allow Myanmar to serve as its chair in 2014 to encourage further changes in its poorest member. The bloc hosts annual meetings attended by leaders from the U.S., China and Asia’s other major powers.

Thein Sein’s government "has the vision and political will, but they don’t have a plan and policies to implement these reforms," said Zaw Oo, director of the Community Development and Civic Empowerment program at Chiang Mai University in Thailand. “This is where the international community can help.”

IMF Advice

Myanmar has sought advice from the International Monetary Fund to end its multiple exchange-rate system and is modernizing its banking system, central bank governor U Ha Tun said Sept 23. The exchange rate will likely be unified in the first quarter as the government moves to streamline bureaucratic procedures and make the investment law more attractive, Nay Zin Latt said.

Under Myanmar’s multiple-exchange rate system, the kyat is pegged to 8.5 per 1 IMF-issued special drawing right, equivalent to about 6.4 kyat per dollar. Unofficial rates are more than 100 times higher, trading at 770 kyat per dollar on Oct. 28, according to the Irrawaddy, an online exile newspaper. The difference hinders trade and increases costs for foreign businesses, according to a 2008 IMF working paper.

“The key factor driving the image and power of one’s country is the economy,” Nay Zin Latt said. “Because of sanctions, not only investment but also technology, management, innovation and so forth have stopped flowing to Myanmar.”

U.S. sanctions ban new investment, imports from Myanmar and fund transfers into the country. Europe’s restrictions, which are less severe, include bans on weapons sales and mining investments.

U.S. Engagement

Clinton’s visit comes amid a flurry of trips by officials from Western powers to Myanmar in the past few months. Derek Mitchell, a special American envoy, completed his third visit to the country in three months on Nov. 4, and U.K. International Development Secretary Andrew Mitchell visited on Nov. 18.

“High-level diplomats from the Western world these days have been in and out,” Nay Zin Latt said. “This is an indication of the situation on external relationships and the number of investors from various countries that are preparing to invest substantially.”

The shift in Myanmar is in part due to its leaders wanting to limit China’s political and economic influence, according to analysts including Ernest Z. Bower, director of the Southeast Asia program at the Washington-based Center for Strategic and International Studies.

Dam Construction Halted

In September, Thein Sein suspended China’s construction of a $3.6 billion dam and India said last month it would extend $500 million of credit to Myanmar as the two countries agreed to boost trade ties. Deputy Foreign Minister U Maung Myint yesterday completed a goodwill visit to China’s Yunnan province, which borders Myanmar, the state-run New Light of Myanmar reported.

Myanmar’s 62 million people are among Asia’s poorest, earning an estimated $2.20 per day on average, about seven times less than the per capita income in neighboring Thailand, according to IMF statistics. In recent years, China, India and Thailand have invested in Myanmar’s ports, railways and oil and gas pipelines to gain access to natural resources.

Myanmar is the “most promising and exciting” Asian market as the government reforms the political system in a country with ample natural resources, Jim Rogers, chairman of Rogers Holdings, told a forum in Tokyo on Nov. 26.

‘Very Genuine’

Thein Sein is “very genuine in his desire for the process of democratization,” Myanmar opposition leader Aung San Suu Kyi told reporters on Nov. 14, a year after she was released from house arrest. The Nobel laureate, who has met with Thein Sein, spent 15 years in confinement since her first arrest in 1989.

Suu Kyi “is very much welcomed by both the new government and parliament,” Nay Zin Latt said. “She has the capacity and she’s also strong in mind for the development of her country.”

Suu Kyi, 66, will stand in an election for the first time after her party voted to rejoin the political process on Nov. 18. She has called on Thein Sein to make peace with ethnic armies fighting for independence and free more than 500 political prisoners still behind bars.

“Releasing prisoners who have a political background is in the mind of the president, but through stability,” Nay Zin Latt said. “This is a transition period, we should not forget. The government does not want any failures and mistakes.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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