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Myanmar May Suffer If U.S. Extends Import Ban, Group Says

U.S. lawmakers may hurt Myanmar’s ability to attract labor-intensive investments in manufacturing by extending an import ban in place since 2003, according to policy research organization International Crisis Group.

The Senate Finance Committee recommended extending the ban on imports from Myanmar for three years, according to legislation under consideration in the upper house. President Barack Obama, who this month authorized U.S. companies to invest in Myanmar for the first time in about 15 years, can issue a waiver at any time to overturn the measure, according to the group.

The extension “could have a serious impact on Myanmar’s economic recovery, by hindering the growth of job-creating manufacturing industries and further skewing the economy towards potentially problematic extractive industries,” the report said. “It is indeed hard to see how retention by the U.S. of its import ban could in any way serve the interests of the Myanmar people or assist the democratization process.”

Obama has eased sanctions against Myanmar after a shift to democracy, while maintaining the underlying legislation to penalize the former military regime if it backslides on rights. President Thein Sein has called for sanctions to be fully lifted to eliminate uncertainty that may deter investors.

Myanmar dismantled a fixed exchange rate in April and parliamentarians are revamping laws to attract investors to the country of 64 million people. The nation’s per capita gross domestic product is less than 10 percent that of neighboring Thailand, according to International Monetary Fund estimates.

Senator Jim Webb earlier this month praised Obama’s decision to allow new investment in Myanmar and called for the suspension of the import ban.

Popular Expectations

“We are facing a critical window of time to push for continued reforms and political reconciliation within that country,” he said in a July 11 statement.

The import ban “would exert no obvious pressure on hardliners in Myanmar” because they don’t have economic interests in manufacturing, the International Crisis Group said. The government is taking steps to end monopolies and favored access to state contracts that benefitted crony business tycoons, military generals and political leaders, all of whom appear to be repositioning themselves instead of blocking reforms, it said.

“There is a risk that popular expectations rise faster than the government can meet them,” Crisis Group said in the report. “When expectations are not met, there can be political consequences -- particularly when longstanding authoritarian controls on the population are being simultaneously removed, allowing frustrations to come into the open.”

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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