Secretary of State Hillary Clinton’s arrival today in Myanmar may give Western companies an opening to return to the former dictatorship 14 years after her husband banned new investment on human-rights concerns.
Clinton’s three-day visit, the highest-level U.S. trip in more than five decades, comes after Myanmar President Thein Sein released political prisoners and eased media censorship. Boycott threats prompted companies such as PepsiCo Inc., Levi-Strauss & Co. and Apple Inc. to pull out of Myanmar even before then-President Bill Clinton imposed sanctions in 1997.
“It’s just a question of whether the little bit of money you made there was worth being stigmatized, even unfairly,” said Frances Zwenig, counselor with the U.S.-Asean Business Council, a trade group whose members include Google Inc., Coca-Cola Co. and Citigroup Inc. “What we’re looking at now is a new world where that might not be the case.”
A political detente would allow U.S. and European companies greater access to a market of 62 million people, though they are among Asia’s poorest. Until now neighboring China, India and Thailand have accounted for most of the investment into Myanmar, pouring more than $25 billion into ports, power plants and pipelines to capitalize on the country’s rich natural resources and strategic location on the Indian Ocean.
Clinton arrived in the capital Naypyidaw today, the Associated Press reported.
‘Very, Very Rich’
“They do have a small stock market, very small, and there are a few public companies that they are trying to develop more right now,” Jim Rogers, chairman of Singapore-based Rogers Holdings, told Bloomberg Television yesterday. “If you can find ways to invest in Myanmar you will be very, very rich over the next 20, 30, 40 years.”
Investment has centered around natural gas production. It has almost quadrupled in the past decade to 12.1 billion cubic meters in 2010, about a tenth that of China, Asia-Pacific’s biggest producer, according to the BP Statistical Review.
China National Petroleum Corp. last year started building oil and gas pipelines across the country, and India last year approved plans for Oil & Natural Gas Corp. and GAIL India Ltd. to invest $1.3 billion in a natural gas project led by South Korea’s Daewoo International Corp. Italian-Thai Development Pcl, Thailand’s biggest construction company, signed an $8.6 billion contract last year with Myanmar’s government to build a deep-sea port and industrial park.
“There are a vast amount of opportunities in Myanmar,” said Chanitr Charnchainarong, executive vice president of the Stock Exchange of Thailand in Bangkok, who has traveled to the country “many times” in the past year. “Every Western company complaining about sanctions is looking around quietly. The more the merrier.”
China, Hong Kong and Thailand’s $25 billion account for more than 70 percent of the total investment into Myanmar, according to government statistics that don’t provide a timeframe. More than 86 percent of total foreign investment there has been in the electricity, mining and oil and gas sectors, government statistics show.
Some western companies are involved: France’s Total SA and Chevron Corp. own part of a gas field and pipeline that stretches to Thailand. Chevron, based in San Ramon, California, obtained a 28.3 percent stake in the Total-operated field through its 2005 purchase of Unocal Corp, which made its investment prior to the 1997 ban. The EU doesn’t block oil and gas investments.
Total spokesman Florent Segura declined to comment on the Paris-based company’s operations in Myanmar. “Wherever we operate, we are dedicated to developing economically viable projects while adhering to national and international laws and ensuring compliance with our Code of Conduct,” the company said in a statement about Myanmar on its website.
“Sanctions hang like a millstone round our necks, and the U.S. would have particular problems unscrambling them as they are so diffuse and Congress could still take a hard line,” Derek Tonkin, chairman of Network Myanmar, a U.K.-based organization that promotes reconciliation in Myanmar, and a former British ambassador in the region, said by e-mail.
Myanmar produced more than 25,000 metric tons of jade in 2009 and has deposits of tin, zinc, coal and copper, according to the U.S. Geological Survey. Even so, decades of military rule in the Southeast Asian country, where forests cover half of a total land area equivalent to the size of Texas, have restricted exploration.
Suu Kyi Meeting
Clinton is the first U.S. secretary of state to travel to Myanmar since John Foster Dulles visited the country, then called Burma, in 1955. Her trip includes stops in Naypyidaw and Yangon, where she will meet with opposition leader Aung San Suu Kyi.
Clinton’s goal is “to continue the momentum that there’s been towards greater respect for human rights, greater movement on political reform in Burma, and also, critically, greater respect for ethnic minorities in the context of national reconciliation,” Ben Rhodes, the White House deputy national security adviser, told reporters on Nov. 22 in Washington.
U.S. sanctions against Myanmar have been tightening since 1988, when then-President Ronald Reagan suspended aid and banned arms sales after soldiers killed about 3,000 student protesters, according to an estimate by Human Rights Watch. A series of congressional acts and presidential orders since have banned imports, restricted money transfers, curbed aid money, frozen assets, prevented engagement from agencies like the World Bank and targeted jewelry with gemstones originating in Myanmar.
Nothing Without Banks
Thein Sein has freed hundreds of prisoners since taking power in February. Suu Kyi, who was released from house arrest a year ago after spending 15 of the previous 21 years in confinement, has called on him to release more than 500 still behind bars.
Already unnerved by Europe’s debt crisis, investors may be wary given legal uncertainties and financial constraints surrounding Myanmar, said Lye Thim Loong, who helps manage about $770 million at Libra Invest Bhd. in Kuala Lumpur.
“It can’t happen overnight,” he said. “First of all, you need banks to do trade financing. Without banking lines nothing trades.”
Several large European companies operating in Myanmar, including Total and Unilever, the world’s second-biggest consumer-goods company, are in talks to form a business organization modeled on EU chambers of commerce in Southeast Asia, said Luc de Waegh, founder of West Indochina Ltd., which advises firms in Myanmar.
Trevor Gorin, a spokesman for London- and Rotterdam-based Unilever, said: “We have no knowledge of this and are not involved.”
De Waegh said the effort is focused on creating quality jobs as part of corporate social responsibility to help Myanmar transition. “The visit of Clinton suggests that responsible investment can contribute to the development of Myanmar,” said de Waegh, who has done business there since 1993.
Myanmar’s citizens earn an estimated $2.20 per day on average, about seven times less than the per capita income in neighboring Thailand, according to International Monetary Fund statistics.
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.
Myanmar has sought IMF advice to end its multiple exchange-rate system and is modernizing its banking system, central bank governor U Ha Tun said Sept 23. Deputy Governor U Maung Maung Win attended a workshop on Nov. 28 on developing a bond market, the state-run New Light of Myanmar reported.
The exchange rate probably will be unified in the first quarter as the government moves to streamline bureaucratic procedures and make the investment law more attractive, Nay Zin Latt, a political adviser to Thein Sein, said in an e-mail interview on Nov. 26.
“There is a real feeling that Myanmar is the next destination for regional development opportunities,” said Gavin Parry, managing director of Parry International Trading Ltd. in Hong Kong. “The risk is that the pace of the current reform does not continue.”