Myanmar reforms likely to continue: U.S. State Department official

WASHINGTON Tue Jul 31, 2012 12:29pm EDT

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WASHINGTON (Reuters) - A top State Department official on Tuesday said he was optimistic Myanmar would stay on the path of political and economic reforms, but warned potential U.S. investors they face a complicated business environment there.

"I do think from the conversations I've have had (with Myanmar leaders) that there is a general understanding if they were really to retreat from this, there would be a lot of social pressure against them," Under Secretary of State Robert Hormats told the Washington International Trade Association.

"My baseline scenario is they will continue to move in the direction of reform," because the average Myanmar citizen's growing expectation of increased economic and civil liberties makes it hard for the government to reverse course, he said.

Myanmar, also known by its former colonial name of Burma, began emerging last year from decades of isolation when its long-time military dictator, Than Shwe, stepped aside and a quasi-civilian government took over.

The new government, led by President Thein Sein, a former military general, has started overhauling the country's economy, easing media censorship, legalizing trade unions and protests and freeing political prisoners.

The United States has responded by easing some sanctions, starting with a decision this month to allow U.S. companies to invest in Myanmar and provide financial services there.

Hormats repeated Washington was prepared to lift additional sanctions on an "action for action" basis and noted that Thein Sein has promised another wave of reform.

Meanwhile, a bill to reauthorize a long-time U.S. import ban on Myanmar through July 2015 is currently pending in Congress, but would allow the White House to ease those and other sanctions in response to additional steps.

Although Myanmar is rich in natural resources like oil and gas, timber, jewels and agricultural crop land, it has relatively few processing industries and is poor compared to neighbors such as Thailand, China and Vietnam.

That has fueled visions of U.S. and foreign countries rushing into an untapped market with huge investments.

Hormats downplayed that possibility, at least in the near terms, saying "I don't see a big gush of money coming in."

While the Myanmar government is eager for U.S. investment to help diversify its economy, the country faces a number of "capacity" challenges, such as a shortage of skilled government workers to process business applications, he said.

"This notion that there's going to be a rush of American capital coming in there - there probably won't," he said.

"Burma is a very complex place and if you're going to invest, you have to do a lot of due diligence," he said.

One reason is the sensitivities of ethnic minorities, who remember the difficult relations they have had with the military government and past investment deals that pushed some of them off their land, Hormats said.

Companies also need to tread carefully because of local concerns about the environmental impact of investments, he said.

(Reporting by Doug Palmer; Editing by Cynthia Osterman)

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