WASHINGTON/HONG KONG (Reuters) - The suspension of U.S. sanctions barring investment in Myanmar in response to political reforms in the poor Southeast Asian state opens the door to U.S. companies queuing to scout for business in one of the last frontier markets.
Industrial heavyweights including General Electric Co and Caterpillar Inc are joining rivals from Asia and Europe that have already moved into a market of up to 60 million people in the former British colony. Analysts and experts have said there will be opportunities for foreign companies across the industrial landscape - from energy, mining and construction to agriculture, finance and tourism.
GE, the biggest U.S. conglomerate, said on Friday it was working with the Myanmar government on possible infrastructure projects and opportunities in the healthcare and energy sectors.
“We are looking at healthcare. We are working with the government on energy. Eventually we will look into all of the infrastructure businesses,” GE Vice Chairman John Rice told Reuters in Hong Kong.
“We are looking at Yangon’s power needs, working with the ministry and the government to figure out how we can help reduce some of the shortages,” said Rice, who runs GE’s global operations and visited Myanmar in April.
Even before the suspension of sanctions, Caterpillar sold its bulldozers and excavators in Myanmar through an independent dealer - an arrangement it uses around the world. The suspension will allow the world’s biggest maker of earth-moving equipment to use its financial services arm to help that dealer expand.
“There had been prohibitions on financial services support, and as we understand it these would be lifted (with the suspension of sanctions) and we believe this will give us an opportunity to support that dealer better, to better allow them to expand and grow and support the customers in the market,” said Jim Dugan, a spokesman for the Peoria, Illinois-based company.
U.S. Secretary of State Hillary Clinton announced the suspension of sanctions at a news briefing on Thursday with Myanmar Foreign Minister Wunna Maung Lwin, on his long-isolated nation’s first official visit to Washington in decades.
“Today we say to American business: invest in Burma and do it responsibly,” Clinton said.
Myanmar, also known as Burma, has huge gas resources, but a dysfunctional power grid, with nationwide rolling blackouts.
A spokesman for automaker Ford Asia told Reuters: “It’s very encouraging to see the rapid and positive developments ... We are sure Ford will find opportunities to participate in this ongoing transformation.”
Hotel chains and airlines are also looking for a chance to move in — earlier this year executives of Starwood Hotels & Resorts and Marriott International said they were interested in opening properties in the country.
“The country won’t be the same in five years as global competition to make investments and provide services heats up as a result of this U.S. policy decision,” said Kevin Mitchell, chairman of the Business Travel Coalition.
The International Monetary Fund has estimated Myanmar’s gross domestic product at a little more than $50 billion. Neighboring Thailand, with a population of about 67 million, has a GDP of $348 billion.
Clinton said Washington would issue a general license to permit U.S. investments across Myanmar’s economy, allowing U.S. energy, mining and financial services companies to look for opportunities in an economy which is rapidly re-opening after having been run down by five decades of military rule.
But she stressed the laws underpinning U.S. sanctions on Myanmar would remain - as leverage while pushing the government further on democratic reforms.
“We are suspending sanctions. We believe that is the appropriate step for us to take today,” Clinton said. “We will be keeping the relevant laws on the books as an insurance policy, but our goal and our commitment is to move as rapidly as we can to expand business and investment opportunities.”
Myanmar welcomed the announcement.
“It is excellent,” Industry Minister Soe Thein said in an interview with Reuters in the capital, Naypyitaw. “This morning I heard the news and I am very, very happy.
“For the investor, financial sanctions are very important. Because of them, I haven’t been able to move ... The U.S. can invest in a lot of areas.”
Soe Thein, who met GE’s Rice in Naypyitaw last month, said the company was interested in leasing generators to supply electricity to Yangon. An official in Yangon said the project would consist of four generators of 25 megawatts each.
President Barack Obama, elaborating on the policy shift, said Washington would work to “ensure that those who abuse human rights, engage in corruption, interfere with the peace process, or obstruct the reform process do not benefit from increased engagement with the United States”.
Myanmar’s reformist, quasi-civilian government took office a year ago and has started overhauling its economy, easing media censorship, legalizing trade unions and protests, freeing political prisoners and agreeing to cease-fires with ethnic minority rebels. Nobel Peace Prize laureate and pro-democracy leader Aung San Suu Kyi has a seat in parliament.
Suu Kyi’s National League for Democracy, Myanmar’s biggest opposition force, won a 1990 election by a landslide but the military refused to cede power and for two decades suppressed the party’s activities, jailing many of its members.
In response, the United States and other Western countries imposed sanctions that drove the country closer to China. Now, Derek Mitchell, the State Department’s coordinator for policy towards Myanmar, is to be nominated U.S. ambassador.
Pro-democracy advocates have urged the United States to move cautiously, saying sanctions are an important tool to maintain pressure on the government to follow through on pledges of greater democratic openness.
Illustrating those concerns, the United Nations is investigating reports of possible weapons-related deals between North Korea and Myanmar, according to a confidential report seen by Reuters.
In preparation for a likely wave of foreign investment into the resource-rich economy, Myanmar’s central bank said it would seek to weaken its newly floated kyat currency and prevent further rises that could derail economic reforms.
“In the near future there will be a massive inflow of foreign direct investment, and as a result Myanmar’s kyat is expected to appreciate. We will do our best to prevent this,” Nay Aye, a deputy central bank governor, told Reuters in an interview.
Hans Vriens, a Dutch consultant and adviser to European companies and the Myanmar government, said the economy was “desperate for foreign investment and especially for Western investment” as it didn’t want to be “a client state of China”.
“The regulatory system is completely outdated,” Vriens told Reuters. “It’s difficult to import, difficult to export. They need to modify that most of all. The government means well and they’re very open to asking for advice, but you need to remember that the government is staffed by former generals.
“They know how to fight an insurgency, but they don’t know how to run an economy,” he said.
Some human rights activists remain wary.
U.S. Campaign for Burma, which opposes wholesale lifting of sanctions until the government makes deeper reforms, said Myanmar’s army continues to wage a campaign against the Kachin ethnic minority in northern Myanmar and the new U.S. policy would do little to stop it.
Bill Davis, Burma Project director of the group Physicians for Human Rights, said Kachin and other ethnic minority groups whose homelands hold Myanmar’s natural resources told him in interviews they were “still afraid of the government”.
“If the people of Burma do not trust their government, the U.S. administration should not either,” he said.
Additional reporting by Scott Malone in BOSTON, Karen Jacobs in ATLANTA, Matt Driskill in SINGAPORE, Henry Foy in MUMBAI, Alison Leung in HONG KONG and Jason Szep and Aung Hla Tun in NAYPYITAW; Editing by Robert Birsel, Nick Macfie and Phil Berlowitz