Myanmar’s opening attracted much interest not only from Asian neighbors but also from those in the West that once considered the country a pariah.
Recent events, however, suggest that the honeymoon with the United States and Europe may be waning over political issues.
By contrast, China and others remain ready to engage, provided business conditions improve.
In May, the Americans extended economic sanctions to maintain the status quo rather than easing up restrictions, as some had hoped. Just this month, religious clashes in Mandalay triggered not only a curfew in Myanmar’s second-largest city but wider concerns about conflict between the majority Buddhists and the country’s Muslim minority.
More questions are being asked about political stability and the risks for businesses. Responses differ according to perceptions and priorities.
Take, for example, the Rakhine state and treatment of the Muslim minority there. European governments and the U.S. have emphasized their concern over the plight of the Rohingya. This is to be expected, given the importance the West gives to human rights.
In America’s case, the decision to extend sanctions was tipped by domestic politics and especially views in Congress. The Obama administration noted progress made by Myanmar on other political fronts. These include the release of more than 1,100 political prisoners, steps toward a nationwide ceasefire with armed ethnic minorities, and greater freedom of expression for individuals and the press. But amid concerns of domestic legislation, the administration is unwilling to push further.
Some may take the view that there is little difference since, while still in place, most American sanctions are suspended. But on our latest trip to Washington, we have found that the Americans were more critical about Myanmar’s reform than a year ago.
For businesses looking at larger-scale investments, the continuation of sanctions means long-term uncertainty. With some exceptions, many look likely to keep watching from the sidelines rather than make commitments.
Yet, in responding to the American decision, the Myanmar government says this would have a limited impact. Government spokesman Ye Htut responded in an interview: “I do not think Myanmar’s development will be harmed because of it.” This is more than talk. For while Western governments continue to place political conditions on their engagement with Myanmar, others have fewer compunctions.
China’s President Xi Jinping responded to the situation by reassuring its neighbor that Beijing remains committed to a policy of noninterference with regards to Myanmar’s internal affairs.
To warm up relations with Myanmar, China dug into its history books and pulled out an almost forgotten 60-year-old agreement signed between Myanmar, India and China in the early days of the Cold War. This spells out the Five Principles of Peaceful Coexistence between the three countries and was the excuse for a big anniversary celebration last month. To receive Myanmar’s President Thein Sein, Beijing rolled out the red carpet and awarded the former general full military honors.
China is not alone in deepening ties with Myanmar. Many others in Asia could try to race ahead of their Western counterparts. Anecdotal evidence and some surveys show that these include not only Chinese companies but also those from Japan, South Korea, India, and members of the Association of Southeast Asian Nations.
A survey of more than 100 companies done recently by Singapore’s United Overseas Bank shows that more than 70 percent have plans to expand in Myanmar within the next year.
Similarly keen interest was shown at a conference that we organized in Yangon, together with the Union of Myanmar Federation of Chambers of Commerce and Industry, and two advisory firms from Singapore — KPMG and the Wong Partnership law firm.
From the perspective of many Asian businesses, American economic sanctions and the political issues that led to their renewal are not the main thing. Their concern is instead with issues on the ground — predominately the lack of capacity and infrastructure, and continuing uncertainty over rules and decision-making.
These business issues — rather than perceptions about the politics — are the choke points that prevent the initial interest of many foreign investors from translating into real investment. The Myanmar government would do well to give this priority, especially for investment projects in the country’s much talked about Special Economic Zones.
Another government priority has to be to help the country’s small and medium enterprises. With the approach of the ASEAN economic community in 2015, trade and market access will increase and local Myanmar businesses fear they cannot compete. Unless they are assisted, they could form a constituency to resist the economic opening.
At present, a number of the business groups in Myanmar emphasize that they do not support protectionist measures. Rather, small and medium-size enterprises seek foreign partnerships to technology and markets, and access to finance.
With elections due in 2015, the current government has a limited runway to consolidate the conditions for economic growth while politics is likely to heat up.
The leadership in Myanmar made a bold step to open up and reach out to the U.S. and Europe. The reality is, however, that reforming Myanmar is not an overnight project and expectations need to be tempered with a view to the longer term.
If the U.S. and Europe will not sustain and deepen their engagements with Myanmar, then others will be ready to offer themselves.
Associate professor Simon Tay and Cheryl Tan are, respectively, chairman and assistant director (media and policy research) of the Singapore Institute of International Affairs. SIIA will hold its annual flagship assembly, the 7th ASEAN & Asia Forum, at The Ritz Carlton, Millennia Singapore, on Aug. 1, including a panel to discuss reform in Myanmar.