When officials from Myanmar’s commercial capital, Yangon, toured six European countries in June, they were hoping to drum up investment in transport, energy and education.
Instead, they were bombarded with questions about the nation’s treatment of the Rohingya Muslim minority, who have long complained of persecution by the Buddhist majority in the oil-rich, ethnically divided, western state of Rakhine.
“In each of every country, that issue was always brought up,” Yangon City Development Committee secretary Hlaing Maw Oo said after the 16-day trip.
The situation in Rakhine has worsened dramatically since then, with more than 400,000 Rohingya fleeing to Bangladesh to escape a military counterinsurgency offensive the UN has described as “ethnic cleansing.”
Western investment and trade in Myanmar is small, but there were hopes that a series of reforms this year would prise open an economy stunted by international sanctions and decades of mismanagement under military rule.
With most sanctions lifted, an expected flood of Western money was seen as a key dividend from the transition to civilian rule under Nobel laureate and Burmese State Councilor Aung San Suu Kyi.
Regional diplomats saw it balancing China’s growing influence over its neighbor.
However, Aung San Suu Kyi has been beset by international criticism for saying little about human rights abuses against the Rohingya, and lawyers, consultants and lobbyists say the European and US companies that had been circling are wary of the reputational risks of investing in the nation.
Louis Yeung, managing principal of Yangon-based investment firm Faircap Partners, said one of his business partners — a listed, US-based food and beverage company — decided to hold off its plan to enter the Myanmar market for three to five years, citing factors including slower-than-expected reforms and the Rohingya crisis.
“Their conclusion is that it wasn’t the right time for them,” he said. “They want to see more traction from the government and Rakhine is not helpful.”
The pressure has been growing in recent months, even on existing investors, with rights group AFD International calling on foreign firms to stop investing in Myanmar.
A small group of investors in US oil major Chevron filed an unsuccessful motion at its annual general meeting urging it to pull out of its production-sharing contract with a state-run firm to explore for oil and gas.
Meanwhile, Norwegian telecom Telenor, which runs a mobile network in Myanmar, issued a statement calling for protection of human rights.
Chevron declined to comment on its investment in Myanmar, while Telenor did not respond to several requests for comment.
Bernd Lange, chair of the European Parliament Committee on International Trade, last week said his delegation postponed a visit to Myanmar indefinitely, saying the human rights situation “does not allow a fruitful discussion on a potential EU-Myanmar investment agreement.”
Myanmar Tourism Federation vice chairman Khin Aung Tun said that global firms planning to hold conferences in Myanmar were considering other locations.
“People were just starting to see Myanmar as a ‘good news’ story,” said Dane Chamorro, head of South East Asia at Control Risks, a global risk consultancy. “Now you can imagine a boardroom in which someone mentions Myanmar and someone else says: ‘Hold on, I’ve just seen something on Myanmar on TV: villages burned down, refugees, et cetera.’”
In an interview published in Nikkei Asia Review on Thursday, Aung San Suu Kyi said it was “natural” for foreign investors to be concerned, but repeated her view that economic development was the key to solving poor Rakhine’s long-standing problems.
“So investments would actually help make the situation better,” she said.
Myanmar’s US$70 billion economy should be a strong investment proposition for Western firms.
It boasts large oil and gas reserves, and natural resources such as rubies, jade and timber. Wages are low and its youthful population of more than 50 million is eager for retail and manufacturing jobs.
In April, Myanmar passed a long-awaited investment law, simplifying procedures and granting foreign investors equal treatment to the locals. A game-changing law allowing foreigners to buy stakes in local firms is expected later this year.
“The investment conditions were improving,” said Dustin Daugherty, ASEAN lead for business intelligence at Dezan Shira & Associates, a consultancy for foreign investors in Asia.
However, Myanmar’s economy might not suffer much if Western firms shun the country — or even if their governments were to reimpose some sanctions, although that appears unlikely for now.
Aung San Suu Kyi has sought to deepen relations with China at a time when Beijing is keen to push projects that fit with its “One Belt, One Road” initiative, which aims to stimulate trade by investment in infrastructure throughout Asia and beyond.
Myanmar trades with China as much as it does with its next four biggest partners: Singapore, Thailand, Japan and India. None of that top five participated in previous sanctions.
Trade with the US is only about US$400 million and US investment is just 0.5 percent of the total. Europe accounts for about one-10th of investment, while China and Hong Kong make up more than one-third, and Singapore and Thailand another one-third.
Than Aung Kyaw, deputy director-general of Myanmar’s Directorate of Investment and Company Administration, told reporters that European investors might have “second thoughts,” but he expected Asian investors to stay put.
China is already in talks to sell electricity to energy-hungry Myanmar and pushing for preferential access to a strategic port on the Bay of Bengal.
In April, the two nations reached an agreement on a pipeline that pumps oil across Myanmar to southwest China.
“It is going to feed Aung San Suu Kyi straight into the hands of [Chinese President] Xi Jinping (習近平),” said John Blaxland, director at the Australian National University’s Southeast Asia Institute and head of the Strategic and Defence Studies Centre.
Additional reporting by Shoon Naing and Wa Lone
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