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As Obama hosts Suu Kyi, US firms eye piece of 8% growth

Wednesday, September 14, 2016 - 11:42

[BANGKOK] When Aung San Suu Kyi heads to the White House on Wednesday in her visit as de facto leader of Myanmar, US companies will watch closely for any sign they'll get more access to the fast-growing Southeast Asian nation.

Business groups in the US have complained that sanctions hinder them from competing with major rivals in an economy that the Asian Development Bank projects will expand 8.4 per cent this year and 8.3 per cent in 2017, making Myanmar Asia's best performer.

By some estimates, as much as 70 per cent of Myanmar's economy is off-limits to American companies despite some easing of sanctions, according to Alexander Feldman, president and CEO of the US-Asean Business Council in Washington. The biggest obstacle to US investment is the Treasury Department's Specially Designated Nationals blacklist of individuals, he said.

"As a result of the SDN list and major investment annual reporting requirements, American companies are at a disadvantage when it comes to speed and cost of investing in Myanmar," he said, noting that any further easing by the US government would be "gratefully accepted".

The US first imposed economic sanctions on Myanmar in 1990 in an attempt to weaken the then-military regime and their associated business cronies. As the generals loosened their grip in recent years, the US did likewise.

Most recently after Ms Suu Kyi's government took power in March, President Barack Obama's administration allowed American businesses to have dealings with seven formerly blacklisted state-owned enterprises, use the country's main port, and work with state-owned banks.

Any further unwinding of sanctions depends on Ms Suu Kyi, who during her time as opposition leader and under house arrest was a leading advocate of punitive measures against the regime, said Herve Lemahieu, a research fellow specializing on Myanmar at the Lowy Institute for International Policy in Sydney.

He said Ms Suu Kyi would likely want sanctions to remain until the generals agreed to amend the constitution, which gives the army control of several key ministries and one quarter of the seats in parliament. It also prohibits her from serving as president.

"The White House is likely prepared to make a strong statement by waiving most remaining US sanctions with the exception of the arms embargo," Mr Lemahieu said.

Ms Suu Kyi will probably not go that far and instead signal that she would "tolerate further sanctions relief but make removing the last vestiges of the US sanctions regime conditional," he said.

The US still maintains a blacklist of people and companies, including two of the nation's largest conglomerates, which invest in everything from mining to banking, but are controlled by the military. It also bans arms sales to Myanmar and the import of jade and gemstones from the country. US entities investing more that US$500,000 in Myanmar must file paperwork every year on issues from human rights to anti-corruption measures.

The US should wait to lift sanctions until Ms Suu Kyi's National League for Democracy party has had time to carry out more government and institutional reforms, said Yan Myo Thein, a Yangon-based political analyst.

"Our political and economic institutions are not ready if the US totally lifts the sanctions," he said, noting the NLD still didn't have a plan in place for legitimising the country's so-called cronies who benefited under military rule and still have a big influence on the economy.

Sanctions Dilemma

The US is working to help Myanmar grow its economy through increased aid, promoting a healthy environment for trade and investment and taking steps to relax sanctions, Ben Rhodes, White House deputy national-security adviser, told reporters last week at a briefing in Laos.

"It's something that we continue to look at, because the purpose of the sanctions regime was to support a democratic transition, and some of the sanctions even were tied to the treatment of Suu Kyi specifically," Mr Rhodes said.

The issue of sanctions are a tricky one for Ms Suu Kyi, whose party was elected in a landslide and is now going to be expected to deliver results, said Zeya Thu, a Yangon-based political analyst. Sanctions could hamper those efforts, he said.

"She is in a dilemma," he said.

"Sanctions have a serious negative impact on the country no matter how targeted or smart they are. On the other hand, she might think of sanctions as a bargaining chip over powerful interests. She has to decide what will be her legacy."

BLOOMBERG