Mar 31, 2012

Europe looks beyond Myanmar sanctions

Pressure is building in the European Union to end sanctions against Myanmar in the coming weeks, a move to reward the country for its shift towards democracy while allowing European companies to gain a foothold before their U.S. counterparts.

No formal decision on softening or removing sanctions is expected until April 23, when EU foreign ministers will meet in Brussels to discuss the issue.

But major corporations are laying out the business case for quick decision-making to their foreign ministries and EU officials are raising their profile in the region.

The European commissioner for trade will attend an EU-ASEAN business summit in Cambodia on April 1, the day Myanmar holds by-elections that will be closely watched internationally to see whether it lives up to its democratic commitment in practice.

And weeks after the elections, which Europe is using as a litmus test of Myanmar's readiness to come in from the cold, Poland's foreign minister will lead a delegation of Polish business leaders on a five-day visit to the once-isolated state.

The EU's foreign policy chief, Catherine Ashton, who will lead the debate on sanctions, is scheduled to visit in the next three weeks, as long as Sunday's elections are "free and fair".

"There's a lot of momentum to remove the sanctions as quickly as possible, beginning even before the April foreign ministers' meeting," said a senior EU diplomat responsible for laying the groundwork for a decision.

"Germany and Italy are among those pushing for a complete removal of sanctions right away, while others favor a more gradual easing," he said, mentioning Britain, France, the Netherlands, Denmark and Sweden among the second group.

Those who are more hesitant point to the military leadership's record on human rights and the treatment of ethnic minorities. Nobody wants to remove sanctions only for Myanmar to reinstate its former style of rule.

Germany's minister for economic cooperation and development, Dirk Niebel, who visited Myanmar's opposition leader Aung San Suu Kyi in February, expressed caution, saying only that the political process in Myanmar was headed in the right direction.

The by-elections could lead to a "democracy dividend that could bring about the lifting of sanctions on development cooperation, and could then lead to a relaxation of EU financial sanctions", he told Reuters this week.

EU Trade Commissioner Karel De Gucht said the by-election, in which Suu Kyi will stand after being freed from house arrest in late 2010, was just an early stage.

"These are only the first steps - it's very important they continue in that direction but also that it also happens in a sustainable way," he told Reuters in an interview at a regional summit in Cambodia.

The 27-member European Union suspended travel bans on the leadership of Myanmar in January, but De Gucht said it would not be rushed by big business into a further easing of sanctions, which include bans on investment in key sectors.

"You should not overestimate pressure by private companies and certainly you should not overestimate the influence this has on the decision-making of politicians," he said.


A major question is what European businesses have to offer Myanmar, and how ready they are to compete with the likes of China, India, Thailand and South Korea, all of which already do substantial business or have large investments in the country.

Most of the excitement in Europe is based on the fact that Myanmar is a country of some 60 million people which neighbors the two biggest markets in the world - China and India - and has a vast requirement for investment in health, construction, telecommunications, housing, energy and infrastructure, having been cut off from much of the world for decades.

While the country has one of the lowest per-capita incomes in the world at $1,300 a year and is still largely agrarian, it also has large untapped resources of oil and natural gas, sizeable deposits of coal, nickel ore and gemstones, and the potential to return to being a major exporter of rice and wood.

"Blessed with its strategic location between India and China, a wealth of natural resources, tourist friendly geography and climate and colonial heritage, Myanmar could become a very prosperous country," CLSA Asia-Pacific Markets, a research brokerage, wrote in a report published in January.

"While current investment options are limited, opportunities may rapidly emerge and events going on in Myanmar deserve close scrutiny," CLSA's Tim Taylor concluded after a two-day visit.

From Europe's point of view, the biggest and most immediate opportunities are expected to be in oil and gas, with companies such as Shell, BP, France's Total, Italy's ENI and Norway's Statoil all seen jostling for position before barriers come down.

Major construction, telecoms and industrial equipment manufacturers such as Siemens and Bouygues are also exploring opportunities, industry sources say.

Igor Blazevic, who is based in the commercial capital Rangoon working for a Czech NGO called People in Need, said hotels were full of Indian, Chinese and European businessmen, including machinery salesmen from Germany and Austria.

"They look more like trading adventurers who are testing the water for bigger players," he told Reuters.
As EU businesses prepare for what they hope will be a watershed, Business Europe, a lobby group representing 20 million companies in 35 countries, held meetings with EU officials on February 28 to push for the lifting of sanctions.

Their concern was that Japan and India, which have not imposed restrictions on Myanmar, were already gaining a firm foothold and that the United States could move into the market more rapidly if the EU did not remove sanctions first.

"We said, there are important developments taking place, you are reviewing sanctions, so please take into account the implications for business," said Winand Quaedvlieg, vice chairman of Business Europe's international relations committee.

"There is a lot of potential in the country," he told Reuters. "There is a low level of development and high potential, both in raw materials and in human resources."


At a time when Europe is in crisis and searching desperately for growth, developing markets in Asia, where economies are expanding at around 7 percent a year, is a top priority.

Over the past two years, Europe has also shown that it can be more nimble than the United States and other rivals when it comes to signing up opportunities in the region.

The EU, the world's largest trading bloc, signed a free-trade agreement with South Korea last year, outflanking both the United States and China to secure the deal first. It is making similar inroads with Malaysia and India.

For the United States, one problem in Myanmar is that it will prove difficult to unravel the web of sanctions it has imposed on the country as quickly as the EU can. The most that can be hoped for in the weeks after April 1 is a lifting of visa bans, U.S. officials say.

But even then, there remain serious human rights concerns, including the detention of more than 1,000 political prisoners, that might prevent the quick removal of the layers of Congressional and presidential restrictions imposed on Myanmar.

"The removal of existing sanctions... may be a more complex proposition because of the overlapping provisions of the laws and executive orders of the current sanctions regime," the Congressional Research Service said in a report in February.

"For example, removing prohibitions on certain types of assistance may be more difficult than eliminating bans on the importation of selected goods with materials, parts or components from Burma," it said.

While there is a broad desire in Europe not to miss an opportunity in Asia, especially at a time when the United States has openly shifted its focus to that part of the world, countries do not want to appear to be craven opportunists, especially if Myanmar were to backslide on democratic reforms.

"There are some really good signs, but there are areas where there are problems," said an EU diplomat from a country that favors the more cautious lifting of sanctions.

"We don't want to be in the position of lifting them and then having to put them back."

Source: Reuters