Apr 20, 2013

EU set to lift most Myanmar sanctions

The EU is set to lift its sanctions on Myanmar apart from an arms embargo next week, in a move that will encourage European investment and leave the US as the only key western state to maintain curbs on the country.

EU foreign ministers are to decide on Monday whether to allow sanctions, suspended a year ago, to lapse permanently on April 30. The decision must be unanimous but EU ambassadors are understood to have signalled their support this week, paving the way for formal ministerial approval.

A separate move to restore preferential trade access for Myanmar to EU markets – suspended under the previous military regime – is expected after approval by European parliament in coming weeks.

For Thein Sein, Myanmar’s president, the EU moves would reward his government’s rapid reforms. At the same time, some member states have expressed concern that the removal of sanctions would undermine EU influence on human rights issues.

In a recent interview with the Financial Times, Mr Thein Sein pledged to step up the pace of reform and counter the waves of racial and religious violence in Myanmar that have left hundreds of people dead and displaced thousands over the past year.

“Only when we have real economic progress will the democratic process flourish. the suspension of EU and US sanctions would help greatly with our difficulties,” he said.

Investors, however, will welcome the EU move, said Nomita Nair, of international law firm Berwin Leighton Paisner. Extractive industries will be the most attractive investments for European companies, Ms Nair said, citing “healthy interest” from EU-based companies in Myanmar’s recently-launched auction for 30 oil and gas exploration blocks.

Other sectors, such as banking and telecoms, should also draw European interest, she added.

While the removal of EU sanctions is a “very positive step” for investors, continuing uncertainty over US curbs will weigh on European investors, said Simon Makinson, who oversees the Myanmar practice at UK law firm Allen & Overy.

US sanctions are more complex than the EU’s, featuring restrictions overseen by various government arms and Congress. The White House has signalled eagerness to re-engage with Myanmar. Barack Obama last year became the first sitting US president to visit the country, and has used executive powers to waive sanctions against US business dealings with Myanmar. However, Congressional curbs still restrict imports from the country, while the US Treasury oversees a so-called “blacklist” of specially designated nationals.

Mr Makinson said: “Investors – even in the UK – are concerned with continuing US sanctions and in particular, that many Myanmar businesses and business figures remain on the US blacklist. This makes it difficult for western investors to do business both for legal and reputational reasons . . . from a wider reputational perspective, they are also concerned about who they do business with in Myanmar.”

Some analysts see the Myanmar blacklist, controlled with little explanation or accountability, as an increasingly powerful policy tool. “Given the substantial reforms to US export control over the past year, the primary changes to US sanctions for Burma going forward look to be via addition to and subtraction from the . . . list,” said Aaron Hutman, a leading sanctions expert at US law firm Pillsbury Winthrop Shaw Pittman, using the old name for the country.

“The practical effect is to reward local actors who are supportive of US policy by allowing them to share more heavily in the new investment coming to the country, while making it harder for difficult actors to participate.”

Some US multinationals are undeterred, including Coca-Cola, General Electric, Hilton Worldwide, Visa International, MasterCard and, on Friday, advertising group J. Walter Thompson, which have all announced Myanmar investments in the past six months.

“Myanmar is one of the world’s last untapped frontiers, and this is a period of change, of uncertainty and also of promise,” said Bob Jeffrey, JWT’s chairman and chief executive, after signing a deal with Mango Marketing, a local company, to set up shop in Yangon.

Source: FT Times

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