During our recent trip to Burma, most of the prodemocracy and human rights activists with whom we met expressed their appreciation for the role that sanctions by the United States and other democratic powers had played in bringing about the modest but potentially significant reforms we are now seeing in the country. They acknowledged that while trade restrictions may have made life harder for ordinary people, particularly those working in the garment and manufacturing sectors, the leverage gained as a result of the sanctions was absolutely vital in catalyzing political will among military leaders to initiate reforms.
This leverage, which has been central to American policy on Burma for over two decades, may well be lost when the U.S. State Department issues a waiver allowing investment in Burma, as the president authorized it to do today. The waiver will permit business dealings with highly corrupt and opaque companies like the Myanmar Oil and Gas Enterprise (MOGE), whose profits have bankrolled a succession of brutal military governments. The measure will leave untouched the actual laws underlying the sanctions, essentially granting U.S. businesses exemptions that, in theory, could be revoked should Burma's government stall or backslide in the reform process. However, trying to shut the flood gates after investment has begun to pour into the country would be next to impossible, especially given the influence that the business lobby seems to have exerted over the Obama administration's Burma outlook in recent months.
Many U.S. businesses, with the support of their allies on Capitol Hill, are eager to participate in the potential bonanza of Burma's largely untapped market and plentiful natural resources. They argue that these opportunities should not be left to Chinese and other foreign competitors, and that interactions with U.S. businesses will expose Burmese firms to higher corporate standards on transparency, accountability, labor rights, and environmental protection. But it is doubtful that such reform by osmosis would be sufficient to counter the corrupting effects of a major influx of funds into what remains a profoundly flawed political and economic system. In fact, U.S. companies risk compromising their own standards as they attempt to operate in such an arena.
Prodemocracy activists in Burma and in the diaspora argue that the Obama administration should not lift all of the trade sanctions before establishing some mechanism to ensure that the predicted wave of foreign investment improves conditions for Burma's long-suffering population, and does not simply bolster the military-backed regime's hold on power. The meager disclosures required of companies that do business in Burma are not an effective check on potential abuses, especially when the enterprises most likely to form partnerships with foreign firms are intimately tied to military leaders and their cronies. The structure of economic and political power in Burma today guarantees that the biggest beneficiary of unbridled U.S. investment would be the Burmese military, which directly or indirectly controls the most lucrative industries.
Hopefully, companies with a genuine commitment to corporate responsibility will think twice before setting up shop in Burma, though others will no doubt succumb to the allure of robust profits and discount the prospect of negative publicity-and legal repercussions-for their role in filling the coffers of despotic rulers.
All of this is not to say that Burma does not need foreign investment. To the contrary, decades of gross mismanagement and grand corruption by military regimes, together with isolation from most of the international community, have left the economy in tatters and the population in desperate poverty. Foreign investment is essential to rectify these harsh conditions. But suddenly funneling money into the country's opaque, scandalously corrupt business environment is no way to help Burma progress economically or politically. This is all the more true when the main investment goal is the exploitation of natural resources. It is no coincidence that around the world, growth strategies based on extractive industries tend to reinforce the concentration of wealth and power and do little to advance general economic well-being-unless the country in question has a strong system of checks and balances and the rule of law. Despite the recent steps toward reform, Burma still has neither.