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Recent events should not, however, be considered a green light
to conduct business in Burma for at least two reasons:
First, governments are likely to take a step-by-step approach
to the sanctions, awarding Burma for specific actions taken, rather
than lifting them wholesale.
Second, even if all the sanctions were lifted tomorrow,
companies would be wise to proceed with great caution and conduct
robust, project-specific social and environmental due
diligence.
In a statement issued earlier today, U.S. Secretary of State Hillary Clinton
announced that the United States will lift sanctions related to
international development aid and some travel restrictions and will
begin
the process of a targeted easing of
[the] ban on the export of U.S. financial services and investment
as part of a broader effort to help accelerate economic
modernization and political reform.
Today's announcement signals impending change in U.S.
sanctions policy, but should not be understood to mean that the
U.S. government will lift all or most investment-related sanctions
in the immediate future. Rather, the Obama Administration has noted
that it will lift sanctions in a stepwise process if Burma takes
more actions to demonstrate that it is moving toward a democratic
system.
The Obama Administration and Congress will condition the further
lifting of sanctions on whether Suu Kyi comments positively on the
elections; her party's ability to operate freely in the
Parliament and institutionalize rule of law; and whether Burma
makes progress on resolving the myriad ethnic conflicts along its
borders. How, exactly, improvement in these areas will be measured
is not clear, but Burma is unlikely to make substantial progress on
them overnight, meaning that it will take time for the sanctions to
be lifted. Furthermore, Congress and the Obama Administration may
hold different views on what constitutes sufficient progress, which
will slow the lifting of sanctions because the process requires
coordination between the two branches of government.
In the meanwhile, companies should consider how they would
conduct business responsibly in Burma, were the investment-related
sanctions to be lifted. Widespread corruption, ethnic conflict, and
antiquated social and environmental regulations present significant
challenges. Companies will need to conduct robust social and
environmental due diligence that takes into account the specific
industry and location -- general country due diligence will not
suffice.
Context matters enormously. For instance, infrastructure
projects even in central Burma raise significant human rights
concerns, given the Burmese government's resettlement
practices, but infrastructure projects in ethnic regions are even
more problematic. The central government is disliked and has
limited control in ethnic areas, and companies should not assume
that a government permit provides a social license to operate.
Companies that seek to operate in ethnic areas should consider the
risk that they will exacerbate conflict between ethnic groups and
the central government -- a determination that requires detailed
due diligence, taking into account the specific ethnic groups
involved.
In instances in which investments would not have a large
physical footprint, companies should still exercise caution.
Corruption is a significant problem, and the military and its
affiliates play an outsized role in the economy. Even if local
companies are not on sanctions lists, they may be associated with
notorious military officers who are linked to human rights abuses.
Accordingly, conducting business with such companies, even if
legal, could have negative reputational effects. Projects in Burma
face other challenges as well because Burma inadequately regulates
labor rights, privacy, freedom of expression, and the environment,
so companies that merely follow national law would fall well below
international standards for good practice.
In short, the United States will lift some sanctions on Burma in
the near future, but will not end most related to investment for
some time. This provides an opportunity for responsible companies
to consider what forms of due diligence they would carry out so
that their investments do not have negative social or human
impacts, and do not bring excessive corruption risks. Companies
should become familiar with Burma's complex political and
ethnic make-up so that if the investment-related sanctions are
lifted, they are prepared to conduct due diligence that is granular
and specific to avoid the myriad pitfalls related to operating in
Burma.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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