URU, Alm.del - 2012-13 - Bilag 71: Responsible Investment in Myanmar: The Human Rights Dimension

IntroductionFOR NEARLY A QUARTER CENTURY,Myanmar, the resource-rich south-eastAsian country formerly known as Burma1, has been mostly off-limits for investorsfrom Europe, the United States, Australia, and a few other countries whosegovernments had imposed economic sanctions because of the country’s poorhuman rights record.2With rapid political changes in the country in the past year,that is about to change.In recent months, the leader of the National League of Democracy Party (NLD),Aung San Suu Kyi, who had been imprisoned for 15 of the past 23 years (much ofit under house arrest), has been able to travel abroad freely. In April 2012, she ledher party to a sweeping victory, winning almost all seats in the parliamentary by-elections. She visited neighbouring Thailand in May followed by a June visit toEurope where she received the Nobel Peace Prize, which she had been awarded in1991 but had been unable to accept in person, because she was a politicaldetainee at that time. In September she is scheduled to visit the United States.In recognition of the political and economic reform process initiated by thegovernment of Myanmar, the European Union and the United States (US) havesuspended most economic sanctions (retaining the arms embargo) and arewatching political developments in the country carefully, although rolling back USsanctions is not straight forward3, as they comprise numerous laws, orders, anddeclarations passed at different times.Next year, Myanmar will host a major regional sporting event as well as a regionalsummit of the World Economic Forum, and in 2014, it assumes the chair of theAssociation of South-east Asian Nations4(ASEAN). With parliamentary electionsscheduled for 2015, businesses have begun making plans to make majorinvestments in Myanmar, a country often called the last frontier of Asia.Myanmar’s leadership – both the government and the opposition – have called fornew investments to be responsible and ethical.

1 Burma’s name was changed to Myanmar in 1989 by the military government. The opposition NLDcontinues to call it Burma. Proponents of Myanmar say it is a more inclusive name, and Burma hascolonial connotations. It also implies that Burma is made up of Burmans, or Bamars, as the majoritycommunity is known. The country is an ethnic melting pot, with many other communities, including theChin, Karen, Kachin, Shan, Mon, and Karenni, among others. Some governments, such as the UnitedKingdom, continue to call the country Burma; Myanmar is the officially registered name at the UnitedNations. For the purpose of this report, the text refers to Myanmar when addressing the period after thename was officially changed, and Burma, when referring to the time before the legal change.2 For a detailed account of Myanmar’s human rights record, see the latest report of the UN SpecialRapporteur on Myanmarhttp://daccess-dds-ny.un.org/doc/UNDOC/GEN/G12/116/04/PDF/G1211604.pdf?OpenElement.Further informationabout allegations of forced labour is available at the website of the International Labour Organisation,and can be found here:http://www.ilo.org/yangon/info/meetingdocs/lang--en/index.htm.Humanrights groups have also documented the human rights situation in Myanmar, which can be found here:Human Rights Watch (http://www.hrw.org/world-report-2012/world-report-2012-burma) andAmnesty International (http://www.amnesty.org/en/region/myanmar/report-2012)3 Licences for new investments (exceeding $500,000) by American entities include strict requirementsthat the investors report annually to the US Government on a range of issues, including human rights.4 The regional grouping was formed in 1967 and today includes Brunei, Cambodia, Indonesia, Laos,Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

Among the concerns they have identified include protection of workers’ rights, theenvironment, and respect for human rights. Myanmar’s President, Thein Sein,under whose leadership path-breaking political reform has occurred, has madeseveral noteworthy speeches recently, calling upon businesses to operate in aresponsible manner.5Last year, he suspended work6on a controversial dam project, which would havegenerated electricity primarily for export to China, because of opposition fromlocal communities and potential environmental impacts.In her speeches7in Europe, Aung San Suu Kyi has called for investments that areresponsible, democracy- and human rights-friendly, environmentally responsible,and respectful of labour rights. She has also warned investors that they should notenter into business relationships with local businesses compromised by their closeties with the military or with businessmen who may be political actors.Following the parliamentary by-elections in April, the United Nations (UN) GlobalCompact launched its activities in Myanmar, admitting 14 companies and theMyanmar Chamber of Commerce as participants in the world’s largest voluntarycorporate citizenship initiative.The International Labour Organisation has readmitted Myanmar as a member. TheWorld Bank is opening an office, although it cannot extend loans to Myanmaruntil US sanctions are fully revoked. Aid and development agencies and non-governmental organisations are exploring the issues facing the country to ensurethat existing and new investments are responsible. This burst of activities points tothe need for close coordination, broad consultation, and for local capacitybuilding.Investors looking for guidance on responsible business practices for operating insuch contexts do not have to look far. In 2011, the UN Human Rights Councilunanimously adopted Guiding Principles on Business and Human Rights, the finalproduct of the six-year mandate of UN Special Representative John Ruggie. TheUN Guiding Principles affirm the duty of all states to protect against human rightsabuses, the responsibility of all companies to respect human rights, and whereprotection gaps exist, the need to ensure access to effective remedies.This paper offers an analysis of the current political and economic situation inMyanmar, identifies a number of risks companies currently operating andconsidering investment in the country face, and raises questions that businessesshould address so that investments are consistent with the corporate responsibilityto respect human rights as affirmed in the UN Guiding Principles.

5 In June he spoke about the need for worker protection and minimum wage by businesses(http://www.mizzima.com/business/7389-thein-sein-calls-for-a-minimum-wage-and-worker-protection.html)and stressed the importance of protecting the environment(http://online.wsj.com/article/SB10001424052702303703004577475801843797044.html)6 See “Government backs down following widespread public protest over dam project at Myitsone” inMyanmarTimes,Oct 3-9, 2011: http://www.mmtimes.com/2011/news/595/news59501.html7 See, for example, her speech in Geneva (http://www.reuters.com/article/2012/06/14/us-myanmar-swiss-suukyi-idUSBRE85C1NA20120614)and the United Kingdom (http://www.scotsman.com/the-scotsman/politics/aung-san-suu-kyi-would-welcome-ethical-uk-investment-in-burma-1-2360900)

The Path to DemocracyIN APRIL 2012,Myanmar held parliamentary by-elections to fill 45 seats vacatedby representatives elected from those seats who were required to resign their seatsupon assuming ministerial office, as per Myanmar’s 2008 constitution. The NLDhad boycotted the 2010 elections because many of its leaders were still in jail andbecause it disagreed with several key features of the 2008 constitution. But itparticipated in the 2012 by-elections due to the changed political conditions inthe country.The NLD won 43 of the 45 seats, including four in the country’s new capital,Naypyitaw, polling nearly 66% of the popular vote. This was the NLD’s firstelectoral test since 1990, when it contested parliamentary elections and won 392of the 492 seats (and 52.5% of the popular vote), even though Aung San Suu Kyiwas under house arrest at the time. Despite its victory in 1990, the NLD was notallowed to form a government. The military regime ignored the results, and yearslater annulled the election. In the intervening period, besides Aung San Suu Kyi,hundreds of the party’s supporters, including its entire leadership, wereimprisoned for many years. Many more hundreds were arrested.The NLD’s victory in April 2012 shows that Aung San Suu Kyi remains hugelypopular, and if parliamentary elections were to be held now, the party would likelywin easily. But as things stand, the NLD has less than 8% of the 664 seats in thebicameral parliament, a quarter of which are reserved for the military.NLD leaders will have to be skilful in their negotiations with the government toenact the constitutional changes they say are necessary to make the parliamentmore representative of the people than is currently the case. Political analystssuggest the government may not be willing to disrupt the status quo by makingsubstantial changes to the constitution.It should be noted that the government drafted and promulgated the newconstitution, and the NLD and many other parties mostly boycotted the process.The constitution has attracted criticism from human rights groups and theconstitutional process8has been controversial.Burma gained independence from Britain in 1948, and Bogyoke (General) AungSan9who founded the Burmese Army, was expected to be the first president. Buthe and his key advisers were assassinated a few months before independence.Mystery still surrounds who led the conspiracy and why. The military prosecuted aformer prime minister and a few British officers, and executed the former premier.Civilian governments unable to exert influence or control over the entire territoryfollowed, until a military coup deposed a civilian government in 1962.Since the mid-1960s, while the Burmese economy declined, the neighbouringcountries of Thailand, Malaysia, Singapore, Indonesia, and the Philippines hadbegun to prosper. The economy has stagnated in the past 50 years, and in the

1980s the government asked the UN to give the country “least-developed” statusto qualify for concessional finance. In 1989, the generals renamed the country,calling it Myanmar. The government also sought foreign investment to revive theeconomy.After the military refused to recognise the results of elections in 1990, westernnations imposed sanctions, which slowed Myanmar’s economy significantly, butdid not cripple it. A recent Amnesty International delegation to the country wastold: “Sanctions did not cause Myanmar’s economic decline, but are hindering itseconomic recovery.”10While lack of funding from the World Bank and the IMF dueto US sanctions has prevented large aid inflows, it should be noted that underParis Club rules, Myanmar would have to clear its arrears before qualifying forfresh loans. There has neither been a request from the government of Myanmarnor an inclination among most donor countries to offer such concessions.Myanmar’s economy functions at high cost, and is dominated by a few large firms,which resemble oligopolies. Many of these firms represent specific multinationalcorporations, which directly cannot, or have chosen not to establish their ownoperations in Myanmar.Foreign companies from China, South Korea, Taiwan, Thailand, Malaysia, andSingapore have invested millions of dollars in Myanmar over the past two decades.Myanmar’s business infrastructure is antiquated, and the country suffers fromcommon constraints of command economies such as high costs and shortages ofcritical components, which hampers production. Its weak banking, legal, andadministrative infrastructure adds further costs.After sanctions were imposed, western governments permitted their companiesalready operating in Myanmar to continue their activities.Totalof France,PremierOilof the UK (which bought the Myanmar interests of the American companyTexacoin 1997), andUnocal11(which was later bought byChevronin 2005, andChevronhad independently boughtTexaco’sworldwide business in 2000) of theUS, were among the significant western oil companies operating in the country.Since 1989, the government has initiated a series of steps amounting to limitedeconomic reforms, including opening the country to foreign investments. Chinaand other neighbouring countries have invested. In 1997, Myanmar joined ASEAN,in spite of criticism from some in the international community, who said it wouldmake it difficult for the leaders of those countries to meet ASEAN delegations ifMyanmar was part of the grouping. Over the past 20 years, Myanmar says it hasreceived foreign investment of $20 billion. According to the UN Conference onTrade and Development (UNCTAD), the actual inflow over this period is actuallycloser to $756 million.12While the ostracism of Myanmar’s political elite has been comprehensive in theWest, over the years, some diplomats, local businessmen, and a few civil societyactivists (including former NLD members, most notably Ma Thanegi13) have arguedthat sanctions have harmed the poor. In particular, they point out curbs on textile10 In its account of its recent mission to Myanmar,(http://www.amnesty.org/en/library/asset/ASA16/003/2012/en/62cc4319-a779-4c9e-93c8-0a3945203411/asa160032012en.pdf)Amnesty International says countries should take a critical lookat their current policies in Myanmar because a viable economy is one of the necessary, if not sufficientconditions to promote and protect economic, social, and cultural rights.11 Chevron acquired Texaco in 2000 three years after Texaco left Myanmar. Chevron also acquiredUnocal in 2005. It has since continued to operate Unocal’s joint venture in Myanmar.12http://thediplomat.com/asean-beat/2011/08/31/behind-burmas-rising-fdi/

exports, which the US government imposed in 2003, resulted in the closing ofmany garment factories, leading to tens of thousands of job losses14.Myanmar’s vast port sites present a picture of inactivity these days. In the past twodecades, some European businesses have had to leave Myanmar because of activistpressure in their home countries, as was the case with Heineken Breweries15andTriumph16, the manufacturer of undergarments. Tourism companies avoidedmarketing holiday visits to the country, because until recently the NLD opposedcommercial transactions with businesses closely linked with the government. Manyother companies have publicly said they are waiting for the NLD to give them ago-ahead.This places the NLD in a peculiar position, since it does not govern the country. Ithas no power to make legislation, and NLD officials say the legislative process isnot transparent and they do not have full access to information about proposedchanges17. The NLD is an opposition party, and its relations with the ruling UnionSolidarity Development Party (USDP) could pose challenges.But public support for the NLD by world leaders, and the importance given to itsleadership’s views on specific investment projects have created the impressionamong some Myanmar government officials that the NLD is acting in concert withexternal powers and undermining the economy. In her recent speeches in Europeand elsewhere, Aung San Suu Kyi has welcomed responsible investment thatrespects workers’ rights, which does not harm the environment, and which issupportive of democracy and human rights.Besides the dilemma of sanctions, there are other issues that affect Myanmar,including human rights concerns and ethnic conflict. Between 1989 and 2011, theState Law and Order Restoration Council (or SLORC, as the military regimedescribed itself, and later changed to the State Peace and Development Council, orSPDC) imposed severe restrictions on civil liberties. Thousands were jailed andmany were tortured; the military fought battles with insurgency movements18representing the Karen, Kachin, Chin, Shan, Karenni and other ethnic minoritygroups; and the government cut off some contact with the outside world.

13http://asiapacific.anu.edu.au/newmandala/2008/03/02/interview-with-burmas-ma-thanegi/14 The Myanmar Garment Manufacturers’ Association claimed some 85,000 jobs, an overwhelmingmajority of them being young women, were lost after the US strengthened sanctions in 2003. Seehttp://www.mmtimes.com/2011/news/562/news56202.html15http://www.nytimes.com/1996/07/11/business/heineken-quits-its-burmese-venture.html16http://www.burmacampaign.org.uk/index.php/news-and-reports/news-stories/Campaigners-force-Triumph-Internationals-withdrawal-from-Burma/317 SeeIrrawaddyJuly 3, 2012.18 Myanmar’s government has now entered into ceasefire agreements with all but one ethnic minorityarmed political groups. The government has recently begun dialogue with the Kachin group, after a 17-year ceasefire agreement broke down in June 2011 and fighting resumed. Some of the conflicts lasteddecades. Burma’s borders were created out of British-ruled territory east of India, and many groupsresented the level of authority the Burmese-majority community exerted over minorities. While the NLDhas not had experience in governing, Aung San Suu Kyi has pointed out that some ethnic groups haveacted in concert with the NLD in boycotting elections, and in participating in political activities when theNLD has chosen to do so. The NLD draws its confidence from the Panglong Agreement, which Gen AungSan signed with three ethnic groups before his death, and the spirit of that document will guide theNLD’s policies on the ethnic issue.

The 17-year ceasefire between the Kachin Independence Organization (KIO) andthe military broke down in June 2011, and fighting continued, displacing nearly75,000 people. Preliminary talks have now begun between the government andthe KIO, and if a ceasefire agreement is signed, it will mean all ethnicinsurgencies have signed some form of truce with the military. But since the Aprilelections, the Rohingya19issue has resurfaced, and thousands of displacedRohingyas are seeking refuge in neighbouring Bangladesh, due to ethnic conflict20in the Rakhine (formerly Arakan) province.Years of isolation have made it harder for the government to interact with theinternational community. Partly self-imposed, and partly due to sanctions,Myanmar’s government has several leaders who have never travelled abroad, noteven within Asia. So suspicious had the government become of foreigners, that itinitially refused assistance from UN agencies and western governments in theaftermath of Cyclone Nargis21, which devastated the Irrawaddy delta in 2008. In2005 the government decided to shift the capital to Naypyitaw, a new city incentral Myanmar, for reasons, which were never made fully clear. Much of the newcapital is now built.Current political changes have gained momentum since March 2011, when GenThan Shwe, who had led the country for 19 years, stepped aside, making way forPresident Thein Sein. The political scenario changed quickly as the Presidentbegan releasing political prisoners and censorship has been relaxed.22Thein Seinis widely respected as a quiet, unassuming man committed to the path of reforms.Political observers say he and Aung San Suu Kyi have reached an understandingand trust each other.Building on that trust is one of the fundamental challenges Myanmar faces today.Beyond party politics, building trust between ethnic Burmans and other ethnicgroups is of enormous importance.

19 Rohingyas are Muslim and speak a dialect also spoken in Southeastern Bangladesh. They do not havecitizenship rights in Myanmar, and their conflict with the Myanmar state is an old one. In June 2012,violence flared up in the Rakhine State between the Rakhine community, which is Buddhist, and theMuslim Rohingya community. Under the 1982 Citizenship Law, Rohingyas are denied citizenship and arede jurestateless. Since 1978 hundreds of thousands have fled from extreme repression from the military,primarily into neighbouring Bangladesh, but also to other countries. Abuses by the army included forcedlabour, forced relocation, and severe restrictions on freedom of movement and marriage.20 SeeThe Government Could Have Stopped This: Sectarian Violence and Ensuing Abuses in Burma’sArakan State(Human Rights Watch, 2012)http://www.hrw.org/node/109214.21 SeeEverything is Brokenby Emma Larkin. Penguin 2010.22 Censorship is being relaxed, and new publications are permitted. In late August Myanmar removedmedia censorship on private publications (http://uk.reuters.com/article/2012/08/20/uk-myanmar-censorship-idUKBRE87J0Q820120820)although it is uncertain what its impact will be because of theprevailing culture of self-censorship (http://www.thejakartapost.com/news/2012/08/22/no-media-freedom-yet-only-self-censorship-myanmar.html). The Internet remains slow, but that will change indue course, with new investments. At the same time, political prisoners are, in effect, being released onparole. Since May 2011, over 650 political prisoners have been released. Absurdly long prison terms hadbeen handed out to dissidents now released, such as the comedian Zarganar and the former studentactivist Min Ko Naing. Others jailed have included monks, civil society leaders, politicians, cartoonists,bloggers, stand-up comedians, writers, and artists.

MOVING FORWARDMyanmar has entered uncharted territory. What accounts for the changesunfolding in the country today?Need for international recognition:President Thein Sein has explained therationale for reforms by highlighting the need to address poverty in the country.Some suggest the government wants international recognition. It was keen toenter ASEAN and waited several years before it was allowed to do so in 1997. Theelections of 2010, the release of over 650 political prisoners, and the by-electionsall indicate the government is serious.Growing international attention on Myanmar is also prompting change. In 2013,the country will host the biennial South-east Asian Games, which brings togetherathletes from the 10 ASEAN states and Timor Leste. The same year, Myanmar willhost the East Asia Summit of the World Economic Forum. In 2014, Myanmar willchair ASEAN, and it may also host several summits as part of the grouping’sdialogue partnership with major powers. All these events will bring many foreignathletes, journalists, dignitaries and delegates to Myanmar, requiring theconstruction of new hotels, better infrastructure and basic economic reforms.Economic imperatives:Actual inflows of foreign investment remain low. Theeconomy has many built-in inefficiencies and redundancies. It takes severalmonths before a business can be set up, be it a shop or a factory. Foreigncompanies are mystified by the plethora of laws, regulations and various levels ofhierarchy they must negotiate.23According to Transparency International, Myanmar ranks 180thout of 182countries in its most recent corruption perception index. The International FinanceCorporation’s project to measure business-friendliness of various countries doesnot even evaluate Myanmar. There are no major foreign banks in the country.Some local businesses are alleged to have links with the narcotics trade. Banks inMyanmar do not have modern facilities such as automated teller machines, creditcards, computerised processing, or even cheque payment. Most payments are incash, irrespective of the size of the amount. The official exchange rate used to besix kyat to one US dollar, and now a managed float rate is in place, at 874 kyat tothe dollar in mid-August. Until recently, there were four additional rates, includingahundi24rate, a rate for imports, a rate for exports, and another for financialtransactions.In terms of other basic infrastructure, land-based telephone services in the countryrarely work reliably. Cellular coverage is spotty and expensive. Until about twoyears ago, merely obtaining a SIM card could cost thousands of dollars. Poweroutages are common. Myanmar produces oil, but it has petroleum shortages, sincemost domestically produced oil is exported. Aid workers have seen cars drawn byhorses in rural Myanmar.

Economic revival is clearly important for Myanmar. Outwardly, Yangon appears tobe a typical South-east Asian city at the cusp of a major change: somewhatcharming and quaint with its tree-lined roads and an absence of high-risebuildings. Its bazaars are busy with outdoor hawker stalls full of families sitting onstools eating noodles. Monks are commonly seen crossing roads in a disciplinedfile while relaxed couples walk by the lake.But the imposition of sanctions has created an artificial economy, which has beena bonanza for well-connected local businesses. Many products, like a four-wheeldrive vehicle – necessary for travel in rural Myanmar – cost twice as much as inneighbouring Vietnam or Thailand. Repairs are impossible, as no majormanufacturer has service stations in the country.Moreover, widespread poverty in Myanmar cannot be understated, something thePresident has said publicly his government will address. Of the 187 countries theUnited Nations Development Programme evaluated in its Human DevelopmentIndex for 2011, Myanmar ranked 149th.25Balancing Chinese influence:Myanmar’s decision to balance its relationshipwith China26on the one hand and western governments on the other is seen asanother key factor driving current government actions. An internal report27datingback to 2004, apparently published by the country’s Defence Service Academy,suggests the current military leadership has old grievances with the Chinese. Thatreport argues that the country’s reliance on China as a diplomatic ally andeconomic patron has created “a national emergency” that threatens Myanmar’sindependence.The dossier stresses that Myanmar should normalise relations with the West after anew Parliament is in place so that the regime can be made more acceptable to theoutside world. Distancing from China is part of that package. Westerngovernments have been aware of these changes.28It should be noted that Myanmar’s outwardly friendly relations with China arerelatively recent, dating from after China began to open its own economy in 1979.With its coastal provinces booming, China sought to spread growth more evenly.For goods made in Yunnan in South-west China, the province bordering Myanmar,a journey to the port in Shanghai would take several days; exporting goods madein Yunnan out of Myanmar’s ports is a more efficient option.China therefore began cultivating Myanmar, with an eye on its resources. Today,Chinese companies have won major concessions to exploit Myanmar’s naturalresources, including minerals and timber, and construction has begun on the $29billion Shwe pipeline, which will carry oil and gas to China through central andnorthern Myanmar. (Two Indian companies—ONGC Videsh and GAIL—are partnersin the project.) Chinese products are widely available in Myanmar.

As our government is elected by the people, it is to respect the people’s will. Wehave the responsibility to address public concerns in all seriousness. Soconstruction of Myitsone dam will be suspended…29The decision stunned many, including environmentalists—who applauded thegovernment—as well as the Chinese government, which sought an explanation forMyanmar’s intentions. The controversy over Myitsone builds on long years ofresentment many in the country have harboured towards the Chinese. Traderscomplain that Chinese investors don’t hire local people but bring workers fromChina by the thousands. Moreover, the Myitsone dam is on the Irrawaddy River,seen by the Burmese people as a symbol of its culture and spiritual and nationalidentity. As Myanmar opens to the west, it is inevitable that China will watch itsmoves closely. Early indications are that China is concerned about the stepsMyanmar has taken, with its official media criticising democracy30and questioningthe relaxation of censorship.31Concern over devastation:Cyclone Nargis, Myanmar’s worst natural disaster inhistory, which devastated parts of the country in April-May 2008 is seen as anotherfactor in the changes taking place in the country. In the delta and surroundingareas at least 130,000 people were killed and many hundreds of thousandsstruggled to survive without adequate food, water, or shelter. Rebuildinginfrastructure required significant resources. The rapid, spontaneous andorganized assistance provided by Burmese civil society – including monks,churches, ad hoc groups – said much about the compassion and resourcefulness ofthe Burmese people. Some reports suggest32the devastation influenced TheinSein, who was already predisposed towards reforms, to do more.Other political imperatives:A final factor which helps explain ongoing changeis the nature of internal dynamics in Myanmar’s politics. While its leaders havefrequently made remarks indicating that every reform they have initiated is part of“a roadmap” they had unveiled, critics disagree and dismiss those efforts. Butmany steps the government has taken were outlined in public announcements, and

It seems plausible that a combination of these motives – rebuilding the country,improving the economy, gaining international respectability, establishing a newrelationship geopolitically - with the west and with China - and working towardsinternal political imperatives –– explains why Myanmar has undertaken reformsteps at this time.It is difficult to assess Myanmar’s future path in the years leading up to 2015 andbeyond. Three distinct scenarios of what might happen in the near future are mostoften discussed:•In theoptimistic scenario,reforms continue at an even pace; the NLD andUSDP work amicably in parliament and outside; international eventsMyanmar is due to host pass uneventfully; the military agrees to anarrangement of a significantly reduced role in return for immunity fromfuture prosecution over its past conduct; and free and fair general electionsare held in 2015 without incident.In the morerealistic scenario,reforms falter because foreign investment isslow on the uptake, prolonging Myanmar’s economic crisis; the NLD andUSDP have a difficult, confrontational relationship; ethnic groups becomerestive and violence returns; the Rohingya crisis worsens; the military refusesto make concessions; elections are held in 2015, but aren’t free or fair.In theworst-case scenario,reforms stop due to unforeseen events, which mayinclude leadership change; break down in cease-fire agreements;consolidation of military positions; restrictions imposed on NLD and itsleaders; and postponement or suspension of 2015 elections.

It is impossible to predict which of these outcomes will occur, but it is in theinterest of all that every effort is made to ensure the ultimate outcome resemblethe first, optimistic scenario. Many dangers lie ahead. The status quo serves onlythe interests of hard-liners within the government, businessmen likely to loseinfluence and monopoly, and politicians fearing future prosecution.Analysts have attempted to draw parallels with the South African transition, toexplore if Myanmar can follow a similar path. While acknowledging the manydifferences between South Africa and Myanmar, there are some commonalities.The events of the past few months in Myanmar could be considered the equivalentof the release of Nelson Mandela from prison, and the beginning of negotiationsleading to constitutional reforms in South Africa, but not to the end of apartheiditself. (Mandela was released from prison in 1990; South Africa held a referendumamong white voters in 1991, asking them if President de Klerk should continuethe reforms. The first elections took place only in 1994).One working assumption among experts in the region is that Myanmar’s leadersseek a conclusion similar to the Indonesian model. The democratic transition ofpost-Suharto Indonesia, in which the army would loosen its control of theparliament gradually and slowly, to make way for democracy, has been suggestedas an Asian alternative. (The current President of Indonesia, Susilo BambangYudoyono, is a former army officer.) The Indonesian army continues to exert someinfluence politically and economically in the country, but its former dominance issubstantially diminished. Myanmar’s situation is unique and different, but it canbe understood why the military would prefer an Indonesian scenario.

The NLD has serious issues to address as well and needs to articulate positions oncritical issues facing the country, including with respect to overcoming ethnicdivisions.33The party will have to develop policies on a whole range of issues,including on economic reform. Its leadership has few young leaders, and thosewho have stayed with the party during the hard times have legitimate aspirationsfor political power.At the same time, the NLD is reaching out to a younger generation ofprofessionals, some of them hitherto apolitical, who may be driven by ambition tojoin the party and who may have political aspirations of their own. Balancing thetwo will be among the many questions the NLD will have to face.This is a perpetual challenge for movements struggling to establish democracy.The African National Congress experienced it, comprising as it did those who hadstruggled against apartheid from abroad; those who fought from within; and thosewho went to jail.Political change, however rapid, may not yield immediate economic benefits. Pastexperience in Vietnam, Cambodia and South Africa has shown that while openingto the outside world leads to an initial boost in trade, serious investment takestime, because investors wait for uncertainties to diminish.

Investment ChallengesBusinesses considering investment in Myanmar will face many challenges. Largeprojects in particular may lead to significant human rights abuses unless effectivedue diligence is ensured at all levels.34In this section, human rights relatedimpacts associated with a select number of critical issues are outlined.Land:Companies investing in Myanmar will need access to land. Whether theirbusiness is to set up a retail store, build a port, erect power lines or cellulartelecommunication towers, construct factories, design golf courses, create tourismcomplexes, or establish export processing zones, investors will need to acquire oruse land. Human rights groups fear this will accelerate the trend seen in somecountries of so-called land grabs.35Forced eviction of communities is one human rights risk that is frequentlyassociated with land acquisition and use. While new land laws have beenpromulgated, under which people have to register their land with the state, civilsociety groups contend that small farmers, farmers in ethnic areas or in remoteareas, may not know of the proposed changes, and companies or well-connectedindividuals may end up acquiring such plots, whether or not they have identifiedlegal or customary owners. Once the new owners acquire legal title, they can seekaccess to land, and may turn to security forces to ensure access, which may resortto using force to evict people, leading to human rights violations.Companies investing in Myanmar will find it difficult to establish who owns land orhas customary usage rights, who should be consulted, and how to obtain free,prior informed consent (FPIC). Under international standards, indigenouscommunities have the right to FPIC, but many companies recognize that it is goodpractice to seek informed consent of all affected parties and vulnerable groupsbefore seeking to use or acquire land. In Myanmar’s case, the process may befurther complicated by local community worries about the consequences ofspeaking freely to outsiders. Historically, the government and dominantbusinesses have often used coercion and paid inadequate compensation to peoplewho have been evicted from land they have owned or used, and suchcompensation is insufficient to maintain a basic standard of living. Communities,therefore, may be reluctant to be open about their concerns in consultationprocesses.Foreign and domestic businesses investing in Myanmar will have to makeadditional efforts to guarantee they obtain consent for use of land through a fullyconsultative process and without force. They will have to use their influence withsecurity forces to ensure they refrain from abuses against communities. There isreal concern among Burmese activist groups that economic reforms will lead toviolations of marginalized and vulnerable groups’ rights, in the form of land

With the anticipated increase in the level of economic activity over the comingyears, in view of planned sporting events, the ASEAN summit, and other majordevelopments, as well as potential foreign investment in export processing zonesand tourism complexes, how companies use or acquire land will be an area of highrisk.Labour:Over the years, courts in the United States have agreed to hear cases filedunder the Alien Tort Claims Act against companies in only a few instances. Onesuch case dealt with Unocal in Myanmar, over allegations that the company usedforced labour in constructing a major pipeline. The company settled the case withthe litigants without admitting wrongdoing before it came to trial, and the casewas withdrawn.38There had been similar litigation involving Total in Belgium.39There are two aspects to labour rights in Myanmar that must be considered – thelaw and the practice. Myanmar until recently did not allow independent tradeunions, and workers’ rights have been violated routinely in factories operated bymainly Asian investors.40A new labour law is now in place, which has been widelypraised41. Despite the new law, workers are frequently required to work far longerthan the number of hours permitted legally; their wages are low; and womenworkers have been harassed sexually; discrimination is rampant on ethnic grounds.Employees receive few benefits, and no due process is followed while terminatingemployment.42In recent months, the government has said it will allow unions, andworkers at some factories have begun demanding recognition of their unions, aswell as citing from the core conventions of the International LabourOrganisation.43The problem of forced labour in Myanmar is a related challenge for companies.Myanmar has a tradition of community labour for public works. But this form ofwork is far different from forced labour, where the army has made people workagainst their will as porters or on construction projects. Such practices were morecommon in the 1990s, but haven’t disappeared completely.

36http://www.irrawaddy.org/archives/423937http://landportal.info/feed-item/burmese-government-land-grab-farmers-without-rights38 Seehttp://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/UnocallawsuitreBurmaandhttp://www.earthrights.org/legal/doe-v-unocal-case-history39http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/TotallawsuitinBelgiumreBurma.See also Total’s response:http://burma.total.com/en/controverse/p_4_1.htm40http://www.burmapartnership.org/tag/labor-rights/41http://www.mizzima.com/business/6744-new-labour-law-goes-into-effect-in-burma.html42http://www.cleanclothes.org/campaigns-list/828-general-information-on-labor-rights-abuses-in-burma43http://www.irrawaddy.org/archives/6745

Companies will have to undertake enhanced human rights due diligence44toensure the rights of workers they and their suppliers hire are protected, and thatno one is forced to work against his or her will.Capital:Myanmar’s banking system is antiquated. The few banks operating in thecountry do not have strong correspondent links with international bankingnetworks. Hotels continue to process their payments in foreign currency inneighbouring centres like Singapore or Bangkok. Visitors have little choice but tocarry large amounts of cash, usually in crisp currency notes of US dollars, andtransactions are settled with the exchange of enormous sacks of cash. Nobusinesses accept credit or debit cards. Money laundering45is an old and recurringissue with some banks operating in Myanmar. Recent reforms suggest thatstandards might improve46but risks of exposure to banks that have links withillicit trade in the past remain.Companies will have to undertake enhanced due diligence of banks and otherfinancial intermediaries as they operate in Myanmar. This means not only checkingthe financial soundness and liquidity of banks and financial intermediaries, buttheir business practices, including their current and previous relationships withclients who may be facing sanctions.Business relationships:The government plays a large role in Myanmar’seconomy. The biggest company – government-owned Myanmar Oil and GasEnterprises (MOGE) – has collaborations with major oil companies, but itsaccounts are opaque. The new US licensing conditions require US companies thatenter into partnership with MOGE to report their activities. Other large companiesare run by businessmen close to the government or by former governmentofficials. Some businesses have been accused of complicity in abuses committedby the armed forces. Other business leaders are so close to the government thatsome are denied visas to travel by several governments, including the UnitedStates47and the European Union48, and the overseas assets of several businessmenhave been frozen.49Owners of some local businesses have had Interpol warrants50pending against them.As a result of political developments in the past year the EU and the US havesuspended some sanctions, and some individuals, including businessmen, are nolonger on the prohibited list. But companies will have to be extremely careful in

44 Former UN Special Representative for Business and Human Rights, John Ruggie, introduced theconcept of human rights due diligence for business, as part of the “Protect-Respect-Remedy” framework,which sets out that states have an obligation to protect human rights, business has an independentresponsibility to respect human rights, and where gaps exist, there should be effective remedies. It isthrough the due diligence process that companies can anticipate what the adverse impacts of theiractivities are likely to be, develop mitigation strategies, and establish effective grievance mechanisms.(For a detailed explanation, see:http://www.hks.harvard.edu/news-events/publications/insight/markets/john-ruggie).45http://www.ibiblio.org/obl/docs/LIOB10-pgutter.htm46http://www.reuters.com/article/2012/04/02/us-myanmar-banks-idUSBRE83107F2012040247http://www.fas.org/sgp/crs/row/R41336.pdf48http://www.hm-treasury.gov.uk/fin_sanctions_burma.htm#eu49http://www.sanctionswiki.org/Myanmar50http://www.fas.org/sgp/crs/row/RL34225.pdf

selecting potential partners. Almost all companies currently operating in Myanmarhave some relationship with the government, and local laws may require foreigncompanies to have local partnerships. But investors should scrutinize potentialpartners, and avoid forming business relationships with partners against whomthere are sanctions, or who face credible allegations of human rights abuses.Discrimination:Ethnic discrimination is widely prevalent in many parts ofMyanmar, and ethnic minorities comprise one third of the population. Thisdiscrimination is at the heart of concerns of ethnic groups fighting for autonomyor independence. Businesses operating in areas where ethnic minoritiespredominate will have to be cautious about issues of discrimination when theyaward contracts, recruit staff, or develop policies that benefit communities. Ethnicminority groups that have previously been discriminated against may bemarginalized, or, in some cases, they might demand favourable terms, which mayplace other communities at a disadvantage. The latter communities are alsovulnerable and live in poverty. If companies appear to prefer one community overanother, they will run the risk of sowing seeds of antagonism and fomenting futureconflict.

Getting it RightAs the international community has begun suspending or relaxing restrictions andsanctions it had imposed on Myanmar, several governments have placed someexpectations on their companies. In their statement while suspending sanctions on23 April 2012, foreign ministers of the European Union referred to the UNGuiding Principles on Business and Human Rights as an appropriate standard toinform business conduct in Myanmar. The EU statement welcomed Europeancompanies exploring trade and investment opportunities in Myanmar, while“promoting the practice of the highest standards of integrity and corporate socialresponsibility,” including the UN Guiding Principles.54Furthermore, the United States Government now requires US companies investingmore than $500,000 in Myanmar to report publicly on their human rights policiesand procedures in line with the UN Guiding Principles on Business and HumanRights.55There are also more specific requirements for companies in the oil andgas, and financial sectors.Businesses exploring investment opportunities in Myanmar will therefore need tofamiliarise themselves with what the UN Guiding Principles entail, and developpolicies, practices, and procedures that are consistent with those principles. Manybusinesses considering new investments in Myanmar have expressed support forthe country’s development goals and announced plans to encourageentrepreneurship locally, and operate in a responsible manner. Towards that end,businesses are likely to make use of existing tools, which have aided in investmentprocesses in different contexts in other countries.To address the problems raised over land acquisition, businesses have access to arange of guidance, which should be consulted carefully. These include thePerformance Standards of the International Finance Corporation56, the recentlyadopted Voluntary Guidelines for land tenure57from the UN Food and AgricultureOrganisation; the guidelines58for evictions in the context of development from theUN Special Rapporteur on adequate housing; the core principles for landacquisition and leases from the UN Special Rapporteur on the right to food59, andso on.

Likewise, in establishing relationships with security forces, businesses should drawon the Voluntary Principles for Security and Human Rights60in the extractivesector. In dealing with issues related to labour rights, businesses would benefit bystudying initiatives such as the ILO’s Better Work Programme, and guidance frominitiatives related to ethical trading and fair labour. In identifying banks orbusinesses to work with, companies will consult the current lists of individualsagainst whom there are specific sanctions such as asset freezes or travel bans,prepared by governments that have imposed sanctions. In dealing with corruption,companies will turn to laws in their own jurisdiction. And in working to eliminatediscrimination, companies should learn from affirmative action policies practisedelsewhere.While each of these tools and frameworks offers useful guidance, includingspecific advice, no single set of tools can be sufficient to prevent abuses fromoccurring. By relying only on tools developed for specific contexts, companies runthe risk of implementing their policies in a piecemeal manner, exposing them tofurther risks. To address this concern, companies should recognise the importanceof a comprehensive approach to implementing their responsibility to respecthuman rights.The UN Guiding Principles on Business and Human Rights, developed after sixyears of intensive consultations with businesses, civil society groups, andgovernments, offer a comprehensive framework to shape responsible businessconduct in Myanmar. The UN Human Rights Council adopted the Principlesunanimously in 2011. They offer an innovative and comprehensive framework inthe present environment. In addition to reaffirming existing state obligations, theUN Guiding Principles make clear that all companies bear an independentresponsibility to respect human rights.This notion of corporate “respect” for human rights goes beyond “respect” in theway in which the concept is understood in the state based human rights lexicon.61Corporate respect for human rights in the UN Guiding Principles stresses theimportance of avoiding actions that infringe on the protection of rights. Doing sorequires several positive, affirmative steps, including undertaking human rightsdue diligence. This involves companies conducting risk and impact assessments,taking corrective steps to ensure they will not be contributing to, or benefitingfrom abuses, and operating in ways that uphold human rights, as well as settinginternal management processes and targets with incentives to ensure compliance,combined with processes to track and monitor performance. Undertaking thesesteps with respect to investment in Myanmar won’t be easy, but it is necessary.Companies based in countries that have imposed sanctions on Myanmar areincreasingly familiar with the due diligence steps set out in the UN GuidingPrinciples.62Additional specific guidance regarding what companies must not do

Because the risk of gross human rights abuses is heightened in conflict-affectedareas, States should help ensure that business enterprises operating in thosecontexts are not involved with such abuses, including by:(a) Engaging at the earliest stage possible with business enterprises to help themidentify, prevent and mitigate the human rights-related risks of their activitiesand business relationships;(b) Providing adequate assistance to business enterprises to assess and addressthe heightened risks of abuses, paying special attention to both gender-basedand sexual violence;(c) Denying access to public support and services for a business enterprise that isinvolved with gross human rights abuses and refuses to cooperate in addressingthe situation;(d) Ensuring that their current policies, legislation, regulations and enforcementmeasures are effective in addressing the risk of business involvement in grosshuman rights abuses.It should be stressed that the UN Guiding Principles apply to all companiesregardless of their size, sector, operational context, ownership, and structure.The Guiding Principles make clear that companies should have a policycommitment to respect human rights; a human rights due diligence process toidentify, prevent, mitigate, and account for how they address their impacts; andprocesses to enable the remediation of any adverse impacts they cause or to whichthey contribute.65Careful reading of the UN Guiding Principles will show thatimplementing them is not a box-ticking exercise, but requires serious commitmenton the part of governments as well as significant management time and effectiveallocation of responsibilities within companies. The Guiding Principles encompasscurrent legal requirements, prevailing best practices, and societal expectations ofbusinesses.The challenges facing Myanmar are formidable. The country has been affected bymany years of armed conflict and human rights abuses have been widespread. Anew leadership is taking gradual steps towards helping Myanmar make asuccessful transition to democracy. In the NLD the country has an opposition partythat has acted responsibly and whose leader exemplifies non-violent and peaceful