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Myanmar may soon be freed from shackles of harsh Western sanctions

Monday, April 16, 2012
By Kelly Macnamara, AFP


BANGKOK -- Myanmar is likely to shake off tough EU sanctions this month, analysts said, after a dramatic change of policy from Britain and opposition leader Aung San Suu Kyi in the wake of sweeping reforms.

Western nations eager to reward changes that culminated in Suu Kyi's election to parliament in April 1 by-elections have made some reciprocal gestures to encourage Myanmar's government.

But the call from British Prime Minister David Cameron for all European Union measures to be suspended is the strongest signal yet that sanctions may be halted — although not scrapped completely as the international community looks to maintain leverage in the still army-dominated country.

Experts said the suspension is likely to be enacted by EU foreign ministers on April 23, potentially opening up what many investors see as the next big frontier market to European firms.

“Given this pre-emptive move by one of Europe's most hard-line countries, the foreign ministers' decision looks like a fait accompli,” said Jim Della-Giacoma of the International Crisis Group, describing the proposal as “a de facto dropping of sanctions.”

Myanmar President Thein Sein has surprised observers with a series of reforms since taking office last year, including accepting Suu Kyi and her party back into the mainstream and freeing hundreds of political prisoners.

But Western sanctions have largely been left intact as the international community balanced fears over the sustainability of the changes and a desire to bolster regime reformers who may face pressure from those wary of change.

Suu Kyi's endorsement of the suspension — which does not include an arms embargo — is also crucial, said Gareth Price, senior research fellow in the Asia Program at Chatham House. “That has always been a big determinant of the UK and pretty much the wider EU position.”

He said the proposal was a “sensible middle path” between countries wanting a wholesale removal of sanctions and those striking a more cautious note.

“Everyone wants the reform process to continue and the question is how best to do that,” he explained.

The 27-nation European Union has already lifted a travel ban on 87 Myanmar officials, including Thein Sein, in February but kept an assets freeze against them.

Its decision later this month is likely to encompass other EU sanctions, including a ban on gems and an assets freeze on nearly 500 people and 900 entities.

But it is still unclear how far it would be echoed in Washington, which said it would ease restrictions on investment to Myanmar and appoint an ambassador this month as a reward for reforms.

The U.S. has indicated further loosening would be tied to the release of remaining political prisoners and a solution to long-running conflicts with ethnic rebel groups.

ICG's Della-Giacoma said while the EU and Australian sanctions could be easily lifted, those in the U.S. were “embedded in law” and would be difficult to shift with the tight schedule and political demands of an election year.

“We should expect more incremental moves from the U.S. with further reforms in Myanmar being matched, but not anything too dramatic,” he said.

Adding momentum to the political decisions is surging investor interest in Myanmar, with its abundant natural resources, strategic position in Asia and soaring tourism sector.

The Asian Development Bank described it as a “goldmine,” predicting accelerating growth, despite an array of challenges.

Myanmar is actively wooing foreign business, with new measures including a managed flotation of its currency, tax holidays for investors and plans to open its first official stock exchange in 2015.

“The Myanmar economy has tremendous opportunities in many sectors,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, pointing to oil and gas, tourism and the underdeveloped financial system.

He said the EU and U.S. were likely to increase their economic engagement with Myanmar through providing new development assistance, meaning the country “could become the next gold rush opportunity” for firms providing everything from construction to health care.

But Western firms are likely to remain cautious about the country as it grapples to resuscitate its moribund economy, crippled by mismanagement and corruption during nearly half a century of military dictatorship.

“It's a country without a functioning rule of law. The idea that all these Western companies are going to pour in billions strikes me as unlikely, until there are some sort of changes in legal protections,” Price told AFP.

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