POSTED: 1:30 a.m. HST, Jul 1, 2013
WASHINGTON » When the Obama administration lifted economic sanctions on Myanmar last year, encouraging American investments after decades of treating the nation as a pariah, it did so with a significant caveat.
For the first time, effective Monday, American companies investing in Myanmar must detail in public reports the steps they have taken to respect human and labor rights, to protect the environment and to avoid corruption in an economy warped by international isolation and military dictatorship.
The reporting requirement represents a novel and, to some, controversial effort by the administration to shape business practices in an emerging economy that has embarked on a remarkable though hesitant opening under Myanmar's reform-minded president, U Thein Sein.
Officials said the effort could become a model for other countries that might someday emerge from sanctions, like Cuba and Iran. It could also be used, they said, for countries with shoddy records of corruption or other abuses that have come under heightened scrutiny after disasters like the one in a Bangladesh factory in April that killed 1,129 workers.
"While these have been tailored to Burma," said Daniel B. Baer, a deputy assistant secretary of state, referring to Myanmar by its other common name as a matter of American policy, "a similar set of issues would apply in other places - not only other countries emerging from sanctions but really any place where businesses are operating and investing."
The requirements have generated considerable criticism. Business and industry groups have complained that they are onerous and make American companies less competitive than their European counterparts, which are also surging into Myanmar.
Human-rights advocates argue that they are not strong enough - and lack explicit penalties for companies that do not comply - to manage a headlong rush to invest in an impoverished country afflicted with ethnic conflicts and still dominated by the military and state-owned enterprises that operate with little transparency.
The U.S. Chamber of Commerce lobbied against the rules as the administration drafted them after President Barack Obama's decision to lift sanctions last July.
American investment in Myanmar "should be encouraged, not hindered," said John Goyer, the chamber's senior director for the region. The organization has called on the administration to extend trade privileges to Myanmar.
"Other countries are not putting similar obligations on their own companies, so it is an additional requirement that our competitors do not have," Goyer said. "Larger companies can put forth the resources necessary to adhere to the reporting requirements, but for smaller companies, it is much more difficult to do so."
The administration imposed the requirements using the legal authority it has from a raft of economic sanctions that were imposed after Myanmar harshly repressed the opposition movement led by Aung San Suu Kyi, refusing to recognize her party's victory in elections in 1990. Her party has since been legalized, and last year she won a seat in the country's Parliament.
Obama has welcomed the initial steps to loosen the military dictatorship and met Thein Sein in the White House last month, but the sanction laws remain on the books and could be reinstated if the reforms are reversed. The president used his authority to waive the sanctions and grant companies licenses to operate there. The State Department then spent months drafting the requirements after holding public hearings and inviting comments from companies and advocates.
The requirements apply to any company investing more than $500,000, and to all investments with the country's state energy monopoly, Myanma Oil and Gas Enterprise.
In addition to ensuring the rights of workers and providing protections for the environment, the companies must also report any payment exceeding $10,000 to government agencies or officials, any contact with Myanmar's military, arrangements with private security companies and the details of any purchase of land or real property.
Companies are required to submit their reports within 180 days of reaching the threshold and by July each year thereafter. The reports will be made public on the website of the newly reopened U.S. Embassy in Yangon, also known by its colonial-era name, Rangoon. Companies can separately submit to the State Department a report with any privileged competitive information that will not be made public.
American companies are already subject to laws governing foreign investments, including the Foreign Corrupt Practices Act, and the Securities and Exchange Commission now requires companies to report on investments in oil, gas and mineral industries overseas under the Dodd-Frank legislation that Congress adopted in 2010. But the requirements for Myanmar are the first to apply to investments across the entire economic spectrum.
While there are no explicit penalties for not reporting, the State Department expects that most companies will comply to avoid public criticism from advocates for human rights and the environment who are closely watching Myanmar's political and economic opening.
"It puts companies in the uncomfortable spot of saying they're not doing anything," said Lisa Mosol, a researcher at Human Rights Watch, which reports regularly on Myanmar. "It might cause companies to slow down and think harder."
The extent of American investment in Myanmar so far remains unclear, but officials and experts expect it could expand significantly given the country's population of nearly 60 million and the dearth of American and European products after so many years of international isolation.
Dozens of American companies have already announced investments, including prominent ones like Coca-Cola, General Electric and Ford, which is opening its first franchise dealership in the capital, Yangon, selling Ranger trucks made in Thailand and F-150s made in America.
John F. Kwant, Ford's director of international government affairs for Asia and Africa, said the lifting of decades of sanctions happened so quickly that companies had little certainty about the requirements for receiving licenses to invest. He said that the State Department's requirements clarified the parameters for investors and, at least in Ford's case, did not seem burdensome.
"We don't find the reporting requirements onerous," he said, adding that big companies were well versed in laws like the Foreign Corrupt Practices Act. "Those are all things we do as a matter of course."
Michael H. Posner, who was assistant secretary of state for human and labor rights until joining the Stern School of Business at New York University this year, said the intent of the requirements was to force companies to examine the murky connections between the business and power in "a very embryonic system," with undeveloped institutions and regulations.
"This is part of a greater trend - not only in the business world, but in our world generally - toward transparency," said Posner, who helped draft the requirements while at the State Department. "I think it's a very healthy trend."