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US sanctions renewal on Myanmar may deter foreign investors

The United States’ decision to extend economic sanctions on Myanmar may make businesses considering investing in the country nervous.

YANGON: The United States’ decision to extend economic sanctions on Myanmar may make businesses considering investing in the country nervous.

US President Obama cited ongoing human rights abuses in ethnic minority areas, particularly in Rakhine state, and the continued role of the military in political and economic activities as reasons for the extension.

US multinationals like Coke, General Electric and Proctor & Gamble have already started operations in Myanmar.

Other US companies are also keen to tap on the business opportunities available in the country.

Industry observers said the sanctions renewal do not bode well for a country aggressively wooing foreign investors, and may spook some investors. 

Romain Caillaud, managing director of Vriens & Partners, said: "In a number of sectors like oil and gas, American companies will continue to move forward. But in others, for example, manufacturing, maybe some companies will delay their investment into the country for some months or years.

“This is bad for Myanmar. Improving relations with the US will attract investment from many more countries. European companies or even Japanese companies look at what the US does when they consider investing in Myanmar. US sanctions have an impact beyond US businesses."

The sanctions renewal also serves as an indication of how Washington will react to Myanmar going forward.

Mr Caillaud said: "I don't think new sanctions will be passed for the moment, but the rhetoric in Washington DC will become more pushy, more aggressive towards Myanmar to try to ensure that the transition process does not stall, that more political reforms are implemented."

But some do not think the extended sanctions are entirely bad.

Dr Maung Maung Lay, vice president of the Myanmar Federation of Chambers of Commerce and Industry, said: "The pros are that we're happy the United States has not abandoned Myanmar. So they're still interested in Myanmar.

“But the cons are that the people are unhappy that after sort of a dramatic transformation, they expect the United States to lift all its sanctions and to reinstate the GSP (Generalised Scheme of Preferences) which they had once allowed us.”

Dr Maung Maung Lay believes it is important for Myanmar to continue with its transformation process, so as to convince the US of the country's political commitment to achieving democracy.

Investments flowing in Myanmar are dominated by Asian countries like China, Thailand and Singapore.

The US does not even feature in the top 10 list of international investors, making up only 0.5 per cent of investments.

Renewed sanctions could thus keep American businesses trailing behind foreign business competitors, while Myanmar will not benefit from potentially significant US investments.  

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