US-Myanmar Economic Relations: Creating an Attractive Investment Environment

1
US-Myanmar Economic Relations Creating an
Attractive Investment Environment
Jared Genser Managing Director February 25, 2013
2
CREATING AN ATTRACTIVE INVESMENT ENVIRONMENT

• Approach
• Provide background on rule of law project
• Discuss opportunities and challenges for U.S. and
  other Western investors in Myanmar
• Offer concluding observations

• Objective
• Present highlights from Myanmar Rule of Law Needs
  Assessment and implications for international
  investors

1
3
ANY LAW REFORM PROCESS MUST BEGIN WITH A COMMON
UNDERSTANDING OF THE RULE OF LAW
The rule of law refers to a principle of
governance in which all persons, institutions and
entities, public and private, including the State
itself, are accountable to laws that are publicly
promulgated, equally enforced and independently
adjudicated, and which are consistent with
international human rights norms and standards.
It requires, as well, measures to ensure
adherence to the principles of supremacy of law,
equality before the law, accountability to the
law, fairness in the application of the law,
separation of powers, participation in
decision-making, legal certainty, avoidance of
arbitrariness and procedural and legal
transparency. Report of the UN
Secretary-General on the Rule of Law and
Transitional Justice in Conflict and
Post-Conflict Societies
Source S/2004/616
2
4
OVER 75 INTERVIEWS HAVE BEEN COMPLETED WITH
INDIVIDUALS FROM THE FOLLOWING INSTITUTIONS

• Office of the President (Legal Advisors)
• Supreme Court
• Union Attorney Generals Office

• Ministry of National Planning Economic
  Development
• National Human Rights Commission

• Nationalities Brotherhood Forum
• Shan National Democratic Party

• Chin National Party
• Karen National Union
• National League for Democracy

• US Agency for International Development
• US Embassy (Myanmar)
• US Department of Justice
• US Department of State
• World Bank
• UN Special Rapporteur on human rights in Myanmar

• Asian Development Bank
• EU External Action Service
• International Labour Organisation
• UK Embassy (Myanmar)
• UK Foreign Commonwealth Office
• UN Development Programme
• Office of UN High Commissioner for Human Rights
• UN Childrens Fund

• ActionAid Myanmar
• American Bar Association
• Asia Justice and Rights
• Amnesty International
• Asia Society
• Burma Lawyers Council
• Burma Justice Committee
• Burma Partnership
• Earth Rights International
• Human Rights Watch
• International Bar Association
• International Center for Transitional Justice
• International Development Law Organization
• International Republican Institute
• Lawyers Performance Aid Centre Lawyers Network
  (U Aung Thane)

• Johns Hopkins University
• Justice for All (Myanmar)
• Justice Base
• Myanmar Development Resources Institute
• Myanmar Legal Aid Network (MLAW)
• Myanmar Egress
• Myanmar Peace Centre
• National Democratic Institute
• National Endowment for Democracy
• Open Society Foundations
• Public International Law and Policy Group
• Project 2049
• Eugene Quah
• US Institute of Peace
• US Campaign for Burma
• United to End Genocide
• 88 Student Generation

For some organizations listed, multiple
separate interviews were conducted with different
people in different parts of the organization and
world
3
5
OPPORTUNITIES
Conclusion Implication

• President Thein Sein and his allies have embarked
  on a reform process which, if focused, sustained,
  and later expanded, could substantially transform
  the country

• Foreign companies interested in Myanmar are in a
  prime position to shape the reform process in the
  sector(s) of their operations

Meaningful reform

• The Executive, Legislative, and Judicial branches
  of the Myanmar government have expressed a strong
  interest in receiving assistance from
  international experts

• The Myanmar government has been very open to
  receiving expert advice and support from a range
  of experts, including private sector institutions

Interest in outside help

• The government understands that attracting
  foreign investment will require law reform
  efforts and substantial adherence to the rule of
  law as it is understood by the international
  community

• Foreign companies are well positioned to explain
  their expectations to the Myanmar government in
  terms of the kind of economic environment they
  require to agree to invest

Embrace of the rule of law

• The Myanmar people strongly support the need for
  responsible investment in their country as a
  means to promote economic, social, and political
  development

• U.S. companies especially have a profound
  opportunity to set a new standard of practice for
  investing in the Myanmar economy

Promote development
4
6
IMPORTANT CHALLENGES (1 OF 4)
Conclusions Implications

• The pace of reform is breathtaking but
  corruption and poor labor, environmental rights,
  and human rights standards make it an uphill
  battle for Western companies to compete
• That said, there is serious interest from the
  Myanmar government to reform in a way that
  attracts and even prefers Western investment

• Western investors need to advocate both
  individually and collectively for the Government
  to adopt new laws to address these issues in a
  way that compels other companies to meet
  international standards

1. Playing field

• Major foundational areas of law have yet to be
  developed or reformed, including
• Privatization laws
• Government contracting
• Government procurement
• Land tenure, land use
• Intellectual property, patent, and trademark

• While selling products or services into Myanmar
  through intermediaries will remain more
  straightforward, serious investment can only be
  done acknowledging the ambiguity of the
  transforming landscape

2. Basic laws
5
7
IMPORTANT CHALLENGES (2 OF 4)
Conclusions Implications

• The pace and breadth of reform is extraordinary,
  but by trying to do so much so fast, the quality
  and implementation of reform efforts are uneven

• Companies investing in Myanmar will need to
  closely monitor and help shape the laws and
  regulations that relate to their sector of
  activity

3. Many priorities

• There is a serious lack of legal capacity in the
  public, private, and non-governmental sector

• Companies investing in Myanmar should take a
  leading role in drafting legal documents relating
  to their activities
• For any significant operations, there will be no
  substitute for having an on-the-ground presence

4. Limited capacity

• Historically, contracts in Myanmar have either
  been honored or broken, but there has been no
  useful domestic means to enforce contracts or
  obtain damages for breach of contracts

• This will remain an ongoing challenge in the near
  term
• Myanmar is looking to ratify the Convention on
  the Recognition and Enforcement of Arbitral
  Awards (New York Convention), which will also help

5. Sanctity / enforcement of contract
6
8
IMPORTANT CHALLENGES (3 OF 4)
Conclusions Implications

• Corruption in Myanmar is endemic even after
  reforms, in 2012, Myanmar was only ranked ahead
  of Somalia, North Korea, Afghanistan, and Sudan
• That said, however, there is a commitment at the
  top to substantive reform

• Companies investing in Myanmar will have to be
  exceptionally vigilant and understand that
  despite a commitment to reform at the highest
  levels of government, they may need to manually
  close the gap between the commitment and the
  reality themselves

6. Corruption

• There is a long history in Myanmar of companies
  ignoring community impact in their operations,
  particularly in extractive industries
• The government is now talking about the
  importance of stakeholder engagement
• The international community and media are
  watching Myanmar investors closely

• Companies making major investments in Myanmar
  will need a serious and substantive plan for
  engaging communities, consistent with best
  practices of corporate social responsibility
  (CSR)
• Consulting with the government and political
  opposition about major projects could help build
  confidence

7. Community engagement
7
9
IMPORTANT CHALLENGES (4 OF 4)
Conclusions Implications

• Reform of the military and police (which is
  controlled by the military) is opaque
• Serious questions remain about civilian control
  over the military

• Companies making major investments will need
  clear plans and protocols for operational
  security that keep arms-length from the military
  and police

8. Relations with military and police

• There are currently roughly 100
  specially-designated nationals, individuals or
  entities with which U.S. persons are prohibited
  from doing business these include major
  investors through all major areas of Myanmar
  economic activity

• Lack of transparency in Burmese corporate
  structures will require substantial due diligence
  to ensure companies do not partner with entities
  that have SDN investors
• There needs to be a process for SDN de-listing
  after substantial remediation measures are taken

9. SDNs

• Recognizing the range of challenges described
  here, the U.S. is imposing annual reporting
  requirements on U.S. companies investing in
  Myanmar

• U.S. companies will face additional costs above
  and beyond what other companies globally will
  face in investing in Myanmar

10. U.S. disclosure requirements
8
10
MYANMAR RULE OF LAW NEEDS ASSESSMENT

• Contents of Rule of Law Needs Assessment
• I. Myanmar Constitution
• II. Branches of Government
• Executive Branch
• Union Attorney Generals Office
• Ministry of National Planning and Economic
  Development
• Parliament
• Judiciary
• III. Myanmar National Human Rights
• Commission
• IV. Criminal Defense and Legal Aid
• V. Legal Profession
• Bar Associations

• Perseus Strategies and DLA Piper will be
  publishing its 50-page Myanmar Rule of Law Needs
  Assessment on March 5, 2013
• We will be hosting a public event to launch the
  report on the same day in Washington, D.C.
• If you are interested in obtaining a copy of the
  report and/or attending the event, please contact
  me

9
11
To obtain a copy of Myanmar Rule of Law Needs
Assessment or an invite to the launch event,
please contact Jared Genser Managing
Director Perseus Strategies, LLC 1 (202)
320-4135 jgenser_at_perseus-strategies.com