Safeguards Needed Before Allowing Investment, Financial Services
(Washington, DC) – The US government should not ease sanctions on business activities in Burma until adequate safeguards are in place to prevent new investment from fueling human rights abuses. A US presidential order imposing a ban on investment and financial services in Burma is scheduled to expire on May 20, 2012, unless it is renewed or revised.
In early April, in response to Burmese government pledges of reform and electoral gains by Burma’s main opposition party, US Secretary of State Hillary Clinton announced that the US government was prepared to relax certain business-related sanctions. A new presidential order easing business restrictions is expected to be issued soon.
“The US government should not reward the Burmese government’s nascent and untested changes by allowing an unregulated business bonanza,” said John Sifton, Asia advocacy director at Human Rights Watch. “Tough rules are needed to ensure that new investments benefit the people of Burma and don’t fuel human rights abuses and corruption, or end up strengthening the military’s control over civilian authorities.”
In two recent joint letters to President Barack Obama and his senior advisers, Human Rights Watch and other organizations expressed concern that the administration would lift business-related sanctions before progress was made on key reform efforts. The groups noted that a current US Treasury Department list of “Special Designated Nationals”– people and companies implicated in human rights abuses in Burma with whom American companies are banned from doing business – had not been updated for at least three years, and needed to be corrected based on new developments.
“The US government shouldn’t lift investment restrictions unless it first updates the Treasury Department list,” Sifton said. “Otherwise US companies could end up going into business with human rights abusers.”
Secretary Clinton, when she announced plans for a “targeted easing” of sanctions in early April, pledged that, “Sanctions and prohibitions will stay in place on individuals and institutions that remain on the wrong side of [Burma’s] historic reform efforts.”
Undertaking business in Burma raises a variety of human rights related risk factors, Human Rights Watch said. These include: weak rule of law and a judiciary lacking independence, the military’s extensive involvement in the economy as well as its use of forced labor and other abusive practices in connection with providing security for business operations, poor regulation and enforcement of labor and environmental laws, widespread corruption, and the mismanagement of public funds. The Burmese government is dominated by the military, which under Burma’s constitution enjoys legal supremacy over civilian authorities.
Human Rights Watch called on the US government to develop and impose binding, enforceable rules prior to permitting new business activities by American companies. In developing appropriate safeguards, the government should hold more extensive consultations with nongovernmental groups inside and outside Burma.
In April, the European Union announced a “suspension” of sanctions for one year. The suspension is likely to be permanent since reimposing sanctions would require consensus from every EU member country, which is highly unlikely given the new business opportunities, Human Rights Watch said. Other governments, including Australia, Canada, and Switzerland, have also announced in recent weeks that they would remove sanctions. Some governments have called for businesses to engage responsibly but none have mandated binding standards.
“It’s not sound policy to relax sanctions just because other countries are doing so,” Sifton said. “The U.S. has led the international community in pressuring Burma to reform and it should continue to do so.
Specific recommendations to the US Government
Human Rights Watch identified several key elements for business standards in Burma that should be featured in any US decision to relax sanctions:
- A careful, calibrated approach featuring the gradual and select easing of sanctions tied to concrete progress on reform in Burma and based on close consultation with nongovernmental groups inside and outside Burma.
- Screening of investment and other business activities. Prior to allowing any American company to invest or otherwise engage in business in Burma, the US government should undertake pre-screening processes to review and approve proposed US business activity, taking into consideration its potential impact on human rights and armed conflict. Scrutiny should include activities that companies may carry out under contract for foreign or Burmese companies. Activities that entail a considerable risk of harmful impacts should not be permitted to proceed.
- A prohibition on any business engaging directly or indirectly, with individuals or entities linked to human rights abuses, including the Burmese military and militias, the military’s private-sector allies, and state-owned businesses.
- A prohibition on involvement in any activity that entails large-scale appropriation or leasing of land, whether from private or public entities.
- An explicit requirement that companies respect human rights and undertake thorough due diligence procedures to prevent rights abuses and remedy them if they arise. Such requirements are consistent with accepted international standards reflected, for example, in the 2011 OECD Guidelines on Multinational Enterprises, and should be made binding for Burma. Among other elements, required procedures should include independent and transparent human rights impact assessments that address all relevant social and environmental concerns, as well as the preparation of human rights implementation or mitigation plans.
- Imposition of binding measures to enforce all applicable obligations, subject to verification and with tough penalties for non-compliance, including fines and withdrawal of permission to invest in Burma.
- Mandatory public reporting requirements for all companies permitted to do business in Burma, including the publication of social and environmental impact assessments, full contract transparency, and the timely and detailed disclosure of all payments made to the government of Burma.
- An effective complaints mechanism accessible to individuals and communities in Burma and those representing them who allege harmful conduct or impacts by US companies investing or doing business in Burma, with findings and decisions binding on companies.
- A requirement that companies affirm that they submit their activities in Burma to the legal jurisdiction of US courts, including activities involving subsidiaries or sub-contractors, or activities companies carry out as a contractor for another party. In addition, the US government should take all necessary steps to ensure that judicial avenues are available to provide recourse to victims and accountability for human rights violations.
Human Rights Watch highlighted several human rights-related risk factors for business in Burma, include the following:
- The extensive role of the military and its closest business allies, who dominate many sectors of the economy and are more likely to benefit from new business deals than ordinary Burmese citizens.
- The abysmal human rights record and absence of accountability of Burma’s security forces, which continue to carry out serious abuses in Kachin state and repression in other parts of the country. The military has a track record of using forced labor and engaging in illegal land confiscation, forced displacement, and unlawful use of force against villagers, among other serious abuses, in the context of clearing land and providing security for business projects.
- Inadequate domestic regulation and enforcement on key issues such as environmental protection, resulting in business activity that has harmful consequences for human rights.
- Persistent labor rights problems. Despite recent legislative reform efforts, serious labor rights problems persist in Burma, including forced labor in ethnic and conflict zones and sweatshop labor conditions in factories, including excessive hours, low wages, and health and safety violations.
- Major tensions over the acquisition and use of land, which has been a flashpoint for forced evictions and other human rights abuses. Such problems are especially likely to arise in connection with extractives industries (oil, gas, and mining), major infrastructure projects (e.g., hydroelectric dams), timber, agribusiness and large-scale tourism projects.
- Lack of community consultation, consent, or benefit in government-approved projects. Local communities in Burma have little or no say in how land and natural resources are used by businesses. Although these communities bear the costs of such projects, for example in terms of displacement and lost livelihoods, they have no effective means to secure adequate compensation or to ensure that the government channels the proceeds to promote socio-economic development and poverty alleviation. Recently passed laws such as the Farmland Bill, and the Vacant and Fallow Land Bill, fail to guarantee rights to land.
- Opaque and unaccountable management of government revenues. The immense revenues Burma has generated from exports of natural gas, which are slated to rise dramatically once twin oil and gas pipelines to China are completed, have bypassed the national budget and fueled outsized spending on the military. Recent moves to bring those revenues on-budget and adjust spending priorities have been insufficient. Despite modest increases in social spending, health and education still receive a minimal share of the budget, while spending on the military, down as a percentage, is up overall.
- Rampant corruption. The country is tied with Afghanistan for the second-worst ranking in the 2011 Transparency International Corruption Perception Index. Only North Korea and Somalia fared worse.