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Emerging from diplomatic isolation and Western economic sanctions, Myanmar wants to be the “it" destination for foreign investors.

Foreign business leaders flocked to the capital, Naypidaw, for the World Economic Forum on East Asia, a regional version of the powerhouse gathering. Major global brands have been enticed by Myanmar’s largely untapped potential and the momentum is picking up: General Electric, the first American company to sign a deal after US sanctions were lifted last July, formally launched its Myanmar office in late May. On June 4, Coca-Cola opened its first bottling plant in the country in 60 years, on the heels of Carlsberg and Heineken. Then, on June 27, Myanmar’s government awarded highly anticipated licenses to extend mobile phone and Internet service to telecommunications firms from Norway and Qatar.

More investors are lining up. In the petroleum sector, dozens of companies from around the world reportedly bid on 30 sought-after offshore oil and natural gas fields last month [June]. A short-list has not been announced, but prominent American, Asian, and European oil firms are likely contenders. At least 20 more fields are to be offered next.

Opportunities abound—but so do pitfalls. The reforms introduced since the quasi-civilian government of President Thein Sein took over from Myanmar’s military junta in 2010 remain far from complete. Key concerns for companies include high risks associated with human rights abuses, security, and corruption.

One flashpoint is the absence of community consultation and consent for projects. Laws regulating land tenure and environmental controls are weak and poorly implemented. Trouble can arise when securing access to land and other resources, particularly in ethnic minority areas where preliminary ceasefires have been signed after decades of civil war. Foreign investment projects have been enmeshed in land grabbing controversies.

Compounding these problems, Myanmar authorities have increasingly used intimidation and criminal prosecutions to clamp down on peaceful protests against international projects. In April, several hundred villagers in western Myanmar’s Rakhine State raised grievances that they received little or no compensation when their farmlands were taken for a major oil and gas project and that they will bear the brunt of the project’s potential negative impact without seeing any benefit. The authorities responded by using a so-called reform law that ostensibly guarantees the right to peaceful assembly to prosecute 10 villagers for holding an unauthorized protest.

In November, at least 40 protesters were injured when the government used excessive force to disperse Buddhist monks and others who had camped out to protest the expansion of a controversial copper mine in Sagaing Region.

Poor laws and the risk of involvement in abuses affect many kinds of companies. The winners of the telecommunications tender, for example, could risk involvement in human rights violations because of Myanmar’s inadequate legal protections for privacy and free expression. Poor rule of law in Myanmar means communities and workers have few effective means to raise grievances and those who do so can face retaliation.

Security issues present another major business risk. Pipelines to transport petroleum across Myanmar to China were completed in May, but their use has been delayed amid clashes between government and ethnic armed groups in Shan State near China. Two oil workers were killed in a May 13 attack on a company compound near the China border for which the government blames Shan rebels.

Sectarian violence beginning last June between majority Buddhists and minority Muslims has included killings, beatings and property destruction in several parts of the country. In Rakhine State, local leaders backed by state security forces carried out a campaign of ethnic cleansing targeting Muslims. Businesses that rely on Myanmar’s unreformed security forces to protect assets or personnel face potential complicity in abuse.

Finding local business associates whose hands are clean of corruption or abuse presents another challenge. Myanmar is considered one of the world’s most corrupt countries. Many potential partners trace their success to their ties to the former military junta.

Vested interests connected to state or military controlled companies are active in many sectors that are drawing foreign investment. One military-owned business partners with a Chinese firm in the copper mine where protesters were violently dispersed. And another recently entered Myanmar’s telecommunications sector under unclear regulatory terms. 

To protect themselves and their reputations, as well as the people their business might impact, companies should take care in Myanmar. The widely endorsed practice of corporate “human rights due diligence” – taking concrete steps to prevent and address any abuses – is an important starting point. Companies would also be wise to protect their investments by maximizing transparency.

Under a new US rule that took effect July 1, American companies investing $500,000 or more in Myanmar have begun to publicly report on their policies and procedures to address human rights, labor, environment, land, corruption and security risks in the country.

Additional steps that could help spare US and other global companies from being associated with human rights abuses include carefully vetting local partners, commissioning independent and credible risk assessments, undertaking thorough consultations with affected communities, developing clear plans to minimize risk factors and remedy problems, and publishing the results of social and environmental impact assessments as well as remediation plans. To capture ongoing risks, companies would also do well to conduct frequent human rights reviews and create mechanisms for communities to address any grievances that arise.

If foreign investment is to advance progress, the rewards need to outweigh the risks both for the companies involved and for the people of Myanmar.

Lisa Misol is a senior researcher on business and human rights with Human Rights Watch in New York.

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