The Anatomy of Foreign Investments in Burma

Submitted by Christoph Amthor on January 8, 2011 – 7:09 pm

It has been pointed out that foreign investments in Burma are no magic potion by which we can simply “switch on” better times, and it is indeed misleading when this form of engagement is presented as something fundamentally innovative. But also considering to lift the sanctions is nothing objectionable if based on proper argumentation.

I cannot get rid of the impression that proponents and opponents alike tend to reduce this issue to a yes-no-question. This is no surprise since the discussion is powerfully pushed by economic world leaders and their policy machineries, so that other involved players – not excluding Burmese themselves – have to face the choice between joining either the powerful, or the confirmed pessimists. This discussion is at times even that much distorted that proponents of “engagement” verbally equate their approach with pragmatism, suggesting that any cautious skepticism must undoubtedly result from escapism or incompetence.

Time to x-ray the observers.

This pressure imposed in favor of a dichotomy is certainly conducive to a situation in which arguments are replaced by authorities: Governments cite think tanks, NGOs cite donors, and activists cite Aung San Suu Kyi. As soon as Aung San Suu Kyi appears to slacken her position, the proponents of liberalism have no problem to cite her too.

Everyone who feels that the past stalemate has not furthered any improvement is now only too easily being tricked into the assumption that extensive and substantial sanctions have been in place for quite a while now, and thus long enough to draw a causal connection between this approach and the present misery. It is easy to declare a tool inefficient after you haven’t actually tried it. On the other hand, one must admit that there is no way of applying it properly with a lack of good will as far as the eye can see.

A strong argument for upholding sanctions suggests we should keep some coins in hand for occasional bargaining. Emptying your pockets into the hands of the junta would leave you only at their mercy if your plans fail to succeed. At the end, however, it’s up to you whether you believe that things in Burma, and the generals in particular, can be moved without deploying any form of coercion.

Doing it the unpragmatic way: Back to theory.

Given this complex issue, I did some brainstorming and tried to sort the results into a clear structure. I will focus on the arguments that speak in favor of investments in order to review their conclusiveness. Directing my attention there, however, doesn’t mean to express any preference.

I’ve tried to look at the argument in three variations: First, in its claim that all foreign investments are beneficial. Second, diluted to the claim that only “western” investments are beneficial. And, third, saying that only small scale investments – including those made by individual consumers on the local market – are beneficial. Each thesis is followed by supporting arguments and is subsequently broken down to reasons why the thesis might not prove true in its absolute claim and what one can do to counter these obstacles. You noticed it, this approach is not really meant to be “unpragmatic”.

I will understand “benefit” and “improvement” in this context in a way that goes beyond mere economic indicators, thus including things like democratic governance, justice, freedom to speech, human rights, non-discrimination etc.

I am aware that I cannot catch all thinkable arguments and counter-arguments, all problems and solutions. I therefore ask you to understand the thoughts below only as encouragement to review the present discussion.

A: General Thesis

Foreign investments improve the situation in Burma.

Arguments

1. Wealth will trickle down to the broader population, which already seeks changes in politics and society and presently only lacks the power to promote them.
2. Exchange with foreign companies will promote the awareness, education and self-confidence of the Burmese population.
3. The Burmese government and its cronies will increasingly depend on foreign investors and thereby be forced or seduced to comply with their demands. Foreign investors will stand up for the Burmese population’s rights and benefit.

Objection

Foreign investments are ongoing and did not improve the situation.

Possible Reasons

1. Investors are interested in people’s benefit only as far as it is necessary for making profit, i.e. if the population is utilized as workforce, as consumers or as pillar to support the country (providing stability, livelihood of the rulers etc.) or as far as it is necessary to avert a negative image in wealthier countries. Increasing influence of foreign investors is irrelevant when they agree with the regime’s governance or even benefit from the population’s disfranchisement.
2. Investors follow the strategic interests of their countries of origin. Especially Burma’s neighbors are not interested in a strong Burma and prefer it to be weakened by inner conflicts and friction losses.
3. Investors don’t have the space in Burma to effect changes, e.g. to oppose the military’s interests, to act against the laws (e.g. censorship) or where certain skills or infrastructure are not available (e.g. education, health care).
4. The wrong type of investors goes to Burma, due to a faulty selection procedure or unfavorable incentives.
5. These parts of the Burmese population that can benefit from foreign capital and that are being empowered do not re-invest in society and politics. Rather, they invest in the benefit of their own families.
6. Foreign investments mainly fill the pockets of the army and enable it continue human rights violations and crimes against humanity and this cancels out any possible benefit, especially in the areas of ethnic minorities.
7. Foreign investments do not reach relevant sectors, like media, health care etc. because they are no attractive targets.

Possible Solutions

1. Force investors (by laws, public pressure, etc.) to consider benefit of people who are neither their customers nor living in powerful countries and to introduce transparency and accountability.
2. “De-patriotization” and globalization of corporations. (Note: This is a particularly tricky point since it would place these corporations above any national law.)
3. Improvement of governance in Burma and import of relevant skills.
4. Enable and encourage companies with good corporate responsibility record to go to Burma.
5. Raise awareness among the middle and upper class in Burma for public benefit as a value per se or as a necessary condition for sustaining the well-being of their own families.
6. Facilitate the necessary conditions in society and politics so that middle and upper class can make changes.
7. Use economic pressure to request that taxes, exchange rate profits etc. are invested into the society, the legal system, health care etc..
8. Non-profitable fields must be operated by local business people who have a certain degree of idealism and assisted by civil society players. The legal framework must support this engagement.

B: Modified Thesis

Investments of “western” companies are different than those of Asian investors.

Argument

Ineffectiveness or harmfulness of present investments are due to the fact that mainly Asian investors are enabled or encouraged to invest in Burma who follow different values.

Objection

Investments of “western” companies are ongoing and did not improve the situation. No difference to Asian investors can be observed.

Possible Reasons

1. There is no essential difference between Asian and “western” companies, especially in regards to their activities outside their countries of origin where public pressure is low and activities are non-transparent.
2. People in “First World” countries assign a low priority to the benefit of people in “Third World” countries or consider it difficult to achieve due to inherent obstacles, which they cannot influence or which are beyond their own responsibility. This is partly due to the simple fact that the interest in geographically closer countries is generally higher than the interest in remoter ones. The same applies for more powerful countries and those that are more intensively promoted in the media.

Possible Solutions

1. Providing legislation in “western” countries that enforce corporate accountability and abidance by the laws and values of their country of origin also in other countries.
2. Awareness raising and education in “First World” countries, changing news reporting, and facilitating voices from “Third World” countries.

C: Modified Thesis

Small scale investments improve the situation in Burma.

Arguments

1. Small scale investments will rather than bigger investments reach the population since they are more difficult to control by the regime than fewer and larger entities.
2. Small scale investments are made by a multitude of individuals who act according to their personal priorities so that the wealth is naturally spread more fine grained.
3. A higher number of small investors will make it more difficult for the regime to corrupt them because of the competition among them and their inaccessibility.

Objection

Small scale investments can in some aspects appear as a torrent and therefore lose their advantage over single big investments.

Possible Reasons

1. Small tourist groups and individual travelers will often end up in big hotels, especially if trip and accommodation are booked from abroad so that smaller providers cannot compete.
2. Small investors are not necessarily morally better. Reports suggest that expats in Burma tend to stick with the Burmese upper class and seem to be at times rather cynical about the well-being of the ordinary people.

Possible Solutions

1. Foster knowledge and awareness and provide the infrastructure to facilitate more and better informed choice of individuals (e.g. benchmarked ethic traveling).
2. Introduce rules of transparency and accountability. If local media cannot provide this, establish these mechanisms abroad, e.g. in the country of origin.

Epilog

Although I have avoided to come to any clear conclusion, it is probably quite clear that I reckon myself among the skeptics. The mentioned solutions may serve as rough guidelines for civil society activities. I doubt, however, that support on governmental or corporate level can be expected.

Photo: Karen Roe

Ref:burmablog