Tipping the Balance of a Pivot

by Anne M. Gillman

There is a noticeable wobble in the Obama Administration’s pivot towards Asia. While the member-countries of the Association of Southeast Asian Nations (ASEAN) have expressed support for the new stance, they share a common concern: that the pivot over-emphasizes regional security and only pays vague lip service to the region’s economic growth.

Although the U.S. government has grave budget difficulties, it can still have a significant economic impact on the region through the American private sector. Myanmar, the ASEAN chair for 2014, is an arena where the administration can demonstrate its commitment to a robust rebalance policy. The time is right to emphasize investment in Myanmar. The country is primed as a hot new market, which excites investors, and the Burmese government is calling for increased American investment in order to rebuild the country’s foundation. Even small amounts of capital will make a relatively large impact.

It is no secret that Myanmar is rich in resources (i.e., teak, jade, and natural gas). The country boasts a large workforce and population of almost 60 million. It is in a geostrategic location between the world’s two largest markets – India and China. However, as a result of U.S. sanctions against Myanmar, Americans have not been able to easily invest in the country until recently. Even though sanctions against Myanmar have been rolled back since the reforms started in 2012, they still have not been permanently lifted. Some inroads have been made: the USAID mission in Myanmar emphasizes public-private partnerships, former Assistant Secretary of State Kurt Campbell’s newly established company is part of a consortium that is one of the top two bidders for construction of the new Yangon airport, and the US-ASEAN Business Council has led multiple tours of the country for American business people, with the next upcoming one in July –– but that is far from enough.

Given that a partial motivation for the pivot is to manage the perceived increase in China’s regional influence, those tasked with implementing the policy would do well to take a step back and look at the factor that has overwhelmingly enabled China’s growing presence –– foreign direct investment (FDI). According to the Myanmar Directorate of Investment and Company Registration, 34.5 percent of FDI inflows in 2012 were from the Middle Kingdom, while only 0.6 percent was from the U.S. During a conversation with an American entrepreneur in Yangon this past January, I learned that the only people he is doing business with are the Chinese in Myanmar –– because they are the ones with capital. An influx of American companies and capital can offer a desirable alternative for investors and government officials looking to implement public-private partnerships.

Secretary of State John Kerry needs to pressure Congress to permanently lift all sanctions against Myanmar. Legislation should be proposed for tax benefits for U.S. companies who invest at least $50 million in Myanmar. A preferential trade agreement with Myanmar can be negotiated, with the aim of eventually working towards their membership in the Trans-Pacific Partnership. Lastly, there needs to be better communication between American diplomats and the expat business community in Myanmar. Another American businessperson I met in Yangon confirmed that, aside from foreign service officers, very few people consult the business community. The American Chamber of Commerce and the US-ASEAN Business Council can facilitate this discussion, but neither has opened an office in Myanmar.

American companies will provide jobs and can influence the policy and institutions in Myanmar. An example of how this will work is the Protec Helmet factory I visited in Hanoi, Vietnam, in 2009. An American started the factory in 2002. The factory’s business success and the large number of jobs it provided for the region, especially for the disabled, earned it the respect and influence of the community.  The founder was one of the forces inspiring the Vietnamese government’s policy change to require motorbicyclists to wear helmets.

The biggest concern of US companies looking to invest in Myanmar is stability and rule of law. Americans are still cautious to take any actions that seem supportive of Myanmar’s military. Irrational exuberance surrounding the emergence of this market also creates unrealistic expectations and could lead to a bubble of unaffordable wages and a spike in the cost of living for locals.

However, after spending 26 days in the country and interviewing more than a dozen American businesspeople, diplomats, and members of the Burmese business community, I am confident that the American private sector can navigate these risks and successfully invest in the country. We must not miss this opportunity to penetrate the market early on, providing jobs, quality consumer goods, and make a difference in the poorest country in Southeast Asia. Tasked with continued implementation of the policy, Secretary Kerry must facilitate and emphasize economic diplomacy in Myanmar to illustrate the tipping of the scales and even out the security and economic growth portions of the administration’s pivot.