It is hard to resist the euphoria surrounding Myanmar these days, and a recent trip to the country has left this group of investors cautiously optimistic. On May 1st, UN Secretary-General Ban Ki-moon launched the Local Network of the UN Global Compact (UNGC) in Yangon. We, [Anna Pot (APG), Kris Douma (MN Services) and Farnam Bidgoli (Sustainalytics)] were among the speakers and participants in the day-long discussion and debates, alongside more than 80 international and national companies. We have spent the past week meeting with companies and civil society to increase our understanding of the current situation in Myanmar. Although it is undeniable that change is happening at an unprecedented speed, optimism over the enormous potential of this country and the opportunities for investment should be matched with caution and a commitment to act responsibly from the start. Our first impression after meeting with local companies is that things are changing rapidly and people are eager to look forward not back. Company representatives, non-governmental organizations and former dissidents all freely discussed recent developments and expressed their belief in a better future. At the local network launch, 15 Burmese companies signed onto the ten principles of the UN Global Compact. A number of major multinationals that are not yet operating in Myanmar also attended the launch, eager to explore how to develop business in a sensible way. The companies were joined by a number of local small and medium enterprises, some with as many as 500 employees, with little to no exposure to foreign markets. These local companies are keen to gain access to international markets, but cognisant of the major obstacles they face.These obstacles include a lack of infrastructure and electricity, low levels of education, and a nearly non-existent rule of law, including inadequate protection of foreign direct investment. In addition, the country’s weak financial system and local companies’ lack of international business experience makes it difficult for global companies wanting to expand into Myanmar. Finally, as Judy Cheng-Hopkins (UN assistant to Secretary general for Peace Building Support) rightly pointed out, Myanmar is vulnerable to the pitfalls of the “resource curse”. These challenges will undoubtedly remain after sanctions are lifted, and in order for companies to operate successfully caution and extensive preparation are essential. The multinational companies that we met with concluded, after extensive due diligence, that there are still many risks, such as the weak rule of law and abundant corruption. For some companies the opportunities in Myanmar will only arise after the rule of law is strengthened. Others may choose to get involved now and contribute to capacity building to lay the groundwork for long-term operations. But some companies may find the current risks palatable. Extractive companies will be tempted by Myanmar’s rich reserves of oil, gas, minerals, and teak. In talks with another multinational company, we were reminded that it is possible to combine activities in the extractive industry with sound sustainable practices such as environmental and social impact assessments, grievance mechanisms and strategic social investments. Since extractive companies inevitably have to work closely with the government, they should leverage government relations to pursue sustainable development and the protection of human rights. Companies can play a distinct role in creating an economic environment where other
companies in other industries can follow suit. Investors also have a role to play by monitoring and engaging with companies regarding responsible business practices, looking specifically for transparency in both government relations and in relations with local communities. While we are filled with careful optimism over the future of Myanmar, we are also mindful of the more cautious approach taken by some members of civil society that we have met over the past week.In fact, as we write this article, the Democratic Voice of Burma reports that the Burmese army is sending 2,000 government soldiers to the Kachin region, despite the fact that Ban Ki-moon called for a ceasefire in the region. Our conclusion: optimism is appropriate, but in advance of the 2015 elections, companies and investors have to make sure that they tread carefully and act as forces for sustainable development.
Anna Pot is Senior Sustainability Manager at APG Asset Management, Kris Douma is Head of Responsible Investment & Active Ownership at Mn Services (MN) and Farnam Bidgoli is an Analyst, Advisory Services at Sustainalytics.