Targeted sanctions on Myanmar would dash hopes of investment surge

Targeted sanctions on Myanmar would dash hopes of investment surge

The US is considering reinstating targeted sanctions on key figures in Myanmar. Investors could be hard pressed to find unsanctioned partners.

Pressure is mounting for the US to take action against the government in Myanmar for the atrocities committed against the Muslim Rohingya population. Following an attack in late August by the Arakan Rohinghya Salvation Army (ARSA) on police posts and a military base, government forces as well as vigilantes have raided Rohingya villages. More than 600,000 Rohingya have fled the Rakhine state in Myanmar since August, many of whom are children.

The response by the international community has been criticized as uninspiring – much has been said and little has been done. In September, the UN declared the crackdown “ethnic cleansing” and the Trump administration called for strong and swift action to end the violence against the Rohingya. More recently, the US withdrew military assistance to Myanmar and halted its consideration of travel waivers for senior military leaders. While this helps set the stage for more concerted action, many find it to be insufficient for holding the government accountable.

U.S. Targeted Sanctions

In response to the persistent persecution of Rohingya the US lawmakers have put forward a bill which includes targeted sanctions with the aim of allowing humanitarian access and supporting the return of Rohingya to Myanmar. More specifically, they are looking to place responsible individuals from Myanmar on the Specially Designated Nationals (SDN) list, which would freeze their assets in the US, prevent their use of US financial institutions, and generally prevent them from doing business with US firms and persons.

Such sanctions are designed to target individuals responsible within the regime rather than the country. More traditional, comprehensive sanctions damage the broader economy and can increase poverty, stall the economy, and in some cases turn the populace against the group imposing sanctions rather than against those sanctioned. This is especially true in Myanmar where there is strong anti-Muslim sentiment. Broader sanctions impacting the general population could be seen as excessive foreign interventionism.

Despite these intentions, even targeted sanctions would likely have a dampening effect on US investment. Sanctions would be aimed at the leadership of Myanmar’s military responsible for the crackdown on the Rohingya. But since much of the economy is controlled by a small group of elites with close ties to the military, investment would likely return to its pre-2016 state during which US investors struggled to find non-sanctioned partners.

Following its independence in 1948, the military directed most businesses in the country. The military has maintained control of businesses even as Myanmar developed a more democratic government and state-owned business were privatized. Although most broad-based sanctions on Myanmar were lifted in 2012, potential investment continued to be limited until 2016 by the fact that much of the economy was controlled by individuals who remained sanctioned or were associated with sanctioned individuals. Companies seeking to invest in Myanmar risked high fines for even accidentally doing business with sanctioned parties.

It was only a year ago that the Obama administration controversially lifted most remaining sanctions on individuals in Myanmar. A reinstatement of sanctions, even targeted ones, would dash expectations of a continued surge of investment from the US.

Limited leverage over Myanmar

The effect of sanctions will also be limited by China’s willingness to support the government to gain influence. Though it has offered some support to the Rohingya it has also said it supports Myanmar’s efforts to “safeguard stability”. By playing this role as a nonjudgmental partner it will give sanctioned individuals somewhere to turn to for economic support in lieu of the US. There are clear strategic benefits for China – Myanmar is a partner in China’s Belt and Road Initiative and the Rakhine province is the origin point of an oil and natural gas pipeline that leads into China. But China is becoming an interested party in the crisis as it has just proposed a three-stage plan to resolve it.

Sanctions would send an important message but the plight of the Rohingya goes beyond a few key leaders in the military. The Rohingya have been in conflict with Buddhists in the Rakhine state for decades and support for the military has risen domestically in light of the crackdown. Furthermore, the ability of the civilian government to ameliorate the crisis is limited by military influence in both industry and in the parliament where it is guaranteed 25 percent of the seats. Rising Buddhist nationalism makes the problem more complicated – they risk giving up some of their domestic authority by speaking out for the Rohingya.

Categories: Asia Pacific

About Author

Peter Hays

Peter is a London based analyst. He specializes in trade and regulation in the Asia Pacific region. He holds a MSc in Economy, Risk and Society from the London School of Economics and a BA in International Studies from American University.