Tipping the Balance on the Pivot

There is a noticeable wobble in the implementation of the Obama administration’s 2012 Asian pivot or rebalance policy.  While the countries of the Association of Southeast Asian Nations (ASEAN) have generally verbalized support for the new stance, there is one commonly cited concern: an over emphasis on the security aspects of the plan with only vague lip service paid to the economic portion. 

Although the U.S. government coffers have grave budget difficulties, the U.S. can still have a significant economic impact through the American private sector, and Myanmar, the ASEAN chair for 2014, is the prime arena to demonstrate commitment to a robust rebalance policy.  The time is right to emphasize investment in Myanmar because the country is the hot new market exciting investors, the Burmese government is encouraging increased American investment, and because the country is rebuilding from its very foundation, so smaller amounts of capital will make a relatively large impact.

It is no secret that Myanmar is rich in resources (i.e. teak, jade, natural gas), has a large workforce and market with a population of almost 60 million, and 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.  Since the reforms in Myanmar started in 2012, sanctions have been significantly rolled back, but still have not been permanently lifted.  Some inroads have been made: the USAID mission in Myanmar emphasizes public-private partnerships, exemplified by the recent CISCO investment, former Assistant Secretary of State Kurt Campbell’s newly established company has bid for construction of the new Yangon airport, and the U.S.-ASEAN Business Council has led multiple tours of the country for American business people – but it is still 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 – FDI. According to the Myanmar Directorate of Investment and Company Registration, 34.5% of FDI inflows in 2012 were from the Middle Kingdom, while only .6% 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 for tax advantages for U.S. companies who invest at least $50 million in Myanmar should be proposed.  A preferential trade agreement with Myanmar can be negotiated, with the aim of eventually working towards their membership in the TPP.  Lastly, there needs to be greater communication between American diplomats and the expat business community in Myanmar.  Another American business person I met in Yangon confirmed that there is little consulting of the business community by foreign service officers.  The American Chamber of Commerce and the U.S.-ASEAN Business Council, can facilitate this discussion, but have yet to open 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, started by an American in 2002.  Through the influence gained by the factory’s business success and the large number of jobs, especially for the disabled, which it provided for 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 the rule of law, and Americans are still cautious to take any actions that seem supportive of the Burmese 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.  We must not miss this opportunity to successfully 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, Sec. Kerry must facilitate and emphasize economic diplomacy in Myanmar to illustrate the tipping of the scales to even out the security and FDI portions of the pivot.