Myanmar leaders hope international investment will allow Myanmar to rapidly develop.

By Tim Williams

Myanmar opposition leader Aung San Suu Kyi emphasised the need for greater rule of law  in Myanmar at a roundtable discussion hosted by the Burma Justice Committee and the London School of Economics and Political Science (LSE) on 19 June 2012.

At the event Suu Kyi emphasised the importance of rule of law in attaining national reconciliation in the country whose nominally civilian government only embarked on wide reforms in 2011, moving away from the military dictatorships which had ruled the country since 1962.

Furthermore, she said that only through rule of law would it be possible to solve the numerous ethnic conflicts in the country and to address the issue of statelessness underlying recent violence in Rakhine State.

Without the rule of law and the implementation of procedures which can guarantee justice, democracy and viable reforms will remain elusive, she explained.

Lack of rule of law undermines investment opportunities

As well as presenting a challenge to political reform, the current lack of rule of law also presents several problems for foreign investors seeking to operate in the country.

For instance, one of the country’s largest infrastructure projects in recent years has been the controversial Chinese-funded Myitsone hydroelectric dam project. Suu Kyi – an opponent of the project – has said that popular opposition to the project has been largely driven by a lack of transparency and accountability, particularly as there was no public access to the contracts.

Suu Kyi called for clear procedures on how future government contracts with international companies are made. Without such procedures, and lacking the requisite transparency and accountability, investment in the country will continue to pose substantial risks to investing companies.

As highlighted in Maplecroft’s recently released Myanmar country risk report, companies may also face reputational and legal risks if security forces step in to violently enforce contracts.

Furthermore companies may also be seen as complicit in committing human rights violations against protesting groups. Additional financial costs may arise if a project is closed down due to popular pressure arising from a lack of transparency. Also, the lack of rule of law means that judicial enforcement of contracts and property rights is challenging for companies operating in Myanmar.

Responsible investment needed in Myanmar

Above and beyond the need for rule of law to secure investment in the country, Suu Kyi signalled the need for ‘democracy friendly and human rights friendly’ investment. She reiterated her appeal for investments to be judged by their long-term impacts. ‘Businesses must take responsibility for the results of the business that they do inside our country,’ she said.

Suu Kyi argued that investments must be environmentally conscious, as well as socially beneficial by creating employment and providing vocational training. In a country wracked by high unemployment – particularly of youth unemployment which Suu Kyi has recently described as a ‘ticking time bomb’ – and a poor education system, the provision of jobs and the requisite training could be a major spur for development.

Transition to democracy necessitates careful management of risks

The roundtable highlighted that Myanmar – in its transitional state from military dictatorship to fledgling democracy – faces immense hurdles but that a focus on consolidating the rule of law could serve to facilitate solving the many challenges the country faces. Furthermore, it is this transitional nature which offers companies great opportunities to enter a new market, gaining access to labour and resources.

Yet these investment opportunities also entail certain responsibilities towards the country and its society and there must be an onus on investments aiding the development of the whole country rather than strengthening elites who still stand to profit from the system as it is. Although companies may face significant risks to their operations when entering the Myanmar market, these risks can be mitigated through employing an ethically, socially and environmentally responsible approach.

Tim Williams is an Asia researcher at Maplecroft.