Despite the welcome reforms, Burma requires further development, not least in terms of business infrastructure, if it is to compete with its Asian neighbours
Wedged in between the world’s biggest democracy and its biggest communist state is Burma. Known for human rights abuses and forced labour perpetrated by a military junta, Burma seems to be entering a renaissance.
In this rapidly changing environment, many companies are looking to Burma as their next frontier. But, is it?
Until 2011, Burma was governed by the world’s longest lasting military dictatorship. Its people are among the world’s poorest, ranking lowest in Asia on the Human Development Index, behind only Nepal. It fares even worse on Transparency International’s Corruption Perceptions Index, tying with Afghanistan for second to last place globally.
Yet recent democratic elections and ensuing government reforms have been rewarded with overtures of support, both political and financial, from Europe and the US. Opportunities once closed to Burma are now being opened. Where once their full ASEAN membership was deferred due to human rights practices, Burma will now chair ASEAN in 2014.
Where their International Labour Organisation membership was restricted due to the military’s propensity to extract citizens from their homes at gunpoint and put them to work on pipelines for no remuneration, they have now been restored to full membership and will receive ILO technical support on forced labour issues.
Steve Marshall, the ILO’s liaison officer for Burma, says: “When I arrived in 2007, people were arrested just for carrying my business card but now we are working in partnership with the government. There has been a marked change.”
Sanctions and bans
These changes have not gone unnoticed on the world stage. The one-year suspension of most economic sanctions by both the EU and US is meant to be a show of support for Burma’s efforts.
However, US companies investing in Burma are subject to responsible investing requirements, including public reporting on security arrangements, policies and procedures to prevent negative impacts on human rights, labour rights and the environment. There is also a prohibition on working with Burma’s military, which has been heavily embedded with local business and industrial zones.
Recently, the US Congress approved an extension of the import ban for another three years and the president, Barack Obama, signed it. So while US companies can invest in Burma, they cannot import goods from the country, unless the president decides to lift the import ban at some future time.
The UK government, which had been reticent to promote trade with Burma, has now published a Burma Business Guide and funded a three-year grant to the Institute for Human Rights and Business in Burma to offer guidance to government and companies in Rangoon.
These shifts in attitude and policy may seem small but bear significant weight for companies anxious to move into new territory. In the US in particular, Burma has been mentioned in whispered tones since summer 2011, when the democratic elections took place. The potential for a new sourcing hotspot in Asia is an attraction for many companies, especially those looking for alternatives to China.
While the US implemented an import ban in the late 1990s, Europe did not. Germany and Spain ranked among the top export destinations for Burmese garments in 2011, with Japan and South Korea alongside them.
Though official statistics do not always match with media reports, there are three special economic zones in Burma and 18 industrial zones. Most public sources agree there are nearly 300 garment factories and as many as 100,000 workers in that sector alone.
While this burgeoning garment industry is an example of hopeful potential for companies looking to do business in Burma, there are still many challenges in this emerging market, and not solely from a human rights perspective.
As one Japanese bank staffer puts it: “Labour costs are cheap and people are hardworking, but its social infrastructure is extremely poor.” The ILO’s Marshall agrees: “Some companies may be holding off until the business services sector has been developed.”
And while many Burmese companies have continued to do business through the long period of the US import ban, their exposure to international labour standards and corporate social responsibility is not as robust as markets that have been openly trading with the west over the last decade.
A number of years ago, I sent a researcher to the ministry of labour in Rangoon to gather information on local labour standards. She was chased out the door by an angry official, questioning her motives in trying to learn about their labour laws. She ended up turning to unofficial channels for her information, acquiring a used law book with 30 years of wear and grime as the best source of labour legislation at the time.
Social auditors visiting factories in the last few years have similar stories. “One factory was not cooperative at all – when we uncovered a report of physical abuse, the audit was aborted and we were kicked out,” says Jeraporn Rothorn, an auditor. Other auditors indicate that workers were afraid to speak with their employers about labour issues and, at the time, were not allowed to have trade unions in the workplace.
While the trade union laws are changing, along with many other things in Burma, it may take time for labour practices to improve. Companies rushing from China or the labour unrest in Bangladesh may find a new set of challenges awaiting in Burma.
“The civil war has not ended yet,” said Aun San Suu Kyi, the Burmese democracy leader, in a July 2012 speech. And Amnesty International says that human rights in Burma have worsened in the last year despite landmark political reforms.
Yet, that said, speaking at the International Labour Conference in June 2012, Suu Kyi pointed out that Burma is “one of the few remaining countries in the world with vast potential waiting to be realised”.
For many companies, the question is not whether they should invest in Burma but only when to do so. Burma presents not only challenges but also opportunities and a sufficiently strong business imperative will drive corporate entry into this new market.
Suu Kyi acknowledged this in her ILO speech: “As rights should be balanced by responsibilities, opportunities should be linked to probity if we are to avoid the dangers of exploitation.” She asks that investors adhere to codes of practice, internationally accepted labour standards and environmental responsibility.
The world will be watching as business moves into this next frontier.
Rachelle Jackson is an independent writer specialising in supply chain labour issues.