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Burma is a final frontier of sorts for multinational companies seeking new growth markets and opportunities. Can this growth be sustainable?
In elections of March 2011, Burma ended more than 52 years of isolationist totalitarian government. New ruler and former military commander Thin Sein started the preliminary steps of opening the country to market forces.
Burma – also known as Myanmar – has abundant natural resources but high poverty rates. Three-quarters of Burmese lack access to electricity, while only 10% have cell phone connectivity. Yet now the country is like a magnet for the multinational companies that have hitherto been on the outside looking in at a potentially large and lucrative market.
Burma’s government seems to be aware that it has a small window in which to ensure that the coming market rush in agriculture, mining and extraction, manufacturing, energy, tourism and telecommunications embraces equitable and green growth.
The list of multinationals that beat a quick path to Burma include Coca-Cola, Unilever, Chevron, General Electric, Pepsi, Cisco Systems and Standard Chartered Bank. Norway’s Telenor and Qatar’s Ooredoo both received cellular phone licences to connect the country. In 2013 alone Japan transferred more than 40% of its clothing imports from China to Burma.
7-Eleven convenience stores are sprouting up in the capital city of Naypyidaw, and the South Korean chain Lotteria is introducing Burmese people to the joys of fast food. In March 2014, Burma’s ministry of energy awarded multinational firms including Chevron and Shell 20 concessions for oil exploration.
Burma’s 63 million citizens are young and literate, and for now appear ready to accept lower wages than Cambodians or Laotians. But how should international companies, NGOs and Burma’s administrators chart a course for development that is more sustainable than that of its neighbours?
Dialogue for diligence
The Organisation for Economic Cooperation and Development (OECD) is hoping that by updating its responsible business guidelines and specifically sponsoring conferences and facilitating meetings it can get the Burma government to more clearly convey its expectations and get companies entering to exercise complete due diligence before they begin business. Potential investors in Burma are not required to “subscribe” to the guidelines, but Marie-France House, head of the OECD unit on the guidelines for multinational enterprises, says a thorough due diligence process ahead of development can prevent many problems later.
The Myanmar Centre for Responsible Business (MCRB) was founded in 2013 and is headed by former UK ambassador and former Rio Tinto employee Vicky Bowman. The centre launched a project in March 2014 to gather information about 50 local Burma companies in order to jumpstart sustainability transparency efforts.
“Transparency is the backbone of a responsible business,” Bowman says. “We have been inspired by a top taxpayers’ list produced by [Burma’s] internal revenue department which created a ‘virtuous competition’ between companies to show that they are good taxpayers. We hope [this] project will have the same effect on company transparency.”
Burma has few of the environmental and social regulations and laws that guide companies keen to invest responsibly. A minimum wage has not been established, and no environmental curbs on emissions or solid wastes are in place. Bowman says the country struggles with the same issues every lesser-developed country does: corruption, inadequate infrastructure, poor public services and an undereducated population.
“Well-designed corporate social responsibility programmes which go beyond respect and promote enjoyment of human rights, in particular through ensuring that economic benefits of the investment are felt locally, will bolster a company’s social licence and contribute to Burma’s development,” she says.
David Baulk, an expert in the political economy of Burma’s current transition, has written a report saying that while efforts such as MCRB’s have been central to the international community’s engagement with the country, “a reliance on business to behave responsibly presents more opportunity for the consolidation of power and wealth at the top than for their diffusion”.
The lack of robust legislation is a critical problem, Baulk argues, because without it companies have no firm guidelines for behaving responsibly. In addition, Burma’s public sector is weak, with financial and political power still concentrated amongst a small quasi-military elite.
Telenor and Ooredoo, the two companies that received licences to expand Burma’s mobile phone network, are trying hard to prove Baulk wrong.
Ooredoo has spent heavily to introduce a 3G network to Burma, with coverage for 97% of the country due to be available later in 2014. Ooredoo is also putting in place a mobile-based free maternal healthcare information service to try to lower the high infant mortality rates and challenging levels of infant malnutrition in Burma. Ooredoo is also in the midst of training what it says will eventually be 30,000 Burmese women to be Ooredoo mobile retail agents.
Telenor’s goal is to reach 90% of the population in Burma with mobile services within five years. Telenor spokeswoman Samantha Chen says Telenor will create 1,000 jobs by the end of 2014 and 2,000 more indirect employment opportunities through local business partnerships. In addition, the company will act “with environmental care”, Chen says.
“As an example, we will use solar-powered energy as a primary source of electricity in many of our base stations and we are open to sharing infrastructure with other mobile operators in the market to avoid a need for duplication,” she says. Telenor has promised to roll out its 3G network by October 2014.
With government oversight still so poor, Bowman’s MCRB will have lots of work ahead. The organisation is currently working on assessing the impact of the oil and gas, and tourism sectors. Once these first assessments are complete, by the end of 2014, MCRB will investigate the impact of agriculture, and then the telecom sector.
Bowman says that in Burma it is the legacy of companies owned or jointly owned by the military that makes a level playing field for responsible business very challenging. Such companies are not always subject to the same scrutiny and oversight as others in the same markets.
“What’s needed is that military-owned companies should have to compete on the same terms for licences and other business opportunities, and be held to the same standards of environmental, social, and corporate governance, including paying taxes,” she says. “There is a need for all companies in Burma to be transparent on these issues, whether foreign, Burma private sector, or military-owned. But at the moment there is no transparency on the part of companies owned by the army – they don’t even have websites.”
Two recent rulings may help. In August 2013 the government passed an anti-corruption law and the parliament is now in the process of developing the structures necessary to enforce it. And an April 2014 ban on all raw timber exports out of Burma is an attempt to rein in corrupt cross-border timber sales.
Burma is in a unique position to approach market development more sustainably, but in the three years since the transition from military rule began, the needed legal reforms have been very slow.
“It’s still early days,” says the OECD’s Marie-France Houde. “We want to keep an eye on what’s going on … really we are just getting started.”
Burma – fast facts
|Area:||677,000 sq km|
|Population (2014 est):||55.7m|
|GDP (PPP):||US$111bn (2013 est)|
|GPP (PPP) per capita:||US$1,700|
|GDP composition:||agriculture 38.0%; industry 20.3%; services 41.7%|
|Export partners:||Thailand 40.7%; India 14.8%; China 14.3%; Japan 7.4%|
|Import partners:||China 36.9%; Thailand 20.2%; Singapore 8.7%; South Korea 8.7%|
|Energy generation by source:||53.3% fossil fuels; 0% nuclear; 46.7% hydro|
Source: CIA World Factbook (PPP = purchasing power parity)
April Streeter is an associate with One Stone. A Certified B Corporation, One Stone has a global team offering sustainability consultancy and communications expertise, based in Stockholm, Edinburgh, Sydney, Portland and Washington DC.agriculture Burma extractives Asia labour practices Myanmar poverty