On July 11, the U.S. government eased sanctions on financial services and new investment in Burma, while requiring that U.S. persons (including U.S.-organized entities) with cumulative investments in Burma exceeding $500,000 report on processes they have in place to address social and environmental impacts. This is the first time that the United States has explicitly used a sanctions regime to encourage responsible business practices. Despite the general easing of restrictions, sanctions imposed on conducting business with specially designated nationals -- including a number of large Burmese “crony” companies -- and the military or military-controlled enterprises remain in place.
The sanctions represent a balance between ongoing U.S. concerns regarding ongoing and severe conflict in Burma’s border regions and the continuing repression of human rights in the country and the Administration’s desire not to have U.S. companies be the last movers in an emerging market. Asian investment, particularly from China, Thailand, Singapore, and Malaysia, has been increasing rapidly over the past decade despite Western sanctions. Moreover, since the European Union suspended most sanctions in April, European companies have visited the country in increasing numbers, leading some U.S. companies to express concern that they would be left behind.
The Reporting Requirements on Responsible Investment in Burma require that U.S. companies that invest an aggregate of at least $500,000 in Burma submit an annual public report on the following topics:
Overview of operations in Burma;
Human rights, labor rights, and environmental policies and procedures;
Arrangements with security providers (if applicable);
Property/land acquisition, including processes to identify land rights and address resettlement practices, if the property is worth more than $500,000 or over 30 acres; and
Payments to the Government of Burma, sub-national authorities, and state-owned enterprises if the aggregate annual amount exceeds $10,000.
Notably, companies are not required to have human rights, labor, and environmental policies and procedures, or to demonstrate that they implement them effectively, but rather merely to identify whether or not they exist. Nevertheless, the public nature of the reporting creates some pressure on companies to demonstrate that they take seriously the substantial social and environmental risks of operating in the long-isolated country.
U.S. companies must also submit annual information to the U.S. State Department regarding the following, which are confidential and will not be made public, including:
The contact information of the individual preparing the report;
Whether the company or individuals representing it have held meetings or had other communications with the military or other armed groups, and, if so, with whom they met; and
Any risks or impacts that due diligence on human rights, labor, and the environment identified, and steps taken to mitigate them.
Moreover, in an attempt to address concerns regarding the corruption at the Myanmar Oil and Gas Company (MOGE), the Reporting Requirements specify that U.S. persons with new investments based on an agreement with MOGE must notify the State Department of the agreement in writing within 60 days of entering the investment.
Stakeholders will have 60 days to comment on the new Responsible Business Reporting Requirements.
Burma certainly represents new opportunities, and some have referred to it as a new Asian tiger. Nevertheless, the new responsible business reporting regime reflects the fact that business in Burma will come under particular scrutiny due to past and ongoing human rights and labor abuses in the country.