[authors: Reid Whitten and Cheryl Palmeri]
On July 11, 2012, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) issued two general licenses lifting long-standing sanctions against Myanmar. The licenses were issued in response to historic reforms that have taken place in the country over the past year, the details of which we reported in this blog in February and May of this year.
Subject to certain limitations, General License No. 16 authorizes exports and re-exports of financial services to Myanmar from the United States or by a U.S. person, wherever located. Notwithstanding the General License, exports and re-exports to individuals and entities whose property interests are blocked pursuant to the Burmese Sanctions Regulations or Executive Order remain prohibited. Transfers of funds to or from an account of a financial institution whose property and interests in property are blocked, however, are authorized, provided the account is not on the books of a financial institution that is a U.S. person.
The authorizations in General License No. 16 could have broad effects on the economy of Myanmar as well as the economic fortunes of companies seeking to do business in the country and the region. The prohibition on such services effectively choked off most U.S. economic activity in Myanmar since its imposition in 2003. Now, however, U.S. banks may provide the financing and services businesses depend on as they look to enter the Burmese market.
OFAC also issued General License No. 17, which authorizes U.S. persons to engage in new investment in Myanmar; such new investment has been prohibited for roughly 15 years. In keeping with U.S. diplomatic policies, permissible investment will be regulated with the intent that it will create positive growth in the country – helping the people of Myanmar and protecting Myanmar’s resources, rather than being used to drain the country or exploit its people.
In particular, under GL 17, any U.S. company or individual investing more than $500,000 in Burma must report annually to the U.S. Department of State its policies and procedures with respect to human rights, workers’ rights, environmental stewardship, land acquisitions, dealings with security service providers, and payments to Myanmar government entities. U.S. persons undertaking new investment under an agreement with the Myanma Oil and Gas Enterprise must notify the State Department within 60 days of their new investment.
Both licenses specifically prohibit transactions with the Burmese Ministry of Defense, including the Office of Procurement; any state or non-state armed group (which includes the military); or any entity in which any of the foregoing own a 50 percent or greater interest. Accordingly, the export and re-export of financial services to, and new investment undertaken pursuant to an agreement with, such entities still are prohibited.
Concurrent with the issuance of these General Licenses, on July 11, 2012, President Obama issued a new Executive Order authorizing the U.S. government to sanction individuals or entities that threaten the peace, security, or stability of Myanmar, including those who are responsible for or complicit in the commission of human rights abuses in Myanmar and those who conduct certain arms trade with North Korea. This Executive Order suggests that while the U.S. government wants to encourage continued reform in Burma, as to those individuals deemed to be hindering reform, the U.S. government will continue to impose measures to cut them out of the U.S. financial system.
The new authorizations, as well as the appointment of the first U.S. Ambassador to Burma since 1990, signal a tentative but significant shift in the United States’ relationship with Burma. This may bring significant opportunities – as well as significant challenges. Companies that take the time to understand their obligations and opportunities under these new GLs will benefit even if they are not the first into the promising Burmese market. Parties seeking investment opportunities in Burma should recognize the continued restrictions when dealing with Burma and try to keep abreast of the complex and shifting domestic and international politics surrounding the country. As with any burgeoning opportunity, Myanmar is fraught with new risks but promises great rewards.