Saturday, August 16, 2014

Why Corporate Behavior is under scrutiny in Myanmar (Burma)

Most observers agree that international business must play a large role in Myanmar’s economic transformation, but there is not yet a consensus on how this should occur. Should additional obligations be placed on international firms over and above compliance with any (voluntary) international codes of conduct under the United Nations or the OECD? How much corporate social responsibility should companies practice if and when they enter Myanmar? Are there effective ways of getting better business behaviour in a ‘regulation free zone’ like Myanmar, or will market-driven international companies inevitably be able exploit loopholes in Myanmar laws?

After 1990, a comprehensive international socio-economic disengagement from Myanmar occurred as OECD members imposed a variety of political and economic sanctions against the military regime when it did not allow a transfer of power after Myanmar’s 1990 elections. For at least 20 years, whether prohibited under the sanctions by OECD members, or whether effectively discouraged by official policies or simply by adverse market conditions, most members of the international business community had ceased conducting business with Myanmar. They effectively disengaged from Myanmar, closing down distribution and supply networks, ending commercial intelligence gathering, and ultimately dispensing with much in-house basic operational know-how about Myanmar. Meanwhile, Myanmar’s own broad regulatory framework to ensure proper governance in business and social arrangements largely lapsed.

The philosophy of corporate social responsibility (CSR) has always attracted a good deal of criticism, as being ‘mainly public relations’, or worse, as ‘corporate greenwashing’. Among the companies which remained in Myanmar after 1990, some had turned to CSR to counter criticisms of their working under a military regime and against the spirit of international sanctions. So CSR is not new in Myanmar. It was accepted after 1990 by the military regime, which allowed some foreign and domestic firms to conduct CSR-like activities, perhaps because Myanmar badly needed new foreign investment. The speed and unexpected nature of the initial political and economic reforms in Myanmar, combined with Myanmar obviously not being ready for international business, also generated a plethora of corporate social responsibility recommendations and proposals during 2011–12.

In the immediate aftermath of the start of Myanmar’s reforms in 2011, a rush of reports from global risk management companies warned about the risks associated with conducting business in Myanmar. In particular, the June 2013 McKinsey Global institute report, which was relatively positive about Myanmar’s economic prospects, warned soberly that ‘all the fundamentals — political and macroeconomic stability, the rule of law, enablers such as skills and infrastructure — must be in place’.

In a significant move, in response to the unusual Myanmar situation, the United Nations itself decided in 2012 to escalate its efforts to provide a safety net for business activities in Myanmar. UN Secretary-General Ban Ki Moon himself ‘launched’ the Global Compact in Myanmar on 1 May 2012, enlisting the participation of companies operating in Myanmar. UN-associated international financial institutions such as the World Bank and the Asian Development Bank were also notable for their strong endorsement of CSR in Myanmar at this time.

Since May 2013, US firms reopening business operations in or with Myanmar have been required to submit regular reports on their activities demonstrating their compliance with responsible business principles. The EU and the UK have also been pro-active in fostering ‘responsible business’ behaviour in Myanmar. At the moment, any UK or EU company seriously thinking of entering the Myanmar market is encouraged to consult the Office of Responsible Business, which was set up in the British Embassy in 2013.

The Myanmar government itself in 2012 announced its intention to sign onto the Extractive Industries Transparency Initiative, for which Australia has provided technical support. As leader of the opposition, Chair of the National League for Democracy Aung San Suu Kyi has explicitly advocated ethical business practices in her numerous meetings with business leaders during all her overseas visits since 2013. In addition, the OECD’s ‘Investment Policy Review of Myanmar’, released on 1 March 2014, gave prominence to the need for ‘responsible business’ principles to be observed by international firms operating in Myanmar. Domestic public support has also come from Myanmar’s non-government organisations, such as the peak Myanmar business organisation, the Union of Myanmar Federation of Chambers of Commerce and Industry and from international NGOs such as the International Bar Association and human rights monitoring groups.

Foreign firms setting up in Myanmar henceforth cannot afford to ignore such developments. It would be folly for companies to ignore CSR factors when doing business in Myanmar at this point in time. Their responsibility to do so under voluntary international codes should be sufficient guidance, given that one way or another all foreign corporate entities will be similarly constrained.

Trevor Wilson is a Visiting Fellow at the ANU College of Asia and the Pacific and a former Australian ambassador to Myanmar.


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