First-Hand Look: How Obama's Cuba Policy Will (Sadly) Play Out

Monday, March 23, 2015
The Obama Administration knows exactly how its counter-productive Cuba policy will play out with Castro's military dictatorship and its neighbors.

It has seen it first-hand in Burma.

By Nikolay Anguelov in Foreign Affairs:

Development Before Democracy

Why ASEAN Isn't Pressuring Myanmar to Reform

Nearly two years after the United States lifted its economic sanctions on Myanmar (also called Burma), the ruling military regime continues to repress the country’s people. Although the rapprochement between the United States and Myanmar had been proffered on the promise of economic, democratic, and social reform, the national outlook only grew darker in subsequent years as Myanmar President Thein Sein cracked down on the press, freedom of assembly, and religious minorities.

And so, in early 2014, after the World Bank published a damning report on Myanmar’s negative economic reality, U.S. President Barack Obama extended the executive orders that prohibit U.S. businesses and individuals from investing in Myanmar. Obama’s justification was that Thein Sein was not demonstrating enough progress and that the Myanmar government’s “actions and policies pose a continuing unusual and extraordinary threat to the national security and foreign policy of the United States.” Despite Obama’s rebuke, members of the Association of Southeast Asian Nations (ASEAN), which are Myanmar’s main trading and investment partners, seem unfazed by Thein Sein’s lackluster reform efforts. Even worse, they might support it.

The reason ASEAN supports Thein Sein is simple: members of the group accrued significant financial benefits during the 20 years of sanctions on Myanmar, and they may not be eager to give them up. Myanmar's regional partners enjoy uniquely protected positions in its resource-rich economy; true economic and political reforms may jeopardize these advantages if they lead to an increase in market competitors. As the United States tightened sanctions over 20 years, China, Germany, India, Japan, Malaysia, and Thailand became Myanmar’s main trading partners, accounting for over 90 percent of the nation’s trade by volume. Multinational corporations (MNCs) from these countries conducted business in the nation through preferential trade deals established by the secretive military regime. The business of those MNCs fueled the wealth of military regime members, their families, and supporters. An example is Tay Za, the self-proclaimed richest man in Myanmar who is the son of a retired lieutenant colonel who worked in high positions during the sanction years for Myanmar’s Ministry of Industry. During those years, it is reported that Tay Za became a close associate of the former chairman of the State Peace and Development Council (SPDC) General Thura Shwe Mann. Because of those connections, Tay Za is first on the list of 3,000 Myanmar nationals against whom targeted sanctions remain in place. Despite sanctions both past and present, Tay Za runs a network of companies with holdings ranging from mining and tourism to telecommunications, aviation, and banking that work with trading partners in China, Malaysia, Russia, and Thailand. Tay Za’s conglomerates make over $500 million a year and are poised to enter a stage of unhindered growth now that easing sanctions make Myanmar more attractive for foreign investment.

During the sanction years, all trade deals were executed through Myanmar’s licensing structures: the SPDC and the Union Solidarity and Development Association. Both the SPDC and the USDA acted as political parties as well as government-controlled corporations. The USDA appointed regional heads of township associations that were responsible for establishing joint ventures with MNCs. Township associations dictated the terms of regional economic growth, creating labor markets and jobs for local residents. Membership in these associations provided citizens with improved job prospects as well, leading many to sign up in order to better their economic circumstances. Expansion in regional industrial operations first had to be cleared through joint venture partnerships with local government-owned entities. It was the SPDC that controlled this federal aspect of economic affairs, and all foreign firms that did business in Myanmar had to do so via partnership with the party. This remains true today, as the SPDC’s former leadership still controls Myanmar’s economic activity.