U.S. Further Eases Sanctions Against Myanmar Banks

On February 22, the U.S. Treasury Department eased sanctions on four Myanmar banks, allowing them to do business with U.S. companies even though at least two of them are controlled by businessmen close to the former military regime who remain on the Treasury Department’s Specially Designated Nationals (SDN) list. U.S. officials said that increased access to Myanmar banks by U.S. companies would help promote social and economic development and serve as a model for responsible investing in the country.

Less than two years after the civilian government took office in Myanmar in March 2011, the U.S. government removed the majority of the decades-old sanctions against investment and trade with the country. The United States first levied restrictions on the import of financial services to Myanmar in 1988 after the then-ruling military junta killed thousands of civilian protestors in a brutal crackdown. The U.S. government issued six federal laws and five presidential executive orders against Myanmar between 1990 and 2008, restricting new investment, imports, visas, and multilateral assistance.

Q1. What sanctions did the U.S. government recently lift?

A1: The U.S. Treasury issued a general license on February 22 to Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment & Commercial Bank allowing them to engage in financial transactions with U.S. institutions. All four banks remain on the SDN list, which allows the U.S. government to respond quickly should the Myanmar government backslide on reforms. American companies can do business with these banks, such as transfer funds, but they cannot invest in or launch joint ventures with them.

The general license removes much of the uncertainty about what U.S. firms can do in Myanmar. It will make it possible for U.S. companies trading with the country to get letters of credit and for companies looking to invest in the county to transfer money to Yangon. Analysts also expect the restrictions to facilitate the reach of MasterCard and Visa credit card services into the country.

Asia Green Development Bank is controlled by Tay Za of Htoo Trading, a conglomerate involved activities including mining, tourism, agriculture, and construction, as well as financial support for the military and arms deals. Ayeyarwady Bank is controlled by Zaw Zaw, another businessman close to the former military regime. Both remain on the U.S. SDN list even though their banks were included in the general license. Recently, both donated money to charities close to opposition leader Aung San Suu Kyi’s National League for Democracy, indicating that they may be positioning themselves to participate in the reform process.

U.S. companies are still prohibited from dealing with at least three other banks that remain on the SDN list: Innwa Bank, Myawaddy Bank, and Myanma Foreign Trade Bank.

Q2. Which sanctions had the U.S. government lifted earlier?

A2: The U.S. Treasury’s Office of Foreign Asset Control (OFAC) issued a general license on April 17, 2012, authorizing U.S. entities to deliver financial services for the purpose of humanitarian, religious, and other nonprofit activities.

The second round of easing took place on July 11, 2012, when OFAC issued general licenses authorizing U.S. businesses to export financial services to and make new investments in Myanmar. The licenses permitted U.S. companies to do business with the Myanmar Oil and Gas Enterprise (MOGE), the state’s largest revenue provider, but in draft reporting requirements prepared by the State Department, firms must disclose these arrangements to the U.S. government within 60 days.

The U.S. government relaxed the ban on most imports of Myanmar goods on November 16, 2012, just before President Barack Obama visited Yangon.

Q3: What U.S. restrictions still remain in place?

A3: The Treasury Department still prohibits investment in entities with ownership connections to the Ministry of Defense or any military group. President Obama also gave the Treasury Department the right to levy sanctions against individuals or firms that undermine the reform process, engage in military relations with North Korea, or contribute to ethnic conflict.

The Tom Lantos Block Burmese Junta’s Anti-Democratic Efforts (JADE) Act of 2008 still prohibits the import of jade and rubies to the United States. The November 2012 relaxation of Myanmar exports excludes gems.

Over 100 Myanmar businessmen and companies that have close ties with former junta and control large portions of the country’s economy remain on the SDN list. The U.S. government is working to update the list by adding new names as their ties to the former regime come to light and removing others who appear to have cleaned up their behavior.

The Treasury Department added seven entities to the list in November 2012 when it eased import restrictions. Included are front companies such as Gold Ocean Pte Ltd. and Asia Pioneer Impex Pte. Ltd., which are believed to be affiliated with businessmen Tay Za and Steven Law, who is alleged to have made his fortune dealing in illicit drugs.

The Treasury Department removed Myanmar president Thein Sein and Lower House of Parliament Speaker Shwe Mann from the SDN list last September just before President Thein Sein visited the United Nations in New York. On January 24, OFAC removed businessman Kyaw Thein, head of Air Bagan, and a close partner of Tay Za from the SDN list.

Q4. Are U.S. companies waiting for other moves by the U.S. government regarding operations in Myanmar?

A4: U.S. companies are still waiting for finalized reporting requirements governing their investments in Myanmar. U.S. officials say these requirements should be released within weeks.

On July 11, the State Department published draft guidelines on which U.S. companies were given an opportunity to comment. These guidelines included requirements that companies investing over $500,000 submit annual reports to the State Department each April 1. They proposed that companies be required to report on their anticorruption policies, and procedures on human and worker rights and environmental protection. The draft procedures proposed that companies disclose any payments to Myanmar companies over $10,000 and provide information on property acquisition and any communication with the Myanmar military.

Q5: How has the removal of sanctions affected U.S. companies Myanmar so far?

A5: Several U.S. multinationals have begun operating in Myanmar since the easing of sanctions. GE became the first U.S. company to finalize a deal in Myanmar in mid-2012 when it began supplying medical equipment to private hospitals. Coca-Cola received an investment license to begin production with a local beverage company. MasterCard and Visa have formed partnerships with Myanmar banks to facilitate the use of credit cards in the country for the first time.

The U.S. Chamber of Commerce is leading a 50-person business delegation to Myanmar to explore opportunities for trade and investment beginning February 22. The delegation participated in the United States-Myanmar Trade and Investment Conference on February 25 in Yangon that brought together business executives and government officials from the two countries to promote increased trade relations.

Most observers doubt that the lifting of the ban against the import of Myanmar goods to the United States will have a significant impact on the country’s export of garments and timber products into the U.S. market.

Murray Hiebert is a senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Amy Killian is a researcher with the CSIS Sumitro Chair for Southeast Asia Studies.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Murray Hiebert
Senior Associate (Non-resident), Southeast Asia Program

Amy Killian