Sanctions may hurt peace prospects, derail economy
Talk of possible sanctions on Myanmar’s military by the European Union and United States could have a cascading effect on the country’s economy, experts caution.
THE US and EU are considering targeted sanctions against the Myanmar military over an offensive that has resulted in an exodus of over half a million Rohingya Muslims from the country. Those sanctions, if imposed, could set the economy back after years of progress.
“There have been various rumors of targeted sanctions against Myanmar. It is not a good sign. Sanctioning a country prevents it from competing economically with others. They would block our rights to freely do business and rights to develop the country and this is not good,” said U Tun Tun Naing, Permanent Secretary for the Ministry of Planning and Finance.
While Western sanctions, if imposed on Myanmar, are unlikely to have a direct impact on the economy due to low levels of trade and cooperation, they could derail the country’s push for peace with the various ethnicities. This will have negative consequences on foreign direct investments (FDI) and domestic economic reform.
Myanmar is only still at the beginning of its push for democratic transformation and national reconciliation towards a Federal Union. Its economy, in comparison, has progressed much faster. FDI is up by three times for the first six months of this fiscal year compared to the same period the year before, exceeding US$4 billion. Meanwhile, the new Investment Law has been enacted, while the new Companies’ Act and Condominium Law are expected to be approved soon.
Talk of developing a thriving digital economy and helping local startups gain access to loans has been rife in the business community, while plans are being laid out for national electrification. Meanwhile, major investments in several Special Economic Zones and a deep-sea port are being discussed. No doubt, the economy’s progress has generated a wave of new jobs and lifted millions out of poverty.
That could all be placed on the backburner if the sanctions are put in place. “No matter what kind of sanctions, [the West] should consider not affecting our efforts to transition to democracy, pursue internal peace and raise the standards of our people’s lives,” said U Zaw Htay, spokesperson for the State Counsellor’s office.
“Not beneficial to anyone”
Since the previous administration, the government, military and various ethnic groups have agreed to pursue internal peace according to the Nationwide Ceasefire Agreement. Nevertheless, issues relating to ethnicity, religion and military are still highly sensitive.
As such, the West’s intention of applying targeted sanctions on Myanmar’s military could result in internal division and disunity, said U Ye Min Oo, economic adviser to the National League for Democracy government.
As Myanmar is still struggling to develop its economy, sanctions at this time will only hinder the government’s attempts to improve democracy and human rights. Therefore, sanctions should not be applied during this time. “No one will gain anything from it, and it will cause disunity,” U Ye Min Oo said.
“All the people and ethnicities live together in this country. We are all working together for the development of the country. We are going to walk towards the future together. So, if a super power tries to impose selective sanctions, it means they are trying to divide our nation. No one will benefit from this,” he added.
As a whole though, the direct economic impact on Myanmar from sanctions by the West is likely to be limited. “Socio-economic impacts due to sanctions depend on whether there is high level cooperation with the countries involved. As trade between Myanmar and the US and EU is limited compared to China, Japan, Thailand and Singapore, there won’t be a significant impact on Myanmar’s economy,” said U Tun Tun Naing.
Between April 1 and September 30 of the current fiscal year, approved FDI from China and Singapore totaled US$829.1 million and US$1.7 billion, respectively, according to the Directorate of Investment and Company Admininstration. In comparison, the combined FDI from France, Germany and The Netherlands was US$537 million.
Despite expectations that US FDI would enter Myanmar after US sanctions were lifted, it has now been two and a half years and FDI has not materialised as much as expected. Meanwhile, Myanmar already has strong trade ties with its partners in Asia, U Tun Tun Naing said.
“Still, we need to be friendly with all nations. When a nation [imposes a sanction against us], we have to reveal the truth of the situation in Rakhine. The sanctions shouldn’t happen and to avoid this, we need to report the actual situation,” U Tun Tun Naing said.
A Rohingya woman feeds her child in a medical center near a camp in Palonkhali, Coxsbazar, Bangladesh, on October 11. The West is now considering sanctions against Myanmar after a mass exodus or Rohingya from Rakhine.