[Date Prev][Date Next][Thread Prev][Thread Next][Date Index ][Thread Index ]

Country Commercial Guides FY 1999:B



Subject: Country Commercial Guides FY 1999:Burma [CHAPTER VII.  INVESTMENT

CLIMATE/U.S. INVESTMENT SANCTIONS]Part [1]
To: burmanet-l@xxxxxxxxxxx
X-Mailer: QUALCOMM Windows Eudora Pro Version 3.0.2 (32)
X-Sender: strider@xxxxxxxxxxxxxxx

Dear BurmaNetters and International Community,
                                                                            
                The following is the document isssued by the US Department
of State:Country Commercial Guides FY1999:Burma.I reckon that the document
is of help for whatever you are pursuing with regard to Burma.As the
document is too large,it is posted in two parts.

Sincerely,

Julien Moe
****************
Part [1]
Country Commercial Guides 
FY 1999: Burma 
 

CHAPTER VII.  INVESTMENT CLIMATE/U.S. INVESTMENT SANCTIONS

U.S. Investment Subject to Sanctions

On May 20, 1997, by Executive Order 13047, the President imposed
economic sanctions prohibiting new investment in Burma (Myanmar).
Those sanctions were based on the President's determination that
the Government of  Burma (GOB) has committed large-scale
repression of the democratic opposition.  The Cohen-Feinstein
Amendment to the Foreign Operations Act of 1997 formed the legal
basis for the ban on new investment.



Even prior to the imposition of sanctions, the few U.S. investors
in Burma had already been affected by an active anti-Burma consumer
movement in the U.S. based on human rights concerns.  A number
of high-profile U.S. companies, including Apple Computer, Eddie
Bauer, Levi Strauss, Liz Claiborne, Motorola, and Pepsi Cola,
among others, withdrew from Burma prior to 1997.  As written, the
sanctions ban new investment but allow companies already invested
in Burma to remain.

The 1997 ban on new investment is in addition to a number of
sanctions the U.S. imposed against Burma following the military
crackdown against civilian democracy activists in 1988.  At that
time the U.S. cut off all bilateral and multilateral financial
and development assistance, prohibited arms sales, downgraded
diplomatic representation from ambassador to a charge, and
launched a vigorous diplomatic effort to condemn the military
regime and push for democratic reform.

Since the early 1990's U.S. commercial policy toward Burma had
been to neither encourage nor discourage trade or investment.
With the 1997 investment ban, that policy has been revised to
prohibit new investment.

Effects of Sanctions

Without doubt sanctions have affected the economy of Burma.
The lack of multilateral development financing in place since
1990 has been the most hard-hitting sanction.  While clearly
interested in infrastructure development, the GOB has been unable
to obtain international financing and has had to rely on foreign
investors and trading partners to advance funding on a commercial
basis with expectation of eventual repayment.  Given the 1997
Asian financial crisis, few of Burma's neighbors have been willing
or able to extend financing this year.  The regional financial
crisis has compounded Burma's internal economic problems.

The 1997 U.S. ban on new investment had a strong deterrent
effect on investment in Burma. While trade and services contracts
were specifically exempted from the 1997 sanctions, few U.S.
companies have been willing to bid on contracts for sales or
services to Burma given anti-Burma public opinion in the United
States.  Both Texaco and ARCO decided to withdraw from Burma
after sanctions were imposed even though they were legally
eligible to stay. Non-U.S. companies have also been affected by
the U.S. investment ban.  Unwilling to risk alienating U.S.
consumers or running afoul of U.S. law, some third-country
corporations have also stayed out of the Burma market.

State and local sanctions which have multiplied in recent years
in the United States over concerns centered on democracy and
human rights have added yet another level of sanctions dissuading
companies from investing in Burma  .In addition to the economic
effects of sanctions, the 1997 U.S. investment ban has also had
a symbolic effect.  In Burma, the U.S. has become an international
standard bearer for democracy and human rights.

Status of Investment

Investment figures published by the GOB include only investment
approved by the Myanma Investment Commission (MIC).  These figures
do not include investments not submitted for MIC approval, such as
a myriad of Chinese investments, or investments approved under the
Companies' Act, outside MIC channels under a regular company license.

As of April 1998, the GOB reported that total MIC-approved foreign
investment was $7.064 billion.   This represents cumulative,
approved foreign investment, not actual or realized investment.
Actual foreign investment was $344 million in FY 1996/97 and $448
million in FY 1997/98.  Cumulative actual FDI for the period FY
1989/90 - FY 1997/98 totals slightly more than $2 billion.  Thus,
actual investment inflows accounted for only about 28 percent of
approved investment.

It is nearly impossible to estimate accurately the share of
foreign direct investment in Burma's overall economy or the effects
of FDI on the balance of payments.  Official figures are distorted
because dollar-based transactions are calculated at the official
kyat 6/dollar exchange rate whereas most business transactions
take place at an unofficial market rate averaging approximately
kyat 250/dollar in FY 97/98.  Official calculations which record
FDI as constituting approximately 0.25% of GDP in FY 1997/98 vastly
underestimate the share of FDI as a portion of overall economic
activity.  Moreover, foreign investment has played an important
role in boosting Burma's fixed capital formation.

Foreign investment suffered a series of setbacks in FY 97/98
over the previous fiscal year.  Foremost, the Asian financial
crisis caused a number of Burma's neighbors to scale down or with-
draw their holdings in Burma.  Secondly, fluctuations of the kyat
reduced financial stability and predictability.  The GOB-imposed
remittance cap combined with strict trade controls significantly
reduced business activity and inflation continued to inhibit
local purchasing power.  American investors were prohibited from
making new investments after May 1997 based on the President's
imposition of sanctions on new investment.  The sum of these
events contributed to a significant loss of confidence by foreign
investors in the business climate.

In fiscal year 1997/98 oil and gas remained the predominant sector
for foreign investment, comprising 32.6% of MIC-approved invest-
ment.  By far the largest investment, the $1.2 billion 254-mile
natural gas pipeline from the offshore Yadana natural gas field to
Thailand should become operational by the end of 1998.  The Yadana
consortium, a production sharing arrangement including the
operator, Total of France (31.24%), U.S. company UNOCAL (28.26%),
Thailand's PTT (25.5%), and Burma's Myanmar Oil and Gas Enterprise
(MOGE)(15%) expects to operate the project on a 30-year horizon.
The Yadana natural gas field is believed to contain 5.7 trillion
cubic feet of gas, and production is expected eventually to reach
525 million cubic feet of gas per day.  The Yadana pipeline
project has been riddled with construction and other delays during
1998, chiefly from the Thai side.

Manufacturing (113 projects totalling $1.4 billion) surpassed
hotels and tourism as the second largest sector for foreign
investment in FY 1997/98, reaching 20% of the total.  Light in-
dustries dominate the manufacturing sector, producing packaged
foodstuffs, textiles, paper and consumer products.  Despite
foreign investment, manufacturing continues to play a minor role
in the overall economy, accounting for only 6.8% of GDP in FY
1997/98.

Despite an upward trend in both foreign arrivals and receipts
since FY 1992/93, growth of the tourism industry has been less
than anticipated.  In 1997 it became apparent that the hotels
and tourism sector (40 projects totalling $1.037 billion in FY
1997/98) was overbuilt.  Since 1993 nine world class foreign-
funded hotels have opened in Rangoon.  Occupancy has been low
and rates have fallen substantially as hotels compete for guests.
Given the downturn of Burma's economy in FY 1997/98, a number
of planned future hotel projects have been halted or delayed.

Real estate (18 projects worth $997 million) is the fourth
largest foreign-invested sector, followed by mining (43
projects worth $501 million).  Rangoon has seen a boom in
office development projects, including the Sakura Tower which
opened in 1998, serviced apartments, five of which are
scheduled to open in 1998, and industrial estates.  By law,
foreigners may not own land, and may only rent property on a
short-term basis.

Given the severely depressed state of the overall economy,
many Rangoon analysts suspect that construction projects still
ongoing by the end of 1998 may be connected to money laundering
activities.

Executive Order

On May 20, 1997, the President of the United States issued the
following Executive Order Prohibiting New Investment in Burma:

By the authority vested in me as President by the Constitution
and the laws of the United States of America, including section
570 of the Foreign Operations, Export Financing and Related
Programs Appropriations Act, 1997 (Public Law 104-208) (the
"Act"), the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq.), and section 301 of title 3 of the
United States Code:  I, William J. Clinton, President of the
United States of America, hereby determine and certify that,
for purposes of section 570(b) of the Act, the Government of
Burma has committed large-scale repression of the democratic
opposition in Burma after September 30, 1996, and further
determine that the actions and policies of the Government of
Burma constitute an unusual and extraordinary threat to the
national security and foreign policy of the United States and
declare a national emergency to deal with that threat.

Section 1.  Except to the extent provided in regulations,
orders, directives, or licenses that may be issued in con-
formity with section 570 of the Act and pursuant to this order,
I hereby prohibit new investment in Burma by United States
persons.

Section 2.  The following are also prohibited, except to the
extent provided in section 203(b) of IEEEPA (50 U.S.C 1702(b))
or in regulations, orders, directives, or licenses that may be
issued pursuant to this order:

(a) any approval or other facilitation by a United States person,
wherever located, of a transaction by a foreign person where
the transaction would constitute new investment in Burma pro-
hibited by this order if engaged in by a United States person or
within the United States; and
(b) any transaction by a United States person or within the
United States that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set
forth in this order.

Section 3.  Nothing in this order shall be construed to prohibit
the entry into, performance of, or financing of a contract to sell
or purchase goods, services, or technology, except:

(a) where the entry into such contract on or after the effective
date of this order is for the general supervision and guarantee
of another person's performance of a contract for the economic
development of resources located in Burma; or
(b) where such contract provides for payment, in whole or part,
in:
     (i) shares of ownership, including an equity interest, in
the economic development of resources located in Burma;
     (ii) participation in royalties, earnings, or profits in
the economic development of resources located in Burma.

Section 4.  For the purposes of this order:

(a) the term "person" means an individual or entity;
(b) the term "entity" means a partnership, association, trust,
joint venture, corporation or other organization;
(c) the term "United States person" means any United States
citizen, permanent resident alien, juridical person organized
under the laws of the United States (including foreign branches),
or any person in the United States;
(d) the term "new investment" means any of the following activi-
ties, if such an activity is undertaken pursuant to an agreement,
or pursuant to the exercise of rights under such an agreement,
that is entered into with the Government of Burma or a non-
governmental entity in Burma on or after the effective date of
this order:
     (i) the entry into a contract that includes the economic
development of resources located in Burma;
     (ii) the entry into a contract providing for the general
supervision and guarantee of another person's performance of a
contract that includes the economic development of resources
located in Burma;
     (iii) the purchase of a share of ownership, including an
equity interest, in the economic development of resources
located in Burma; or
     (iv) the entry into a contract providing for the partici-
pation in royalties, earnings, or profits in the economic
development of resources located in Burma, without regard to the
form of the participation;
(e) the term "resources located in Burma" means any resources,
including natural, agricultural, commercial, financial, industrial,
and human resources, located within the territory of Burma,
including the territorial sea, or located with the exclusive
economic zone or continental shelf of Burma;
(f) the term "economic development of resources located in Burma"
shall not be construed to include not-for-profit educational,
health, or other humanitarian programs or activities.

Section 5.  I hereby delegate to the Secretary of State the
functions vested in me under section 570(c) and (d) of the Act,
to be exercised in consultation with the heads of other agencies
of the United States Government as appropriate.

Section 6.  The Secretary of the Treasury, in consultation with
the Secretary of State, is hereby authorized to take such actions,
including the promulgation of rules and regulations, and to
employ all powers granted to me by section 570(b) of the Act and
by IEEPA, as may be necessary to carry out the purposes of this
order.  The Secretary of the Treasury may redelegate the
authority set forth in this order to other officers and agencies
of the United States Government.  All agencies of the United
States Government are hereby directed to take all appropriate
measures within their authority to carry out the provisions of
this order.

Section 7.  Nothing contained in this order shall create any
right or benefit, substantive or procedural, enforceable by any
party against the United States, its agencies or instrumentalities,
its officers or employees, or any other person.

Section 8.  (a)  This order shall take effect at 12:01 A.M.,
eastern daylight time, May 21, 1997.   (b) This order shall be
transmitted to the Congress and published in the Federal Register.

Questions regarding the interpretation of the above-cited executive
order may be addressed to:

THE U.S. DEPARTMENT OF THE TREASURY
Office of the Under Secretary for Enforcement
Office of the Deputy Assistant Secretary for Regulatory,
Tariff and Trade Enforcement
Office of Foreign Assets Control (OFAC)
Treasury Annex 1, Room 2233
Pennsylvania Avenue and Madison Place, N.W.
Washington, D.C. 20220
Attn:  Mr. R. Richard Newcomb
Director, Office of Foreign Assets Control
Telephone:  202-662-2500
Sanctions Regulations

DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 537
Burmese Sanctions Regulations
Agency:  Office of Foreign Assets Control, Treasury.
ACTION:  Final rule. 
SUMMARY:  The Office of Foreign Assets Control of the U.S.
Department of the Treasury is issuing the Burmese Sanctions
Regulations to implement Executive Order 13047 of May 20, 1997,
"Prohibiting New Investment in Burma."
EFFECTIVE  DATE:  May 17, 1998

FOR  FURTHER  INFORMATION  CONTACT:

Steven I. Pinter, Chief of Licensing, tel.:  202/622-2480, or
William B. Hoffman, Chief Counsel, tel.:  202/622-2410, Office
of Foreign Assets Control, Department of the Treasury, Washington,
D.C.  20220.

Electronic Availability

This document is available as an electronic file on "The Federal
Bulletin Board" the day of publication in the Federal Register.
By moden, dial 202/512-1387 and type "/GO FAC," or call
202/512-1530 for disk or paper copies.  This file is available
for downloading without charge in WordPerfect 5.1 ASCII, and
Adobe Acrobat readable (*.pdf) FORMATS.  For Internet access,
the address for use with the World Wide Web (Home Page), Telnet,
or FTP protocol is:  fedbbs.access.gpo.gov.  The document is
also accessible for downloading in ASCII format without charge
from Treasury's Electronic Library ("TEL") in the "Business,
Trade and Labor Mall" of the FedWorld bulletin board.  By modem,
dial 703/321-3339, and select self-expanding file "T11FR00.EXE"
in TEL.  For Internet access, use one of the following protocols:
Telnet = fedworld.gov (192.239.93.3);  World Wide Web (Home
Page) = http://www.fedworld.gov;  FTP = ftp.fedworld.gov (
192.239.92.205).

Additional information concerning the programs of the Office
of Foreign Assets Control is available for downloading from the
Office's Internet Home Page:
http://www.ustreas.gov/treasury/services/fac/fac.htrnl, or in
fax form through the Office's 24-hour fax-on-demand service:
call 202/622/0077 using a fax machine, fax modem, or (within the
United States) a touch-tone telephone.

PART  537  --  BURMESE  SANCTIONS  REGULATIONS

Subpart A -- Relation of this Part to Other Laws and Regulations
Sec. 537.101 Relation of this part to other laws and regulations.

Subpart B -- Prohibitions
537.201  Prohibited new investment by U.S. persons.
537.202  Prohibited approval or other facilitation by a U.S. person
of a foreign person's investment.
537.203  Evasions;  attempts;  conspiracies.
537.204  Exempt transactions.

Subpart C -- General Definitions
537.301  Economic development of resources located in Burma.
537.302  Effective date.
537.303  Entity.
537.304  Foreign person.
537.305  General license.
537.306  Government of Burma.
537.307  License.
537.308  New investment. 
537.309  Nongovernmental entity in Burma.
537.310  Person.
537.311  Resources located in Burma.
537.312  Specific license.
537.313  United States.
537.314  United States person;  U.S. person.

Subpart D -- Interpretations
537.401  Reference to amended sections.
537.402  Effect of amendment.
537.403  Economic development of resources located in Burma.
537.404  Purchase of  shares in economic development projects
in Burma.
537.405  Investment in entities involved in economic development
projects in Burma.
537.406  General supervision and guarantee.
537.407  Activities under pre-May 21, 1997 agreements.
537.408  Sale or purchase of goods, services or technology.
537.409  Approval or other facilitation of a foreign person's
investment.

Part[2] to be continued

Source:US Dept of State