For Myanmar, End to U.S. Penalties Still a Murky Goal

Updated May 22, 2016 11:05 a.m. ET
YANGON, Myanmar—Khin Shwe, a businessman once known for his close ties to Myanmar’s former spy chief, said he tried hard to get off the U.S. blacklist of people who backed the country’s former military junta.

The construction and real-estate executive first met with U.S. officials in 2014 to frame his new outlook. His lawyers drafted petitions showcasing his corporate social-responsibility programs. He forged ties with Nobel laureate Aung San Suu Kyi and supported her party. And he submitted evidence that villagers removed from land he developed were adequately compensated.

But when the Obama administration last week further eased sanctions on Myanmar, Mr. Khin Shwe found himself still blacklisted. So were at least eight other Burmese businessmen who had petitioned the U.S. government, their lawyers said.

“The Treasury department keeps coming back to me and asking more and more questions, but nothing is happening yet,” Mr. Khin Shwe said. “I don’t know how long it will take or what I have left to do.”
Related

U.S. Sanctions on Myanmar to Stay Until Military’s Influence Is Reduced

As U.S. Secretary of State John Kerry visited Myanmar on Sunday to signal support for the country’s democratic overhauls, Mr. Khin Shwe’s predicament illustrates its lingering struggle to distance itself from a legacy of brutal military rule.

It also reflects, some American business groups say, how the U.S. has developed considerable skill in imposing sanctions on governments ranging from Myanmar to Iran to Cuba but lags in finding ways to roll them back.

The Myanmar delisting process has so far been slow-moving and ambiguous. Only a few blacklisted people were removed in recent years, including two dead generals and the head of Myanmar’s chamber of commerce.

“The process is not working how it should be, and the blame lies on both sides,” said Erin Murphy, founder of the Inle Advisory Group, a Washington consultancy that advises businesses on Myanmar. “It is not surprising that [those sanctioned] are frustrated—they may think they are doing everything to be removed, but are met with silence.”

The U.S. Treasury Department said it can’t comment on individual cases but that it continues to review all sanctions-delisting petitions from Myanmar and around the world. It said individuals must show a clear change of behavior with supporting evidence.

The department, after receiving a petition, will “go back with questions to the extent we have any” and will “seek documentation supporting any claims that an individual or entity may be making,” said John Smith, acting director of the Treasury Department’s Office of Foreign Assets Control, which administers the sanctions. The goal is to “change the behavior of illicit actors,” he said.

The Obama administration has moved cautiously in lifting sanctions on Myanmar. It has voiced concern over the durability of the shift to democracy, the military’s continued political and economic influence and the country’s treatment of ethnic and religious minorities, including the Rohingya.
Rohingya children attended Arabic school in an internal displacement camp in Sittwe, Myanmar. The Obama administration has cited the country’s treatment of the Rohingya as a factor in keeping sanctions. ENLARGE
Rohingya children attended Arabic school in an internal displacement camp in Sittwe, Myanmar. The Obama administration has cited the country’s treatment of the Rohingya as a factor in keeping sanctions. Photo: Lauren DeCicca/Getty Images

The previous government has said it distanced itself from North Korea and was working to instill democracy and improve human rights.

The U.S. said this past week that sanctions would remain on people and entities in Myanmar that are thwarting political reform, engaging in human-rights abuses or forging military trade with North Korea.

About 100 individuals and entities, estimated to represent about half the economy, remain blacklisted from doing business with American entities or entering the U.S.

American companies “will still have to do significant due diligence to make sure that they aren’t engaged with what amounts to most of the major players,’’ Ms. Murphy said.

A new era for Myanmar began in 2011 with the election of a nominally civilian government led by generals, leading Washington to relax sanctions a year later. The 2015 election of Ms. Suu Kyi’s National League for Democracy and her recently installed government nudged the country further toward democracy.

Mr. Kerry on Sunday said Myanmar would have to change its constitution to guarantee civilian power before the remaining American economic sanctions can be lifted. Speaking in the capital Naypyitaw after meeting with Myanmar’s foreign minister, Mr. Kerry said Myanmar should show more progress in reducing the military’s influence as the country continues along the road to democracy. “It is very difficult to complete that journey, in fact impossible to complete that journey, with the current constitution,” Mr. Kerry said.

Ms. Suu Kyi said Sunday she didn’t regard the remaining sanctions as weighing on ties with the U.S. “We’re not afraid of sanctions, we’re not afraid of scrutiny,” she said at a joint news conference with Mr. Kerry. “The time will come soon that the United States will know that this is no longer the time for sanctions.”

Mr. Kerry’s visit comes after the U.S. this past week said it would ease sanctions by enabling U.S. banks to move money in and out easily and take other steps to boost trade. State-owned enterprises now controlled by civilian-led ministries instead of the military were removed from the blacklist.

But the U.S. didn’t shy away from punishing others. It tightened curbs on Burmese businessman Steven Law and his Asia World company conglomerate. U.S. officials have said Mr. Law’s father was a drug capo and the family supported the junta and prospered under it. Representatives for Mr. Law declined to comment. Mr. Law has said he was never involved in the drug trade. His father, who is deceased, hadn’t commented on the allegations.

But other Burmese businessmen are attractive partners for foreign investors despite sanctions. One of them, Zaw Zaw, oversees a conglomerate and is admired for employing hundreds of people and supporting local soccer teams. Mr. Zaw Zaw has joined with with France’s Accor to build hotels, including one where Mr. Kerry stayed in 2014. Mr. Khin Shwe himself is credited with bringing significant development to Yangon’s northern outskirts, where he built an industrial zone.

Many Myanmar businesses fear that keeping sanctions without a clear timeline for their removal will push them closer to Chinese companies. That, they say, would be despite these local businesses’ desire for investment from their American counterparts.

“For us [businessmen], we have property, we have money, we aren’t personally affected by these sanctions—I am still rich,” said Mr. Khin Shwe. “But if I can’t grow my business without new investment, that is hundreds of people that cannot get jobs.”

—William Mauldin in Washington contributed to this article.

Corrections & Amplifications:
Erin Murphy founded the Inle Advisory Group. An earlier version of this article incorrectly referred to her as Mr. Murphy in a subsequent reference. (May 22, 2016)

Write to Shibani Mahtani at shibani.mahtani@wsj.com

ANGON, Myanmar—Khin Shwe, a businessman once known for his close ties to Myanmar’s former spy chief, said he tried hard to get off the U.S. blacklist of people who backed the country’s former military junta.

The construction and real-estate executive first met with U.S. officials in 2014 to frame his new outlook. His lawyers drafted petitions showcasing his corporate social-responsibility programs. He forged ties with Nobel laureate Aung San Suu Kyi and supported her party. And he submitted evidence that villagers removed from land he developed were adequately compensated.

But when the Obama administration last week further eased sanctions on Myanmar, Mr. Khin Shwe found himself still blacklisted. So were at least eight other Burmese businessmen who had petitioned the U.S. government, their lawyers said.

“The Treasury department keeps coming back to me and asking more and more questions, but nothing is happening yet,” Mr. Khin Shwe said. “I don’t know how long it will take or what I have left to do.”
Related

U.S. Sanctions on Myanmar to Stay Until Military’s Influence Is Reduced

As U.S. Secretary of State John Kerry visited Myanmar on Sunday to signal support for the country’s democratic overhauls, Mr. Khin Shwe’s predicament illustrates its lingering struggle to distance itself from a legacy of brutal military rule.

It also reflects, some American business groups say, how the U.S. has developed considerable skill in imposing sanctions on governments ranging from Myanmar to Iran to Cuba but lags in finding ways to roll them back.

The Myanmar delisting process has so far been slow-moving and ambiguous. Only a few blacklisted people were removed in recent years, including two dead generals and the head of Myanmar’s chamber of commerce.

“The process is not working how it should be, and the blame lies on both sides,” said Erin Murphy, founder of the Inle Advisory Group, a Washington consultancy that advises businesses on Myanmar. “It is not surprising that [those sanctioned] are frustrated—they may think they are doing everything to be removed, but are met with silence.”

The U.S. Treasury Department said it can’t comment on individual cases but that it continues to review all sanctions-delisting petitions from Myanmar and around the world. It said individuals must show a clear change of behavior with supporting evidence.

The department, after receiving a petition, will “go back with questions to the extent we have any” and will “seek documentation supporting any claims that an individual or entity may be making,” said John Smith, acting director of the Treasury Department’s Office of Foreign Assets Control, which administers the sanctions. The goal is to “change the behavior of illicit actors,” he said.

The Obama administration has moved cautiously in lifting sanctions on Myanmar. It has voiced concern over the durability of the shift to democracy, the military’s continued political and economic influence and the country’s treatment of ethnic and religious minorities, including the Rohingya.
Rohingya children attended Arabic school in an internal displacement camp in Sittwe, Myanmar. The Obama administration has cited the country’s treatment of the Rohingya as a factor in keeping sanctions. ENLARGE
Rohingya children attended Arabic school in an internal displacement camp in Sittwe, Myanmar. The Obama administration has cited the country’s treatment of the Rohingya as a factor in keeping sanctions. Photo: Lauren DeCicca/Getty Images

The previous government has said it distanced itself from North Korea and was working to instill democracy and improve human rights.

The U.S. said this past week that sanctions would remain on people and entities in Myanmar that are thwarting political reform, engaging in human-rights abuses or forging military trade with North Korea.

About 100 individuals and entities, estimated to represent about half the economy, remain blacklisted from doing business with American entities or entering the U.S.

American companies “will still have to do significant due diligence to make sure that they aren’t engaged with what amounts to most of the major players,’’ Ms. Murphy said.

A new era for Myanmar began in 2011 with the election of a nominally civilian government led by generals, leading Washington to relax sanctions a year later. The 2015 election of Ms. Suu Kyi’s National League for Democracy and her recently installed government nudged the country further toward democracy.

Mr. Kerry on Sunday said Myanmar would have to change its constitution to guarantee civilian power before the remaining American economic sanctions can be lifted. Speaking in the capital Naypyitaw after meeting with Myanmar’s foreign minister, Mr. Kerry said Myanmar should show more progress in reducing the military’s influence as the country continues along the road to democracy. “It is very difficult to complete that journey, in fact impossible to complete that journey, with the current constitution,” Mr. Kerry said.

Ms. Suu Kyi said Sunday she didn’t regard the remaining sanctions as weighing on ties with the U.S. “We’re not afraid of sanctions, we’re not afraid of scrutiny,” she said at a joint news conference with Mr. Kerry. “The time will come soon that the United States will know that this is no longer the time for sanctions.”

Mr. Kerry’s visit comes after the U.S. this past week said it would ease sanctions by enabling U.S. banks to move money in and out easily and take other steps to boost trade. State-owned enterprises now controlled by civilian-led ministries instead of the military were removed from the blacklist.

But the U.S. didn’t shy away from punishing others. It tightened curbs on Burmese businessman Steven Law and his Asia World company conglomerate. U.S. officials have said Mr. Law’s father was a drug capo and the family supported the junta and prospered under it. Representatives for Mr. Law declined to comment. Mr. Law has said he was never involved in the drug trade. His father, who is deceased, hadn’t commented on the allegations.

But other Burmese businessmen are attractive partners for foreign investors despite sanctions. One of them, Zaw Zaw, oversees a conglomerate and is admired for employing hundreds of people and supporting local soccer teams. Mr. Zaw Zaw has joined with with France’s Accor to build hotels, including one where Mr. Kerry stayed in 2014. Mr. Khin Shwe himself is credited with bringing significant development to Yangon’s northern outskirts, where he built an industrial zone.

Many Myanmar businesses fear that keeping sanctions without a clear timeline for their removal will push them closer to Chinese companies. That, they say, would be despite these local businesses’ desire for investment from their American counterparts.

“For us [businessmen], we have property, we have money, we aren’t personally affected by these sanctions—I am still rich,” said Mr. Khin Shwe. “But if I can’t grow my business without new investment, that is hundreds of people that cannot get jobs.”

—William Mauldin in Washington contributed to this article.

Corrections & Amplifications:
Erin Murphy founded the Inle Advisory Group. An earlier version of this article incorrectly referred to her as Mr. Murphy in a subsequent reference. (May 22, 2016)

Write to Shibani Mahtani at shibani.mahtani@wsj.com

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