Commentary | 20 October 2016

Myanmar's road ahead: Growth, peace, and US Sanctions

In this commentary, Research Fellow Aaron L. Connelly argues that the US was right to remove most sanctions on Myanmar, and should now turn its attention to helping Myanmar achieve peace between ethnic and sectarian groups.

Photo: Getty Images/Bloomberg

  • Aaron L Connelly

In this commentary, Research Fellow Aaron L. Connelly argues that the US was right to remove most sanctions on Myanmar, and should now turn its attention to helping Myanmar achieve peace between ethnic and sectarian groups.

Photo: Getty Images/Bloomberg

  • Aaron L Connelly

Full text

Originally published in Foreign Affairs

When Aung San Suu Kyi and her National League for Democracy (NLD) took power in Myanmar in March of this year, they inherited three especially daunting challenges: an economy devastated by decades of mismanagement and sanctions; virulent anti-Muslim sentiment among much of the country’s Buddhist majority; and a moribund peace process struggling to end nearly seven decades of ethnic insurgency in many of Myanmar’s border states.

The situation in Rakhine State – where conflict has flared between the Buddhist Rakhine, the majority ethnic group, and the Muslim Rohingya, the minority – has been of particular concern. There, on 9 October, a series of attacks by unidentified assailants on border police outposts has provoked what activists allege to be retaliatory killings by the authorities. Such incidents threaten to inflame tensions and plunge the region back into communal violence on a scale not seen since the 2012 riots that killed nearly 200 and displaced 140,000, almost all of them Rohingya.

Although Aung San Suu Kyi appeared uninterested in these problems before she took power, she has since turned her attention to bringing peace to a country that has been riven by communal violence for much of its history.

Until recently, however, US policy toward Myanmar was not well equipped to assist her government in addressing these challenges. Relations between the countries had been burdened by a sanctions regime created 20 years earlier to punish Myanmar’s military junta for its failure to turn over power to a democratically elected government led by Aung San Suu Kyi. Those sanctions have since become an obstacle to the economic development that the country now needs in order to consolidate democratic gains. The Obama administration’s decision, carried out in an 7 October executive order, to remove most sanctions on Myanmar thus presents an opportunity to refocus US attention and help Aung San Suu Kyi meet her most serious challenges. On some of these, sanctions might still have a role to play. 

BABY STEPS

The United States removed most general trade and investment sanctions on Myanmar in 2012 as a reward for the country’s initial steps toward democratization, and trade between the two nations climbed from $10 million to $185 million in the subsequent three years. But in June 2015, that nearly ground to a halt after Citigroup flagged a shipment transiting the main port at Yangon. The container terminal there, the bank noted, was operated by one of 111 individuals and organizations on the list of “Specially Designated Nationals” (SDN) that remained under US sanctions for their support of Myanmar’s former junta. Suddenly, US banks realized they could not allow firms to pay the port for unloading their goods. After six months of deliberations, the US Treasury Department issued a license allowing the payments to resume, but the incident underscored the threat, for US companies, of accidental transactions with sanctioned entities.

The ordeal illustrates how US sanctions have typically worked in Myanmar. The SDN list was created to make life difficult for the repressive generals and their allies in business, who governed Myanmar under the junta. But because much of the economy is still controlled by those oligarchs, finding unsanctioned partners, suppliers, and customers proved difficult for investors. Western banks, too – which have paid tens of billions of dollars in fines in recent years for violating sanctions against Cuba, Iran, and Myanmar – had become extremely reluctant to do business in countries where the United States maintains such extensive and complex sanctions. In effect, the sanctions had throttled Myanmar’s access to international finance, and put the entire country off-limits for most US investors, which ironically helped the oligarchs to maintain their market share.

Obama’s executive order, motivated by the progress represented by Aung San Suu Kyi’s victory, will strike the names of most Myanmar nationals from the SDN list, thus effectively removing sanctions and making business dealings with the country possible again. The decision has been criticized by some human rights advocates and members of Congress, who note that the military retains significant powers under the current constitution, including the power to choose its own commander-in-chief and appoint the defense minister, home affairs minister, border minister, and 25 per cent of the members of the legislature. Changes to the constitution require the support of 75 per cent of the legislature; so, the military has an effective veto, which activists worry it will use to block further reforms.

Both Obama and Aung San Suu Kyi have acknowledged that much remains to be done. Yet the constitution is – at least for the moment – no longer the obstacle to democratization that it once was. Aung San Suu Kyi’s NLD won a landslide victory in the November 2015 elections, delivering a majority in both houses of the national legislature. Among other things, this gave the NLD the right to appoint all nine members of the constitutional tribunal. The NLD thus has unfettered legislative and jurisprudential power. Constitutional amendments remain out of reach, but the military has not stopped Aung San Suu Kyi from circumventing the document: when she could not convince the generals to change a provision in the document prohibiting those with foreign family members from becoming president – Aung  San Suu Kyi has two British sons from her marriage with the late Michael Aris – members of her party created the post of state counselor for her, and endowed it with the powers of a head of government. 

Some of these workarounds may be unique to Myanmar’s current circumstances. If the next parliamentary election is not won in a landslide, the military’s allocation in parliament will be more consequential. And it is not clear where the military might draw the line regarding the NLD’s circumvention of the constitution. It is important that the military eventually allow the document to be changed, and the US should continue to urge the generals to do so; but it would have been a mistake to make further sanctions relief contingent upon that. 

Removing Myanmar from the SDN list will not cure all that ails the country’s economy: there is still high inflation, an overheated property market, and a lack of regulatory and judicial certainty. Aung San Suu Kyi and the NLD have released few details about how they intend to solve these problems, irrespective of US sanctions.

CHURCH AND RAKHINE STATE

Yet beyond economic development, Aung San Suu Kyi must do two things: minimize ethnic and sectarian tensions, and conclude a peace agreement with the 17 armed ethnic groups that have been fighting the central government in one form or another since independence in 1948.

The issue of sectarian tension is perhaps the most pressing of the two. Myanmar is about 87 percent Buddhist, and the religion is core to the identity of the majority Bamar ethnic group. Myanmar has also long been home to a Muslim minority, which makes up around four percent of the population. Although Muslim families have lived in the country for generations, in recent years Buddhist nationalists – chief among them monks of the Patriotic Association of Myanmar, known by the acronym Ma Ba Tha – have stoked fears that illegal immigration from Bangladesh and population growth among Muslims might eventually make Buddhists a minority.

Anti-Muslim rhetoric from the Ma Ba Tha and others has had lethal consequences: in 2013, Buddhists attacked Muslim neighborhoods in several cities across central Myanmar, killing dozens. At the time, officials in both the military-aligned former government and the NLD, then in the opposition, declined to speak out against the group for fear of attracting a nationalist backlash. Yet the new NLD government has made some progress. When the party’s chief minister of Yangon, the country’s former capital and largest city, spoke out against the Ma Ba Tha during a talk in Singapore this July, the group called for protests to greet him upon his return. Only ten protestors showed up, surprising observers and making the group far less fearsome. Most important, the country’s top clerical body declared in July that the Ma Ba Tha was improperly constituted, further delegitimizing it.

US pressure, however, also played a role. In late 2015, Congress passed an appropriations bill that restricted the US government from funding groups designated by the secretary of state to be advocating sectarian violence in Myanmar, singling out Ma Ba Tha. Although little funding was going to such groups anyway, some leaders in Ma Ba Tha and other Buddhist groups have sought to distance themselves from violent rhetoric, partly to avoid the embarrassment of the secretary’s designation. Anti-Muslim rhetoric and communal violence are still a problem, but in interviews in Mandalay in August, several Buddhist leaders said they understood that the new government needs sectarian harmony if it is to achieve its goals and retain its international legitimacy, and do not want contribute to unrest.

The situation is more difficult in Rakhine State, in the west of the country along the border with Bangladesh. Rohingya human rights are regularly violated by the state and central governments, and last year around a million were disenfranchised by the former government. From 2012–15, facing dire conditions in Rakhine, tens of thousands of Rohingya sought to leave on smugglers’ boats. Several were lost at sea, drowning thousands.

Although the new government has attempted to suppress communal tensions elsewhere in the country, the plight of the Rohingya attracts little sympathy in Myanmar, even from other ethnic minority groups. The Rohingya are not classified as one of the 135 official ethnic minorities considered to have settled in Myanmar prior to 1823, and thus are not considered citzens – although British records place Rohingya in Myanmar as early as 1799. Most of the country’s leaders, including Aung San Suu Kyi, even refuse to use the term “Rohingya,” and Buddhist extremist groups have protested the US Embassy’s use of it. It was in this environment that the attacks earlier this month occurred. Nine border guards were killed, prompting a crackdown by security forces that has left thirty dead in what activists have described as extrajudicial killings. If the attacks were carried out by radicalized Rohingya, as security forces allege, it would be the first sign in decades of organized violent resistance to their mistreatment. But even if the attacks are an isolated event, they will likely be used to justify even more repressive measures.

In the short term, security forces must exercise restraint so as not to inflame tensions. But in the medium term, communal conflict can only be avoided through broader reform of the security forces and a slow, painstaking process of dialogue between Rakhine and Rohingya. Aung San Suu Kyi’s decision to appoint a commission on the Rakhine question, led by former UN Secretary General Kofi Annan, may be a first step toward achieving these goals. The United States should assist Myanmar by consistently indicating to its leaders that it considers improvement in Rakhine State to be key to further progress in the relationship, particularly to the possibility of more substantive interaction between the two countries’ militaries. The United States can also use the State Department’s annual evaluation of the risk of human trafficking in Myanmar as leverage. This past year, Myanmar was given the lowest possible mark, Tier 3, in part because the fleeing Rohingya are sometimes smuggled by human traffickers working in the area. Although the Tier 3 designation comes with automatic trade and aid sanctions, these were waived by Obama. US officials should note that further waivers will not be forthcoming, or will be less comprehensive, without measurable improvements in the situation in Rakhine State.

Photo: Getty Images/Piti A Sahakorn

E PLURIBUS UNUM?

Rakhine State is hardly the only area where ethnic tensions have led to conflict and a humanitarian crisis. As the historian Thant Myint-U writes, 'Since independence from Britain in 1948, one of Myanmar’s principal challenges has been finding a form of government acceptable to its many and diverse ethnic communities.' There are long-running tensions between the majority Bamar ethnic group, who largely comprise the ruling elite, and the minority ethnic groups, many of whom have waged long-running insurgencies that heat up any time the government seeks to assert greater control in ethnic areas, which are generally located in the country’s periphery. 

Those conflicts continue till today, but the transition to a popular reformist government under Aung San Suu Kyi has raised new possibilities for their resolution. Her father, independence hero Aung San – widely respected by the different ethnic groups – laid down the foundations of such a settlement at the Panglong Conference in 1947, which called for shared resources and autonomy for the ethnic states. Aung San Suu Kyi’s democratic and personal legitimacy could thus give her greater latitude to strike an agreement in what are sure to be difficult negotiations. The end of economic isolation, moreover, has made economic development of many of these areas possible if a durable peace can be reached. Many armed groups representing ethnic minorities have funded otherwise legitimate struggles by trafficking in illicit goods such as gems, timber, and narcotics – committing grave human rights violations in the process. (The military engages in such practices as well). The possibility of a peace dividend makes abandoning such illicit trade a less daunting task for these groups.

Some groups may need further encouragement to leave criminal activities behind. For example, the United Wa State Army (UWSA), a remnant of the disbanded Burma Communist Party once supported by Beijing, has controlled an area near the border with China since 1989. The UWSA is among the most well-equipped military forces in Myanmar, and does brisk business supplying other rebel groups with arms. Unlike other armed ethnic groups, which seek a revision of the constitutional arrangements and more control over areas populated by their ethnic group, the UWSA is quite secure in its autonomous statelet and stands to gain from continued conflict. As a result, it has played the spoiler at critical moments in the peace process over the last two years. The previous government left Aung San Suu Kyi a peace process that had succeeded in negotiating a nationwide ceasefire in April 2015 only to see it undermined by the UWSA, which refused to sign and organized other groups to oppose it. Of the 13 armed groups that initially agreed to the ceasefire, only eight signed the document.

The United States can assist Myanmar by using sanctions to incentivize armed groups to give up businesses based on conflict and seize part of the potential peace dividend. For example, 32 individuals and businesses associated with UWSA remain subject to US sanctions under a separate SDN list for drug traffickers; their sanctions were not canceled earlier this month. The United States should be prepared to add names from the UWSA and other groups to the list if these organizations continue to obstruct the peace process, and to remove those names if they display a serious commitment to the peace.

In a hopeful sign, Aung San Suu Kyi was able to entice nearly all of the armed ethnic groups to attend what she termed a '21st Century Panglong Conference' at the end of August. Even the UWSA attended, although its delegates left on the second day of the conference in protest over a perceived protocol slight. The hard part lies ahead. Although the August conference did little to resolve these issues, merely reconstituting an active peace process was an achievement. The US should support this process – as well as Myanmar’s development more generally – as it moves forward.