AFG Venture Group Dispatches

Corporate advisory and consultancy in Australia, South East Asia and India.

Australian Trade/Investment in Myanmar and Corporate Social Responsibility

July 2nd, 2014

Author: Trevor Wilson
Visiting Fellow, Department of Political & Social Change, ANU Advisor to the Australia-Myanmar Chamber of Commerce

This article was originally written for the Australia Myanmar Chamber of Commerce(AMCC).

1. Introduction

How much corporate social responsibility should Australian companies practise if and when they enter Myanmar? Should there be additional obligations placed on Australian firms over and above expecting their compliance with any (voluntary) international codes of conduct under the United Nations or the OECD? Should Australian firms operating in Myanmar be expected to conform with reporting requirements by the Australian Government, as US firms are expected to do for the State Department? Should Australian firms be encouraged to go through an “education” process about responsible business in Myanmar, as British firms are to by the Foreign Office? Are there other ways of getting better business behaviour in a “regulation free zone” like Myanmar, or will market-driven international companies be able exploit loopholes in Myanmar laws?

2. Does CSR Still Have Credibility?

As an idealistic philosophy, corporate social responsibility has always attracted a good deal of criticism, as being “mainly public relations”, or worse “corporate greenwashing”. It has also been criticised by some economists. One of the most cited critics of CSR was the Nobel prize winning US economist, Milton Friedman, whose response to CSR was to assert, famously, that: ‘the business of business is business’ rather than enforcing social standards. In practical terms, criticisms of CSR, include its lack of formal regulation, its apparent misuse as a marketing ploy by some companies, and abuse of power by decision making companies in the social domain. It is also argued that it: “distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful corporations though there is no systematic evidence to support these criticisms. A significant number of studies have shown no negative influence on shareholder results from CSR but rather a slightly negative correlation with improved shareholder returns.” (Wikipedia).

An important vehicle for implementing CSR-type ideas has been the global international business codes that have been developed in the various multilateral institutions over more than three decades. One of the challenges in implementing CSR ideas is its voluntary nature and the absence of enforcement measures. Even where codes of conduct for multinational enterprises exist1, they are also voluntary and lack enforcement measures. There has been a great amount of literature about the development and utility or otherwise, of global codes of conduct for companies engaging in international trade and investment. In cases such as the EITI, compliance (by all parties – business and governments) is actually monitored and publicly reported, but this is unusual. A powerful case against CSR for being too weak, is made by British political commentator and “eco-activist” Claire Fausset.2

3. International Economic Disengagement from Myanmar

After 1990, the “Western” international community instituted a variety of sanctions against Myanmar, though never through the United Nations where China and Russia exercised a veto, but rather through the Western economic coordinating mechanism of the OECD. Economic sanctions against Burma were mostly the result of long bitter political fights in “the West”, and their effect was to make Myanmar a “no go zone” for many companies, even though other countries, especially those in Asia such as ASEAN countries and China, did not maintain any sanctions against Myanmar. Generally, sanctions against Myanmar did not only consist of specific legislative restrictions on certain business activities, but they also sought to discourage trade, investment and even tourism with Myanmar. However, after Myanmar’s 2010 multi-party elections and the restoration of parliamentary government in 2011, and after the main opposition the National League for Democracy resumed participation in Myanmar’s political process in 2012, economic sanctions against Myanmar were lifted or suspended, and trade and investment with Myanmar more or less returned to “normal”.

During this period, however, a comprehensive international socio-economic disengagement from Myanmar had occurred. For at least twenty years, whether prohibited under the sanctions of OECD members, or whether effectively discouraged by official policies or simply by adverse market conditions, most members of the international business community had for all intents and purposes ceased conducting business with Myanmar. Indeed, most members of the international business community had effectively disengaged from Myanmar, closing down distribution and supply networks, ending commercial intelligence gathering, and ultimately dispensing with much in-house basic operational knowhow about Myanmar. Eventually, this necessitated special efforts by the international business community to regain the necessary expertise to re-engage commercially.

But among the companies which remained in Myanmar, some had resorted to CSR to counter criticisms of their working under a military regime and against the spirit of international sanctions. So CSR is not new in Myanmar. Indeed, it was tacitly accepted after 1990 by the military regime, which allowed some foreign and domestic firms to conduct CSR-like activities, perhaps because the military regime badly needed new foreign investment. A leading example of foreign CSR in Myanmar from as early as the mid-1990s was the French energy company Total, which – with the military regime’s approval – initiated a variety of programs (human rights, business code of conduct, social responsibility) in connection with its Yadana off-shore gas project in the Andaman Sea south of Yangon, on which it commissioned “independent” reports from 2002.3 Slightly later, at the Yetagun off-shore gas project in southern Myanmar, the UK energy company Premier Oil had also conducted extensive CSR programs on which it reported publicly.4 The author met some of the experts who prepared these reports in Myanmar at the time. Although their reports were widely regarded as self-serving for the companies that sponsored them, had limited political credibility, and therefore had little wider beneficial impact, they were essentially factual and thoroughly done. 5

Objectively, however, in 2011 Myanmar remained poorly prepared for sizeable international business activities in terms of its legal and formal regulatory frameworks. There was, moreover, widespread concern that Myanmar’s resources and its people would be exploited by international business without some regulatory or normative “intervention”. In the immediate aftermath of the start of Myanmar’s reforms in 2011, there was a rush of reports from global risk management companies, mostly warning about the risks associated with conducting business in Myanmar. A typical example is that by the UK firm Maplecroft, which said:

The report also highlights reputational risks as a key concern for companies operating in the country. While Aung San Suu Kyi’s calls for new ‘good investment’ stand out and weaken NGOs’ pro-sanction stance, reputational risks are likely to persist. On-going human rights violations, including labour rights violations, continuous violence against ethnic minorities, and weak freedom of speech, are expected to continue, at least for now, and NGOs will continue to monitor companies doing business with the government of Myanmar.6

It was hardly surprising that international management consultants and international risk companies should warn about the gaps in Myanmar’s capacities. Thus, while the McKinsey Global institute report in June 2013 was relatively positive about Myanmar’s economic prospects, it noted soberly that7:

All the fundamentals—political and macroeconomic stability, the rule of law, enablers such as skills and infrastructure—must be in place.

It is also apparent that such reports contributed to a slowing of the emergence of new FDI as much as the Myanmar authorities’ difficulties in coordinating the enormous number of business visitors and the proposals (or queries) that arose from their initial contacts with Myanmar. Generally, Thein Sein government representatives do not disguise – publicly or privately – the problems they face in getting reforms under way.

4. “Responsible” Economic Re-engagement with Myanmar

After official sanctions were suspended in 2012, some members of the international community also turned to CSR-like principles to bring about better compliance with higher standards of international business, despite Myanmar’s obvious lack of preparedness in terms of legislation and procedures. As mentioned, the United States is the foremost among these countries, but the EU and the UK have also adopted a pro-active stance to encourage “responsible business” behaviour in Myanmar.

The speed and unexpected nature of the initial political and economic reforms in Myanmar, combined with Myanmar’s obvious unreadiness for international business, also generated a plethora of corporate social responsibility recommendations and proposals during 2011-12. The standard bearer of the second category of response, in relation to “responsible business”, was CSR Asia’s June 2013 report on responsible business in Myanmar.8 In itself, this report is balanced, comprehensive and persuasive, but it also quite demanding in its expectations and not especially concerned by the extent of the administrative and managerial obligations it advocates.

In a significant move, in response to the unusual Myanmar situation, the United Nations itself decided to escalate its efforts to provide a safety net for business activities in Myanmar. UN Secretary-General Ban Ki Moon himself “launched” the Global Compact in Myanmar on 1 May 2012, enlisting the participation of companies operating in Myanmar.9 UN-associated international financial institutions such as the World Bank and the Asian Development Bank were also notable for their strong endorsement of CSR in the circumstances of Myanmar at this time. Indeed, in 2003 the World Bank specifically commissioned a report to assess:

“The commitment of business to contribute to sustainable economic development working with employees, their families, the local community, and society at large to improve their quality of life, in ways that are both good for business and good for development.”10

The report made clear that it was employing the term CSR in connection with codes of conduct in global supply chains, using a narrow interpretation in referring to social and environmental practices and standards. As it prepared to re-engage with Myanmar after the political transition there began in 2011, the bank maintained an emphasis on a principled approach to re-engagement after it re-opened its office in Myanmar in 2012. This was also picked up in media positive reporting about the reopening of offices of both banks in Myanmar.11

In a parallel development, supporters of economic sanctions against Burma were extremely reluctant to abandon them prematurely after 2011. The removal of sanctions (whether in whole or in part) was sometimes made more palatable politically by the introduction of new regimes to administer procedures aimed at ensuring “best practice” business standards and behaviour, but which might also act as a safety net if Myanmar’s reforms were not successful. In the case of the United States, US firms reopening business operations in or with Myanmar since May 2013 have been required to submit regular reports on their activities demonstrating their compliance with responsible business principles.12 While achieving new levels of transparency and (perhaps) accountability, the reporting requirement represents another additional set of bureaucratic compliance obligations, which although not especially onerous, may end up not being enforced thoroughly or effectively. So its utility, in terms of its stated goals, remains to be seen at this stage. To date, the United States is the only country imposing such a requirement on its corporate sector, and so far there is no noticeable effort by the United States to have other countries impose similar obligations.

The Myanmar Government itself took a noteworthy step in 2012 when it announced its intention to sign onto the Extractive Industries Transparency Initiative (EITI).13 The Thein Sein Government itself made a public commitment to join the Extractive Industries Transparency Initiative (EITI), which is a relatively new multilateral attempt to encourage better business practices through prescribed universal transparency measures. The minister with overall responsibility for economic reforms, then Minister for Industry and now Minister in the President’s Office, (former Admiral) Soe Thane announced this in 2012, and has been one of the most consistent and committed advocates for responsible business, especially through the vehicle of the EITI.14 In one sense, however, the Myanmar Government’s commitment to the EITI was a specific example of continuity of policy, and should have been no surprise.

Non-government organisations that actively support and facilitate better business practices for new and old firms seems also to be proving helpful in ensuring wider understanding of the meaning of “responsible business”. First and foremost this includes the peak Myanmar business organisation, the Union of Myanmar Federation of Chambers of Commerce and Industry (UFMCCI) which is still essentially a government-supported body. International NGOs, such as the specialist International Bar Association (whose Human Rights Institute now supports the Responsible Business Office in the UK Embassy Yangon) have also been effectively mobilised.15 Numerous local activist groups in Myanmar have responded with enthusiasm to the limited new openings, and have undoubtedly been encouraged and influenced (some would say excessively) by their new-found ability to defend labour rights and to fight for better working conditions, and by the greatly increased interest shown by international rights groups in Myanmar.16 Foreign firms setting up in Myanmar henceforth cannot afford to ignore such developments. Confirming this, the OECD’s “Investment Policy Review of Myanmar”, released on 1 March 2014, gave prominence to the need for “responsible business” principles to be observed by international firms operating in Myanmar.17

5. New International Measures Applying CSR Principles in Myanmar

There is no “responsible business charter” to which all firms operating in Myanmar could sign onto on an equivalent basis, other than the “Global Compact” and the UN principles for multinational corporations engaging in international business which remain “voluntary”. While, under UK (or EU) legislation, there are no special requirements for companies entering Myanmar for UK or EU business in Myanmar, the normal provisions of the UK Anti-Bribery Act and (voluntary) OECD Guidelines for Multinational Enterprises apply.18 Rather, EU member embassies tend to suggest any company seriously thinking of entering the market first consult the Office of Responsible Business, which was set up in the British Embassy in 2013. No specific “sanctions” would be taken against EU firms who do not do what is required, other than those under relevant EU members’ laws. However, the UK government could distance itself from a non-conforming company and decline to provide it with support, particularly if it went against their advice. No separate “global” reporting of business activity is carried out on the part of the EU governments, although some sector-wide reporting is carried out. Certain NGOs, like Oxfam, Earthrights International, and the UK Burma Campaign are likely to act as “watchdogs”.

6. Can CSR Really Help in Myanmar?

Proponents of ethical business are in no doubt that some form of CSR is necessary in Myanmar today.19 At the moment, it is still too early to assess whether or not these new corporate behaviour standards being applied in Myanmar will have much tangible impact, either in terms of frontline corporate compliance or in terms of improved country-wide or sector-wide business performance.

Like sanctions before them, these standards suffer from not being universal, but being only applied by a few foreign governments. However, in terms of political support inside Myanmar, there is a greater consensus in favour of “responsible business” than there ever was for economic sanctions, even if the Myanmar Government’s commitment to responsible business practices might be more lip-service than insistence on absolute compliance. As leader of the opposition, NLD Chair Person Aung San Suu Kyi has been one of the most consistent and explicit advocates of ethical business, raising this in her numerous meetings with business leaders during all her overseas visits since 2013, as well as in high-profile economic meetings such as the World Economic Forum, in which she participated.20

If Myanmar Government rhetoric is backed up by concrete policies, there might still be a chance that Myanmar’s own corporate business legal procedures might reach sufficient levels to make non-government compliance regimes unnecessary. Alternatively, the plethora of business monitoring schemes (including those by normal human rights agencies operating in Myanmar) might make the new regimes superfluous or redundant.

7. What Position Should Australian Entities Adopt on CSR in Myanmar?

In contrast with some of the major OECD member countries, Australian firms are at the moment relatively lightly “regulated” when it comes to entering the Myanmar market. Indeed, with the lifting of Australia’s financial sanctions from June 2012, it could be said that Australia has moved to a position of (mildly) encouraging Australian business with Myanmar. Several Australian business delegations have visited Myanmar since 2011 – one led by the then (ALP) Minister for Industrial Relations, Bill Shorten in 2012 – and a private sector-led Australia-Myanmar Chamber of Commerce has been established, also in 2012. A few Australian NGOs have set up business networks on Myanmar. Generally, the emphasis is not on restricting or moderating Australia’s business presence, but rather channelling or focusing it better. There is certainly no official emphasis on imposing further unilateral benchmarks or standards on Australian corporate behaviour.

The Australian Human Rights Commission — in a project on the role of Australian companies in promoting and protecting human rights that it commissioned in 2008 (and later shared in a joint seminar with the ASEAN Inter-Governmental Commission on Human Rights) — argued that Australian companies have a distinct responsibility to respect human rights.21

According to the Australian Embassy in Myanmar, Australian companies show some interest in CSR.22 As general message, the embassy tries to ensure that Australian firms are informed about the importance of socially and environmentally responsible investment in Myanmar, and of their need to be attentive to Myanmar’s needs and Myanmar’s own reform agenda. When appropriate, Australian companies are provided with more specific information – for example, contact details for NGOs with an interest in CSR around extractive industries. The impression is that Australian firms are, perhaps, more attentive to CSR in Myanmar than they might be in other contexts, given the spotlight that is generally shining on the country at the moment, but many Australian companies are more “CSR-aware” than they used to be.

Australia’s overseas trade promotion body, Austrade (which re-opened its Yangon office in June 2013), does not provide specific advice to Australian companies about CSR options, but when talking to them about the investment environment in Myanmar, mentions the fact that the Myanmar Investment Commission (MIC) does consider the CSR component of foreign investment proposals when assessing those proposals, and that the MIC looks favourably on proposals that include a strong CSR program. Austrade also informs Australian firms that foreign investors may be required under Myanmar law to undertake environmental and social impact assessments prior to investment, particularly in the resources sector, and points out that those ESIAs would presumably include the impact of any CSR component of the investment proposal.23

Formally, the Australian Treasury has broad responsibility for Australian conformity with the OECD guidelines and endeavours to ensure that the corporate sector within Australia is aware of the need for good CSR practices. But it does not actively search for breaches of the Guidelines, and acknowledges that it cannot actively monitor all activities of Australian corporations across the globe. Acting as the “Australian National Contact Point”, it has established clear guidance for handling any allegations made in respect of Australian-based corporations, and provides an opportunity to bring parties together to mediate an outcome, if at all possible. However, there are no specific procedures in relations to Australian firms doing business with Myanmar.24

Austrade also strongly encourages Australian companies that are doing business in Myanmar to comply with the OECD Guidelines for Multinational Enterprises, which are explicitly mentioned on the Myanmar country page of Austrade’s website.

8. Conclusions

Probably the most reasonable thing that can be said is that it would be folly on the part of Australian companies to ignore CSR factors when doing business in Myanmar at this point in time. A fundamentally pragmatic perspective is taken by the British commentator Russell Sparkes in an address at the London School of Economics, where he said (addressing British business leaders): 25 “your CSR concerns should be limited to the way you do business, and ultimately will differentiate your company from its competitors. It is up to you whether this is positive or negative.”

While Australian firms may not be legally bound to comply with additional CSR-type provisions and behaviour, it would clearly be foolish of them to be obviously out of step with other international firms operating in Myanmar. Nor would it be wise to incur the displeasure of Myanmar political leaders who have repeatedly made their views on such matters known. Any dubious activities in Myanmar will quickly come under scrutiny either from the newly liberalised Myanmar print media, from NGO rights “watch dogs” focusing on Myanmar, or from their own government.

At the same time, despite the absence of effective international or domestic measures to enforce universal conformity by international firms, the lack of guarantees that adopting responsible business practices will pay off in Myanmar, notwithstanding any cost, as well as the presence of choices both for FDI partners for Myanmar and for investment destinations for foreign firms, together weaken the case for formal compliance measures along the lines adopted by the Unites States or the UK. Moreover, generally, it remains difficult to verify how much impact codes of conduct or similar mechanisms have had in countries such as Myanmar. Whether or not they make a substantive difference is hard to determine.

Nevertheless, Australian companies considering doing business in Myanmar should also take account of the views of Professor David Kinley, a prominent academic lawyer on the subject of business and human rights in Australia, who also led a human rights training program in Myanmar from 2000-2003. Professor Kinley argues that firms have a duty to pursue higher standards of human rights behaviour in countries like Myanmar.26

  1. Such as the 1990 UN Code of Conduct for Transnational Corporations (which was negotiated in conjunction with the International Chamber of Commerce) and the 2000 OECD “Guidelines for multinational Enterprises, to which Australia is a “adhering government”. http://www.oecd.org/investment/mne/1922428.pdf
  2. Fausett, Claire. “What is Wrong with Corporate Social Responsibility”, 2006. http://www.corporatewatch.org/?lid=2688
  3. Total/Collaborative Learning Project (CDA), http://burma.total.com/myanmar-en/publications-/the-cda-reports-200226.html
  4. Premier Oil, 2005. “Social and Environmental Responsibilities”.
  5. Richard Jones, who worked for Premier Oil at the time, refers to the “inventory of gains” from CSR in Myanmar in the early 2000s in “Making a Responsible Corporate Contribution to Modern Diplomacy in Myanmar” in Myanmar’s Long Road to National Reconciliation, Ed. By Trevor Wilson. Singapore and Canberra: ISEAS and Asia Pacific Press, 2006 (pp177-187).
  6. A summary of the Maplecroft report can be seen at: http://maplecroft.com/about/news/country-reports-myanmar-may18.html.
  7. Myanmar’s Moment: Unique Opportunities, Major Challenges”, McKinsey Global institute, June 2013.
    http://www.mckinsey.com/insights/asia-pacific/myanmars_moment.
  8. See Welford, Richard & Zieger, Miriam. “Responsible and Inclusive Business in Myanmar”, June 2013, CSR Asia.
    http://www.csr-asia.com/report/CSRA2013_Responsible_and_Inclusive_Business_in_Myanmar.pdf
  9. See the UN media release about this event at:
    http://www.unglobalcompact.org/NewsAndEvents/UNGC_bulletin/2012_05_01.html
  10. Strengthening the Implementation of Corporate Social Responsibility in Global Supply Chains”, Washington DC: World Bank, 2003.
    http://siteresources.worldbank.org/INTPSD/Resources/CSR/Strengthening_Implementatio.pdf
  11. Reuters “World Bank to help Myanmar clear arrears”, 1 August 2012.
    http://www.reuters.com/article/2012/08/01/us-myanmar-worldbank-idUSBRE8700AO20120801
  12. The US Government’s procedures state that: “U.S. persons are required to report annually on a range of policies and procedures with respect to their investments in Burma, including human rights, labor rights, land rights, community consultations and stakeholder engagement, environmental stewardship, anti-corruption, arrangements with security service providers, risk and impact assessment and mitigation, payments to the government, any investments with the Myanma Oil and Gas Enterprise (MOGE), and contact with the military or non-state armed groups.”. See State Department and Treasury website:
    http://www.humanrights.gov/2012/07/11/burmaresponsibleinvestment/
  13. An account of these moves is given in Laohamutuk “Transparency in Burma’s gas and oil industry”, 31 August 2012. http://www.laohamutuk.org/Oil/EITI/Burma/12EITIBurma.htm
  14. Myanmar attended the ministerial level EITI meeting for the first time in Sydney in May 2013.
  15. The International Bar Association Human Rights Institute had a fact-finding mission to Myanmar in mid-2012 and published a report later in 2012 entitled: “The Rule of Law in Myanmar: Challenges and Prospects”. See: http://www.burmapartnership.org/wp-content/uploads/2012/12/Myanmar-report-December-2012.pdf
  16. See relevant chapters on land rights and labour rights in “Debating Democratization in Myanmar”, papers from the 2013 Australian National University Myanmar Update conference. Editors: Nick Cheesman, Nicholas Farrelly & Trevor Wilson. Singapore: Institute of Southeast Asian Studies, 2014.
  17. See “OECD Investment Policy Review of Myanmar”, March 2014.
    http://www.oecd.org/countries/myanmar/investment-policy-reform-in-myanmar.htm.
  18. This paragraph is based on the author’s interview with the Office of Responsible Business, April 2014.
  19. A well-argued case is made by Rachelle Jackson, writing for Ethical Corporation. “Can Burma be the next business frontier?”, 22 August 2012. http://www.ethicalcorp.com/business-strategy/can-burma-be-next-business-frontier
  20. See WEF report on her address at the WEF Summit on East Asia, Bangkok, 1 June 2012 at: http://www.weforum.org/news/aung-san-suu-kyi-calls-investors-focus-how-help-myanmar; and her video presentation to WEF Annual Meeting in February 2012 http://www.weforum.org/videos/aung-san-suu-kyi-annual-meeting-2012.
  21. See report on the presentation by the Chairman of the Australian Human Rights Commission, announcing the findings on the “Corporate Social Responsibility & Human Rights” project at:
    http://www.probonoaustralia.com.au/news/2009/07/csr-and-human-rights
  22. This paragraph draws on the author’s interview with an embassy representative in April 2014.
  23. Author’s interview with Austrade representative April 2014.
  24. Advice from International Economic Division, Treasury Department, September 2013.
  25. Sparkes, Russell, 2003. “A Pragmatic Approach to Corporate Social Responsibility”.
    http://cep.lse.ac.uk/seminarpapers/19-05-03-SPA.pdf
  26. Kinley, David. Civilising Globalisation : Human Rights and the Global Economy. Cambridge University Press, 2009.