Swiss businesses tread carefully in Myanmar

A man climbs on scaffolding at a construction site in Yangon, Myanmar Reuters

Switzerland’s business community is taking a new interest in Myanmar. Yet a year after the opening of a Swiss embassy there, the prevailing optimism remains cautious. The situation in the country is still unstable and questions remain as to how to ensure responsible investment.

“It’s now or never: if we wait, we’ll arrive too late.” Barbara Möckli-Schneider, a Myanmar specialist at the Swiss-Asian Chamber of Commerce, has no doubts about the potential of the country. “It is one of the richest countries in terms of resources. The interest is enormous and the present government is doing all it can to promote positive development,” she told swissinfo.ch.

With abundant natural resources, a strategic position between India and China, a population of 55 million people and a young and inexpensive workforce, Myanmar has been in the sights of entrepreneurs and investors for a while. With the end of international sanctions, the gates of the ‘new Asian economic frontier’ have now opened.

“Foreign investment is booming,” says the newsletter of Thura Swiss, a consulting firm in Yangon, the main city. Between April and August 2013, foreign investment in Myanmar – coming mostly from Asia – has amounted to $730 million (CHF661 million), more than double what it was a year ago.

Swiss business also wants to be in on this new El Dorado. After all, Switzerland was one of the first western countries to open an embassy in Myanmar in November 2012 after the military regime ended. The economic missions have been succeeding each other and trade between the two countries (CHF15 million in the first half of the year) is constantly increasing.

“We have regular contact with Swiss companies and entrepreneurs. Every month we get four or five requests on average,” said Corinne Henchoz Pignani, a political and economic officer at the Swiss embassy in Yangon in an e-mail to swissinfo.ch.

Myanmar: to be handled with care

“Myanmar is like the Thailand of 25–30 years ago: a country with a high potential for development, particularly as regards infrastructure,” says Patrick Djizmedjian, spokesman for Switzerland Global Enterprise, the organisation responsible for the promotion of trade and Swiss business abroad.

“For Swiss companies this is an interesting market. They can contribute to the development of roads, ports, airports, infrastructure for electric power and telecommunications. The sectors of tourism, health and  consumer goods also provide many opportunities.”

Recently, the Swiss food giant Nestlé obtained approval to open a branch plant in Myanmar. A few months earlier, the Swiss-Swedish industrial concern ABB, which had not been a player in Myanmar for a number of years, secured an initial contract for electrical components. The company prefers for the moment to keep a low profile, says its spokesman Antonio Ligi.

Most of the Swiss entrepreneurs are proceeding with caution, emphasises Rina Alluri of the Swisspeace foundation, which in spring organised a round table on the topic ‘Doing business in Myanmar’. “The situation is still fragile and sectors such as the banking system still lack the necessary infrastructure.”

“It is necessary to act with caution and keep pace with the opening up and political development of the country,” agrees Djizmedjian. “For that reason, we are not promoting [Myanmar] too actively.”

Swiss company implicated in abuses?

In an article on August 24, 2013, the online newspaper The Irrawaddy reported that about 8,000 people in Shan State, Myanmar, had been forced to leave their homes and farms.

The population of the Paunglaung valley was forced to move to unproductive lands on the surrounding hills to make room for a huge hydro-electric project, says The Irrawaddy, citing local sources. Many people had received insufficient compensation.

Several foreign companies are involved in the construction of the dam, started in 2004, including the Swiss firm AF-Consult. Contacted by swissinfo.ch, the company, which is based in Baden, canton Aargau, explains that “the contract includes technical support for planning and construction of the new hydro-electric power station”.

The Myanmar Ministry for Electric Power “has set up an internal team which is responsible for the resettlement of the residents in the dam reservoir area as well as measures and compensation. AF-Consult is informed about the general process, but is not involved in these actions,” states Dieter Müller, head of the Hydro-electric Power department of AF-Consult Switzerland.

The company, he says, “has also offered consulting support according to international standards.” In the meantime, he adds, there have been considerable improvements. The flooding of the reservoir “was postponed in order to allow the local people to harvest another crop and the compensation has been increased.”

Investment at high human risk

The picture in Myanmar is not completely rosy yet. In spite of reforms brought in by the civilian government in office since 2011, and international aid programmes, the legal and regulatory framework remains unstable.

There remain chronic problems involving corruption, red tape and the fact that a large part of the economy continues to be controlled by the military men and their associates. Several reports have emphasised that the country lacks the institutional framework to ensure the kind of development that will respect human rights and the environment.

“Every week there are demonstrations in Myanmar. The people are taking to the streets to protest against poor working conditions, land grabbing, forcible relocation of populations and violations of the rights of ethnic minorities,” points out Michel Egger of Alliance Sud, a coalition of six Swiss development organisations.

In areas like hydro-electric power, gas, petroleum and the textile industry, “investment is at a high risk in terms of human, social and ecological rights”, emphasises Egger. “If people start investing massively and with the idea of turning a quick profit, they could do a lot of damage,” notes the Swiss ambassador in Myanmar, Christoph Burgener.

Business and human rights

To avoid any negative impacts, Switzerland is adopting a multi-level strategy. The most significant move has been the creation of an “integrated embassy” coordinating diplomacy, peace policy, and the development cooperation projects of the State Secretariat for Economic Affairs (SECO).

“The integrated Swiss embassy has also created an informal platform of contacts with Swiss businesses in which it particularly emphasises the importance of economic development that respects human rights, and social and environmental standards,” explains spokesperson Isabel Herkommer.

The strategy of Switzerland is “interesting”, comments Anne Seydoux-Christe, a Christian Democrat senator who recently put a parliamentary question to the government on Swiss investment in Myanmar. “We need to do more,” she emphasises, however, referring to the “massive human rights violations, violence and deep-rooted ethnic conflicts”.

Investment and human rights in Myanmar

By integrating the office of development cooperation with the Yangon embassy, the Swiss government intends to achieve a balance between business promotion and defence of human rights in Myanmar. “The Embassy takes every opportunity it has to interact with business partners on issues such as labour rights, social and environmental impact and sustainability,” indicated the Swiss delegation in an e-mail to swissinfo.ch.

Swiss development cooperation, which has about CHF30 million per year at its disposal for 2013-2017, is focusing its efforts on four priority areas: labour and vocational training, health and effective local government, agriculture and food security, and promotion of peace and human rights.

To encourage responsible investment, Switzerland supports multilateral initiatives like the UN’s guiding principles on business and human rights and the Extractive Industries Transparency Initiative (EITI). It has also announced a financial contribution to the new Myanmar Centre for Responsible Business, which was founded by the Institute for Human Rights and Business in London and the Danish Institute for Human Rights.

Switzerland and Myanmar have also embarked on a bilateral economic dialogue, in which they discuss labour rights and the social responsibility of companies. The first series of discussions will take place in November, as part of a business mission to Myanmar led by the Director of the State Secretariat for Economic Affairs, Marie-Gabrielle Ineichen-Fleisch.

Companies to take more responsibility

Like other parliamentarians, Seydoux-Christe believes that Switzerland should follow the example of the US. American guidelines in force since May of this year require anyone who invests more than $500,000 to present an annual report. Companies have to indicate their policies and procedures regarding human rights, corruption and any environmental risks associated with their activity.

“The measures adopted by Switzerland remain voluntary, however. We should go further, establishing basic standards of due diligence and reporting as regards human rights and investment transparency for all Swiss companies investing in Myanmar,” urges Egger of Alliance Sud.

In practical terms, companies should be required to monitor the impact of their operations, to consult local communities, to guarantee decent working conditions and to evaluate the quality of their business partners.

Respecting and applying international standards, such as in the field of human rights, is part of the responsibility of corporate management, not the State, notes economics minister Johann Schneider-Amman.

However, as requested by a parliamentary committee (see link), the government is currently weighing various solutions whereby obligatory mechanisms of due diligence as regards human rights and the environment would be put in place, emphasises the minister. These regulations would cover all Swiss activities abroad, not just investment in Myanmar.

Before such a policy could be implemented, years may pass, emphasises Anne Seydoux-Christe. “But it’s needed now.”

(Translated from Italian by Terence MacNamee)