In easing Myanmar sanctions, U.S. seeks to boost reforms

WASHINGTON (Reuters) - The United States is moving to ease bans on U.S. companies investing in and providing financial services to Myanmar, and will first target those sectors that could support democratic reforms in the country, a senior U.S. official said on Friday.

The official said that final reviews were under way following Secretary of State Hillary Clinton's pledge earlier this month to begin unwinding U.S. business sanctions, with decisions expected in coming weeks.

"It will be a matter of weeks to months to actually implement all that, but we are not looking long term," the official, who spoke on condition of anonymity, told Reuters in an interview.

The United States has repeatedly promised to review sanctions in response to dramatic political reforms in Myanmar that have seen veteran pro-democracy leader Aung San Suu Kyi elected to parliament and a raft of other repressive measures lifted. Myanmar, also known as Burma, was run by the military for five decades until a year ago.

But the complex web of U.S. sanctions has proved hard to unravel, leaving some companies fretting they will be left out of a potential economic boom in the country.

"It has taken a lot of our time to figure out how to navigate them and therefore how to use them to send the signals that we want to send," the official said.

Certain sectors of the Southeast Asian country's economy, notably industries such as mining, oil and timber, remain riddled with cronyism, making them less appealing candidates for immediate sanctions relief, the official said.

But he said greater U.S. involvement in other sectors could help Myanmar transform its economy and establish new standards for transparency, accountability and corporate social responsibility.

"We still are concerned about the reversibility and the sustainability of reform. But we also believe it is time that we also relieve some of the restrictions that are getting in the way of our ability to partner on reform," he said, stressing no specific decisions had yet been made.

'LOW-HANGING FRUIT'

The United States has already eased some limits on Myanmar, announcing this week it would permit financial transactions to support humanitarian and development projects - a boon to non-governmental organizations that hope to expand operations there.

The United States has also moved to support normal U.N. Development Program, or UNDP, operations, and is working to set up a local office of the U.S. Agency for International Development.

Government contacts are also expanding as the United States drops visa bans on senior Myanmar leaders. The country's health minister was in Washington last week, and its foreign minister is due in May.

The United States is also expected soon to return a full ambassador to Myanmar after an absence of two decades.

But U.S. businesses are watching closely for steps to ease sanctions on investment, which have helped keep the country isolated and pushed it deeper into the economic embrace of its powerful neighbor China.

The U.S. official said that banking services, the agricultural sector and telecommunications were all areas where U.S. companies could make contributions to Myanmar's economic reforms and the welfare of its people.

"These are low-hanging fruit," said Suzanne DiMaggio, vice president for policy at the Asia Society, adding that a step-by-step strategy could help preserve U.S. leverage but also ran the risk of allowing other countries to steal the march on one of Asia's most promising, yet undeveloped economies.

"It is really going to be hard for the United States to compete with the Chinese in the immediate future, especially if it takes a sector-by-sector approach," DiMaggio said.

'FIRST, SECOND AND THIRD LOOK'

The U.S. official said Washington remained leery of Myanmar's extractive industries, saying they were "riddled with cronyism," deeply involved with corrupt elements of the military and focused in restive areas where ethnic minority groups say they have long been oppressed.

"That sector probably shines brightest in terms of having to give it a first, second and third look," the official said.

He also said the United States had broader concerns over the commitment of military leaders to reform, and their ties to North Korea.

U.S. officials and economic analysts have cautioned that, despite its progress, Myanmar will likely remain a challenging business environment. Corruption, shaky investment protections and infrastructure problems promise to slow international investment and trade even as sanctions fall away.

But China already has extensive economic interests in Myanmar, Australia has eased sanctions, and the European Union is expected to suspend its economic sanctions next week, opening the country to more competition.

Washington hopes that as it opens its own door to economic ties, U.S. companies will benefit from the halo effect of strong U.S. support for the reform process and Nobel Peace laureate Aung San Suu Kyi herself.

"I think our companies will have an equal, level playing field when they go in," the official said. "They want to buy American. They want to engage with America."

(Reporting By Andrew Quinn; Editing by Peter Cooney)

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