Sanctions: An Ineffective Tool in Myanmar
Cchavi Vasisht, Research Associate, VIF

Imposing sanctions is not new to Myanmar and its economy and people. Since independence, the country has been under the impact of ethnic conflicts and a continuous fight for civilian versus the military rule. It took its worst shape in 1988, and since then many countries had imposed sanctions against Myanmar. However, despite being under two decades of sanctions, the Myanmar military had found ways to overcome the impact of sanctions.

With the transition towards democratic values, such as conducting general elections, the sanctions were gradually removed. However, the western countries grew critical of the civilian government Aung San Suu Kyi and the military for the atrocities inflicted on the Rohingya in 2017. Sanctions were again im-posed, but these were tailored; these sanctions did not have the same broad impact on the economy or population as pre-reform sanctions’ regimes. But they were also ineffective in nudging Myanmar’s mili-tary or government to change their policy regarding the Rohingya.

Furthermore, with the overthrow of the civilian government on 01 February 2021, Myanmar military again earned international condemnation and sanctions. The condemnation and sanctions were further enhanced due to attacks by the military against the protesters leading to the death of around 750 citi-zens and more than 3000 being placed under detention.

Before studying the effectiveness of sanctions, it is essential to underline the core of Myanmar’s econo-my, which is profoundly shaped by the Myanmar military. The two military conglomerates Myanmar Economic Corporation (MEC) and Myanmar Economic Holdings Limited (MEHL), operate in each and every sector of the economy with 133 companies. These sectors range from banking and insurance to mining and agricultural activities and its revenues flow directly to the military.

Western Sanctions

The United States (US) added both conglomerates-MEHL and MEC to a trade blacklist and imposed new sanctions against military and government figures. Canada and the United Kingdom also introduced their targetted measures. The US also redirected more than USD 40 million of aid from the Myanmar government to civil society. The OECD countries have also issued travel bans and asset freezes on Myanmar military officers. New Zealand has suspended high-level contacts with Myanmar’s new leadership, imposed measures to ring-fence its foreign aid and banned travelling of Myanmar’s military leaders.

The pressure has also been built up on several international companies to suspend their operations or projects in Myanmar. For example, South Korean steel company POSCO is being pushed to break ties with Myanmar’s military-controlled joint venture. The US and EU, however, have resisted pressure from civil society organisations, and have not taken any action against Myanmar Oil and Gas Enterprises (MOGE). They have stated that the action would affect the power supply in the country. The civil society groups on the other hand stated that they only want the companies to stop transferring the profits to the military, and continue with their operations.

However, not all international projects or ventures in Myanmar are being terminated. Few stakeholders continue to operate in the country. France’s Total CEO Patrick Poyanne said that the company would continue producing gas to maintain Myanmar’s power grid and clarified that it would not pay its taxes to the military. Instead, they stated that the amount would be donated to human rights organisations.

However, the UNSC mandated sanctions have never been imposed on Myanmar, given Myanmar’s close relations with China and Russia, which are discussed later in the article. At an UNSC informal meeting on Myanmar, aka Arria-formula meeting, there was a repeated call for an immediate ceasefire. The National Unity Government (NUG) member, Khaw Moe Thun also called for targeted sanctions, an arms embargo and declaration of no-fly zones. The NUG’s interim cabinet has been formed by the Committee
Representing Pyidaungsu Hluttaw (CRPH), a shadow parliament formed after the military coup. The CRPH has also said that the other countries should recognise them as the official government of Myan-mar.

Effectiveness of Sanctions

Sanctions appear to have a minimal effect, apart from sending a morale raising message in support of pro-democracy protests. In Myanmar, they have had limited impact on military actions, who continue with their repressive policies to remain in power. Despite the transition to the democratically elected government, the military was successful in preventing every constitutional amendment aimed to reduce their powers. Economically, the two conglomerates of military have controlled key development projects and have a critical share in all major foreign investments across all sectors.

The two decades of sanctions from 1990s to 2010 focussed on suspension of development aid and technical assistance, targeting named individuals, entities and on investment and trade. The broader sanctions applied to trade and investments hurt the Myanmar economy. The western nations banned new investment by their citizens or entities in Myanmar. In 2003, a complete import ban was imposed on Myanmar and the export of financial services to Myanmar was also banned. However, these trade and investment sanctions reduced Western investment in Myanmar and led to unemployment in the country. For example, in 2003, when the US imposed an import ban on Myanmar’s garment industry, thousands of workers, mainly women, lost their jobs.

Effectively, sanctions played little role in bringing any change in Myanmar’s political system. After achieving its objective of creating a political system with a powerful military under the 2008 Constitu-tion, the military opened up its economy. The NLD government tried to curb the power of the military by opening several sectors to foreign investment and competition. However, the efforts could only make a limited impact on military control over economic resources and political influence. For example, the Constitutional Amendments introduced in 2020 could not be passed, as military blocked bills that aimed to reduce their powers (any constitutional amendment bill to become an act, needs more than 75 per cent votes, and the military reserves 25 per cent of the votes; effectively having complete control over amendments in the Constitution). In the November 2020 elections, the NLD government again voiced its concerns over increasing transparency and effective transfer of power but failed to do so.

It is important for the country to obtain foreign investments and open up several sectors of economy to ensure growth; for this an open and transparent economy is necessary. The Transparency International’s Corruption Perception Index (2020), ranked Myanmar at 137 out of 180 countries. The country is indirectly ruled by the norms and rules of the military, which lack transparency. Politically and economically, Myanmar military has controlled the country’s economic developmental process. The increased transparency and competition would have attracted foreign investors and would have eventually threatened military’s strong economic domination across sectors.

Furthermore, sanctions worked to the financial advantage of the military. It crowded out competition from businesses, and the military eventually ruled most business sectors. Instead, the isolation from the world restricted Myanmar citizens’ access to information, technology, good practices, and models of good governance. The generation under the military rule had apparently accepted the norms set by the military. However, the situation is changed now. The young generation has lived under the communication revolution, and since the opening of the Myanmar economy and social structures, there is increased awareness. Therefore, even after more than 100 days of military rule, the protestors continue to raise their voices against the regime.

Indeed, sanctions have decreased Myanmar’s military leaders dependence on the Western nations, and the military therefore, has focussed more on the exploring the market and resources of Asian neighbours. The Myanmar military preferred to part with the United Nations as its leadership did not receive Christine Schraner Burgener, the UN Special Envoy on Myanmar, in her visit to Thailand. After the initial conversation with Deputy Chief of Staff Gen Soe Win, the military leader who was assigned to brief her on the situation in Myanmar, Burgener condemned the situation in the country. Soe Win then did not receive her in her visit to Thailand and stated that Myanmar would rather prefer "to learn to walk with few friends.” This clearly shows that Myanmar military is not very much concerned with UN for any aid or support and has chosen isolation over losing any power in the country. It again has focussed on friends in the immediate neighbourhood, which is discussed in the next section.

Role of Neighbouring Countries in Bypassing Sanctions’ Impact

Because of decades of isolation, the military focussed on the domestic market and the neighbouring re-gion. The neighbouring countries, such as Thailand, China, and India helped Myanmar develop economically through aid, developmental projects and increasing trade and investments. Also, Myanmar reached out to the extended neighbourhood as it developed close cooperation with Japan and Russia.

India’s interest in Myanmar is due to economic and security concerns. India has expressed its deep concerns both through MEA Statement and at the UNSC closed-door meetings at the prevailing situation in Myanmar. However, India has not come out with any decisive actions against the military. Economically, India has not sanctioned any project or suspended any work. The work on Kaladan Multi-Modal project continues. However, Indian firms are being pressured by civil society organisations to suspend their works. The Indian firm Adani’s ports and SEZ were delisted from S&P Dow Jones Sustainability Index.

China has strategically invested in Myanmar for realising its interests of gaining access to the Bay of Bengal. During decades of military rule, China maintained friendly relations with the military. 2020 marked the 70th anniversary of China and Myanmar diplomatic relations. China’s Belt and Road Initiative involves key projects, such as the development of Kyaukphyu port. However, China’s indirect support to the Myanmar military sparked violence. Around 32 China-owned factories were burned in several Yangon townships. However, who sparked the fire is not confirmed, as the protestors accused the military of such acts.

Singapore, Indonesia, and Malaysia have also expressed their concerns; for example, Lim Kaling (Singa-pore businessman) stated that his investment in a tobacco firm linked to the military conglomerate would be terminated. Amata Corp., Thailand’s industrial estate developer, announced the suspension of its first industrial estate in Yangon. But the ASEAN countries have not declared any sanctions against Myanmar. After the initial resistance to not interfere in Myanmar’s domestic politics, ASEAN leaders on 24 April released a joint statement with a Five Point Consensus Plan to solve the crises in the country. A special envoy will be appointed to facilitate the mediation process among all stakeholders in the country.

Russia shares a close relationship with the Myanmar military. In 2007, Russia and Myanmar agreed to establish a nuclear research centre. The two countries agreed on a defence cooperation agreement in 2016. In 2020, Myanmar participated in Russia’s military exercise, Caucasus-2020. In 2021, after the military coup, Russia was the only country to send Deputy Defence Minister Alexandr Fomin to attend Myanmar’s Armed Forces Day. The two powerful friends of Myanmar, Russia and China, blocked any attempt to take actions or impose sanctions against Myanmar at the UNSC.

Japan has been very active in Myanmar, both politically and economically. Japan brokered a deal between Tatmadaw and Arakan Army (AA) to conduct elections in Rakhine. Japan defended the country when the world countries condemned the situation in Rakhine State. Economically, huge grants and development loans were offered to Myanmar, and the development of the Thilawa Special Economic Zone (SEZ) and development project in Yangon City are underway. However, after the coup, Japanese car giant Suzuki immediately halted operations at two of its factories in Myanmar and Japan’s Kirin Holdings announced the discontinuance of its two major joint ventures in Myanmar.

Way Forward

The ongoing military clashes and use of airstrikes have led to many citizens of Myanmar seeking refuge across the borders. Around 3,000 ethnic Karen villagers have reached Thailand border. Similarly, Myanmar nationals have crossed borders and reached the Indian states - Mizoram, Manipur, Nagaland and Arunachal Pradesh. The Northeast State governments, due to their close ethnic and cultural relations with neighbouring Myanmar states, have responded with empathy.

An alternative to the board sanctions is to ensure that world countries collectively ban arms sale to the Myanmar military while continuing to engage diplomatically to ensure that the military reverses its course. It is clear that suspending economic ties harms the people at large, leading to unemployment and a decline in economic growth. Given the impact of the COVID-19 crises, Myanmar economy is already facing an economic slowdown, rising unemployment and decline in remittances. Sanctions have to be used strategically as a tool to adversely impact the military and its leadership without causing economic harm to the ordinary citizens. Halting infrastructure projects, cancelling projects, shutting down companies and economic integration would only harm the citizens of Myanmar in the long run.

Though the Myanmar military has been least affected by any international condemnation and isolation, in the past and the present, it is yet to be seen how the protests will continue to shape the politics. As is often said about protests, due to their high intensity, they could be short-lived; therefore, protestors will have to decide whether to turn these protests into a collective, sustained social movement otherwise there is a risk of protests petering out eventually.

References

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>

Post new comment

The content of this field is kept private and will not be shown publicly.
1 + 4 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.
Contact Us