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Burma Friday, 14 August, 1998, 15:20 GMT 16:20 UK
Multinationals and human rights
Rangoon street scene
The Burmese economy needs investment to modernise
The Burmese government has faced an international campaign by human rights groups to block foreign investment.

The campaign, which is supported by opposition leader Aung San Suu Kyi, has had some noticeable successes, particularly with consumer products companies.

But major infrastructure projects have carried on, and the government argues that the boycott just hurts the Burmese people.

Opponents of the government say that given the lack of democracy, and the use of forced labour, economic pressure is the best way to force the regime to change.

Consumer boycotts

graph of investment in Burma
Most investment is in raw materials
The campaign had its first big success in 1996 when the Danish brewer Carlsberg withdrew its plans for a $30m bottling plant.

US companies have been particularly sensitive to consumer pressure.

Pepsi was forced to withdraw in 1997 after a well co-ordinated consumer boycott organised in the US by church and student groups, which involved picketing the company's Taco Bell and Kentucky Fried Chicken restaurants.

Other consumer brands which were also affected by the boycott, including Levi Strauss jeans, Liz Claibourne, Macy's, and Mobil Oil, have ceased production or sales.

Major Western investments

Barges operated by Total Oil off Burma
Off-shore gas fields have a big potential
But other investors - mainly those in capital projects - have not been deterred. The largest foreign project is the $1.2bn development of a massive offshore gas field - a joint development of the French oil company Total and the US energy company Unocal. The Yadana field is located near the Andaman islands 70km off the coast.

The field will send the gas along a 649 km pipeline to Thailand to generate electricity for the Bangkok area.

Another nearby gas field, Yetagun, being developed by Texaco, was sold to the UK's Premier Oil last year.

Other major investments include a $90m copper mine being developed by Indochina Goldfields, a Canadian mining company which specialises in the emerging markets.

Debate in US over investment ban

In May l997 the Clinton administration banned new investment in Burma. The US government has also stopped its own foreign aid and blocked economic assistance to Burma through international organisations. It has also been urging other governments to take the same course of action.

Which companies invest in Burma
ASEAN investment has replaced US funds
The ASEAN countries, which have admitted Burma to membership, argue that "constructive engagement" - including economic investment - is the best way to move Burma towards democracy.

Asian companies have partially replaced the foregone US investment, with Singapore and Thailand among the major new investors, especially in the manufacturing and mining sectors, attracted by low wages and abundant reserves.

Europe has taken a middle position. The EU has taken away some of Burma's trade privileges, but it has proved reluctant to ban investment entirely, even with Britain urging a more "ethical foreign policy."

Part of the reason is a series of long-standing disputes with the US over investment bans in other countries.

The US has sought to block European firms from investing in Cuba, under the Helms-Burton Act, and in Libya and Iran.

The EU has taken the US to the World Trade Organisation over the issue, arguing that the US has no powers to impose sanctions on non-US companies, and the restrictions have yet to be imposed.

Economic collapse imminent?

The US government argues that Burma is close to economic collapse partly because of sanctions. It points to falling foreign exchange reserves, a declining exchange rate (350 kyats to the dollar on the informal market, as opposed to the official rate of six), and strict limits on the export of capital abroad.

The Burmese government says the economy is healthy and more investment is poised to flood into the economy.

The reality is that the rate of foreign investment has slowed down, and the poor state of Burma's infrastructure and the Asian crisis have added to its difficulties.

But as a very poor country, still largely agrarian, its very backwardness makes it less vulnerable to economic pressure.

BBC News
Politician David Steel, Marrack Goulding and journalist Simon Jenkins discuss ethical foreign policy on BBC's Today programme
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