US-Myanmar Economic Relations: Creating an Attractive Investment Environment

1. US-Myanmar Economic Relations: Creating an Attractive Investment Environment Jared Genser Managing Director February 25, 2013

2. CREATING AN ATTRACTIVE INVESMENT ENVIRONMENT • Objective • Present highlights from Myanmar Rule of Law Needs Assessment and implications for international investors • Approach • Provide background on rule of law project • Discuss opportunities and challenges for U.S. and other Western investors in Myanmar • Offer concluding observations 1

3. ANY LAW REFORM PROCESS MUST BEGIN WITH A COMMON UNDERSTANDING OF THE RULE OF LAW • The rule of law refers to a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency. • Report of the UN Secretary-General on the Rule of Law and Transitional Justice in Conflict and Post-Conflict • Societies Source: S/2004/616 2

4. OVER 75+ INTERVIEWS HAVE BEEN COMPLETED WITH INDIVIDUALS FROM THE FOLLOWING INSTITUTIONS* Political Parties UN Agencies / Governments / IFIs NGOs / Lawyers Myanmar Government • Office of the President (Legal Advisors) • Supreme Court • Union Attorney General’s Office • Ministry of National Planning & Economic Development • National Human Rights Commission • Nationalities Brotherhood Forum • Shan National Democratic Party • Chin National Party • Karen National Union • National League for Democracy • US Agency for International Development • US Embassy (Myanmar) • US Department of Justice • US Department of State • World Bank • UN Special Rapporteur on human rights in Myanmar • Asian Development Bank • EU External Action Service • International Labour Organisation • UK Embassy (Myanmar) • UK Foreign & Commonwealth Office • UN Development Programme • Office of UN High Commissioner for Human Rights • UN Children’s Fund • ActionAid Myanmar • American Bar Association • Asia Justice and Rights • Amnesty International • Asia Society • Burma Lawyers Council • Burma Justice Committee • Burma Partnership • Earth Rights International • Human Rights Watch • International Bar Association • International Center for Transitional Justice • International Development Law Organization • International Republican Institute • Lawyers Performance Aid Centre & Lawyers Network (U Aung Thane) • Johns Hopkins University • Justice for All (Myanmar) • Justice Base • Myanmar Development Resources Institute • Myanmar Legal Aid Network (MLAW) • Myanmar Egress • Myanmar Peace Centre • National Democratic Institute • National Endowment for Democracy • Open Society Foundations • Public International Law and Policy Group • Project 2049 • Eugene Quah • US Institute of Peace • US Campaign for Burma • United to End Genocide • ‘88 Student Generation * For some organizations listed, multiple separate interviews were conducted with different people in different parts of the organization and world 3

5. OPPORTUNITIES • Conclusion Implication • President Thein Sein and his allies have embarked on a reform process which, if focused, sustained, and later expanded, could substantially transform the country • Foreign companies interested in Myanmar are in a prime position to shape the reform process in the sector(s) of their operations Meaningful reform • The Executive, Legislative, and Judicial branches of the Myanmar government have expressed a strong interest in receiving assistance from international experts • The Myanmar government has been very open to receiving expert advice and support from a range of experts, including private sector institutions Interest in outside help • The government understands that attracting foreign investment will require law reform efforts and substantial adherence to the rule of law as it is understood by the international community • Foreign companies are well positioned to explain their expectations to the Myanmar government in terms of the kind of economic environment they require to agree to invest Embrace of the rule of law • The Myanmar people strongly support the need for responsible investment in their country as a means to promote economic, social, and political development • U.S. companies especially have a profound opportunity to set a new standard of practice for investing in the Myanmar economy Promote development 4

6. IMPORTANT CHALLENGES (1 OF 4) • Conclusions Implications • The pace of reform is breathtaking – but corruption and poor labor, environmental rights, and human rights standards make it an uphill battle for Western companies to compete • That said, there is serious interest from the Myanmar government to reform in a way that attracts and even prefers Western investment • Western investors need to advocate both individually and collectively for the Government to adopt new laws to address these issues in a way that compels other companies to meet international standards 1. Playing field • Major foundational areas of law have yet to be developed or reformed, including • Privatization laws • Government contracting • Government procurement • Land tenure, land use • Intellectual property, patent, and trademark • While selling products or services into Myanmar through intermediaries will remain more straightforward, serious investment can only be done acknowledging the ambiguity of the transforming landscape 2. Basic laws 5

7. IMPORTANT CHALLENGES (2 OF 4) • Conclusions Implications • The pace and breadth of reform is extraordinary, but by trying to do so much so fast, the quality and implementation of reform efforts are uneven • Companies investing in Myanmar will need to closely monitor and help shape the laws and regulations that relate to their sector of activity 3. Many priorities • There is a serious lack of legal capacity in the public, private, and non-governmental sector • Companies investing in Myanmar should take a leading role in drafting legal documents relating to their activities • For any significant operations, there will be no substitute for having an on-the-ground presence 4. Limited capacity • Historically, contracts in Myanmar have either been honored or broken, but there has been no useful domestic means to enforce contracts or obtain damages for breach of contracts • This will remain an ongoing challenge in the near term • Myanmar is looking to ratify the Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention), which will also help 5. Sanctity / enforcement of contract 6

8. IMPORTANT CHALLENGES (3 OF 4) • Conclusions Implications • Corruption in Myanmar is endemic – even after reforms, in 2012, Myanmar was only ranked ahead of Somalia, North Korea, Afghanistan, and Sudan • That said, however, there is a commitment at the top to substantive reform • Companies investing in Myanmar will have to be exceptionally vigilant and understand that despite a commitment to reform at the highest levels of government, they may need to manually close the gap between the commitment and the reality themselves 6. Corruption • There is a long history in Myanmar of companies ignoring community impact in their operations, particularly in extractive industries • The government is now talking about the importance of stakeholder engagement • The international community and media are watching Myanmar investors closely • Companies making major investments in Myanmar will need a serious and substantive plan for engaging communities, consistent with best practices of corporate social responsibility (CSR) • Consulting with the government and political opposition about major projects could help build confidence 7. Community engagement 7

9. IMPORTANT CHALLENGES (4 OF 4) • Conclusions Implications • Reform of the military and police (which is controlled by the military) is opaque • Serious questions remain about civilian control over the military • Companies making major investments will need clear plans and protocols for operational security that keep arms-length from the military and police 8. Relations with military and police • There are currently roughly 100 “specially-designated nationals,” individuals or entities with which U.S. persons are prohibited from doing business – these include major investors through all major areas of Myanmar economic activity • Lack of transparency in Burmese corporate structures will require substantial due diligence to ensure companies do not partner with entities that have SDN investors • There needs to be a process for SDN de-listing after substantial remediation measures are taken 9. SDNs • Recognizing the range of challenges described here, the U.S. is imposing annual reporting requirements on U.S. companies investing in Myanmar • U.S. companies will face additional costs above and beyond what other companies globally will face in investing in Myanmar 10. U.S. disclosure requirements 8

10. MYANMAR RULE OF LAW NEEDS ASSESSMENT • Contents of Rule of Law Needs Assessment • I. Myanmar Constitution • II. Branches of Government • Executive Branch • Union Attorney General’s Office • Ministry of National Planning and Economic Development • Parliament • Judiciary III. Myanmar National Human Rights Commission • IV. Criminal Defense and Legal Aid • V. Legal Profession • Bar Associations • Legal Education VI. Access to Information VII. Recommendations • Perseus Strategies and DLA Piper will be publishing its 50-page Myanmar Rule of Law Needs Assessment on March 5, 2013 • We will be hosting a public event to launch the report on the same day in Washington, D.C. • If you are interested in obtaining a copy of the report and/or attending the event, please contact me 9

11. To obtain a copy of Myanmar Rule of Law Needs Assessment or an invite to the launch event, please contact: Jared Genser Managing Director Perseus Strategies, LLC +1 (202) 320-4135 jgenser@perseus-strategies.com