EU Expected to End Myanmar Sanctions

By SHIBANI MAHTANI

European Union foreign ministers were expected permanently to end sanctions against Myanmar on Monday, recognizing the country's transition from military dictatorship to a civilian rule that has released thousands of political prisoners, improved freedom of expression and made efforts to maintain peace with armed ethnic minority groups.

Though the EU planned to leave an arms embargo in place for one more year, ending other sanctions would highlight strengthening international support for the long-isolated Southeast Asian nation, despite allegations from human-rights groups that authorities are failing to stem abuses against minorities, particularly Rohingya Muslims who have been driven from their homes by tens of thousands of extremists from the Buddhist majority.

EU ministers were expected unanimously to endorse the removal of sanctions late Monday at a meeting in Luxembourg. The arms embargo would be reviewed after another year. Ambassadors from EU member states had indicated over the past week that a year-old suspension of sanctions would be made permanent.

European leaders had warned last year that the suspended sanctions could be reimposed at any time, and they pressed for vigilance over the pace of change, as encouraged by opposition leader Aung San Suu Kyi.

Removal of sanctions, analysts say, should encourage investment by European companies who have spent the past year researching opportunities in what has been Asia's most talked-about frontier market.

The U.S. has lifted the bulk of its sanctions in stages over the past year, permitting its companies to invest and allowing imports from Myanmar. Still, the Treasury Department forbids U.S. citizens from business dealings with 100 or so Myanmar citizens termed as "Specially Designated Nationals" and considered cronies of the former military regime. Companies with operations in the U.S. risk running afoul of U.S. sanctions against these individuals.

Fully removing EU sanctions would show how quickly momentum has built toward rewarding President Thein Sein's nominally civilian government, with much of the West hesitant to undermine the sweeping political and economic reforms he has undertaken, despite the serious eruption of ethnic violence and the failure of authorities to stem it.

On Monday, Washington, D.C.-based Human Rights Watch alleged the government was complicit in "coordinated attacks" on Muslim neighborhoods and villages in Rakhine state, in southwestern Myanmar, where more than 100 ethnic Rohingya Muslims have been killed and an estimated 125,000 displaced by mob violence over the past year. Much of Myanmar's Buddhist majority regards the Rohingyas as noncitizens. Thousands of Rohingyas have fled the country in rickety boats in recent years, with many drowning.

Human Rights Watch has labeled the violence as a campaign of ethnic cleansing and accused the government of not doing enough to prosecute perpetrators, giving Buddhist extremists incentive to attack Muslims elsewhere, such in central Myanmar, where clashes in March killed at least 43 people and displaced thousands. Myanmar's government spokesman didn't immediately reply to requests for comment.

Officials from the United Nations have warned of a possible humanitarian crisis when expected monsoon rains hit Rakhine state in May, possibly causing widespread flooding in crowded refugee camps. Tensions remain high in the region. Only 4% of Myanmar's estimated 60 million people are Muslims, but tensions have been highest in areas where they are more numerous, such as Rakhine, where they make up about one-quarter of the population.

For European investors, practical concerns, including infrastructural hurdles and an untested legal environment, may weigh more strongly when choosing whether to enter Myanmar's nascent market despite the lifting of sanctions.

European business leaders cautioned that an immediate influx of investment is unlikely as companies continue to watch for political stability, with elections due in 2015, along with improvements in infrastructure.

"We won't see changes from one day to the other, but we consider it the very important first step to be made," said Sofia Bournou, an adviser in the international affairs department of Business Europe, which is a coalition of industry federations from throughout the continent. "EU companies will be happy to invest once the situation is clear."

Nomita Nair, a partner at the international law firm Berwin Leighton Paisner with significant Myanmar experience, said the current human-rights situation is only one reason businesses might choose to wait before making significant investments, citing "practical operational issues and the ease of doing business" which still remain trickier than in other emerging markets.

The EU has been trying to calibrate its response to Myanmar's unfolding changes, announcing a €150 million aid and development package last year. The bloc also opened an office in Yangon, Myanmar's commercial capital, last April, and Thein Sein recently visited Brussels, where he encouraged EU leaders to lift all sanctions. EU officials have also proposed allowing Myanmar goods duty-free and quota-free access to the European market.