Home MMBIZ News US Gov’t Needs to Clarify Its Investment Reporting Requirements

US Gov’t Needs to Clarify Its Investment Reporting Requirements

American businesses have until the end of the June to file an annual report with the US government detailing their investment activities in Myanmar.

Under General License 17 (GL 17), US businesses engaging in new investment in Myanmar must report their investment activities to comply with the Reporting Requirements on Responsible Investment in Burma. Any US person investing more than $500,000 in Myanmar, or investing in the oil and gas sector, is required to submit a report.

On her recent commercial diplomacy mission to ASEAN, US Secretary of Commerce Penny Pritzker celebrated the growing relationship between Myanmar and the United States and encouraged American companies to consider Myanmar as a destination for investment. Often viewed as the gold standard for investment, American companies not only produce high quality products and services, but are also known to institute vigorous standards in terms of sustainability, corporate social responsibility, and respect for human rights – helping to facilitate broad-based economic growth and prosperity. According to the US Embassy’s website, American companies have invested $243.6 million (K243.6 billion) in Myanmar and have planned or already implemented dozens of corporate social responsibility programs.

In order to reconcile American business’ increasing interest in Myanmar with the country’s rocky past, the United States government instituted the reporting requirements as a means to maintain this gold standard and encourage responsible investment.

The reporting requirements have been met with mixed responses from both the business community and human rights organisations.

On the business side

The added duty of the reporting requirements is made more complex with the incredibly difficult business environment, which makes accounting for every operational component – if we are honest – nearly impossible, and in many ways erodes the competitiveness of US companies. Some businesses also fear becoming a target of unwarranted scrutiny that could damage global brand identity, while others feel the reporting requirements do not represent their specific type and level of investment.

Anthony Nelson, director of public relations at the US-ASEAN Business Council said, “US companies view responsible investment and the performance of CSR as part of our competitive advantage. US business is committed to investing in Myanmar the right way, but the reporting requirements add an additional layer of bureaucratic and legal complexity to US investment in Myanmar, that taken along with remaining sanctions and limited EX-IM financing, give a head start to competitors. We encourage the US government to continue clarifying the requirements. ” 

While the requirements are meant to address key foreign policy concerns in Myanmar in regards to human rights and responsible investment, and even assist US companies in planning strategic engagement and due diligence policies, they are not a “catch all” reporting mechanism.

In early June, the US Campaign for Burma released its Report Card: US Companies Investing in Burma. Coca-Cola was the shining star of the report, and it makes sense given the company’s internal infrastructure developed over decades of working in high-risk countries around the world. With physical operations and distribution in Myanmar, Coca-Cola’s investment in the country is clear and transparent – a true representation of American business.

However, not every type of investment in Myanmar is as clear and clean cut, and may pose a challenge to the reporting requirements in its current form – presenting additional difficulties for American companies.

In the same report, Capital Group was labeled an “irresponsible investor,” and cited by the report as refusing to “answer essential questions about human rights due diligence policies and procedures,” and that “it has no responsibility to answer because its investments are ‘passive’.”

When asked about how the State Department deals with incomplete, inaccurate or potentially troubling information in submitted reports, Public Affairs Officer Satrajit Sardar at the US Embassy in Yangon, did not want to speculate on hypothetical situations, but did note, “The reports posted thus far have adhered to the instructions laid out in our FAQs.” The FAQs refer to the frequently asked questions found at www.humanrights.gov, which also states the reporting requirements).”

According to its public report filed in April of this year, Capital Group is a minority investor (less than 1 percent) in Yoma Strategic Holdings Ltd – a conglomerate incorporated in Singapore and traded on the Singapore Stock Exchange – and posses no controlling stake in the company, nor does itself have operations or a supply chain in Myanmar. The US reporting requirements do not address how to deal with such passive investments – an emerging limitation in a process meant for good – that could result in the misinterpretation of a company’s investment intensions. Even though Capital Group has been labeled an “irresponsible investor,” they have fully complied with US law per GL 17 and the Responsible Investment Reporting Requirements. 

On the human rights side

Rights groups view transparency in US investment as the paramount concern. Advocates look at the US reporting requirements as zero-sum, which reflects the report card’s desire for Capital Group to dig deeper. Rights group’s have a legitimate desire to present a transparent view of American investment in Myanmar so that civil society can play an active role in the country’s economic development. As such, human rights groups want the reporting requirements to go further to account for every possible scenario.

However, at this point and time there exists no middle ground that accounts for every investment scenario.

Clarifying US reporting requirements

In order for the reporting requirements to be effective and retain their value, the United States government needs to address how to make the process less onerous, while maintaining high standards, and work to clarify the requirements on how to deal with indirect investment.

First, the US government must seek input from companies interested in entering the country, but remain hesitant. This input, combined with information obtained in current investor reports, can help guide US policy that is more effective and efficient for both American companies and human rights stakeholders. A balanced approach that addresses the needs of both the business community and human rights organisations should be the goal. While seemingly incompatible, we must push through to find common ground, understanding that no one group will get 100 percent of everything they want – it’s just the reality.

Second, clarification on how to report passive investment should be introduced in the near term. Reporting standards for passive investment could be determined by the degree of stakeholder control, an investor’s ability to affect company decisions and operations, and the percentage of a business’ operations that are physically in Myanmar.

If the United States wants to encourage investment in Myanmar, then clarifying the reporting requirements sooner than later will help make this goal a reality – providing strategic economic advantage to both Myanmar and the US.

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