State Department Must Renew and Strengthen Reporting Requirements for Companies Investing in Myanmar

This week, EarthRights International (ERI) urged the State Department to renew and strengthen the Reporting Requirements for Responsible Investment in Burma (Myanmar), which require U.S. companies making significant new investment in Myanmar to report on their operations and explain their due diligence policies and procedures on human rights, the environment, corruption, and labor. New investors are also required to provide information on their land acquisitions and disclose payments to the government and contacts with the military and other armed groups. In a submission to the State Department as part of the U.S. Government’s review of the Reporting Requirements, ERI reiterated the importance of ensuring that new U.S. investment in Myanmar does not undermine the reform process.

In 2012, the Obama Administration substantially eased U.S. sanctions on Myanmar, allowing new U.S. investment in Myanmar for the first time in decades. In response to concerns raised by Myanmar civil society and human rights organizations like ERI about the negative consequences of new foreign investment without proper safeguards, the Obama Administration proposed the Reporting Requirements for new investors. (ERI participated extensively in the initial approval process by submitting comments and in publishing a guide, Detailed Guidance on Reporting for the Proposed Reporting Requirements on Responsible Investment in Burma, which is listed as a resource on the State Department’s FAQs page.)

Progress has continued. The 2015 elections were a significant milestone in the Myanmar’s transition to democracy after decades of military dictatorship and the success of the National League for Democracy (NLD) will undoubtedly lead to an influx of new foreign investment in Myanmar. But significant challenges remain. The economy is still dominated by military-owned and crony companies and irresponsible and uninformed investments risk undermining the fragile transition process by exacerbating conflict, land rights disputes, corrupt management, and other human rights threats.

U.S. companies that have taken their obligations under the Reporting Requirements seriously, such as Coca-Cola, have already played an important role in promoting respect for international standards in Myanmar and contributed positively to a broader dialogue around the importance of robust due diligence. The level of detail in Coke’s report about due diligence processes, identified risks and concerns, and steps taken to ensure that Coke and its partners are mitigating serious risks has provided critical transparency necessary to build trust with local communities and civil society, and set an example for other companies to emulate.

Not all companies have chosen the same path, however, and experience to date has highlighted serious weaknesses that limit the Reporting Requirements’ effectiveness. ERI’s submission calls on the State Department to strengthen the Reporting Requirements by eliminating loopholes that transparency-averse companies seek to exploit to avoid required disclosures. In particular, the State Department must clarify that the obligation to report applies equally to “passive” and hands-on investors as well as the facilitation of new investment, which is critical to ensure companies cannot evade reporting simply by structuring their investments through a foreign subsidiary. ERI also urged the State Department to remove the option of confidential reporting on risk mitigation and prevention measures, ensure companies disclose the identities of their local Myanmar partners, and clarify the penalties for non-compliance with the Reporting Requirements.

Over 30 Myanmar civil society organizations also wrote to the State Department to urge it to renew and strengthen the Reporting Requirements, emphasizing their importance in ensuring that new foreign investment in is accountable and transparent, and providing critical information that would not otherwise be available. Investors and human rights, labor and anti-corruption organizations like the AFL-CIO, Global Witness, Human Rights Watch, and the International Corporate Accountability Roundtable, also filed submissions emphasizing that the Reporting Requirements are critical to fulfilling the U.S. Government’s commitment to promote responsible investment that supports the reform process, and offered similar recommendations for enhancing their effectiveness.

New U.S. investment is just starting to ramp up in Myanmar and U.S. companies are re-engaging in high risk sectors, including oil and gas, which has long been plagued by rights violations and corruption. Chevron and ConocoPhillips, for example, began exploration activities in Myanmar at the end of 2015 and will soon be required to submit reports, and new oil and gas block auction are expected sometime in the near future. The failure to renew the Reporting Requirements would eliminate this key tool before it even has a chance to work. We hope the U.S. Government will uphold its commitments to the people of Myanmar and continue to ensure new U.S. investment activity promotes, rather than undermines, the reform process.