The UN on 9 September said that nearly 300,000 Rohingya refugees have fled from Myanmar to Bangladesh. This latest surge of Muslim refugees from predominantly Buddhist Myanmar followed a 25 August attack by the Arakan Rohingya Salvation Army (ARSA) against several border police stations in the north of Rakhine state. This in turn prompted the Tatmadaw (Myanmar military) to launch a counter-offensive on the Rohingya population that has since garnered widespread international criticism. UN High Commissioner for Human Rights Zeid Ra’ad Al Hussein on 29 August said this turn of events ‘was predicted and could have been prevented’. The UN Security Council (UNSC) on 30 August convened to discuss the renewed violence in Rakhine. Although no formal statement was issued, individual council members called upon all parties for restraint.

The latest events would appear to be a repeat of the Tatmadaw’s October and November 2016 ‘clearance operations’ in the northern townships of Rakhine in response to a October 2016 ARSA attack, and begs three fundamental questions: 

  • Are foreign partners losing faith in State Counsellor Aung San Suu Kyi’s ability to successfully lead Myanmar’s political transition from a highly authoritarian, military-ruled political system towards a stable democracy;

  • Why is the ruling National League for Democracy (NLD) so united in its response, tacitly and at times, overtly supporting, the Tatmadaw’s operations in Rakhine state; and finally,

  • Are foreign businesses in Myanmar facing growing reputational risks as a result of the government’s apparent lack of restraint?

    The NLD-led government’s immediate response to the crisis is largely co-ordinated by the defence, interior and border affairs ministries – which, under the country’s 2008 constitution, are all still directly controlled by the Tatmadaw – and has generally received popular support. Aung San Suu Kyi, a Nobel Peace Prize laureate, has not been more vocal about the Rakhine crisis because she cannot compensate for this lack of formal power over the actions of the Tatmadaw by mobilising her own considerable popular support to rein in the military. Aung San Suu Kyi has implied in past interviews that the de facto expulsion of the Rohingyas from Myanmar trumps her own sway with the public as the former is popular with the country’s non-Muslim majority. While that might be true, a growing number of foreign critics argue that she is guilty of making no effort to use her influence to even attempt to steer the political debate towards an understanding that the status and rights of the Rohingyas cannot be disregarded from the broader project of transitioning the country to a sustainable democracy.

    Statements from the NLD leadership counter that the new government is facing ‘formidable challenges’ in pursuing an inclusive national peace agenda (it has not included the Rohingyas in this agenda, but has included all the country’s other ethnic minorities with separatist causes), which have been undermined by international backlash over the ‘unique’ circumstances of the Rakhine conflict. As such, the NLD government claims it needs the continued support of the international community to overcome these challenges. It is highly likely to continue receiving this support – although large-scale ‘ethnic cleansing’ is a probable red line. Criticism of the situation in Rakhine is unlikely to turn into punitive action, simply because the international community recognises that Aung San Suu Kyi is a vital actor in – and greatest hope for – the country’s still delicate transition. Most diplomatic efforts on the conflict in Rakhine will therefore continue to be pragmatic and discreet.

  • Despite this trade off, the ongoing crisis will only feed concerns by company headquarters, non-governmental organisations (NGOs), pressure groups and government actors over the reputational risks of investing and operating in Myanmar. The 25 August attack, the army’s response and the resulting displacement of hundreds of thousands of Rohingya will also continue to receive extensive international media coverage. In turn, the Myanmar government will continue its hardline approach vis-à-vis the Rakhine crisis – driven by popular local support – which includes the alleged planting of antipersonnel landmines along the Myanmar-Bangladesh border, and rejection of a month-long ceasefire offered by ARSA on 10 September. Any efforts towards addressing the root causes of the conflict in line with the recommendations of the Advisory Commission on Rakhine State headed by former UN secretary-general Kofi Annan – such as citizenship, entrenched discrimination, lack of economic development and the humanitarian crisis – will not receive much attention or be part of the government’s public communication strategy.

    Most Yangon-based diplomats and company managers have spent time briefing their regional or global headquarters about the unfolding events in Rakhine state, and the potential impact on their interests in the country. Foreigners are not welcome in the affected townships, however there are no signs that the diplomatic disapproval of the Tatmadaw’s tactics will manifest as broader anti-foreigner sentiment. That is helped by the current absence of any signs of bi- or multilateral boycotts or sanctions against Myanmar.

    Foreign organisations will need to balance reputational risks against the need for continued positive engagement with the Myanmar government as it remains the country’s best hope to reduce the still considerable influence of the army and those with entrenched interests that have enjoyed favourable treatment under previous governments. That does not translate to divestment or a deceleration of investment plans in the face of this ongoing crisis. Instead, extreme scrutiny of which elements of the Myanmar state companies are dealing with, and more so for those with direct interests in Rakhine state – of which there is a growing number – must become a priority. Beyond the conflict zone, the Tatmadaw still directly and indirectly controls a considerable portion of Myanmar’s economy – a fact that is often challenging to avoid when looking for local partners. Detailed scrutiny of those partners, of any deal involving large areas of land, and of the government’s likely direct involvement in a project are essential – the latter requiring foreign investors to establish a strong government relations function.

    Foreign investors already in Myanmar and those entering the country for the first time need to understand that the commercial and ethical quality of those investments are closely interlinked, will require a significant investment of time and resources to ensure that quality is maintained, and will need that level of attention to be sustained over the lifetime of the investment.

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