```

[Senate Hearing 112-496]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-496

                          U.S. POLICY ON BURMA

=======================================================================

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON EAST ASIAN 
                          AND PACIFIC AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 26, 2012

                               __________

       Printed for the use of the Committee on Foreign Relations

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                COMMITTEE ON FOREIGN RELATIONS         

             JOHN F. KERRY, Massachusetts, Chairman        
BARBARA BOXER, California            RICHARD G. LUGAR, Indiana
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   MARCO RUBIO, Florida
JIM WEBB, Virginia                   JAMES M. INHOFE, Oklahoma
JEANNE SHAHEEN, New Hampshire        JIM DeMINT, South Carolina
CHRISTOPHER A. COONS, Delaware       JOHNNY ISAKSON, Georgia
RICHARD J. DURBIN, Illinois          JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico                MIKE LEE, Utah
               William C. Danvers, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                         ------------          

         SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS        

                  JIM WEBB, Virginia, Chairman        

BARBARA BOXER, California            JAMES M. INHOFE, Oklahoma
ROBERT P. CASEY, Jr., Pennsylvania   JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire        JOHN BARRASSO, Wyoming
CHRISTOPHER A. COONS, Delaware       MARCO RUBIO, Florida

                              (ii)        

                            C O N T E N T S

                              ----------                              
                                                                   Page

Biswal, Hon. Nisha, Assistant Administrator for Asia, U.S. Agency 
  for International Development, Washington, DC..................    11
    Prepared statement...........................................    12
Jackson, Karl, Ph.D., C.V. Starr Distinguished Professor of 
  Southeast Asia Studies School of Advanced International 
  Studies, Johns Hopkins University, Washington, DC..............    35
    Prepared statement...........................................    36
Manikas, Peter, senior associate and regional director for Asia 
  Programs, National Democratic Institute, Washington, DC........    30
    Prepared statement...........................................    31
Steinberg, David, Ph.D., distinguished professor, School of 
  Foreign Service, Georgetown University, Washington, DC.........    24
    Prepared statement...........................................    25
Szubin, Adam J., Director, Office of Foreign Assets Control, U.S. 
  Department of the Treasury, Washington, DC.....................    15
    Prepared statement...........................................    17
Webb, Hon. Jim, U.S. Senator from Virginia, opening statement....     1
Yun, Joseph, Principal Deputy Assistant Secretary, Bureau of East 
  Asian and Pacific Affairs, U.S. Department of State, 
  Washington, DC.................................................     5
    Prepared statement...........................................     7
    Responses to questions submitted for the record by Senator 
      James M. Inhofe............................................    43

              Additional Material Submitted for the Record

U.S. Chamber of Commerce, the U.S.-ASEAN Business Council, and 
  the National Foreign Trade Council, prepared statement.........    42

                                 (iii)

 
                          U.S. POLICY ON BURMA

                              ----------                              

                        THURSDAY, APRIL 26, 2012

                               U.S. Senate,
    Subcommittee on East Asian and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:03 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. James Webb 
(chairman of the subcommittee) presiding.
    Present: Senators Webb and Inhofe.

              OPENING STATEMENT OF HON. JIM WEBB, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Webb. The subcommittee will come to order. This 
afternoon the East Asia and Pacific Affairs Subcommittee will 
examine U.S. policy toward Burma, with particular reference to 
the recent political reforms in that country, the impact of 
U.S. policy, including sanctions, on Burma's political 
transformation, and the prospect for further reforms.
    I'd like to also point out at the opening of the hearing, 
we've got a really, I think, fine list of witnesses today; two 
different panels. I appreciate all of you coming. There is a 
lot of business going on in the Senate right now as the Senate 
prepares to wrap up tonight for this work period. Thursday is 
always an interesting day in the United States Senate. A lot 
can get done, but a lot happens. As they say, when the smell of 
jet fumes fills the air people actually start talking to each 
other.
    But we have a series of votes that are scheduled to begin 
as early as 3:25. It's my intention to stay here to try and 
finish this hearing unless I'm called over to vote on the first 
couple of votes. I appreciate everybody's time constraints 
here.
    Earlier this month, following a historic parliamentary by-
election, I visited Burma for the second time in the last 2\1/
2\ years. Prior to my visit in August 2009, Burma in many ways 
appeared locked in its status quo of international isolation. 
The promise of democratic reform had not been fulfilled. 
Conflicts with ethnic minority groups threatened to fracture 
the country. Aung San Suu Kyi remained under house arrest. 
Externally, voices critical of the regime called for additional 
sanctions and increased isolation of Burma by the United States 
and the international community.
    My 2009 visit, which was carefully planned for months in 
advance, was the first to Burma by a member of Congress or a 
national leader in more than 10 years. It reinforced 
observations that I had made during my first visit to that 
country in 2001 as a private citizen, namely that our 
restricted diplomatic and commercial ties had also limited our 
connections with the Burmese people and had prevented them from 
seeing the benefits of a free society.
    Both the country and its leadership were becoming more and 
more remote, increasing the challenge that we all agreed was 
our ultimate goal, which was to assist and encourage Burma's 
reentry into the international community. In sum, our attempts 
to isolate that country had limited our opportunities to push 
for positive changes, which was the goal of the isolation in 
the first place.
    In September 2009, with my support, the administration 
redirected U.S. policy to engage directly with the military 
government, which began sending positive signals. Many within 
our own government and elsewhere expressed deep skepticism 
about this approach, but I believed that this redirection was 
timely and appropriate. And although our engagement over the 
past 2\1/2\ years has been an imperfect process, it has allowed 
both governments to learn more about each other and to begin 
the process of building trust in our bilateral relationships.
    The transition from a military government to a more 
representative political system officially began in November 
2010 with the election of national and regional parliaments and 
the transition to a civilian-led government. Most recently, the 
April 1 parliamentary by-election filled seats vacated by 
officials who became ministers in the new government.
    During my 2009 visit I specifically observed to Burmese 
Government officials that, at a time when Aung San Suu Kyi was 
still under house arrest, in order for elections in Burma to be 
perceived as credible she and her party should be offered the 
opportunity to participate fully and openly in the process. 
Aung San Suu Kyi's decision to participate in the by-election 
and her open active campaign throughout the country was a 
positive sign of political reconciliation taking place within 
that country. Moreover, her party won 43 out of the 45 seats 
contested in the by-election, making it the largest opposition 
party in both chambers of the national parliament.
    It is important to note that Aung San Suu Kyi, whose 
struggles and sacrifices were at the very core of the reason 
that sanctions originally took place, is now an elected 
representative of the existing government and is directly 
participating in shaping the future of the country.
    Burma's movement toward democratic governance has been 
propelled by two leaders, Aung San Suu Kyi and President Thein 
Sein, who themselves could not be more different in their 
background and their life experiences. The world knows about 
the life and the struggles of Aung San Suu Kyi.
    She was a member--is a member of one of Burma's great 
families. Her father is widely viewed as the father of Burmese 
independence. He was assassinated when she was 2 years old. She 
studied overseas in Great Britain. She was denied the results 
of an election that had proclaimed that she would be the 
national leader. She spent years under house arrest. She won 
the Nobel Prize for her struggles.
    Thein Sein is less known and we know, quite frankly, less 
about him. But we do know that he is from a village in a remote 
part of that country which still does not have basic 
infrastructure, such as paved roads and electricity; that he 
chose a military career; that he was in charge of the relief 
efforts after the tragic cyclone that killed tens of thousands 
of people in that country; and that from all evidence this 
experience as much as any other motivated him to try to seek 
different ways in terms of the governmental process in the 
country.
    These two leaders set their differences aside for the good 
of the country and joined together to try to move the country 
toward its promised democracy. I respect both of them for their 
courage and for their commitment to their country, and the 
results of their effort are increasingly becoming clear. The 
international community is once again engaging with the Burmese 
Government and its citizens in a positive manner. Opposition 
parties have been formed. Ethnic minority groups are 
negotiating for peace and open media is being encouraged and 
allowed. In 1 year more than 600 political prisoners have been 
released. Aid groups are seeing a new willingness by the 
government to tackle poverty and health crises in the country. 
Burma will soon take up the chair of ASEAN, the Association for 
Southeast Asian Nations, for the first time, representing a 
vote of confidence by its fellow ASEAN members.
    During my last visit earlier this month, I had the 
opportunity to meet with representatives from different 
business, political, and media groups. We had a good discussion 
about their specific concerns. But unanimously they also said 
that the situation is far different than it was a year ago and 
that the ability to report and comment on political events 
inside the country is vastly improved.
    This is an incomplete process. More can be done on all 
sides. We will continue to monitor it closely and press for 
continued progress. But it's also important to consider these 
changes in this country and in a global and regional context. 
First, the events of the Arab Spring last year have taught us 
that democratic movements often do not share the same path and 
can occur within a windstorm of violence that is both dangerous 
and uncertain. Burma's transition to this point is occurring 
within a relatively stable environment.
    Regionally, Burma's reforms, again at this point, place it 
beyond many of its own neighbors. One of the comments that I 
heard several times during my recent visit through Japan, 
Thailand, and into Burma was that Burma, if it can sustain even 
the changes that have been made over the last year, now places 
about halfway up inside the ASEAN nations in terms of its 
political process. They have been releasing political 
prisoners. They have been opening up their media. They are 
holding popular elections. There are concerns about policies in 
other countries, most notably at this time Vietnam and China.
    Despite the concerns that we have had and the continuing 
negotiations we have had with those other countries, we have 
full trade relations. We lifted our trade embargo against 
Vietnam in 1994, 18 years ago. China is now our second-largest 
trading partner, despite internal policies, and in fact we 
lifted the trade embargo against China 41 years ago.
    The State Department's human rights report estimates tens 
of thousands of political prisoners are incarcerated in China 
in prisons, administrative detention, or labor camps.
    And, in telling contradiction to Aung San Suu Kyi's 
situation, China's Nobel Peace Prize winner, Liu Xiaobo, 
remains incarcerated for leading a pro-democracy manifesto that 
calls for expanded liberties and the end to single party rule 
in China. China is also undergoing a leadership transition this 
year, but it will not be decided by a popular vote.
    Burma has a long way to go, but its leaders should be 
acknowledged for concrete efforts to take the country in a 
different direction. The Government of Burma is attempting a 
peaceful simultaneous transition in both the economic and 
political spheres. This is rare, especially in this part of the 
world.
    Our opening to both China and Vietnam decades ago was 
predicated on the idea that economic reform would ultimately 
lead to political reform. In Burma, on the other hand, the 
sustainability of political reforms will depend to a large 
degree on economic progress in the country. In many ways, 
economic progress in Burma is ultimately tied to the sanctions 
that are in place. Most financial transactions, such as using a 
credit card or getting a bank loan, are difficult or impossible 
in Burma due to financial sanctions, and it's hard to conduct 
business, let alone lay the foundations of a modern economy, on 
a purely cash basis.
    United States sanctions targeting Burma are specified in 
five Federal laws, four Executive orders, and certain 
Presidential determinations, which I will be asking our 
witnesses to go through in some detail as they're very complex.
    When I met with President Thein Sein's economic adviser, 
Winston Set Aung, he commented to me that Burma is trying to go 
overnight from a crawl to a run while its hands and feet are 
tied. And his request was that at least at this point we could 
untie their feet.
    I hope today's hearing will give us a clearer understanding 
of the range of sanctions that currently are in place, what the 
obstacles are to removing them, and the administration's vision 
for the path ahead.
    Two weeks ago, Aung San Suu Kyi, speaking alongside British 
Prime Minister David Cameron, announced her support for 
suspending sanctions in response to democratic reforms in 
Burma. 
On Monday the European Union agreed to suspend for 1 year all 
sanctions except for the arms embargo. Earlier this month, the 
State Department announced that we would begin processing 
easing the ban on the export of U.S. financial services and 
investment. I understand the Department of Treasury took steps 
last week to authorize nongovernmental organizations to conduct 
certain activities.
    We also should be mindful at this point that we as a 
government should be identifying what measures can incentivize 
further reforms and build the capacity for democratic 
governance within Burma. This involves supporting the political 
reconciliation process and negotiations for peace with Burma's 
ethnic minority groups, as well as assisting the Burmese people 
with political and economic reforms, including providing 
training and assistance to all political parties and government 
officials.
    So at bottom we have reached a profound moment in the 
history of our relations with this country, and when such 
moments occur history teaches us that it's important to act in 
a way that is clear and decisive. What those actions might be 
is the subject of this hearing, and to discuss these and other 
issues before the subcommittee, we have two distinguished 
panels, as I mentioned earlier.
    Our first panel, which is seated; I'd like to welcome 
Principal Deputy Assistant Secretary Joseph Yun; Assistant 
Administrator Nisha Biswal; and Office of Foreign Assets 
Control Director Adam Szubin. And I will introduce the second 
panel when this panel has completed its witness statements and 
questions. So welcome.
    Secretary Yun.
    Let me ask, by the way, if you could summarize your remarks 
in your opening statement, and your full testimony, all three 
of you, will be entered in the record at the close of your oral 
statements.
    Secretary Yun.

STATEMENT OF JOSEPH YUN, PRINCIPAL DEPUTY ASSISTANT SECRETARY, 
 BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Yun. Thank you very much, Mr. Chairman, and thank you 
for inviting me here today to testify about United States 
policy toward Burma and the remarkable developments that have 
been unfolding in that country.
    As you mentioned, Mr. Chairman, I will submit a written 
testimony and I will keep my remarks very short.
    Senator Webb. Your full testimony, as I said, will be 
entered at the end of your oral statement.
    Mr. Yun. Mr. Chairman, I do want to take this opportunity 
to thank you especially for your leadership in respect to our 
Asia policy efforts. From Burma to the Philippines to the South 
China Sea to Japan, your leadership has enabled us to make 
important progress over the past 3 years. Your insight into 
Burma is particularly valuable. As you've mentioned, you've 
made many visits, and I think you are the only U.S. official to 
have met both Senior General Than Shwe and President Thein 
Sein.
    Let me say three things that remain constant in our Burma 
policy. First is that it continues to be bipartisan.
    Second, it does really reflect partnership between our 
executive and legislative branches. And third, it is based on 
close coordination with our friends and partners in Asia and 
Europe.
    During the past 9 months, the Burmese Government, working 
collaboratively with many local stakeholders, has made 
significant progress, as you mentioned. We assess this nascent 
opening as real and significant, though we also believe it is 
fragile and that we need to carefully calibrate our approach to 
encourage continued progress.
    The election this month of Nobel laureate and former 
political prisoner, Aung San Suu Kyi, and 42 other National 
League of Democracy members is the most recent dramatic example 
of the political opening under way. In addition to 
parliamentary by-elections, we're encouraged by other notable 
political reforms in Burma, including the release of over 500 
political prisoners in October 2011 and January 2012. The 
government is also proceeding with important economic reforms, 
including adjustment from a convoluted exchange rate regime, 
easing some onerous import and export requirements, and 
drafting new foreign investment regulations.
    I'd like to go through a couple of steps that the United 
States has done in response. Over the past year we have 
responded to change in Burma with increased outreach and 
concrete actions. During Secretary Clinton's historic visit to 
Naypyitaw and Rangoon in May 2011, the first such visit in 56 
years, she clearly articulated our commitment to partnering 
with and supporting Burma on a path of reform and to a strategy 
of matching action for action. To date, we have announced the 
resumption of cooperation in counternarcotics and operations to 
recover World War II remains of U.S. personnel. We have pledged 
support for assessment missions by international financial 
institutions and, following the release of over 250 political 
prisoners in January, we announced our intention to exchange 
ambassadors.
    On April 4, to respond to Burma's by-election, Secretary 
Clinton announced additional steps, which included our 
intention to reestablish a USAID mission in Burma, lend United 
States support for a normal UNDP country program, authorize 
private United States entities to send funding to Burma for 
nonprofit activities, facilitate travel to the United States 
for select Burmese officials and parliamentarians, and begin a 
process to ease the bans on exportation of United States 
financial services and new private investment. We plan to 
proceed carefully as we ease any sanctions, maintaining 
targeted prohibitions on individuals and entities.
    While we recognize the momentous release of political 
prisoners, we continue to call for the immediate and 
unconditional release of all prisoners of conscience and the 
removal of conditions on those already released. We also urge 
an immediate halt to hostilities in Burma's ethnic minority 
areas, particularly in Kachin State, where fighting has 
continued at varying levels of intensity since the cease-fire 
lapsed in June 2011. We also remain troubled by Burma's 
military trade with North Korea.
    Therefore, I would like to emphasize that much work remains 
to be done in Burma. Therefore, in conclusion, Mr. Chairman, as 
we look forward there is a great store of good will within the 
international community to reengage Burma. Though the 
challenges that lie ahead are daunting, the efforts of the 
resilient and diverse people of Burma are as inspiring as ever.
    Let me say again how grateful we are to you and the members 
of this committee, and we look forward to consulting closely 
with you to support a brighter future for the people of Burma.
    Thank you, Mr. Chairman. I am happy to answer any questions 
you may have.
    [The prepared statement of Mr. Yun follows:]

     Prepared Statement of Deputy Assistant Secretary Joseph Y. Yun

                              introduction
    Mr. Chairman, Senator Inhofe, and members of the subcommittee, 
thank you very much for inviting me here today to testify about U.S. 
policy toward Burma and the remarkable developments that have been 
unfolding in the country. Many Members of this committee and in the 
Congress have been key proponents of human rights and democracy in 
Burma over the past two decades, and I am sure you all are following 
events with as much hope and interest as we do at the State Department.
    We have been the first to acknowledge that engagement with Burmese 
authorities early in this administration was a profound disappointment. 
We expected that it would be a long and slow process, but the lack of 
progress from late 2009 to mid-2011 was nevertheless disheartening.
    As some have said, ``That was then, this is now.'' Following the 
formation of a new government in March 2011, positive changes have 
emerged ranging from the release of political prisoners, to new 
legislation expanding the rights of political and civic association, 
and a nascent process toward cease-fires with several ethnic armed 
groups. Secretary Clinton has become actively involved, including her 
historic visit to Burma in December 2011, where she met senior Burmese 
Government officials including President Thein Sein and opposition 
democracy leader, Aung San Suu Kyi, who has been an inspiration to many 
around the world, including the Secretary, for her steadfast efforts to 
bring a more free and prosperous life to her people. She also met with 
a variety of civil society and ethnic minority representatives.
    Because of President Obama's and Secretary Clinton's far-sighted 
leadership and the hard work of our first Special Representative and 
Policy Coordinator for Burma, Ambassador Derek Mitchell, the Burmese 
Government has engaged with the United States in candid and 
constructive exchanges, leading toward concrete progress on our core 
concerns over the past 9 months.
    In both its words and actions, Burmese officials have demonstrated 
increasing signs of interest in political, economic, and social 
development, and national reconciliation. Although we assess this 
nascent opening as real and significant, we also believe it is fragile 
and reversible--as Secretary Clinton said on April 4, ``the future in 
Burma is neither clear nor certain''--and therefore, we need to 
carefully calibrate our approach to encourage continued progress. 
Additionally, the impact of Burma's reform efforts has not extended far 
beyond the capital and major cities. This is particularly true in 
ethnic minority areas: Fighting continues in Kachin State, coupled with 
reports of severe human rights violations. In Rakhine State systematic 
discrimination and denial of human rights against ethnic Rohingya 
remains deplorable. Overall, the legacy of five decades of military 
rule--repressive laws, a pervasive security apparatus, a corrupt 
judiciary, and media censorship--is still all too present.
    The initial reforms are only the beginning of a sustained process 
and commitment required to bring Burma back into the international 
community and toward more representative and responsive democratic 
governance.
                           political reforms
    The election of Aung San Suu Kyi and 42 other NLD members is the 
most recent and dramatic example of the political opening underway in 
Burma, a culmination of several reforms that together constitute an 
important step in the country's democratization and national 
reconciliation process.
    Overall, the NLD won 43 of the 44 seats it contested, losing 1 seat 
to the Shan Nationalities Democratic Party. Though contesting in all 45 
constituencies, the ruling Union Solidarity and Development Party won 
only a single seat. Less than 7 percent of all seats in Burma's 
bicameral legislature were at stake, but the participation and victory 
of the NLD could give Aung San Suu Kyi a role and voice in government 
for the first time in the country's history. The new Parliament 
convened on Monday, April 23, but NLD members including Aung San Suu 
Kyi have not yet taken their seats due to concerns about the 
parliamentary oath. We hope the government and the NLD will work toward 
a mutually satisfactory resolution of this issue soon to enable the NLD 
to take their newly won seats and begin this new era in Burma's 
politics.
    In the runup to the by-elections, we consistently emphasized that 
the results needed to be free and fair and reflect the will of the 
Burmese people. We also underscored the importance of an inclusive and 
open electoral process from the campaign phase to the announcement of 
results. While not perfect, the by-elections were a significant step 
forward in comparison to the 2010 elections, which we and others in the 
international community strongly condemned as neither free nor fair. In 
advance of the by-election, the Burmese Government's amendment of 
certain election-related laws enabled the NLD, which authorities had 
dissolved in 2010, to register and participate. The campaign process 
was more inclusive than in the past with the NLD and 16 other parties 
participating.
    A few days before the April 1 vote, the government invited a number 
of international representatives and foreign media from ASEAN, ASEAN 
dialogue partners including the United States and the European Union, 
and the United Nations to witness the polling. We asked representatives 
from the National Democratic Institute and the International Republican 
Institute to be present, and the Burmese Government invited several 
U.S. journalists to cover the elections. Poll watchers had access to 
polling stations to survey the voting and the vote count. While they 
reported some irregularities, including questions with voter lists and 
security of ballot boxes, overall, the election demonstrated a smooth 
and peaceful voting process. In addition to the formal diplomatic 
observation tour coordinated by the Burmese Government, authorities 
also permitted U.S. Embassy officers and diplomatic colleagues to 
informally watch voting activities on election day. The Government of 
Burma did not, however, establish an adequate framework and allow 
sufficient access for election monitoring or observation to be 
conducted according to international standards.
    Ahead of the vote, several problematic process issues arose. Before 
the elections, the government cancelled polling in three constituencies 
in Kachin State, citing security concerns. We also monitored closely 
credible allegations of election-related irregularities. Aung San Suu 
Kyi and the NLD raised concerns, publically and privately, about 
inaccurate voter registration lists, reports of irregularities with 
advance voting procedures, and local intimidation, including a violent 
attack at a campaign event in the Naypyitaw district, in which an NLD 
supporter was injured. We assess that these incidents, while troubling, 
did not appear to reflect a government-directed effort to skew the 
outcome of the elections. Although the by-elections marked an 
improvement from the 2010 elections and a step forward in Burma's 
reform process, we note that much work remains to be done as we look 
forward toward the next general election in 2015.
    In addition to the parliamentary by-elections, we are encouraged by 
several other notable political reforms in Burma, including progress on 
some of our longstanding human rights concerns. The Burmese Government 
released over 500 political prisoners in October 2011 and January 2012 
amnesties. These releases included the most prominent civic leaders and 
pro-democracy and ethnic minority prisoners of conscience. Many of 
these individuals had been imprisoned for over 20 years.
    The Burmese Government has also made progress toward preliminary 
cease-fire agreements with several ethnic armed groups including the 
Chin National Front (January 2012), the New Mon State Party (February 
2012), the United Wa State Army (September 2011), and the Shan State 
Army-North (January 2012). For the first time in 63 years, the Burmese 
Government and the Karen National Union (KNU) entered into a 
preliminary cease-fire agreement in January 2012, and began followup 
peace discussions the week of April 4 on a host of political issues at 
the heart of Burma's longest running internal conflict. Earlier this 
month, KNU representatives from Thailand traveled to Rangoon and 
Naypyitaw for landmark meetings with President Thein Sein, Aung San Suu 
Kyi, and several government ministers.
    These efforts to halt the fighting are important initial steps, but 
must be followed by genuine dialogue and negotiations to address the 
longstanding political and economic grievances of ethnic minority 
populations in Burma including issues of cultural autonomy, natural 
resources, and power-sharing with the ethnic Burman-dominated central 
government. Fighting continues in Burma's Kachin State despite periodic 
cease-fire talks.
    The Burmese Government has also pursued important legislative 
initiatives in support of political reform. Parliament passed and 
President Thein Sein has signed an International Labor Organization-
endorsed labor law allowing workers to form labor unions and protecting 
freedom of association. The government has revised other legislation to 
define, prohibit, and criminalize forced labor in Burma, and 
authorities signed a memorandum of understanding with the International 
Labor Organization in March to take proactive strides to eliminate all 
forms of forced labor in Burma by 2015. In addition, Parliament passed 
and President Thein Sein signed a new law in December 2011 to protect 
the rights of citizens to peacefully assemble.
    The Burmese Government has also taken a variety of measures to 
relax media censorship. Today, Aung San Suu Kyi's image, her political 
activities, and her meetings with world leaders are widely covered in 
local and even in state media. While most news is still subject to 
censorship, restrictions have been eased on television and the 
Internet, including on exile news sites. The Burmese Government has 
recently provided access for a range of foreign journalists for the 
first time including from the Voice of America and Radio Free Asia. The 
government has also started to host its first press conferences and 
engage with civil society on the topic of press and media freedoms.
                            economic reforms
    In addition to the notable political reforms I have highlighted, 
the Burmese Government is proceeding with a strong program of economic 
reforms. After decades of mismanagement, Burma has become the poorest 
country in Southeast Asia with approximately one-third of its 
population living in poverty. In January, for the first time, the 
Burmese Government agreed that International Monetary Fund (IMF) staff 
could publish a detailed summary of the conclusions of their 2011 
Article IV consultation with the IMF. This year, the IMF consultation 
addresses issues and challenges facing Burma as it transitions to a 
more market-based economy, including needed reforms related to the 
exchange rate regime, trade policy, monetary policy, and fiscal policy. 
A summary was not only posted on the IMF Web site, but was also 
published, in the Burmese language, in Burma's state-owned newspaper. 
We have called on the Burmese authorities to release the full text of 
the Article IV Staff Report, and we hope that they do so.
    A primary distortion in Burma's economy has been the use of 
multiple exchange rates. Burma's multiple exchange rate system is 
highly inefficient, limits access to foreign goods to all except well 
connected entities, and creates opportunities for corruption. On April 
2, Burma's Central Bank aligned the official exchange rate close to the 
prevailing parallel rate, an important first step reforming the 
exchange rate regime. The Central Bank is now posting the official 
daily rate on its Web site and allowing the exchange rate to move in 
line with market forces. There will be teething problems as Burma's 
financial sector adjusts to this important reform, but it is a 
necessary first step for a broader agenda of economic reforms that we 
hope will improve the responsiveness of the government to the needs of 
the people.
    In addition to exchange rate reform, the Burmese Government has 
discussed the country's budget in Parliament for the first time. 
Members of Parliament and the Government discussed budget allocations 
and in March published an approved budget in a state-run newspaper. 
Budget allocations for the military remain grossly disproportionate, 
however, at 16.5 percent of the total budget. Allocations for health 
and education were 3.25 percent and 6.26 percent of the total budget, 
quite low by regional standards. At the same time, however, Burma 
reduced the relative share of its military budget in its FY 2012 
budget, and allocations for health and education quadrupled and doubled 
respectively. Authorities have also eased some import and export 
requirements and drafted a new Foreign Investment Bill.
    As businesses consider investing in Burma, it will be critically 
important to actively promote a strong corporate social responsibility 
ethic through active engagement with our regional and like-minded 
partners as well as with the Burmese Government and local communities. 
We will also engage the Burmese Government to apply nondiscrimination 
principles and to create a ``level playing field'' for foreign 
investors. Moving forward, we believe that by addressing these 
investment-related concerns, the private sector, including many U.S. 
companies, will be able to play a positive role in contributing to 
justice, development, and reform in Burma.
                             u.s. response
    Over the past year, we have carefully responded to evidence of 
change in Burma with increased outreach and concrete actions. As I 
noted above, the President's decision to ask Secretary Clinton to visit 
to Burma in late 2011 marked a turning point in our engagement policy, 
sending a strong signal of support to reformers both inside and outside 
of government, while never mincing words about our continuing concerns.
    During her visit, Secretary Clinton clearly articulated our 
commitment to partnering with and supporting Burma on the path of 
reform and committed to a strategy of matching ``action-for-action.'' 
Since his appointment in August 2011 as the first U.S. Special 
Representative and Policy Coordinator for Burma, Ambassador Derek 
Mitchell has played a key role in driving this effort. He has traveled 
to Burma, along with numerous other senior State Department officials, 
nearly on a monthly basis, engaging officials in Naypyitaw and 
consulting with key leaders of civil society, including Aung San Suu 
Kyi, ethnic minority groups, and the pro-democracy opposition to 
further catalyze concrete action on our core concerns.
    The actions we have undertaken thus far have been measured and 
meaningful. During Secretary Clinton's visit to Burma, we announced 
that we would resume cooperation on counternarcotics and operations to 
recover missing U.S. personnel from World War II, which the Burmese 
Government suspended in 2004. We also pledged our support for 
assessment missions and technical assistance by international financial 
institutions and pursued a temporary waiver of trafficking in persons 
sanctions to fulfill this commitment. Following the substantial release 
of over 250 political prisoners in January, we responded with an 
announcement regarding our intention to upgrade diplomatic ties to 
exchange ambassadors.
    More recently, we have announced additional U.S. actions. On April 
4, Secretary Clinton announced five key steps that the United States 
would take to respond to Burma's parliamentary by-elections and the 
progress that they signified. We announced our intention to reestablish 
a USAID mission at our Embassy in Rangoon, lend U.S. support for a 
normal UNDP country program, authorize funds to be sent by private U.S. 
entities to Burma for nonprofit activities, facilitate travel to the 
United States for select Burmese officials and parliamentarians, and 
begin a process to ease the bans on the exportation of U.S. financial 
services and new investment. Since that announcement, the Treasury 
Department has issued a general license authorizing certain financial 
transactions in support of humanitarian, religious, and other not-for-
profit activities in Burma, including projects for government 
accountability, conflict resolution, and civil society development.
    In terms of easing the bans on the export of U.S. financial 
services and new investment for commercial activities, we plan to 
proceed in a careful manner. We will also work closely with the U.S. 
Department of the Treasury to reexamine and refresh the Specially 
Designated Nationals list.
    We have taken important steps on the assistance front as well, 
which my colleague from USAID, Assistant Administrator Nisha Biswal, 
will address. I will say, however, that in the immediate term, the 
State Department has announced new activities for microfinance and 
health, particularly in ethnic minority areas, based on our 
consultations with civil society in Burma. Special Representative 
Mitchell launched an interagency scoping mission to Burma to assess 
opportunities and obstacles to Burma's transition and to align U.S. 
assistance efforts in a manner that promotes the overall reform 
process, directly benefits the people of Burma, and alleviates poverty, 
particularly in Burma's rural areas.
    We continue to emphasize that much work remains to be done in Burma 
and that easing sanctions will remain a step-by-step process. We have 
pursued a carefully calibrated posture, retaining as much flexibility 
as possible should reforms slow or reverse, while pressing the Burmese 
Government for further progress in key areas.
    We have serious and continuing concerns with respect to human 
rights, democracy, and nonproliferation, and our policy continues to 
blend both pressure and engagement to encourage progress in all areas. 
While we recognized the momentous release of prisoners last January, we 
continue to call for the immediate and unconditional release of all 
political prisoners and the removal of conditions on those released. 
The State Department's Bureau for Democracy, Human Rights, and Labor 
estimates at least several hundred prisoners of conscience are still 
behind bars. Through an upcoming human rights dialogue, we will engage 
officials on developing a credible, transparent, and inclusive process 
to identify remaining political prisoners of conscience, seek access to 
prisons for international organizations, and press for the immediate 
release of all political prisoners unconditionally. We have also 
spotlighted our concerns regarding remaining political prisoners in 
human rights resolutions at the U.N. General Assembly and the U.N. 
Human Rights Council, which we have supported or cosponsored.
    In every interaction with the Burmese Government, at every level, 
we are also urging the immediate halt to hostilities in Burma's ethnic 
minority areas, particularly in Kachin State, where fighting has 
continued at varying levels of intensity since the cease-fire lapsed in 
June 2011. We have consistently urged unfettered access for United 
Nations and humanitarian agencies to Burma's conflict zones. This 
access is crucial so that the international community can assess needs 
and attempt to assist tens of thousands who have been displaced as a 
result of the fighting. While the Burmese Government has recently 
allowed limited access to U.N. agencies to deliver assistance to 
certain areas of Kachin State, we are pressing for regular and 
sustained access to all areas, including those controlled by the Kachin 
Independence Army, to provide humanitarian aid to internally displaced 
persons (IDPs). In March, the United States contributed $1.5 million in 
assistance to the United Nations High Commissioner for Refugees (UNHCR) 
to support IDPs in Kachin State.
    We also remain concerned by serious human rights violations against 
the ethnic minority Rohingya people who are denied citizenship and 
human rights, such as freedom of movement and freedom to marry, among 
other rights all people should be able to exercise. We will urge the 
Burmese Government, including through a human rights dialogue, to 
pursue mechanisms for accountability for the human rights violations 
that have occurred as a result of fighting and discrimination in ethnic 
areas. We will also continue to spotlight continued abuses in Burma at 
the United Nations and other multilateral and regional forums including 
ASEAN.
    While we are pleased that the NLD, Aung San Suu Kyi's pro-democracy 
party, has been allowed to reregister and participate in the political 
process, the degree to which reforms are genuine and irreversible will 
be reflected in the amount of political space the opposition parties 
will have and the amount of dissent the government will tolerate in the 
coming weeks and months. We will continue to monitor the 
democratization process carefully, including the issue concerning the 
parliamentary oath, and urge the Burmese Government to take steps, in 
terms of both policy and legislative reform, to promote greater civic 
openness and support for a vibrant civil society and more free media.
    Much more needs to be done on the legal and institutional front for 
the government to definitively break with its legacy of the past. 
Dozens of oppressive, arbitrary, and unfair laws used to convict 
political prisoners remain on the books and new laws need to be 
effectively implemented to make a true difference in the lives of the 
people.
    In addition to continuing human rights and democracy concerns, we 
remain troubled by Burma's military trade with North Korea. This is a 
top national security priority, and we will continue to press the 
government on this issue. We are collaborating closely with the EU, 
ASEAN, and other key regional partners including South Korea, Japan, 
and Australia to stress to Burma the importance of full compliance with 
U.N. Security Council Resolutions 1718 and 1874 and to underscore to 
senior Burmese officials the seriousness of this matter and its 
potential to impede progress in improving our bilateral ties.
    We will also continue to urge the Burmese Government for greater 
transparency on nonproliferation. We were encouraged by public 
assurances from senior officials, such as Lower House Speaker of 
Parliament, Thura Shwe Mann, in January 2012, that Burma has no 
intention of pursuing a nuclear weapons program and is committed to 
full compliance of all its international nonproliferation obligations. 
We have encouraged the Government of Burma to signal its commitment 
through concrete actions such as signing and ratifying the IAEA 
Additional Protocol, updating its Small Quantities Protocol and 
improving cooperation with the International Atomic Energy Agency.
                               conclusion
    As we look forward, there is a great store of good will within the 
international community to reengage Burma, rebuild its capacity, and 
reconnect with the Burmese people, should the reform process continue. 
Though the challenges that lie ahead are daunting, the efforts of the 
resilient and diverse people of Burma are as inspiring as ever.
    Let me finally take a moment to acknowledge the leadership of 
Congress in promoting change in Burma. So many Members of Congress have 
demonstrated consistent and personal commitment over many years to 
democratic reform, human rights, and the welfare of the Burmese 
people--and many of you have traveled to the region in recent months to 
see for yourselves conditions on the ground and meet with the reformers 
themselves. We are grateful for your efforts, and we look forward to 
consulting closely with you as we continue to support a brighter future 
for Burma.

    Senator Webb. Thank you very much, Secretary Yun.
    Administrator Biswal, welcome back to the subcommittee.

  STATEMENT OF HON. NISHA BISWAL, ASSISTANT ADMINISTRATOR FOR 
ASIA, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, WASHINGTON, DC

    Ms. Biswal. Thank you, Mr. Chairman, and it is indeed a 
pleasure to be back here to testify about the developments in 
Burma, which are quite exciting.
    Senator, you covered much in your statement of the trends 
and developments that give us so much cause for optimism in 
Burma, and I wanted to outline to you how USAID is preparing 
the way forward. The U.S. assistance relationship with Burma 
dates back to 1950 and we have had an aid mission in that 
country previously, which was suspended in 1988. But our 
assistance programs, particularly our humanitarian programs for 
the people of Burma, have continued from years past. Currently 
we have had a bilateral assistance program of approximately $38 
million per year that has addressed the humanitarian 
requirements both inside Burma and along the Thai-Burma border, 
as well as support for democracy, human rights, and independent 
media.
    Recently, Secretary Clinton announced the opening of a 
USAID mission after the successful April by-elections. We plan 
to have a mission director in-country by the fall of this year 
and a fully staffed mission in place by next summer. We think 
that that ability to have people on the ground will 
fundamentally transform our ability to engage in support of the 
Burmese people. It will allow us to directly support Burmese 
civil society, to support reconciliation efforts, as well as 
continued assistance to vulnerable populations, particularly 
ethnic minority populations. It will allow us to engage with 
reform-minded institutions inside government and outside, 
particularly in strengthening their understanding and capacity 
to engage in democratic governance. It will allow us to engage 
more efficiently with the donor community. And finally but most 
importantly, it will allow for a greater degree of oversight as 
we engage in this new and evolving environment.
    Our challenges as we move forward are going to be to build 
upon the resilience of the Burmese people and the capacity of 
the Burmese people without overwhelming them with the influx of 
assistance from all donors that is not well coordinated. So we 
hope that as we take these steps in this sequential order, we 
will be able to assist in an efficient and effective manner. 
I'm mindful of the words of Aung San Suu Kyi when we discussed 
our plans with her, that assistance should be building upon 
resilience and avoiding dependency.
    Mr. Chairman, we have worked very closely with this 
committee and with all relevant committees in Congress on Burma 
policy and pledge to continue to consult closely with you as we 
move forward.
    I'll stop there and engage any questions that you may have.
    [The prepared statement of Ms. Biswal follows:]

       Prepared Statement of Assistant Administrator Nisha Biswal

    Chairman Webb, Ranking Member Inhofe, and distinguished members of 
the committee, thank you for the opportunity to testify before the 
committee today on the important issue of our policy toward Burma. As 
my esteemed colleague, Principal Deputy Assistant Secretary Yun has 
recounted the dramatic changes underway and covered the broader U.S. 
policy towards Burma, I will limit myself to discussing the areas under 
my jurisdiction: U.S. assistance programs and policies in Burma and 
along the Thai-Burma border.
    As Principal Deputy Assistant Secretary Yun noted, the significant 
steps taken by the Government in Burma have been matched by actions 
from the United States. On April 4, Secretary Clinton announced that 
the United States Agency for International Development would 
reestablish its mission in Burma. The Secretary's announcement 
recognizes the significant opening to strengthen our ties with the 
people of Burma and provide critical support in their efforts for 
political and economic reform.
                          past u.s. assistance
    The United States signed the first U.S.-Burma Economic Cooperation 
Agreement in 1950, and thus has had a long history in that country. 
Following the events in 1988, USAID halted all economic assistance to 
Burma and USAID American staff and contractors were evacuated. Since 
that time, USAID has not had a mission inside Burma. While we suspended 
our mission in Burma, we did not stop supporting the Burmese people. 
The United States has continued to provide humanitarian assistance to 
Burmese refugees and migrants in Thailand for the last 20 years and has 
also provided support for human rights, democracy, and independent 
media through USAID and the State Department.
    Beginning in 2003, USAID resumed limited, targeted health 
programs--because infectious diseases prevalent in Burma had the 
ability to spread and undermine U.S. disease prevention efforts here at 
home and in other parts of the world. These programs, which were 
implemented through nongovernmental organizations, were managed from 
our regional mission in Bangkok, Thailand. Significantly, in response 
to the devastation of Cyclone Nargis in May 2008, the USG provided more 
than $83 million in humanitarian assistance through USAID and the 
Department of Defense.
    Since FY 2010, funding for the USAID program has been approximately 
$38 million per year, providing humanitarian assistance for Burmese 
living along the Thai-Burma border, in the Irrawaddy Delta and Central 
Burma, and supporting human rights and independent media--all of which 
has been channeled exclusively through U.S. and international 
organizations and in strict adherence to legislative requirements.
                              burma today
    On my recent visit to Burma, I was struck both by the resilience of 
the Burmese people, and the extreme fragility of its institutions. 
Decades of mismanagement and missed opportunities have taken their 
toll. Burma is a country of rich natural resources, but it is not yet 
able to meet its development needs due in part to weak infrastructure, 
low service delivery capacity, and corrupt governance systems.
    Burma today is ranked among the least developed countries in the 
world and is one of the poorest in Asia. The United Nations Human 
Development Index, which is a composite index reflecting health, 
education, and income indicators, ranks the country at 149 out of 187 
countries with comparable data. According to the World Health 
Organization, approximately 35 percent of children suffer from 
stunting.
    Despite the fertile landscape, many parts of the country suffer 
from high levels of food insecurity and according to the World Food 
Programme, the national prevalence of acute malnutrition among children 
under 5 is 9 percent. Dengue, measles, avian influenza, HIV/AIDS, and 
tuberculosis (TB) all pose significant health threats in Burma, and it 
is in this area of communicable diseases where strengthening health 
infrastructure is most critical. Burma's rate of TB prevalence is three 
times higher than the global average and according to Medecins Sans 
Frontieres, 85,000 people in Burma are in need of lifesaving 
antiretroviral treatment for HIV/AIDS.
    Yet, the nascent changes underway have fostered a sense of hope 
among amongst the people. During my visit I had the opportunity to meet 
with ethnic and religious leaders, released political prisoners, and 
Burmese civil society leaders. And while I agree with their assessment 
that the reality on the ground for the average citizen, particularly in 
the ethnic areas has not yet changed or improved as a result of the 
reforms, I was also struck by the hope, optimism, and determination of 
the individuals and organizations with whom I met, to engage the 
government in support of reforms and reformers in order to realize a 
better future for their country.
                             usaid mission
    This is precisely the opportunity and challenge for the United 
States, and for USAID. Secretary Clinton's announcement authorizing 
USAID to reestablish its mission will enable USAID to have the staff 
and capability to partner with and support the Burmese people in this 
endeavor. By supporting reform efforts and strengthening nascent civil 
society organizations, we will build on our existing commitment to 
improve the welfare and well-being of the people in Burma.
    Pursuant to the Secretary's announcement, USAID sent to this 
committee Congressional Notification No. 38 informing of our intent to 
reopen the USAID mission later this year. We expect to have a small 
mission within the U.S. Embassy with 5 to 7 U.S. Direct Hire Foreign 
Service officers and 8 to 10 locally hired Foreign Service National 
staff. We anticipate that as program needs and resource implications 
are still to be determined, the exact makeup and size of the mission 
may shift. Mr. Chairman, our plan is to have a mission director in 
place by the fall of this year and to have the mission fully staffed by 
next summer. We are sending in a retired USAID Foreign Service officer 
to serve as interim Mission Director.
    Mr. Chairman, as CN No. 38 notes, the expected startup costs for 
the USAID mission in this fiscal year 2012 are approximately $600,000. 
The fiscal year 2013 budget request assumes an operating budget for 
Burma of $1.7 million. While we are still developing our final mission 
plan, and the overall operating budget may change, we plan to absorb 
the operating costs of the Burma mission from within the amounts 
requested in the President's budget request for USAID Operating 
Expenses.
    The establishment of this mission will enable USAID to engage more 
with Burmese organizations and institutions to support political 
reforms, foster ethnic reconciliation, and strengthen the capacity of 
reform-minded individuals and institutions. It will enable greater 
oversight of our programs and stronger coordination with other donors, 
multilateral institutions and eventually the private sector.
                         assistance priorities
    During my visit, I met with members of the Burmese Government, 
civil society, including nongovernmental organizations and bi- and 
multilateral donors to assess the political, economic, and social 
changes occurring in Burma and the opportunities for our engagement. In 
addition, USAID took part in an interagency scoping mission to identify 
the impediments to change, and look at the ways in which the USG could 
best engage as we observe signs of change in Burma in the future.
    While we have not yet completed the programmatic assessments of 
needs and priorities for U.S. assistance in Burma, I would like to 
share with you our preliminary thoughts based on my visit and the 
scoping mission. We have identified four broad priorities, including 
the need to (1) support reforms by strengthening civil society, (2) 
build the capacity for institutional processes for good governance (3) 
support reconciliation, and (4) ensure close coordination with the 
international donor community.
    Furthermore, we see a need to continue humanitarian assistance to 
the refugee and displaced populations along the Thai-Burma border and 
to expand access and assistance to vulnerable populations in Kachin 
State and other ethnic areas.
                      strengthening civil society
    A broad and resilient civil society exists in Burma despite decades 
of repression. Most local civil society organizations are welfare and 
service-delivery focused, but there is a budding movement for advocacy 
around particular issues, such as transparency of government budgeting 
and decisionmaking, inclusive policy dialogue, and promotion of human 
rights. The organizations are small and informal, with little 
management or financial structure--and they need training, mentoring, 
and strengthening of their technical capacity.
    While the operating space for civil society at the national level 
has improved to a degree, most organizations are grassroots and operate 
in remote regions where change is harder to discern. Even at the 
national level, licensing and registration requirements, associated 
fees, and changing restrictions governing civil society, matched with 
an inefficient bureaucracy and severely limited communications, have 
made it difficult for most civil society groups to operate safely and 
legally. Additionally, very few local organizations have the capacity 
to partner directly with international donors. Yet a robust civil 
society is crucial for reforms to penetrate and take root at all levels 
of government and society. So USAID will prioritize engaging with and 
strengthening local civil society organizations.
  building the capacity of institutional processes for good governance
    Mr. Chairman, a consistent message we heard from both the executive 
and legislative government officials in Burma was their limited 
technical capacity and knowledge of bureaucratic procedures. This lack 
of technical capacity in government was also identified by civil 
society and human rights groups as a major roadblock to reform. For 
reforms to be truly irreversible, it will require transforming the 
culture and capacity of a large and entrenched bureaucracy. Some 
ministries are already aggressively tackling this challenge, while 
others are not. We believe engaging with the government in priority 
sectors such as health and agriculture, where there are reform-minded 
leaders, combined with support for local and international 
nongovernmental organizations (NGOs) is critical to addressing the 
alarming health and nutritional indicators in the country. Other 
priority areas of governance we hope to explore include parliamentary 
strengthening, electoral systems strengthening and support for the rule 
of law and an independent judiciary.
                        national reconciliation
    Ongoing ethnic divisions and armed conflicts continue to be a 
significant concern. While the government has been signing cease-fire 
agreements with many armed ethnic groups, these agreements, absent a 
more inclusive dialogue to address political grievances and development 
needs, will not lead to long-lasting peace. USAID, along with other 
donors, is exploring ways to support a reconciliation process. However, 
there are complex dynamics underlying the conflicts in many ethnic 
areas and the road to reconciliation will be long and arduous. In the 
meantime, we are committed to maintain our support for the Burmese 
populations, particularly the refugee and displaced communities on the 
Thai-Burma border. Ambassador Mitchell has led efforts to press other 
donors to maintain and expand their assistance to these populations as 
well. USAID continues to monitor closely the humanitarian situation in 
Burma, including access limitations and potential openings in Kachin 
and other border areas.
                           donor coordination
    Because of the many development challenges in Burma--supporting 
reforms, engaging civil society, supporting good governance, and 
fostering ethnic reconciliation--we recognize the benefits of working 
in tandem with the other donors. The close relationships we have 
established with teams working on Burma issues at both the Australian 
Agency for International Development and the United Kingdom's 
Department for International Development will allow us to better 
coordinate our programs going forward. We are also looking at ways to 
engage Japan, and other Asian donors such as Thailand and Indonesia, as 
well as regional organizations such as the Association of South East 
Asian Nations. We are keenly aware of the need to build sustainable aid 
mechanisms and local capacity in a way that maximizes efficiency and 
impact, while avoiding duplication and without overwhelming the 
government and local organizations.
                               conclusion
    Mr. Chairman, I believe this is a critical moment for laying the 
groundwork to address development needs in Burma that have long been 
unmet. The development trajectory in Burma will not be turned around 
overnight. But our investment, at this time, can help forestall greater 
human tragedies and will, in a sense, determine the steepness of the 
road ahead.
    We are looking forward to increasing our engagement with the 
Burmese people. As these reforms gain momentum we look forward to the 
elections in 2015, which will be the true test of a transition to 
democracy. And we are mindful of the advice provided by Daw Aung San 
Suu Kyi when Ambassador Mitchell and I discussed plans for a USAID 
mission to ensure that our assistance builds upon the resiliency of the 
Burmese people.
    USAID's core mission is to promote peace and stability by fostering 
economic growth, protecting human health, providing emergency 
humanitarian assistance, and enhancing democracy in developing 
countries. We undertake these efforts to improve the lives of millions 
of people worldwide because we believe it represents American values 
and advances our national interests. We are committed to supporting a 
peaceful transition in Burma that is consistent with our mission and in 
the mutual interest of the American people and the people of Burma.
    I appreciate the vital role the Congress has played on Burma. USAID 
has consulted closely with this committee and other congressional 
stakeholders and will continue to do so to ensure that our programs 
reflect congressional intent.
    I appreciate the opportunity to share with you our proposed points 
of engagement to address the challenges ahead in Burma. I am eager to 
hear your advice and counsel and welcome your questions.

    Senator Webb. Thank you very much.
    Before I introduce Director Szubin, I neglected to point 
out at the opening that we do have a written statement from the 
U.S. Chamber of Commerce. They have asked that it be considered 
a part of the record and it will be put into the committee 
record after the testimony of panel number two.
    Director Szubin, welcome.

STATEMENT OF ADAM J. SZUBIN, DIRECTOR, OFFICE OF FOREIGN ASSETS 
    CONTROL, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC

    Mr. Szubin. Thank you very much, Mr. Chairman. Chairman 
Webb, Ranking Member Inhofe, thank you very much for the 
opportunity to appear today to discuss current U.S. sanctions 
against Burma and how we are responding to the very positive 
developments that you outlined and that others have already 
discussed.
    Sanctions are an instrument of U.S. foreign policy and need 
to match and reflect developments of that policy as it evolves. 
We have all witnessed over the past 8 months the dramatic and 
rapid developments that you outlined, including the election of 
Aung San Suu Kyi and her party to the Parliament, along with 
the release of hundreds of political prisoners and other 
important reforms.
    We must recognize the important role that our broad as well 
as targeted array of sanctions have played in these 
developments, along with sanctions imposed by our partners in 
the European Union and elsewhere. We intend to continue some of 
the targeted aspects of those sanctions against those who 
oppose reform. At the same time, we must also adapt our 
framework in response to the progress we have seen on the 
ground.
    We intend to proceed cautiously. The United States still 
has concerns in Burma, including the remaining political 
prisoners, ongoing conflict in ethnic minority areas, and 
serious human rights abuses, as well as Burma's troubling 
military ties to North Korea.
    What Secretary Clinton announced on April 4 was the 
beginning of a targeted process to ease certain sanctions in a 
manner that will contribute to our overarching principled 
engagement policy. We understand the importance of retaining 
flexibility to tighten or ease our sanctions as warranted by 
developments on the ground.
    Our sanctions have played a central role in United States 
policy on Burma over the past 20 years. In the wake of the 
Burmese regime's 2007 crackdown on Buddhist monks and others, 
the administration and Congress intensified our sanctions, 
expanding the scope of our authorities and increasing our 
efforts to identify and track the assets of bad actors. 
President Bush issued two new Executive orders and worked with 
Congress to enact the JADE Act of 2008. Throughout 2007-2008, 
the Treasury Department targeted bad actors in Burma 
aggressively, designating over 60 entities and a dozen 
individuals. Treasury targeted wealthy cronies of the Burmese 
regime along with their companies and commercial holdings, 
highlighting their ties to illicit activities, including drug 
trafficking and arms dealing.
    U.S. economic sanctions have made it more difficult and 
more costly for the Burmese regime and its financial supporters 
to profit from their oppressive policies. These sanctions have 
weighed heavily on decisionmakers and on their inner circle, 
and we have heard them complain privately and publicly, 
repeatedly and bitterly, about the impact that these sanctions 
have had in restraining them. And we believe that has all been 
to the good.
    At the same time that we concentrated our sanctions on the 
military government and its cronies, we worked diligently to 
minimize the adverse impact of sanctions on the Burmese people 
in every way possible. Our sanctions have not restricted travel 
or the exchange of information to or from Burma. We have 
broadly licensed personal remittances to Burma. In May 2008, in 
response to Cyclone Nargis, OFAC swiftly issued a new general 
license to facilitate the flow of aid to the Burmese people, 
authorizing financial transactions in support of not-for-
profit, humanitarian or religious activities.
    In addition, OFAC regularly issues specific licenses 
authorizing financial transactions in support of a broad range 
of not-for-profit activities in Burma, including conservation, 
higher education, civil society development, and certain 
noncommercial development projects.
    In recognition of the historic reform efforts under way, 
Secretary Clinton outlined on April 4 several key steps that 
the administration would be taking. In particular, Secretary 
Clinton announced that we would enable a broader range of not-
for-profit activities, and begin a targeted easing of the bans 
on the export of financial services and new investment.
    At the same time, Secretary Clinton underlined that 
sanctions and certain prohibitions would stay in place against 
those individuals and institutions that thwart efforts at 
reform. We are working already to implement those commitments. 
On April 17, OFAC issued a general license authorizing 
financial transactions in support of a broader range of not-
for-profit activities in Burma, and we are now preparing to 
take additional steps with regard to new investment and 
financial services. But, as Secretary Clinton announced, these 
measures will not constitute a wholesale lifting of sanctions. 
We will retain targeted measures against cronies of the former 
regime and their corporate holdings, and our sanctions 
framework retains its flexibility. If developments in Burma 
reverse course, we do have the authority to reverse these 
loosening measures.
    In summary, the Department of Treasury will continue to use 
a balanced regime of relaxing and retaining sanctions as 
appropriate to promote U.S. foreign policy goals toward a more 
free, more prosperous, and more democratic Burma. As the 
Burmese people determine their way forward and embrace the 
opportunity for democratic representation, we stand ready to 
work with our colleagues across the administration to assist 
them.
    Thank you very much.
    [The prepared statement of Mr. Szubin follows:]

             Prepared Statement of Director Adam J. Szubin

                              introduction
    Chairman Webb, Ranking Member Inhofe, and distinguished members of 
the committee, thank you for the opportunity to appear before you today 
to discuss current U.S. sanctions against Burma and how we are 
responding to the positive developments in that country. I am pleased 
to be here with Deputy Assistant Secretary Joseph Yun and Assistant 
Administrator Nisha Biswal.
                    response to recent developments
    Sanctions are an instrument of U.S. foreign policy and need to 
match and reflect developments in that policy. We have all witnessed 
over the past 8 months dramatic and rapid developments in Burma, 
including election of Aung San Suu Kyi and her party to the Parliament, 
the release of hundreds of political prisoners, and other important 
political reforms. We must recognize the important role that our broad-
based array of sanctions have played, but we also must adapt our 
framework in response to the progress we see on the ground. We intend 
to proceed cautiously; the United States still has concerns in Burma, 
including the remaining political prisoners, ongoing conflict in ethnic 
minority areas and serious human rights abuses, as well as Burma's 
troubling military ties to North Korea. What Secretary Clinton 
announced on April 4 was the beginning of a targeted process to ease 
certain sanctions in a manner that will contribute to our overarching 
principled engagement policy. We understand the importance of retaining 
flexibility to tighten and ease our sanctions as warranted by 
developments on the ground.
   background: use of sanctions against burmese officials and junta 
                                cronies
    As one tool among many that the United States and the international 
community have used to address concerns in Burma, our array of 
sanctions have played a central role in our policy on Burma over the 
past 20 years. In the wake of the Burmese regime's 2007 crackdown on 
Buddhist monks, the administration and Congress intensified our 
sanctions by expanding the scope of our authorities and increasing our 
efforts to identify and track the assets of bad actors. President Bush 
issued two new Executive orders and worked with Congress to enact the 
Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 
2008. On September 27, 2007, the Department of the Treasury's Office of 
Foreign Assets Control (``OFAC'') designated 14 senior officials of the 
Burmese regime.
    Throughout 2008 and into January 2009, the Treasury Department 
continued to target bad actors in Burma aggressively, designating 56 
entities and 12 individuals. Treasury targeted wealthy cronies of the 
Burmese regime and their companies and commercial holdings, 
highlighting their ties to illicit activities including drug 
trafficking and arms dealing. Treasury sanctioned the holdings of 
regime cronies: Win Aung, including his Dagon companies, and Steven Law 
and Cecilia Ng, including their Asia World and Golden Aaron companies. 
We also expanded sanctions against regime crony, Tay Za, to include his 
Htoo Group and Air Bagan.
    U.S. economic sanctions have made it more difficult and more costly 
for the Burmese regime and its financial supporters to profit from 
their repressive policies. Senior Burmese officials, such as the 
Foreign Minister, have publicly complained about sanctions and called 
for them to be lifted. And, in private conversations, influential 
businessmen in Rangoon with connections to the regime have complained 
about the detrimental effects sanctions have had on their business 
operations and lives. Between July 1, 2007, and March 24, 2011, 355 
transactions totaling approximately $11,100,000 involving Burmese 
individuals or entities were reported to the Treasury Department as 
blocked.
    At the same time, we have worked diligently to minimize the adverse 
impact of our sanctions on the Burmese people in every way possible. 
Our sanctions do not restrict travel or the exchange of information, to 
or from Burma. In May 2008, in response to Cyclone Nargis, OFAC swiftly 
issued a new general license to facilitate the flow of aid to the 
Burmese people by authorizing certain financial transactions in support 
of not-for-profit humanitarian or religious activities in Burma. In 
addition, OFAC regularly issues specific licenses authorizing financial 
transactions 
in support of a range of not-for-profit activities in Burma, including 
conservation, higher education, civil society development, and certain 
noncommercial development projects.
    In recognition of both the historic reform efforts underway in 
Burma, as well as the remaining concerns about those who oppose this 
transformation, Secretary of State Clinton outlined on April 4 several 
key steps the administration would take. In particular, Secretary 
Clinton announced that we would enable a broader range of nonprofit 
activities in Burma, and begin a targeted easing of the bans on the 
exportation of financial services to Burma and new investment in Burma, 
as part of our broader efforts to accelerate economic modernization and 
political reform. At the same time, Secretary Clinton underlined that 
sanctions and prohibitions would stay in place against those 
individuals and institutions that thwart efforts at ongoing reform.
    Treasury is working to implement these commitments, and on April 17 
OFAC issued a general license authorizing financial transactions in 
support of a broad range of not-for-profit activities in Burma. This 
general license replaces the earlier license issued in response to 
Cyclone Nargis authorizing financial transactions in support of not-
for-profit humanitarian and religious activities. It expands that 
authorization to allow funds to be sent to Burma in support of not-for-
profit activities such as conservation, education, democracy-building 
and good governance, and certain noncommercial development projects.
    We are now preparing to take additional steps with regard to new 
investment and financial services. But, as Secretary Clinton announced, 
these measures will not constitute a wholesale lifting of sanctions. We 
will retain sanctions targeting, among others, parastatals, cronies of 
the former regime and their corporate holdings. And our sanctions 
framework is fluid and flexible--if developments in Burma reverse 
course, we can revoke licenses and reverse other measures.
    In our use of sanctions to pressure the Burmese Government to 
change, the United States has not acted alone. Sanctions have maximum 
effect when they are part of a coordinated multilateral effort. 
Although we have not had the benefit of a U.N. Security Council 
Resolution, the United States has worked with friends and allies around 
the world, including the European Union, Canada, and Australia, to 
coordinate sanctions actions against the former regime in Burma. In 
recent days, our friends and allies have lifted and suspended their 
respective sanctions regime on Burma; the United States, like our 
friends and allies, agree that steps need to be taken to recognize the 
changes that have occurred in Burma and encourage further progress. 
However, we intend to pursue a careful and calibrated approach and will 
continue close and strong coordination with our partners to ensure 
continued progress on our remaining concerns.
                               conclusion
    The Department of the Treasury will continue to use a balanced 
regime of relaxing and continuing sanctions where appropriate to 
incentivize the Burmese Government down the road of political reform 
and toward a more free and prosperous Burma. As the Burmese people 
determine their way forward and embrace the opportunity for democratic 
representation, Treasury stands ready to work with our colleagues 
across the administration to assist them.

    Senator Webb. Thank you. Thank all of you.
    A vote has been called. Senator Inhofe would like to ask a 
question. I'm going to go ahead and yield to him. I'm going to 
stay here through the vote.
    Senator Inhofe. Yes. Mr. Szubin--first of all, I'm sorry I 
wasn't here on time. We're having a lot of conflicts today.
    On the sanctions you're describing there, it's my 
understanding--has the EU lifted sanctions?
    Mr. Szubin. Yes, they have suspended sanctions in greater 
measure----
    Senator Inhofe. The EU has suspended all of them?
    Mr. Szubin. With the exception of an arms export ban.
    Senator Inhofe. OK. And we are now talking about lifting 
some sanctions.
    Mr. Szubin. That's right.
    Senator Inhofe. But we don't know what ones. You're not 
here today to talk about what is going to be the recommendation 
of the State Department in terms of what sanctions should be 
lifted?
    Mr. Szubin. That's right. We are currently discussing those 
steps within the administration very actively, with an aim 
toward charting and continuing the course that Principal Deputy 
Assistant Secretary Yun----
    Senator Inhofe. I've heard some authentic rumors, I don't 
think so--but some pretty good reports that they feel that we 
may be lifting sanctions, but not sanctions on oil and gas. Mr. 
Szubin, is that wrong or can you tell me where on your priority 
lift of lifting sanctions oil and gas would be placed?
    Mr. Szubin. At this point I can't comment on specific 
sectors as to whether sanctions will be eased or not. What I 
can point back to, Mr. Senator, is the principles that animate 
these discussions within the administration.
    Senator Inhofe. OK, that's fine. But let's stop and realize 
and think about this. Sanctions are there to punish. They're 
there because you've been a bad boy and we're going to have 
sanctions on you, right?
    Mr. Szubin. They're there to influence behavior.
    Senator Inhofe. Yes, I understand. Now, if you were to come 
up and decide you were going to lift sanctions and not lift oil 
and gas, and yet the EU and other countries have lifted it, it 
doesn't punish them at all because they will merely do it, but 
do it with other countries than the United States. Isn't that 
correct?
    Mr. Szubin. That's an argument that's made against 
sanctions at any time when they're not global. I would note 
that the sanctions against Burma that have been retained have 
never been global. The U.N. Security Council has not authorized 
sanctions.
    Senator Inhofe. OK, I'm not communicating. Someone's going 
to be punished by--assume that you were lifting all sanctions 
except oil and gas. Make that assumption. If that happens, 
they're not punished, we are.
    Isn't that correct? They're going to go ahead and do their 
exploring, do their drilling, and reap all the profits. It will 
just be with someone other than the United States.
    Mr. Szubin. As I said, Senator, at the time of the Burmese 
crackdown I heard those same arguments being made, that the 
Chinese were exploring Burmese oil and gas sectors and we were 
the ones who were punishing ourselves. Obviously, there's an 
aspect to that with sanctions. We are restricting the 
opportunities for U.S. businesses any time we impose sanctions. 
At the same time, there are other principles that we're 
vindicating in imposing those sanctions, and we believe, given 
the unique skills and talents and resources that U.S. 
businesses bring to bear, there is a real impact when we say to 
a country: You will not have the benefit of U.S. firms 
participating.
    Senator Inhofe. That's true in a lot of businesses. It 
isn't true in drilling because all countries do this. This is 
something that we're not going to do any differently than any 
of the other countries who previously had sanctions on them or 
didn't have them at all. I just can't see the logic in saying 
we're going to leave sanctions on oil and gas, when they're 
going to continue to develop their oil and gas, but with 
somebody else.
    Now, it may not be true in some other businesses and 
industry where we have a unique ability to do something other 
countries can't do. It's not true in oil and gas.
    Mr. Szubin. Please don't take me to be saying that that is 
indeed the direction.
    Senator Inhofe. Well, if it comes I just want to make sure 
we've got it on the record that it's another thing that we 
shouldn't be doing. That's all.
    Mr. Szubin. Thank you.
    Senator Webb. Thank you, Senator Inhofe.
    I am probably going to miss this vote unless I am needed on 
the floor. I want to keep this hearing going. I'm never going 
to be Cal Ripken anyway in terms of consecutive votes, so I 
guess if I'm going to miss one this is a good reason to be 
missing it.
    Let me first of all start by saying, Director Szubin, I'm 
not here to debate whether or not sanctions are a good idea. We 
have a lot of different opinions about that, and I think that 
anyone who's going to have that debate should be able to 
honestly discuss the changes in policy in China and Vietnam. I 
actually was one who opposed the idea of lifting the trade 
embargo against Vietnam, until the Japanese lifted their trade 
embargo in 1993, and then I supported it. And, quite frankly, I 
saw a lot of very positive benefits in doing that.
    But that's not really the purpose of the hearing. I held a 
whole separate hearing at one point on sort of the situational 
ethics of American foreign policy, where do we find consistent 
standards when we start applying these sorts of policies.
    What I'm really interested in today, particularly from the 
three of you, which is why I asked that we have the three of 
you in a panel, is to give us some context here in two areas. 
First, I would be interested in knowing a comparison of the EU 
sanctions that were just lifted and what it took there compared 
to what it takes here, but what the areas are. I assume it's 
all of their trade areas. I understand this is a suspension, 
but what is the difference in their sanctions versus ours?
    The second question that I would have--and I think the 
three of you are uniquely qualified to answer it--is what 
exactly are the processes that we would go through, assuming 
that we were to lift a number of these sanctions? How many of 
them are capable of being lifted through the executive process 
and which ones specifically require further legislation? 
Secretary Yun, if you could begin and open us on that. But all 
three of you; I'm very interested in seeing if we can't sort 
this out on the record.
    Mr. Yun. Thank you very much, Mr. Chairman. I do want to 
emphasize one thing, which is as we continue to deliberate and 
form how we should stand vis-a-vis the changes that are going 
on there, we will consult broadly, and we have consulted with 
you and we will continue to consult with you.
    As Director Szubin mentioned, really we have decided to 
ease sanctions. We have not come to conclusions on the steps we 
need to take.
    Senator Webb. I understand that. But my question is, If 
this process were to move forward, which portion of it is 
doable through decisions by the executive branch and which 
elements would require further legislation? We have a very 
complex series of policies with respect to this country that I 
don't think we've had with very many others. So that's really 
what I would like to hear about. I understand the 
administration's present policy.
    Mr. Yun. May I turn to Director Szubin, who is the real 
expert on these things.
    Mr. Szubin. Sure. And yes, Mr. Chairman, it is a complex 
area of sanctions, with overlapping statutes, as you mentioned, 
as well as Executive orders. And it does take even an expert--
and I wouldn't classify myself as an expert, but it does give 
one pause in assessing the full framework.
    That said, it is as a general matter true that the main 
categories of sanctions that have been imposed, whether by 
statute or by Executive order, can be lifted by the executive 
branch should--either via licenses or via Presidential 
rescission of Executive orders or issuance of waivers, 
typically on a national security of the United States waiver 
threshold.
    That's true with respect to the investment ban, which would 
require a Presidential waiver, but can proceed upon a 
Presidential waiver. That's true with respect to the import 
bans that were first issued in the Burmese Freedom and 
Democracy Act and then expanded in the JADE Act, with a waiver 
that has been delegated to the Secretary of State. That is true 
with respect to designated entities, senior Burmese officials, 
their cronies and the companies and parastatals that they 
control that have been subjected to both congressional and 
executive sanctions.
    There is already a waiver process in place that allows for 
those companies to be effectively delisted or for licenses to 
be issued to deal with those companies and those individuals 
upon a determination by the Treasury Department.
    Finally, in terms of exports of financial services to 
Burma, there is no legislative restriction at all. That's 
purely governed by the Executive orders that the President has 
put in place pursuant to IEEPA.
    Senator Webb. Just to be clear in our understanding, that 
conceivably could be done and still separate out the bad actors 
that you were discussing in your testimony?
    Mr. Szubin. Yes. And I believe Secretary Clinton even 
alluded to this in her April 4 statement, that we have 
designated, which is just term of art for developing an 
evidentiary record and putting someone's name on the sanctions 
blacklist, we have designated a number of former leaders from 
the military regime as well as their cronies, individuals like 
Steven Law, Tay Za, who have become very rich, often on the 
backs of the Burmese people, and typically engaging in some 
grey or illicit activities.
    Senator Webb. Right. So they could be separated out if an 
Executive decision were made on these other areas you're 
talking about.
    Mr. Szubin. That is correct, sir.
    Senator Webb. Secretary Yun, what's the position of the 
administration on the actions that the EU just took?
    Mr. Yun. We have consulted closely with the U.N. We 
understand that they have moved to suspend the sanctions, all 
but the arms trade. Clearly, they are their own boss, but we 
have been consulting closely. We believe, given the 
developments that have gone on, the political openings, 
economic openings, those were the paramount concern of the EU. 
They made a number of visits. So I think it's fair to say they 
had their reasons, as we do ours.
    Senator Webb. So there's no--I'm not trying to put words in 
your mouth, but there's no particular resistance or criticism 
from the administration for the action that was just taken?
    Mr. Yun. No; we have not criticized, nor have we made any 
comments on them, yes, sir.
    Senator Webb. Administrator Biswal, one of the comments 
that I heard from President Thein Sein when I met with him was 
an eagerness to learn more about democratic systems. My 
impression was this is not the situation you would have in many 
of these other historic evolutions, where you have the desire 
of the people on top simply to perpetuate a system of the past, 
although there are concerns in that area clearly from people 
who have had reservations about the changes that have been 
made.
    But the question really is, Are we exploring ways to teach 
or assist in the understanding of democratic processes across 
the board, even with the ruling party?
    Ms. Biswal. Thank you, Senator Webb. I had the opportunity 
to travel to Burma just a few weeks ago and to meet with people 
in all levels of government, in the executive branch as well as 
in the Parliament. And I also came away with not only the 
desire, but also the awareness of the lack of capacity to enact 
the type of reforms that they are seeking to enact.
    So we are exploring a number of different possibilities. 
One is as we look toward the 2015 elections it's clear that we 
are going to need to work with the government and Parliament. 
The international community writ large will need to work with 
institutions inside government and outside government to build 
knowledge, understanding, and capacity of democratic practices. 
We are looking at programs, including strengthening the 
Parliament. In our meetings with Thuya Shwe Mann, the Speaker 
of the Lower House, as well as with the Speaker of the Upper 
House, there was a great desire to build the capacity of 
Parliament to act as an effective check on the Executive.
    In many of the ministries where we met, there was a desire 
to build their technical capacity as well as their management 
systems and capacity. Then in civil society as well, we see a 
desire to create more formal management structures and 
capacity. It's a very resilient civil society, but still a very 
informal one out of necessity. So we're exploring all of those 
opportunities.
    I think that the needs are vast and the challenge for us is 
how to prioritize and sequence our engagement for maximum 
impact.
    Senator Webb. Thank you very much. I couldn't agree with 
you more. I think that we are pretty good at working with 
opposition groups, as well we should be, in many parts of the 
world in order to help create a better understanding of 
democratic systems. I think this is a fairly unusual situation 
here, where we do at least at the moment have the opportunity 
to work with the governing systems in this area as well. I 
would hope you would continue to do that.
    I'm going to have to end the panel at this point in the 
interest of time. I appreciate all of your testimony and we 
will leave the committee hearing record open until--I was going 
to say close of business tomorrow. We may not be in session 
tomorrow. But if not close of business tomorrow, then the end 
of the close of business of the first day that we are back in 
session.
    Thank you all again for your testimony.
    We'll now hear from the second panel. I'd like to welcome 
three distinguished experts on Burma and on Southeast Asia: Mr. 
David Steinberg is a specialist on Burma, the Korean Peninsula, 
Southeast Asia, and U.S. policy in Asia. He's the distinguished 
professor of Asian Studies at Georgetown University. He was 
previously a representative of the Asia Foundation in Korea, 
Hong Kong, Burma, and Washington, DC. As a member of the Senior 
Foreign Service, he also served as Director for Technical 
Assistance in Asia and the Middle East for USAID and Director 
for Philippines, Thailand, and Burma Affairs.
    Dr. Karl Jackson is the distinguished professor of 
Southeast Asian Studies at the School for Advanced 
International Studies at Johns Hopkins University. He's a 
former professor of political science at the University of 
California-Berkeley and adviser to the World Bank, 
International Finance Corporation; additionally, served as 
National Security Adviser to the Vice President, senior 
director for Asia at the National Security Council during the 
George H.W. Bush administration, was Deputy Assistant Secretary 
of Defense for East Asia during the Reagan administration.
    Mr. Peter Manikas is a senior associate and regional 
director for Asia Programs at the National Democratic 
Institute. Previously he served as the Institute's chief of 
party in Bangladesh, Cambodia, Indonesia, and Malawi. He has 
been involved in NDI's democratic development work in more than 
30 countries since 1988. Earlier this month he participated in 
observing Burma's parliamentary 
by-elections as one of two nongovernmental U.S. observers. Mr. 
Manikas is a lawyer and member of the Illinois bar.
    Gentlemen, welcome. Thank you for coming to testify today. 
Mr. Steinberg, let's begin with you. Thank you very much for 
being here.

 STATEMENT OF DAVID STEINBERG, PH.D., DISTINGUISHED PROFESSOR, 
 SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY, WASHINGTON, 
                               DC

    Mr. Steinberg. Thank you very much, sir. I'm honored to be 
here. I'd like to second Secretary Yun's comments on your 
leadership. This has been very important. I'll summarize my 
report.
    The reforms I believe are real. They are unlikely to be 
rescinded in their entirety, but they are, however, fragile. 
There's internal opposition both against them or against the 
speed, and one of the problems is a lack of capacity, not to 
articulate the reforms, but to implement them.
    There are external problems as well. Potential changes, if 
they don't occur in donor policies, will show that the reforms 
have not produced the desired effect, and if donors attempt to 
take credit for the reforms. That is very important. These are 
Burmese reforms and they must be seen that way.
    There is in Washington now an intensive campaign against 
reducing sanctions based on the fact or the assessment that the 
government is insincere and that we should await comprehensive 
reforms in a variety of fields. I disagree with both of these 
and will talk about that in my report.
    Initiating change in Myanmar is difficult under this 
administration because policy must be put into law and it must 
be implemented without the taut military system, command 
system, that existed previously. Minority issues are the most 
important problem facing the country. It's been the most 
important problem since independence. We are beginning to see 
some positive effects in the Karen area, but much more needs to 
be done, obviously.
    I believe U.S. policy should concentrate on pluralism, 
civil society, local legislatures, and the development of 
nongovernmental resources inside the country. China is 
exceedingly important in this relationship. The Chinese have a 
comprehensive strategic cooperative relationship, partnership 
with Burma, but the Chinese trust Myanmar less because of the 
Myitsone Dam construction stoppage. China views the United 
States policy as part of the containment of China, but there 
are avenues of cooperation with China to avoid what China 
really worries about, which is a bloody people's revolution 
like 1988, which would destroy their position, or insurrections 
on the Chinese frontier that would destroy their 
infrastructure.
    I have a set of recommendations that I will quickly read. I 
hope that the United States can speed the confirmation of a 
resident ambassador and nominate an appropriate and 
knowledgeable person to take his place as the ambassadorial 
coordinator.
    I would like to see the official use of ``Myanmar'' as the 
name of the state, and I think Aung San Suu Kyi will be 
basically put in that position when she is in the legislature.
    We should develop a timetable for the quid pro quo relief 
from sanctions as reforms in Burma continue to be implemented, 
while providing immediate changes in banking and certain labor-
intensive industry regulations.
    We should begin dialogue with the Chinese on collaborative 
efforts to provide economic assistance and to assist in 
ameliorating minority problems along the Chinese periphery.
    We should be supporting indigenous civil society 
organizations and delegating to the U.S. Embassy in-country the 
authority to use U.S. official assistance directly to state-
sponsored or supported institutions if and when local 
conditions justify that action. It should be a local decision, 
not a Washington decision.
    We should encourage U.S. and ASEAN institutions to engage 
in extensive capacity-building across a broad spectrum of 
society needs, encourage the growth of autonomous, 
intellectually respectable institutions of higher education and 
learning, provide educational materials, encourage U.S. private 
sector and nonprofit institutions to consider support to both 
resident and nonresident teacher consultants to assist the 
Burmese in this process, support the development of appropriate 
concepts of law, legal institutions, and associations, and an 
independent judiciary, as the Burmese Constitution stipulates, 
but which is unlikely at the moment.
    We should work with the Burmese Government on plans for the 
reintroduction of nonlethal IMET training; and we should help 
on the environmental issues.
    I would like to say one thing on the sanctions issue, that 
sanctions are a tactic and the tactic under the both Clinton 
administration and the Bush administrations was regime change, 
and that was not going to happen. Under the Obama 
administration, sanctions have been an element in reform and I 
believe that is an appropriate policy for sanctions if you're 
going to have sanctions. But I would like to see a time limit 
set on this.
    Thank you, sir.
    [The prepared statement of Mr. Steinberg follows:]

                Prepared Statement of David I. Steinberg

    I am honored to have been asked to testify before this subcommittee 
on issues related to Burma/Myanmar. I will use the term Myanmar, rather 
than Burma, in reference to events since 1989 when the country's 
military rulers changed the name of the state. I do so without 
political connotation, as virtually all states have used Myanmar except 
the United States. I expect that will change in due course. It took 
some two decades for the United States to call the capital of China 
Beijing rather than Peking.
    I would like to comment on the reforms and changes that have taken 
place in Myanmar under the new administration that came into power in 
March 2011. It is most appropriate near its first anniversary to assess 
the prospects for progress in that country, and possible responses from 
the international community, and more specifically from the United 
States, and to consider the U.S. national interests in Myanmar.
    Since the remarkably open and self-critical inaugural speech of 
President Thein Sein on March 30, 2011, both foreign observers and 
Burmese have been astonished by the breadth, scope, and speed of the 
reforms articulated by the President. Although many foreigner observers 
called the elections that brought him and his government to power a 
``sham,'' which they were not, or ``deeply flawed,'' which indeed they 
were by any objective international measure, so comprehensive have been 
the positive changes both articulated and instituted that the world has 
generally recognized that this is not simply a repeat of the 
maladministration of the past half-century of direct and indirect 
military rule. Rather, these changes are the most important chance 
since 1962 for Burmese society to redeem its lost social and 
developmental promise. The public recognition of the dire state of the 
state was the first step toward comprehensive reforms that have been 
needed since the military coup of that year.
    Yet external critics of the military junta have engaged in an 
obvious and intensive campaign in Washington from denigrating the 
reforms to encouraging the slowing of the process of modification or 
elimination of sanctions. They variously attributed the articulated, 
planned reforms of President Thein Sein as an insincere, superficial, 
and cynical attempt to placate foreigners to win approval for Myanmar 
to chair the ASEAN summit in 2014, and to eliminate the rigorous 
sanctions regimen imposed, most severely, by the United States. 
Although the present government is an outgrowth of the military, which 
had ruled the country since 1988, and although its abuses are well 
documented, I believe this conclusion is both simplistic and wrong. 
Some adherents of this persuasion have called for continuing the U.S.-
imposed and sequenced sanctions until a change in government occurs 
and/or comprehensive reforms in all fields have been achieved.
    There are two inaccuracies in this approach. First, serially 
introduced sanctions (1988, 1997, 2003, 2008) are not an end: they are 
simply a tactic to achieve the changes in policies or actions 
objectionable to the United States. During the administrations of 
Presidents Clinton and Bush, that goal was regime change--honoring the 
results of the May 1990 elections that were swept by the opposition 
National League for Democracy (NLD). The Department of State reports to 
the Congress during that period repeatedly called for recognition of 
the NLD's right to rule, even though the elections were for a new 
constitutional convention, not a government. In effect, the U.S. 
position to the junta was: get out of power and then we will talk to 
you. This was, I submit, patently absurd. President Obama changed that 
policy to call for reforms rather than regime change and this created a 
new and positive dynamic to the bilateral relationship to which the 
Burmese responded. That policy--pragmatic engagement--recognized the 
internal U.S. political need to continue sanctions but to engage in 
high-level dialogue. That policy has proven to be positive.
    The second problem, that of awaiting comprehensive reforms in all 
fields in which the United States has especial interests (including but 
not limited to human rights, labor, religion, child soldiers, 
trafficking, minority problems, censorship, rule of law, constitutional 
changes, etc.), is that reform is a never-completed process, for as 
progress is made in one or several fields, there is always more to be 
done. The United States has significant experience in that arena. So 
awaiting the resolution of all issues in all areas of concern is a 
surrogate for continuing in perpetuity the sanctions in some form and 
to some degree. Rather, the easing of some sanctions is more likely to 
be a spur to progress, rather than an impediment to positive changes in 
that society. In spite of NLD claims that broad sanctions have not hurt 
the Burmese peoples, this is patently inaccurate. ``Targeted 
sanctions'' are also likely to be ineffective in promoting change in 
that society.
    The scope of the planned and implemented changes in Myanmar is 
remarkable, comprehensive, and encompasses major elements of that 
society. A cease-fire with the Karen, the longest rebellion in the 
modern world beginning in 1949, has been achieved. Political prisoners 
have been released, and any remaining number (variously calculated and 
in dispute) incarcerated is under review. By-elections have been held 
on April 1, 2012, swept by the NLD, conclusively illustrating that they 
were free and fair. Aung San Suu Kyi and her colleagues can take their 
seats in Parliament. A liberalized labor law has been enacted. 
Censorship has been vastly reduced. Currency reform has started and 
other economic changes, including a new foreign investment law, are in 
process. Construction on a major Chinese dam has been stopped because 
of popular antipathy. The President is committed to better health and 
education with increased budgets for those fields. He is concerned over 
better minority relations--peace not simply cease-fires, which are but 
the first steps in that process. Aung San Suu Kyi has publicly 
indicated that she believes that President Thein Sein is sincere in his 
desire for positive change.
    Institutionalizing these planned changes, however, is more 
difficult under the new governmental system than under the previous 
junta. By ruling by decree under a military command system, the junta 
could institute its will by fiat. Policy became fact--for better or 
worse. Now, this new government must first articulate proposed 
policies, then translate them into laws and pass them in the 
government-controlled legislature but with significant debate, and 
finally implement them without the same degree of authoritarian control 
that previously existed. We have seen that in the Kachin State, for 
example, centrally mandated cease-fire policies are not easily or 
smoothly transformed into action: the center under the new government 
will have more difficulty in controlling the periphery. However much 
the new government is the product of the previous military regime, 
differences between both are already apparent.
    Is such broad progress irreversible? There are conflicting views. 
It is highly unlikely that the changes could be comprehensively 
rescinded without major popular unrest. But there are two aspects of 
possible regression: internal issues and foreign responses. Internally, 
there are obviously those within the old regime who still have 
considerable power and who are against change or want change to proceed 
slowly. Some in society will lose their privileged positions, access, 
and economic opportunities, and will be concerned. If those close to 
the previous military regime see the government's reform efforts 
falter, or if reforms come too quickly to be ingested, or are badly 
implemented, or indeed if they are not implemented at all, then 
retrogression is possible. Internal momentum thus must be maintained at 
a pace consistent with capacity if internal receptivity is to continue, 
and the people must begin to feel that reforms are having a positive 
impact, or have the potential to improve their lives.
    External impacts on the reforms must be deftly undertaken. The 
administration wants results from the reforms, ranging from practical 
economic benefits in trade and investment that the relief from 
sanctions would bring, to a more balanced foreign policy, increased 
international political legitimacy, respectability for the military's 
role in society, and indeed recognition of their patriotic concerns 
over the well-being of the people. If the response from the outside 
community is inadequate, and importantly the United States is the 
central actor in this drama because of its power and past negative 
role, then Burmese who have been against reforms could claim that these 
changes were unsuccessful, and the old, authoritarian ways were better. 
If, on the other hand, the United States or other foreigners were to 
claim credit for the reforms and they were seen to be instituted under 
foreign auspices and serve international--rather than Burmese--needs, 
then a negative nationalistic reaction could set in.
    To date, the U.S. response to the new government has been 
appropriate and successful. The U.S. executive branch's measured 
engagement and congressional sensitivities are understood at the 
Burmese Cabinet level. They know that resolution of the sanctions 
issues is both legally complex and politically charged, and is likely 
to be a lengthy process. Progress has already been made, and the 
Burmese recognize these changes. Although realizing that some forms of 
sanctions are likely to continue for some time, key economic advisors 
to the Burmese President have called for modification of the sanctions 
that would have a positive impact on the Burmese antipoverty program. 
They call for the removal from the sanctions of certain types of labor-
intensive industries, especially those employing women, that would 
provide jobs, and the lifting of the prohibition of the use of U.S. 
banking facilities, as this increases the problem of Burmese 
competitiveness on the world's markets. Such changes would have both 
positive social and economic effects.
    United States public diplomacy toward Myanmar has been composed of 
a single strand--human rights and democracy, when normally the United 
States has multiple concerns in any country. That policy has been 
influenced by Aung San Suu Kyi, or what the United States, or her 
followers, believed to be her views. I have regarded reliance on any 
single foreigner, no matter how illustrious or benign, in any country 
as the primary influence on U.S. policy toward that country as 
inherently unsound. Now, Aung San Suu Kyi is in government and a member 
of the legal opposition. She will have the freedom to articulate her 
views and they will be reported in the Burmese media. As she, and the 
U.K. Prime Minister, have called for the suspension of sanctions 
(``suspension'' is a political euphemism and more acceptable than 
``removal,'' but their meaning in this context is the same because 
sanctions could be reimposed at any time), there is a clear path to 
move ahead on their gradual elimination in the interests of the Burmese 
people.
    If these changes are not superficial or insincere, as I have tried 
to illustrate above, then will they bring democracy as understood in 
the West and the United States? Certainly not in the near term. The 
military have designed a system where their control will remain over 
policies they regard as essential to the state and their interests. 
They have explicitly done so in the 2008 constitution that includes 25 
percent Active-Duty military in the legislatures at all levels, and in 
various other provisions. Their interests include military autonomy 
from civilian control, the unity of the state, and the importance of 
their interpretation of national sovereignty. Even under a market-
oriented economy, which they espouse, and greatly enhanced foreign 
investment, the military's economic interests are highly important and 
influential though military-owned conglomerates that are not part of 
the public sector. Even so, built into the military-mandated 2008 
constitution are elements of pluralism that need fostering both from 
internal and external sources. Even under such a system, there is ample 
room for improvement in social and economic factors.
    The most immediate problem facing the new administration is also 
the oldest since Burmese independence in 1948, and has been the 
essential issue facing the state since that time. That is, the balance 
between the power and resources of the central government, dominated by 
the ethnic Burman majority, and the diverse minority peoples who 
comprise about one-third of the population but who occupy a far greater 
proportion of the land base containing much of the natural resource 
wealth of the state. Majority-minority relations have been the primary 
problem of the country since 1948; no civilian or military government 
has resolved them, with the military regimes exacerbating the issue. 
Every major ethnic group has had a significant element of its 
population in revolt at some time, and in spite of 17 official cease-
fires, peace where it exists is still fragile.
    Some minorities half a century ago wanted independence, but now 
will settle for some sort of federal structure, but federalism is 
anathema to the military who have argued for 50 years that it is the 
first step toward secession. The problem is exacerbated because all 
neighboring states (except Laos), and the U.K. and the United States, 
have supported rebellions or dissidents across borders that are 
ethnically porous. The solution to minority issues is urgent, but the 
credibility of all foreign powers in assisting resolution, given past 
history, is questioned by the central government. Yet devolution of 
more authority and revenues, and increased cultural respect of the 
minorities and languages and cultures, beyond the appropriate rhetoric 
of the constitution, is required if a long-term resolution is to be 
found. It should also be remembered that the NLD is a Burman party, and 
although it had called for a federal structure, it has only limited 
influence in minority regions.
    One major challenge to continuing reform is the lack of an adequate 
capacity in almost any field. This is the result of isolation both 
political and intellectual, and the effective collapse of standards in 
an education system that was once the pride of the region. Capacity-
building is essential in any field, including the modern international 
training of teachers both in country and abroad, especially in the 
ASEAN region. As this process continues and as foreign public and 
private assistance flows in, experience in other states has shown there 
is likely to be intense competition for these capable individuals to 
the detriment of coordinated foreign assistance.
    This paucity of capacity is exacerbated by the weakness of 
institutions aside from that of the military itself. This is both a 
product of past military attempts to consolidate power by weakening 
institutions and organizations not under their control, but it is also 
an aspect of the personalization of power in Burmese society, where 
loyalty has been to individuals and not to institutions. The building 
of pluralistic institutions, public and private, is an important 
element of change and growth.
    Although U.S. policy has consistently focused on democracy 
building, a preliminary stage toward that goal would be to concentrate 
on the building such pluralism, and the movement from a unitary state 
to a more complex system--one that is locally responsive to local 
needs. The potential institutions for this change are built into the 
new constitution: the state, regional, and minority legislatures at 
local levels. Although they may not have been originally conceived a 
serving this role, the potential is there. The strengthening of all 
legislatures at central and local levels could be an important focus of 
foreign assistance.
    The regional impact of the Myanmar reforms is highly significant. 
The European Union will likely drop its sanctions this month. ASEAN 
certainly regards the changes as strengthening ASEAN as a whole. 
Thailand has major plans to develop the Dawei (Tavoy) region as an 
industrial hub, building industries that (as the former Thai Prime 
Minister noted) could not be constructed in Thailand because of 
environmental concerns. After China, Thailand is the second-largest 
investor in Myanmar. Japan, after pressure from the United States to 
withhold all but humanitarian aid, is prepared to provide major 
assistance and to forgive Myanmar's massive debt to that country. It 
has diverse historical and contemporary interests in Myanmar, not the 
least of which is moderating Chinese penetration and influence. India 
has important policy objectives, part of which, like Japan, relate to 
moderating China's domineering role, but also importantly are focused 
on India's own Northeast region which has been plagued by rebellions. 
Delhi is working with Naypyitaw to develop a transit route (The Keledan 
River Multi-Modal Transport Project) to the Northeast through Myanmar's 
Rakhine and Chin states.
    It is China, however, that is critical to Myanmar and important in 
U.S. relations with that country.In May 2011, China and Myanmar signed 
a ``comprehensive strategic cooperative partnership'' agreement. 
Although China has signed such agreements with other states, this was 
significantly the first time with Myanmar. Some erroneously thought 
that Myanmar had become a client state of China. Yet several months 
later President Thein Sein ordered stoppage on work on a major $3.6 
billion Chinese dam on the Irrawaddy River in a culturally sensitive 
area in the Kachin State, as he said he listened to popular opinion 
against it.
    Although China has erroneously viewed the changed Obama Myanmar 
policy as part of a planned containment of Chinese interests in the 
region, there are important potential avenues of cooperation between 
the United States and China related to Myanmar. China fears two 
potential dangers in that country: a people's uprising like that in 
1988, or minority warfare near the Chinese frontier that could 
jeopardize Chinese infrastructure projects in those regions.
    China officially welcomes the U.S. improvement of relations with 
Myanmar, as long as that influence does not threaten Chinese national 
interests, which are important in Myanmar, which has been built into 
major Chinese economic planning. China recognizes that the best 
antidote to civil unrest in Myanmar is broad-based development that 
only the West can help bring, so there are potential avenues for 
cooperation there. The United States and China could also collaborate 
on assisting the process of reconciliation with the minorities on the 
border with China. Such cooperation would serve Chinese interests, 
improve the lives of the minority peoples in those areas, and open 
those areas to U.S. and international business as well. Although 
suspicions abound in Myanmar on U.S.-China relations, this need not be 
the case. The United States would have to recognize Chinese national 
interests in its oil and gas pipelines and in environmentally and 
socially sound hydroelectric projects, while China would have to 
understand the U.S. concerns for a stable and prosperous Myanmar in 
light of the U.S. alliance with Thailand and the burgeoning 
relationship with India.
    The United States needs to continue its engagement with Myanmar by 
responding to positive plans there with supportive policies and actions 
designed to improve the condition of the Burmese peoples, which is in 
the national interests of the United States.
    United States has a national interest in the development of a 
stable, prosperous, cohesive yet pluralistic Myanmar with a responsible 
and balanced foreign policy.
    In summary, U.S. interests in Myanmar would be served by the 
following actions:

   Speeding the Senate confirmation of Derek Mitchell as 
        resident Ambassador in Myanmar. His work as ambassadorial 
        coordinator has been exemplary.
   Nominating an appropriate, knowledgeable person to take his 
        place as the regional coordinator on Myanmar policy to 
        supplement the internal U.S. ambassadorial role.
   Officially using Myanmar as the name of the state.
   Developing a timetable for quid pro quo relief from 
        sanctions as reforms in Myanmar continue to be implemented 
        while providing immediate changes in banking and in certain 
        labor-intensive industry regulations.
   Beginning dialogue with the Chinese on collaborative efforts 
        to provide economic assistance and to assist in ameliorating 
        minority problems along the Chinese periphery.
   Supporting reputable indigenous civil society organizations 
        and delegating to the U.S. Embassy in country the authority to 
        use U.S. official assistance directly to state-sponsored or 
        supported institutions if and when local condition justify such 
        action.
   Encouraging U.S. and ASEAN institutions to engage in 
        extensive capacity-building across a broad spectrum of 
        society's needs.
   Encouraging the growth of autonomous, intellectually 
        respectable institutions of higher education and learning.
   Provision of educational materials that would support both 
        internal capacity-building and higher education.
   Encouraging the U.S. private, educational, and no-profit 
        institutions to consider support to both resident and 
        nonresident teachers/consultants to assist the Burmese in these 
        processes.
   Supporting the development of appropriate concepts of law, 
        legal institutions and associations, and an independent 
        judiciary, as the Burmese Constitution stipulates.
   Working with the Burmese Government on plans for the 
        reintroduction of a non-lethal IMET training.
   Encouragement of the Burmese human rights commission 
        activities.
   Advocacy on analysis and amelioration of environmental needs 
        related to Myanmar's natural resources and economic expansion.

    This is a unique moment in U.S. Myanmar relations, and it should 
not be ignored.

    Senator Webb. Thank you very much.
    Mr. Manikas, welcome.

   STATEMENT OF PETER MANIKAS, SENIOR ASSOCIATE AND REGIONAL 
  DIRECTOR FOR ASIA PROGRAMS, NATIONAL DEMOCRATIC INSTITUTE, 
                         WASHINGTON, DC

    Mr. Manikas. Thank you very much, Mr. Chairman. It's a 
pleasure to be here. I look forward to testifying on the recent 
reform efforts in Burma. I have been involved in Burma for 
quite some time, but it's been only recently since we've had 
the opportunity to actually travel there. I've made two trips 
since January, the latter one being around April 1 as part of a 
two-member delegation to observe the by-elections.
    During both of those trips, though, I found widespread 
agreement among all the people that I talked to that the recent 
changes are very significant and that they've led to a 
significant opening of the political space. At the same time, I 
think everybody's quite concerned about how far these reforms 
are going to continue to go and how much more needs to be done 
to help ensure that democratization continues.
    As the nation heads toward elections in 2015, there is not, 
for example, a level playing field. With 25 percent of the 
seats in the legislature reserved for the military, opposition 
parties face a very difficult challenge in garnering a 
majority. Also, the constitution is unclear on the scope of the 
civilian government's authority over the military, and the 
military retains a veto power over constitutional amendments.
    In addition, human rights abuses persist, particularly in 
the border areas, and, while many political prisoners have been 
conditionally released, others remain in custody.
    Mr. Chairman, the recent by-elections provided the first 
opportunity in more than two decades for the NLD to compete for 
public office and, while there were several problems in the 
elections, they marked an important step forward in the reform 
process.
    I was invited by the U.S. Government to view the by-
elections along with a colleague from the International 
Republican Institute, but because of the limitations on our 
ability to observe every aspect of the electoral process it was 
not really an international election observer mission that met 
international standards. However, we were able to see more than 
we initially expected. Polling officials often invited us into 
polling stations, despite the lack of legal authority to do so.
    There are several election-related issues that I outlined 
in my written testimony that should be examined, I think, 
further. These include the lack of a legal authority for 
nonpartisan election monitors and problems in advance voting. 
While these issues and others are identified in my written 
testimony, obviously they didn't affect the outcome of this 
election, but their impact in 2015 may be magnified in a much 
more hotly contested political environment.
    In addition, there are several reform initiatives being 
explored or pursued by reformers inside and outside of 
government that the international community should support.
    These include: One, efforts to secure a lasting peace in 
the ethnic areas. Exploring how other countries in the region, 
such as Indonesia, have dealt with decentralization in the 
context of a substantial ethnic diversity might be very helpful 
in that regard.
    Two, reviewing the constitution, especially the imbalance 
between civilian and military authority.
    Three, promoting the rule of law by establishing an 
independent judiciary.
    Four, strengthening the legislative process, which can be 
an important forum for debating and adopting further reforms.
    And five, increasing the capacities of political parties 
and civil society, which have to modernize and adjust to a more 
competitive political environment.
    Mr. Chairman, the challenge of the international community 
is how to calibrate a response to the changes that are 
occurring. That response needs to support the reforms that are 
taking place and encourage further democratization, while also 
recognizing that the transition process is a work in progress 
and that reforms to date must be expanded and sustained.
    NDI hopes that the international community will continue 
its efforts to help reformers in pursuing their goals and 
fulfilling the aspirations of the Burmese people.
    Thank you very much.
    [The prepared statement of Mr. Manikas follows:]

                 Prepared Statement of Peter M. Manikas

    Mr. Chairman and members of the subcommittee, I appreciate the 
opportunity to speak about recent events in Myanmar and the ongoing 
efforts of the people of Burma to advance political and economic 
change. The nation's new openings have led to opportunities for 
organizations like NDI to travel within the country; and in January I 
traveled to Yangon and Mandalay with a small NDI team to assess the 
political environment. Earlier this month I participated as part of a 
two-member U.S. delegation sent to view the April 1 by-elections.
                          recent developments
    After decades of military rule and economic stagnation Myanmar is 
beginning to institute political and economic reforms. In recent 
months, the country has seen in rapid succession: cease-fire agreements 
with most of the ethnic groups long at war with the central government; 
the release of a large number of political prisoners; the easing of 
restrictions on the media and civil society; amendments to the 
electoral laws paving the way for the National League for Democracy 
(NLD) to participate in the political process; and the holding of by-
elections in which the NLD won all but one of the constituencies it 
contested. As a result of the by-elections a new generation of 
reformers will soon be entering the nation's legislative chambers.\1\ 
The government also has announced an overhaul of its currency system 
and recently instituted a managed floating exchange rate. In addition, 
a new foreign investment law has been introduced in Parliament.
---------------------------------------------------------------------------
    \1\ On April 23 the newly elected NLD members of Parliament 
declined to take their seats because of the requirement that they take 
an oath ``to safeguard the constitution.'' The oath appears as an 
appendix to the nation's constitution and the dispute likely 
foreshadows further contention regarding constitutional issues.
---------------------------------------------------------------------------
    The reforms implemented and underway are impressive and should be 
acknowledged and responded to by the international community. It is 
equally important, however, to recognize that Burma is at the 
beginning--not the end--of a reform process and the outcome is not 
assured. The nation is still grappling with the challenge of 
transitioning from military rule to a more open political and economic 
system. The political situation is fragile and much more needs to be 
done to help ensure that the democratization process continues.
    As the nation heads toward national elections in 2015, there is 
not, for example, a level playing field for the participants in the 
nation's political process. Since, according to the 2008 constitution, 
25 percent of the seats in the national and regional legislatures are 
reserved for the military, political forces aligned with the military 
need to secure only one-third of the contested seats to attain a 
majority in each chamber. Opposition parties, on the other hand, would 
need to win twice as many elective seats--two-thirds--in order to 
garner a majority.\2\
---------------------------------------------------------------------------
    \2\ For instance, there are 440 seats in the Pyithu Hluttaw, the 
lower house of the national legislature. Of these, 110 are reserved for 
the military. The remaining 330 seats are filled through election. For 
allies of the military, a controlling majority would be obtained by 
securing 111 elected seats giving them a total of 221 seats (110 
reserved plus 111 elected seats). Opponents of the military would need 
to win 221 of the 330 contested seats (or two-thirds of the contested 
seats) in order to have a majority.
---------------------------------------------------------------------------
    Once elected, the constitution is unclear on the scope of the 
civilian government's authority over the military. Article 6(f), for 
instance, states that the defense services are to participate in the 
national political leadership of the state. Article 20(e) assigns the 
military the primary responsibility for ``safeguarding the 
nondisintegration of the Union, the nondisintegration of national 
solidarity and perpetuation of sovereignty.''
    In addition, while progress has been made in negotiating peace 
agreements with the nation's ethnic groups, human rights abuses 
persist, particularly in the border areas. For many who live in remote 
rural areas, life has not changed. And, while many political prisoners 
have been conditionally released, others remain in custody. Those that 
have been released are unsure of their freedom to engage in the 
political process. Political space has opened for democratic activists, 
but enforcement of the rights of assembly and expression remains 
uncertain.
    The reform agenda established within government and in the 
political opposition--requires international engagement and support to 
help ensure that democratization proceeds.
                        the april 1 by-elections
    The recent by-elections provided the first opportunity in more than 
two decades for the NLD to compete for public office and the success of 
the electoral process was an important step toward political 
reconciliation. The government's invitation to the international 
community to view the election, coming just a few days before the 
elections were to be held, was a positive development, although it fell 
short of international standards for election observing. The 
Declaration of Principles for International Election Observation, 
launched at the United Nations in 2005, for example, establishes 
fundamental standards for observation missions, including observing the 
preelection period and deploying a sufficient number for observers to 
assess an election nationwide. There was no opportunity to observe the 
campaign period, no legal authority to enter polling stations and no 
opportunity to view the aggregation of results. At the same time, the 
invitation for the international community to witness the process was a 
significant step toward increasing the transparency of the elections 
and opening Burma to the outside world.
    Originally 48 seats were to be contested, but the elections in 
three constituencies in Kachin state were postponed due to the 
government's concerns about security. Thus, a total of 45 by-elections 
were held. These consisted of 37 seats in the lower house (Pyithu 
Hluttaw); six seats in the upper house (Amyotha Hluttaw); and two seats 
in the regional Hluttaw. The NLD ultimately fielded 44 candidates and 
43 of them were successful.
    I was invited by the U.S. Government to view the by-elections, 
along with a colleague from the International Republican Institute. We 
constituted the U.S.-based delegation; however the U.S. Embassy as well 
as other embassies in Yangon deployed their staffs throughout the 
country as the elections approached. Because of the limitations on our 
ability to observe every aspect of the electoral process, it is not 
possible to evaluate the by-elections as a whole. However, we were able 
to see more than we initially expected and polling officials often 
invited us into polling stations despite the lack of specific legal 
authority to do so.
    Throughout the day we visited nine polling centers in Naypyitaw and 
the surrounding area. The management of the polls was quite different 
from center to center, but in general we saw no election-day 
intimidation of voters or candidates and, despite some significant 
shortcomings in administration, most of the polling centers seemed to 
be staffed by well-intentioned officials. Polling agents from the NLD 
and Union Solidarity Development Party (USDP) were present at every 
station we visited. Either officials invited us into the station or we 
had an unobstructed view through doorways and windows. At the closing 
that we witnessed, the count was conducted in the view of the party 
agents and was reasonably efficient. But still, a lack of transparency 
was evident. For example, the final vote count that we witnessed did 
not include an announcement of the results. We had to obtain that from 
the NLD party agent. Nor were the results visibly posted on or near the 
polling station. We saw no international or domestic observers in any 
of the polling centers we visited.
    In one polling center--the most rural center that we visited--
voters had been given a white slip of paper, provided by the USDP that 
was designed to enable the prospective voter to find his name on the 
registration list. This was a common practice in some townships and was 
used by both parties to assist illiterate voters. At this station, 
however, the slip of paper also contained an illustration of a voter 
placing a check mark in the box for the USDP. The slip was given to the 
officials when the voter went to the registration desk at the polling 
station and the slip was retained by the election officials. Therefore, 
the polling station now had a record of that particular voter being 
linked to the USDP. In the other polling stations where a similar 
practice occurred, the slip did not link the voter with a party and was 
not retained by election officials. It is not hard to imagine how this 
practice could be abused--for example by denying entry to someone who 
did not have a USDP-provided slip. There were other peculiarities about 
this polling station. We received the least cordial greeting there; in 
fact, no one would speak to us. The center was surrounded by a gate and 
at first we were denied entry, but the entrance later opened for us. 
Since we could not enter the polling station at this location, we could 
not talk to the polling agents. Indeed, we could not be sure that 
agents were present. While this might be an isolated instance, it could 
be the case that in the most remote rural areas similar practices are 
followed, beyond the scrutiny of any observer.
    We also saw another questionable practice in polling that took 
place on the grounds of the Ace company. The election officials marked 
the white slips with a green pen. The voter could later take the white 
slip to a camp that was set up and receive a free meal. It is not clear 
if this represents a civic-minded gesture to encourage people to vote 
or was designed to influence the voter's choice.
    There were several issues that should be examined going forward:

   While political party agents could observe the polling, 
        nonpartisan election monitors did not have the legal authority 
        to enter the polling stations; domestic election monitors were 
        deployed on election day, conducted their activities and 
        reported their findings, but were constrained by their lack of 
        legal status as observers;
   There seemed to have been no effort to ensure that those who 
        voted in advance of election day, as permitted by the election 
        law, did not vote twice--once in the days preceding the 
        election and again on election day. There was no inking used on 
        either day and we saw no evidence that voters were crossed off 
        the registration list when they voted early; the advance votes 
        were locked in a cabinet at a township office, guarded by 
        election officials and distributed to the proper polling 
        station on election day. The security of the ballots is highly 
        problematic, particularly because the number of advance votes 
        at some stations could affect the outcome of an election;
   The ballots delivered to each station were exactly equal to 
        the number of registered voters. There was no room for error 
        (though the accuracy of the registration list is dubious);
   There were no serial numbers on the ballots and no apparent 
        way of linking a ballot to a polling station; and
   The lack of inking for the advance vote and on election day 
        poses a potential threat of fraudulent voting.

    Obviously, these problems did not affect the outcome of the 
elections. However, if they persist they could pose more substantial 
issues in the 2015 electoral contests when much more is at stake and 
tensions among the political rivals are heightened. The problems 
identified are not difficult to remedy, but addressing them effectively 
will require that the Union Election Commission be receptive to 
reviewing its procedures and drawing on regional and global best 
practices. The Commission is appointed by the government and its 
independence is, therefore, suspect. Election reform will undoubtedly 
be high on the list of priorities for the newly elected members of the 
national legislature.
                            the way forward
    While the April 1 by-elections and the reforms that preceded them 
were significant and important steps, reformers inside and outside of 
government will undoubtedly be debating an ambitious reform agenda, 
which includes:

    1. Addressing the Ethnic Conflicts. While cease-fire agreements are 
in place with almost all of the ethnic groups, this 60-year-old problem 
persists, threatening the stability of the country and jeopardizing 
democratization efforts; cease-fire agreements will have to become 
peace agreements and they will likely be ultimately debated in 
Parliament.
    2. Constitutional Development. Aung San Suu Kyi has identified the 
need to address the constitutional imbalance between civil and military 
authority, such as removing the reserved military seats from the 
constitution, as a top priority. Some reformers in government have 
acknowledged that addressing this and other constitutional concerns 
will be needed to achieve national reconciliation. Reformers have 
indicated an interest in Indonesia, which also reserved temporarily 
military presence in the Parliament, as a model for constitutional 
development in this area. Federalism and other means for decentralizing 
power to help resolve ethnic conflicts will likely be discussed in the 
context of constitutional change.
    3. Electoral Reform. There is a growing recognition that steps must 
be taken to remedy shortcomings in election administration, including 
securing the independence of the Union Election Commission. This will 
become increasingly important for enhancing public confidence in the 
electoral process as the 2015 elections approach.
    4. Establishing the Rule of Law. An independent judiciary is needed 
to protect the rights of those participating in the political process 
and ensure the equal application of the laws.
    5. Strengthening the Legislative Process. Shwe Mann, the speaker of 
the Lower House of Parliament, has indicated that he is receptive to 
assistance in modernizing Parliament so that it can address more 
effectively the problems of corruption and economic development. 
Parliament will face new challenges as it adapts to a new multiparty 
political environment where the rights of the opposition will have to 
be recognized in the country's legislative chambers. The new 
legislature also faces the challenge of addressing the balance of power 
between Parliament, the Executive and the military.
    6. Political Party Development. The nation's political parties are 
seeking assistance in adjusting to the new political environment. The 
victory of the NLD may well be a reflection of the overwhelming 
popularity of Aung San Suu Kyi, rather than the party's institutional 
strength. The USDP, too, must adjust and modernize to meet the demands 
of a more competitive political system.
    7. Civil Society Strengthening. There has been little experience in 
Myanmar with an active civil society and civil society activists are 
pressing for reforms so that they can operate within the framework of 
the law. For example, many civil society groups are operating in the 
absence of legal registration; they are also seeking assistance to 
build their capacity to operate, particularly in the area of democratic 
development, which in the past has not been recognized as a permissible 
civil society activity.
    8. Media Access. To establish a level playing field for all of the 
participants in the political process, access to the media will be 
essential. There was little coverage of the by-elections in the media 
and no laws that require equal treatment of the candidates.
    9. Human Rights Monitoring. Human rights violations continue 
throughout the country, particularly in the ethnic areas. Monitoring 
and reporting on the human rights situation can help focus attention 
on, and raise public awareness of this issue.
    10. Developing a Telecommunications Policy. Economic and political 
development depends in part on the ability to connect citizens 
throughout the country in a cellular network that is affordable and 
reliable. Currently, no such network exists, though reformers in and 
out of government have identified this as a pressing need. Such a 
cellular network would be important for the rapid transfer of 
information by election observers in the national elections of 2015.

    Mr. Chairman, the challenge confronting the international community 
is in how to calibrate a response to the changes that are occurring. 
That response needs to support the reforms that are taking place and 
encourage further democratization, while also recognizing that the 
transition process is a work in progress and that the reforms to date 
must be expanded and sustained.
    NDI hopes that the international community will continue its 
efforts to help reformers inside and outside of government in pursuing 
their goals and fulfilling the aspirations of the Burmese people.

    Senator Webb. Thank you, Mr. Manikas.
    Just for your information, I think I'm now missing my 
second vote. There may soon be a posse out to bring me over to 
the Senate floor. But we'll continue as long as they allow me 
to.
    Dr. Jackson, welcome.

  STATEMENT OF KARL JACKSON, PH.D., C.V. STARR DISTINGUISHED 
    PROFESSOR OF SOUTHEAST ASIA STUDIES, SCHOOL OF ADVANCED 
INTERNATIONAL STUDIES, JOHNS HOPKINS UNIVERSITY, WASHINGTON, DC

    Dr. Jackson. Thank you. Thank you very much for inviting me 
to testify. It's a privilege to be back here in the Senate 
testifying after all these years, and I too would like to 
reiterate what Joe Yun said in praise of you for conducting 
these hearings.
    I have only really two major points. I've been back and 
forth to Myanmar now nine times in the last 2\1/2\ years. There 
is a uniformity of opinion within the country, regardless of 
whether you're talking to released political prisoners, members 
of the government, or people in the lobby of the hotel, there's 
a unanimity of opinion that things have changed, there is no 
going back, and that the military regime is over.
    I believe that the time has come to change the way we 
define our strategy for dealing with Myanmar. I think we need a 
more active strategy for encouraging democracy and, rather than 
a reactive strategy, in which we wait for them to make the 
first move and then we respond, hopefully in kind. I think we 
have to change our own role definition from that of teacher-
disciplinarian to that of a more open-handed partner in the 
process--the process of trying to move this country, Myanmar, 
toward democracy.
    Now, my second point is whether the reforms survive depends 
vitally on elite opinion inside Myanmar, more vitally on elite 
opinion within Myanmar than on anything else. And the subelites 
that I'm talking about are the military, the bureaucracy, the 
business elite, and the civil society elite. We should deal 
actively, actively, with all four of these in order to make 
sure that all four of these subelites realize that the road to 
reform is the road to benefit for them, for each of them, for 
civil society, for the bureaucrats, for the business elite, and 
for the military elites.
    The whole question revolves around the politics of 
democratic reform's survival. This is not an assured thing at 
this point in time and our policy should be tailored to trying 
to make sure that the process of democratization goes on.
    I would just list four things. I think we should 
incentivize each of these four subelites. We should obviously 
continue to cultivate civil society, not just a single group 
but across the board, with particular emphasis on activities 
that lead different parts of Burmese or Myanmar society to deal 
with one anther. In other words, we should encourage civil 
society groups that involve more than a single ethnic group.
    Second, we should lower the transaction costs for Myanmar 
business persons by decreasing or dropping as many financial 
sanctions as we possibly can. We should try to open up free 
access to the American market, especially for myanmar's small 
and medium enterprises. We should allow Americans to invest in 
schools, hospitals, hotels, and SMEs, to generate employment 
within Myanmar.
    We should also supply technical assistance to reforming the 
bureaucracy. This is a military, top-down model of bureaucracy 
that frankly the people who operate it don't fully know how to 
change. I would advocate greater emphasis on rule of law 
programs, rather than the ``ruler's law'' programs that have 
dominated Burma for the last 20 years.
    Finally, in order to encourage elements within the military 
to support the democratic reforms, I think we should open up 
slots within the U.S. military education system for a limited 
number of the Myanmar military. In other words, I think we 
should take ``yes'' for an answer.
    Thank you.
    [The prepared statement of Dr. Jackson follows:]

                 Prepared Statement of Karl D. Jackson

    Let me begin by stipulating my answers to several questions that 
have preoccupied us all over the last several years. We have debated 
whether any change could take place in Burma. Subsequently we debated 
whether any real change had transpired. Now we are debating whether 
enough change has taken place to satisfy us, on the assumption that we 
will decide the future of Burma. What nine separate trips in a little 
over 2 years have taught me are: (1) significant changes have already 
taken place; (2) reforms are real, and although there are certain to be 
setbacks, the reform trend seems likely to continue; and (3) absent 
further changes the United States will be playing an increasingly 
marginal role in a fast-paced drama in which almost all other nations 
have dropped or suspended sanctions to take advantage of growing 
opportunities.
                        u.s. national interests
    The questions with which we should be concerned now are:

    1. Why should the United States be interested in Myanmar? What 
long-term U.S. national interests are involved in Myanmar?
    2. What can the United States do now to encourage the emergence of 
a new, more peaceful, friendly, and democratic Myanmar?

    In real estate three things determine value: location, location, 
and location. The same can be said of Myanmar. It is strategically 
situated below China, between the emerging mega-nations of Asia--India 
and China. Myanmar has become increasingly reliant on China for 
weapons, official development assistance, and foreign direct 
investment. If Myanmar were to become a full-fledged client state of 
China, this would change the regional strategic balance. To avoid 
overdependence on any one nation, Myanmar officials over the past year 
have articulated a more omni-directional foreign policy that is equally 
friendly toward ASEAN, China, India, Japan, and the United States. 
Beneath the surface, even when the relationship with China seemed most 
intimate, Burmese nationalism and antipathy toward the growing number 
of Chinese nationals working inside Myanmar motivated the Myanmar elite 
(including most especially the military elite) to look outward, first 
to ASEAN and now to the entire outside world (including the United 
States).
    The United States could safely ignore more than 55 million people, 
living in a resource rich country the size of Texas, located just above 
the vital Strait of Malacca, as long as Myanmar was consumed by its own 
internal conflicts and led by a military elite that largely ignored, 
and was ignored by most of the outside world. As long as the outside 
world remained more or less uniformly willing to ignore Myanmar, the 
United States could afford to overlook Myanmar's strategic and economic 
potential while concentrating almost exclusively on the odious 
qualities of the Burmese Government. The world has changed. China has 
risen. The United States has pivoted back to Southeast Asia. Myanmar is 
now simply more accessible in political and economic terms than it has 
been for the last 50 years. Will the United States take advantage of 
the new opportunities or will it miss the boat?
                        developments in myanmar
    Domestically driven political developments in Myanmar have created 
the first real opportunity in 50 years for the outside world to play a 
supporting role in Myanmar's development. A new constitution is in 
place (guaranteeing the role of the military), but the first multiparty 
Parliament since 1962 is passing laws and requiring the government to 
take notice of its views regarding budgetary allocations. Most 
political prisoners have been freed, press censorship has been 
partially relaxed, the government is more responsive to public opinion, 
and the by-election of April 2012 appears to have been free and fair. 
Aung San Suu Kyi and President Thein Sein are cooperating with one 
another, even while Aung San Suu Kyi is rebuilding her party, the 
National League for Democracy, with an eye toward the election of 2015. 
A process of democratization is well underway in Myanmar but is far 
from complete. There is remarkable unanimity of opinion inside Myanmar 
that the process is real and has gone so far that it would be difficult 
to reverse.
    After having been wracked by 40 insurgencies since the 1940s, the 
Government of Myanmar has now managed to reach cease-fires with most, 
but not all, of its armed internal competitors. Exports of natural gas 
and gems have indicated to the government that it can survive the 
sanctions regime, but contact with the burgeoning economies around 
Myanmar have convinced a significant segment of the Myanmar elite to 
join the race toward a more prosperous modernity. The military remains 
by far the most powerful sub-elite in the society. The army is not 
uniformly supportive of the reforms themselves, but as long as 
President Thein Sean's policies restore Myanmar's respectability, 
increase domestic prosperity and maintain internal stability, the 
officer corps remains unlikely to oppose the President's policies 
overtly as long as the emerging, semidemocratic system does not attempt 
to take away the military's wealth and privileges.
    The economy is expected to expand by more than 5 percent in 2012. 
Economic reforms are at least as important as political ones. The dual 
track exchange rate has been abolished and replaced with a managed 
float on April 1, 2012. Privatization under the prior government 
benefited individuals who were well connected, but under President 
Thein Sein the ``cronies'' are less favored, and even the cronies are 
adapting to the changed political situation. A new foreign investment 
law was drafted in March 2012, allowing joint ventures as well as 100 
percent foreign ownership, and granting protection against 
nationalization. With 80 percent of the world's teak supply, 90 percent 
of its rubies, and the 10th-largest natural gas reserves in the world, 
the economy seems poised for sustained growth if it can gain full 
access to trade. The negative impact of sanctions fell most heavily on 
those producing items that could not be readily smuggled. For example, 
textile production initially fell by 30 percent and resulted in 
significant layoffs of textile workers.
    Over the past year the price of hotel rooms in Yangon has increased 
by 50 percent, and the hotels are filled with Chinese, European, 
Japanese, and Korean tourists, businesspersons, aid officials, and 
foundation representatives, all of whom sense that there will be 
attractive opportunities in Myanmar in a matter of weeks or months 
rather than years or decades. Only Americans are conspicuous by their 
relative absence. If Myanmar can maintain its current economic growth 
rate for several decades and create significant infrastructure 
connecting itself by road, rail, and pipeline to China and to Thailand, 
Myanmar will become a land bridge between India, China, and the rest of 
peninsular Southeast Asia and increased its strategic importance even 
before its GDP/capita catches up with its economic potential.
                       human resource limitations
    Myanmar, like Indonesia under the early New Order and Vietnam after 
the initiation of its reforms, seems to be ``getting the policies 
right,'' and this should generate significant increases in wealth. 
There are two very real limiting factors: lack of capacity in 
government and the absence of a modern university system. Since 1962, 
top down, military style government predominated. Almost all decisions 
were pushed up to the very top because of pervasive fears that 
initiative would result in dismissal. Rule by decree rather than laws 
governed outcomes. The judiciary disintegrated and the law schools were 
closed. As a very-well informed Myanmar interlocutor remarked, 
``Judicial reform must start from scratch. The members of Parliament 
cannot draft laws because there are very few trained lawyers to advise 
them.'' A bevy of changes are needed to economic rules and regulations 
but there is almost a complete lack of persons who know how to write 
them. As one of the most important advisors to President Thein Sein 
said to me, ``We know we need to change, but we do not know what we 
need to change or how to change it.'' International expertise, 
especially in the form of resident advisors, is desperately needed in 
the short run to prevent the economic momentum from being lost.
    University education (once the strongest in Southeast Asia) has 
been decimated by five decades of military rule and starved of 
resources during 60 years of civil strife. The antigovernment movement 
was repeatedly led by university students and the military reciprocated 
by closing the universities for long periods of time and dispersing 
undergraduate students permanently from the main campuses. Rangoon 
University, once the finest in Southeast Asia, now consists of a large, 
decayed, empty campus. Weeds grow everywhere among the closed and 
crumbling buildings and constitute a metaphor for the country's 
intellectual capacity. Expenditures have been so low that books, 
rudimentary equipment for laboratories, IT facilities, and 
internationally trained faculty are simply absent. In the health 
sector, the hospitals and medical schools are short of almost 
everything from decent beds to sufficiently trained staff, from access 
to the Internet to sustainable standards of excellence. Virtually no 
ambulance services exist (even in Yangon) and there are very high death 
rates from accidents because of the poverty of emergency room care and 
procedures. Appropriately focused technical assistance could have very 
substantial impact on the lives of ordinary people who are not to blame 
for past bad government.
                         the future of myanmar
    Transitional democracies have often failed in spite of the world's 
best wishes. Good will is not a substitute for good policy, and tactics 
are not a substitute for strategy. What we are witnessing in Myanmar is 
an attempt at top-down transition to democracy. Because of our past 
sanctions policies and our inability to unravel them rapidly, we are 
probably going to be unable to play a leadership role in seizing the 
best chance democracy has ever had in Burma. The administration cannot 
move as fast as it would like because it feels that Congress wants to 
go slowly, but going slowly may result in the missing the moment for 
reform.
    Everyone wants the reforms to succeed and for Myanmar to become a 
fully democratic and prosperous nation in the shortest possible time 
period. The problem is top-down transformations are prone to failure. 
The task of evolving from rule by a narrow military elite to more open 
forms of government is inherently difficult and requires exceptional 
leadership throughout the society as well as favorable external 
circumstances.
    There are at least five factors that must be present for a 
successful top-down transition to democracy.

    1. A middle level of strength and confidence within the government. 
Governments that are too strong, don't reform, and governments that are 
too weak can't reform. Reforms can be strangled from within by those 
who had most of the power and derived most of the benefits from the old 
way of doing things. Successful reform requires that a growing 
proportion of the old powerholders become sufficiently confident and 
willing to share increasing portions of the wealth and privileges with 
wider groups in return for the prospect of a more rapidly growing, 
distinctly richer, more peaceful and more respected society. The 
proportion of established and emerging elites who have confidence that 
reforms can bring about a win-win situation must increase with time in 
order to sustain the reform movement. In Myanmar, holding the U.S. 
sanctions in place will make it more difficult to increase the 
proportion of military officers actively supporting democratic reform. 
Small things, such as allowing access by the Myanmar military to the 
U.S. military education system, might increase support for democratic 
reform.
    2. An ability to deliver. Political evolution can fail because the 
benefits of reform take too long to arrive. Failed policies can kill 
political evolution whereas successes can supply the political space 
allowing the reform process to continue to unfold gradually. Early 
successes in economic and social policies create the political oxygen 
for subsequent political evolution. Regimes that improve schools, 
medical care, and economic livelihoods often buy time for the private 
sector to deliver increases in overall general welfare (see Asia over 
the last 40 years). Increased delivery of government services, in 
combination with private sector job creation, can increase the 
legitimacy of newly minted democratic institutions. Broad sanctions 
against investment and constrained access to technical assistance from 
international institutions (such as the World Bank and the 
International Finance Corporation) will make it more difficult for 
President Thein Sein (perhaps in collaboration with Aung San Suu Kyi) 
to improve hospitals and schools and to increase employment among those 
most hurt by the sanctions. Allowing targeted investment in schools, 
hospitals, and employment-producing industries such as tourism and 
small and medium enterprises would enhance the prospects for success 
and improve the lives of people in the bottom half of the social 
structure. Unless economic success arrives in time, the political 
reformers may be chased from power.
    3. Institution building. Political transitions can only succeed if, 
at the elite level, there is a generalized acceptance of new and 
permanent ``rules of the game.'' Successful transition from elitist to 
more popular forms of government require acceptance of the norm that 
power can be shared and that at some stage the ruling elite may be 
peacefully replaced by a new government. For this to become possible, 
those who are in power must become confident that if they lose direct 
control of the government their lives and property will continue to be 
safe. Confidence comes from the rules established to protect and 
regulate rights. In Myanmar this will take time and will require the 
establishment of a legal framework as well as the creation from scratch 
of a judiciary that is willing to constrain any arbitrary exercise of 
power. Encouraging the rule of law, through aid to judicial reform, 
could play a vital role in establishing firm ``rules of the game'' for 
elites and counterelites alike. Helping Myanmar to redevelop its law 
schools and judicial system should be among the highest priorities of 
the U.S. Government rather than being prohibited by sanctions against 
bilateral assistance to the Government of Myanmar. Under just-issued 
modifications by the U.S. Treasury this assistance may become possible 
but only through nongovernmental organizations in a country where there 
are, as yet, no private universities. A tsunami of foreign investment 
in a country without an adequate legal framework will create a 
widespread culture of corruption and/or enhance the importance of a 
select number of crony capitalists who can provide political protection 
for the foreign investor. It is much less costly for all concerned if 
early foreign assistance can help Myanmar to get the regulations right 
initially before large veto groups have become established within the 
evolving political system.
    4. A patient populace. Without a patient populace that is willing 
to watch and wait for elites and counterelites to accumulate trust and 
work out their differences, reform can be killed by excesses of popular 
participation. Although virtually everyone favors the growth of civil 
society, a political system can be torn apart if it is the wrong kind 
of participation (see Weimar Germany). For instance, participation in 
political parties that accept the rules of the game of political 
competition has a positive impact on the political system. In contrast 
political parties dedicated to the overthrow of the entire system 
usually destroy the reform process.
    Politics based exclusively on religious and ethnic identities tend 
to divide rather than unite and the rise of identity based politics 
tends to kill off reform. Continued progress toward settlement of the 
ethnic conflicts that have bedeviled Burma since independence must be 
given the highest priority. No peace; no rapid economic improvement. No 
peace; no sustainable political reform.
    At present in Myanmar reconciliation and realistic expectations 
seem to be the dominant mood.
    The just-released U.S. Treasury regulations should facilitate 
increased assistance to civil society organizations in Myanmar but care 
must be taken that the civil society organizations being funded support 
the reform process. Those with political aspirations can either reform 
the system or break the machine, and assistance to civil society should 
be designed to promote civility across ethnic and religious divisions.
    5. Favorable Circumstances. If the world economy were to drop into 
depression and global trade and incomes collapse, this would obviously 
imperil political evolution in Myanmar. If, on the other hand, reform 
starts during a long positive global economic cycle, this helps the 
process of peaceful reform. Global economic prosperity would benefit 
reform in Myanmar by enabling elites and counter elites to share an 
expanding economic pie.
                               a strategy
    First, the current trajectory in Myanmar is positive and the United 
States should ``take `yes' for an answer.''
    Second, we should do everything possible to encourage reform in the 
short run rather than taking a minimalist position. Targeted sanctions 
relief could support reform without permanently relaxing the entire 
sanction regime. Rather than waiting for conclusive proof that Myanmar 
had become a democracy, the United States should selectively relieve 
prohibitions against private investment to encourage the 
democratization process by demonstrating the tangible benefits of 
reform (such as increased employment opportunities). Likewise, 
international institutions should be encouraged to assess Myanmar's 
social and economic needs and provide technical assistance to Myanmar's 
reformers in their attempt to create a more modern and open economy. In 
addition, we should encourage reformist sentiments in the military 
elite by offering limited access to the U.S. military education system.
    Third, private and public support for judicial reform and the rule 
of law should be given a very high priority. Getting the rule of law 
established early is vital to the long-term legitimacy of the 
democratic process. Leaving governance questions until ``later'' is a 
false economy. Institution-building takes longer than anything else, 
and in Myanmar the current reform moment has created an opportunity to 
get things right at the outset on important topics such as 
environmentally responsible investment codes and mechanisms for 
controlling corruption.
    Fourth, the U.S. universities should be encouraged to provide 
technical assistance to Myanmar's universities to relieve human 
resource shortages especially in economics, law, medicine, and 
engineering. In addition, the United States should encourage its 
friends and allies such as Australia, Japan, Korea, Singapore, and 
others to fund scholarships for executive education and degree programs 
to bring Myanmar back into global society after decades of isolation.
    Fifth, above all do no harm. It has been estimated that there are 
only a few hundred officials and an equally small number of persons in 
civil society who are implementing the economic and political reforms. 
When Myanmar becomes ``the darling of the donors'' aid agencies and 
NGOs will pour into the country. To satisfy each of their 
organizational needs the international NGOs will hire away the best and 
the brightest, thereby damaging the capacity of Myanmar's Government 
and civil society to continue to push the reform process forward. Aid 
agencies and NGOs alike should be encouraged to cooperate in 
establishing a coordinating mechanism to control the harmful effects of 
``the aid rush.''

    Senator Webb. Thank you very much, Dr. Jackson.
    Again let me say that all of your full statements will be 
entered into the record immediately following your oral 
statements, and following that the written statement by the 
U.S. Chamber of Commerce will be entered into the record.
    Senator Webb. Let me just start off by saying there's just 
an enormous amount of experience sitting at this table. All 
three of you have my profound respect. I have appreciated being 
able to listen to these condensed statements as well.
    I would start off by saying I think that a number of people 
here in the political process tend to, quite frankly, overreact 
to the word ``sanctions'' in terms of lifting sanctions. 
There's a difference between lifting sanctions and moving into 
full relations or full economic relations even. I think you can 
see that with the example of Vietnam, where it took until I 
think 2007 until we had full economic relations with Vietnam 
from 1993.
    Dr. Jackson, I really take your point when you talk about 
moving into an active national diplomatic policy toward this 
country. It's a rare moment in history when we have this kind 
of an opportunity. One of the most profound impressions I had 
when I was visiting in 2009, when I was able to sit down with 
General Than Shwe and his immediate group was actually how 
remote they were. The country had grown more remote, part of it 
because of the decisions of their own government, part of it 
because of the way that the Western world, for lack of a better 
term, had decided simply not to talk with the regime.
    And to come out of that remoteness, when you get this 
moment when there's an expression of clear intent, really does 
require proactive policies, because in many cases they don't 
know what the next step should be. I mentioned that in my 
earlier statement, but that's one of the things I kept hearing, 
is we want to learn.
    So I would like to ask all three of you for your thoughts 
on, first of all, whether you believe that's a legitimate 
comment at this time or whether that represents just a piece of 
the ruling government, and if so how do we do this? What should 
we be doing to decrease the remoteness, to incentivize conduct?
    Dr. Jackson, you mentioned with respect to the elites.
    What should we be doing?
    Start with Mr. Steinberg.
    Mr. Steinberg. Senator, if I were to make a suggestion I 
would think that we, the U.S. Government, the State Department, 
should be sitting down with the Burmese and saying: You know 
that sanctions are difficult to be lifted in their entirety. 
They know that already. Cabinet officials have told Dr. Jackson 
and myself that. So if you were to establish a timetable saying 
if you do X we will do Y, and at a certain point if everything 
works out we will have sanctions ended by a certain date, that 
will alleviate the anxiety that they have, because in the past 
they have taken some actions and they wanted a U.S. reaction 
and we didn't react to the degree they wanted.
    But if we could agree on that timetable, that would be a 
step forward, I think, and it would be proactive.
    Senator Webb. Mr. Manikas.
    Mr. Manikas. NDI has never had a policy on sanctions 
themselves, but I think that we certainly think that it's very 
important to provide positive inducements to the reformers 
inside the government. When I met with Suu Kyi in January, I 
know that she communicated that message to me very clearly.
    I think that there is going to have to be a variety of ways 
in which we engage the government, and it could be on the 
reform measures that I think almost all of us have identified. 
There are obviously people in government that are quite 
interested in pursuing reform and we should take advantage of 
that. That's going to be a form of engagement, I think, that 
will be very important going forward.
    Finally, calibrating the international response to the 
positive events that are occurring I think is a very 
challenging task. But I think it's important to consult with a 
broad range of actors within Burma, including the opposition, 
in regard to how they feel, how far the international community 
should go in responding. I think there's going to be continued 
disagreement over the pace and extent of the international 
response, but I think that's expected and it's just part of the 
process that I think we're going to experience going forward.
    Senator Webb. Dr. Jackson.
    Dr. Jackson. I guess I beg to differ with my colleague 
somewhat. I think we should be more open-handed. I think we 
should move more quickly, not because I approve of the people 
who have run that government for the last 40 years, but because 
I want to see them ushered out the door more rapidly and the 
way to do that is to allow the reforms to go forward and to 
prevent internal struggle within the government against those 
reforms.
    We could be doing things at a practical level that would be 
approved of by people like Daw Aung San Suu Kyi, that we are 
not able to do or not able to do readily right now. Let me give 
you an instance. It would be nice to be able to conduct 
seminars, for instance, for the highest level people in the 
government, regardless of whether they once wore a military 
uniform, on the subject of how do you run a nonmilitary 
bureaucracy, how do you create rule of law as opposed to rule 
by fiat.
    Well, you'd say to yourself, well, the Treasury 
Department's not going to bother you about conducting those.
    Well, unfortunately that's not entirely true, because of 
the fact that some of those people might be on a list somewhere 
and I can't get money from an American foundation to do it just 
on the chance that one of those individuals with whom I might 
be talking might be on a list somewhere.
    These are practical obstacles that are preventing us from 
moving and moving quickly. The next 2 years are what are 
critical. Sure, we can eventually get all this stuff cleared 
up, but the question is how long will the moment for reform 
last.
    Senator Webb. Thank you very much for that.
    I'm going to have to close this hearing. Let me say that, 
Dr. Jackson, I fully agree with what you just said. I think 
that the two most important factors right now from my own 
personal point of view would be to get as many people from the 
international community to interact with the average citizen on 
the street in a positive way so they can see with their own 
eyes different ways of doing things; and the other is to get as 
many people as we can from their governmental systems out, so 
that they can see with their own eyes how the rest of the world 
lives and that we can have the kind of conversations that 
you're talking about. I will be doing whatever I can in the 
coming months to try to assist that process.
    Again, all three of you, I have a tremendous admiration and 
respect for the years that you have put into this part of the 
world and I appreciate you testifying today.
    This hearing is over. Thank you.
    [Whereupon, at 4:13 p.m., the hearing was adjourned.]
                              ----------                              

              Additional Material Submitted for the Record

  Prepared Statement of the U.S. Chamber of Commerce, the U.S.-ASEAN 
        Business Council, and the National Foreign Trade Council

    The U.S. Chamber of Commerce, the US-ASEAN Business Council, and 
the National Foreign Trade Council are pleased to have the opportunity 
to submit a statement for the record to the Senate Committee on Foreign 
Relations, Subcommittee on East Asian and Pacific Affairs, on Burma.
    Our three organizations represent millions of U.S. businesses 
across every state and every sector. Our members range from small 
businesses with a few employees to some of the world's largest 
companies.
    Our members have been watching developments in Burma with great 
interest, and applauded the much-improved electoral process by which 
Aung San Suu Kyi and the National League for Democracy won a resounding 
victory in by-elections held on April 1, 2012. Badly needed political 
and economic reforms in that country are moving forward, in many cases 
at a pace faster than most observers had expected. For the first time 
in many years, there is a genuine sense of hope for the future.
    It is in U.S. interests that the process of reform and 
liberalization continue. We commend the administration, in particular 
Secretary Clinton and the State Department, for their increased level 
of diplomatic engagement, and their continued efforts to support reform 
in Burma.
    This is a critical moment; the momentum is behind reform, but the 
process is fraught, the challenges are formidable, and there is 
ultimately no guarantee of success. Therefore, U.S. policy should be 
geared toward supporting and strengthening the hands of the reformers. 
Strategic engagement by the U.S Government, as well as by leaders from 
the nonprofit and business sectors, is vital to solidifying and 
broadening these reforms.
    As the next steps in the process of encouraging Burma's engagement 
with the global economy are laid out, the door should be opened to 
further involvement of 

the U.S. business community. U.S. companies bring in the capital, 
technology, and respect for rule of law that will build a foundation 
for sustained economic growth. Without this foundation, development and 
improved standards of living for the people of Burma (or any other 
country) is simply not possible.
    Moreover, U.S. companies provide capacity-building, training, high 
environmental standards, and projects that engage the communities in 
which they operate to a substantially greater degree than most of our 
competitors from other nations. For example, Burma's neighbors benefit 
tremendously from U.S. corporate social responsibility projects in 
areas ranging from maternal health to education, environmental 
stewardship, IT training, agricultural productivity, and many others. 
These are all areas where Burma badly needs support and assistance.
    Laying out a plan that eases restrictions on private investment 
across all sectors and includes the same rules for all businesses is 
critical to the success of this effort. Permitting investment in some 
sectors, while prohibiting it in others, will not prevent those sectors 
from being developed in Burma; it will simply ensure that our 
competitors fill the void, as they are already doing. As a result, the 
jobs which could go to American workers will instead go to their 
counterparts in Europe, Asia and elsewhere. U.S. companies are already 
starting from a disadvantage, as numerous entities from other nations 
have substantially stepped up their engagement in recent months.
    Most urgently, the lifting of financial services facilitation and 
transactions sanctions will be essential to the sustainable expansion 
of the Burmese economy and the successful operation of any U.S. 
business effort. Currently, U.S. companies are unable to conduct many 
basic research efforts that would enable them to formulate plans 
focused on engaging Burma because of the ban. Lifting the financial 
services facilitation and transactions sanctions in conjunction with 
easing the investment ban is an essential step in enabling any U.S. 
business to work in Burma.
    The Specially Designated Nationals (SDN) list provides a way to 
ensure that business dealings do not enrich those parties responsible 
for Burma's decades of suffering, and that those honest entrepreneurs 
seeking a way to connect with the outside world are not kept in 
isolation due to the actions of others. This list should be maintained, 
regularly updated, and made more accessible and user-friendly.
    It is incumbent upon the international community, and multilateral 
institutions, to ensure the success of Burma's reform effort. The April 
23 announcement by the EU of the suspension of its sanctions, and 
similar moves by Australia, Japan, and others, now calls into question 
the continued value of coercive measures. We all want to ensure that 
the citizens of Burma have the chance to rebuild their country with a 
fair and rules-based economic system that creates sustainable growth. 
The U.S. administration and Congress need to lay out a plan that will 
allow U.S. businesses across all sectors to begin the process of 
reconnecting with Burma in a timely manner.
                                 ______
                                 

 Responses of Principal Deputy Assistant Secretary of State Joseph Yun 
           to Questions Submitted by Senator James M. Inhofe

    Secretary Clinton has established a new Bureau of Energy Resources. 
In announcing the Bureau, the Secretary recognized the critical 
importance that energy plays around the world. In describing the 
Bureau's key missions, she said that it would seek to ``increase access 
to energy in developing countries, expand good governance, and deepen 
transparency.'' Secretary Clinton acknowledged that U.S. energy 
companies are instruments in advancing transparency and safe and 
sustainable operations.

    Question. Assuming you agree with Secretary Clinton's assessment in 
establishing the Bureau on Energy Resources, do you agree that U.S. oil 
and gas companies would be instruments that could positively influence 
transparency and other reform goals in Burma?
    The Chinese, French, and other nations are looking to increase 
investment in Burma's oil and gas sector right now.

    Answer. In all of our actions with respect to Burma, from foreign 
assistance to any potential new investment, the United States is 
seeking to ensure that we advance our overarching goal of a more 
democratic, prosperous, and freer future for the diverse peoples of 
Burma. We believe that U.S. companies, including oil and gas companies, 
can play a positive role in this effort by demonstrating high standards 
of responsible business conduct and transparency, including respect for 
human 

rights. As Secretary Clinton announced on May 17, we are taking steps 
to authorize new U.S. investment in Burma, as well as the export of 
U.S. financial services to Burma, across all sectors. We believe these 
steps will help bring the country into the global economy, spur broad-
based economic development, and support ongoing reform. We will proceed 
in a careful manner that supports positive change in Burma and will 
continue to consult closely with Congress as we move forward.

    Question. If the U.S. Government does not allow U.S. oil and gas 
companies to explore for and produce resources in Burma in the coming 
months, will those resources go undeveloped or will companies from 
other countries like China and France fill the void?

    Answer. On May 17, Secretary Clinton announced that the U.S. 
Government will take steps to authorize new U.S. investment in Burma, 
as well as the export of U.S. financial services to Burma, across all 
sectors, with the exception of arms.
    Chinese, South Korean, Vietnamese, Thai, and Indian companies are 
already active in Burma's oil and gas sector, as is Total, a French 
company. Chevron, a U.S. company, retains a minority stake in one 
project that predated the imposition of the sanctions on new 
investment. According to press reports, Burma's 2011 bid round resulted 
in awards of 10 new onshore blocks to companies from Russia, Oman, 
India, Thailand, Indonesia, Malaysia, Switzerland, and China. Although 
Burma has a difficult investment climate, we believe Burma's future bid 
rounds are likely to generate significant international interest.

    Question. Do you agree that if sanctions were eased to allow for 
U.S. oil and gas companies to conduct business in Burma, the United 
States could assert a positive influence there through close 
monitoring, and in collaboration with the international community, help 
ensure strict enforcement of the Specially Designated Nationals list?

    Answer. As we take steps to ease our financial and investment 
sanctions in Burma, we will continue to monitor the situation 
carefully, work with our regional and like-minded partners, and 
restrict transactions with individuals and entities on the U.S. 
Treasury Department's Specially Designated Nationals list. We will work 
in close collaboration with U.S. companies and U.S. and Burmese civil 
society leaders to encourage responsible investment consistent with our 
overall goals of supporting Burma's reform process. American companies 
can play a positive role in Burma in contributing to broad-based and 
sustainable economic development and in modeling high standards of 
labor and human rights, environmental stewardship, and transparency.

    Question. Do you agree that U.S. oil and gas companies are more 
transparent, and generally operate in a more free market manner than 
Chinese, Russian, or many other nationally owned oil companies?

    Answer. Many U.S. companies in the extractives sector helped to 
create, and are active participants in, international initiatives to 
promote transparency and respect for human rights, including the 
Extractive Industries Transparency Initiative and the Voluntary 
Principles on Security and Human Rights. All U.S. companies, including 
oil and gas companies, must abide by restrictions in the Foreign 
Corrupt Practices Act and other U.S. laws that prohibit bribery and 
other corrupt practices when operating overseas. Furthermore, section 
1504 of the Dodd-Frank Wall Street Reform Act requires all companies 
who file reports with the U.S. Securities and Exchange Commission to 
disclose payments they make to foreign governments. These initiatives 
and requirements--along with the voluntary responsible investment and 
corporate governance activities undertaken by many U.S. companies--
encourage U.S. companies to maintain high standards of transparency and 
accountability, particularly in difficult investment environments with 
weak institutional governance and rule of law, as is the case in Burma.

    Question. As potential instruments of U.S. foreign policy, is it 
not in our Nation's interest to allow U.S. oil and gas companies to 
conduct business in Burma and have an opportunity to engage with and 
advance free market reforms there, and compete against Chinese and 
Russian own petroleum companies which may not value or support free 
market or transparency agendas?
    Answer. We support a peaceful transition in Burma to a more 
democratic, prosperous, and free market system that respects the rule 
of law, the fundamental human rights of its diverse peoples, and all of 
its international obligations. We believe U.S. companies can contribute 
to advancing economic reform by promoting high standards of 
accountability and transparent business practices, as well as improving 
the lives of the Burmese people through their activities, and we 
encourage them to do so. On May 17, we announced that we will take 
steps to ease our bans on the export of financial services and new 
investment in a manner that supports Burma's economic and political 
reform process and contributes to a brighter future for its people.

                                  
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