AS history speeds up in Myanmar, Europe can play a vital role in encouraging sustainable democracy, reform and economic progress in the country.

A positive start has been made. In recent visits to Myanmar, European foreign ministers and senior officials voiced support for the military-backed civilian government’s efforts at political and economic change and have pledged a two-year aid package.

European businesses, meanwhile, are interested in Myanmar’s natural resources and are also looking to invest in tourism, financial services, hotels, telecommunications networks and infrastructure.

However, the barriers to progress are formidable: international isolation, decades of mismanagement and inept military rule have left the economy in tatters. The EU is especially well-placed to help. Europe has strong experience in implementing poverty-alleviation projects and offers a lucrative market for Myanmar’s exports of timber, oil and gas, textiles, seafood, gemstones and manufactured goods.

Lacking the institutions needed to support and deepen the democratisation process, Myanmar needs EU assistance for ‘capacity-building’ programmes to help the administration and the new parliament hammer out crucial legislation on land reform, foreign investment laws and exchange-rate unification.

European pledges of increased aid and trade are expected at the first large-scale international aid conference on Myanmar to be organised by the United Nations later this year. A separate pledging conference focusing on aid to conflict zones in the country’s ethnic-controlled areas is also being convened.

For all the focus on new aid commitments, the future of EU-Myanmar relations hinges on European governments’ decision to lift or keep existing sanctions on Naypyidaw. Imposed in 1996 after bloody military crackdowns on the pro-democracy movement led by Nobel Prize laureate and opposition leader Aung San Suu Kyi, EU sanctions target nearly 1,000 firms and institutions with asset freezes and visa bans and also include an arms embargo, a prohibition on technical assistance related to the military and investment bans in the mining, timber and precious metals sectors.

The EU has signalled a readiness to be flexible. Citing “the remarkable programme of political reform”, in Myanmar since March 2011, EU foreign ministers agreed in February to suspend the travel ban on President Thein Sein and 86 other senior leaders. Further moves are expected.

Aung San Suu Kyi is running for a seat in parliament along with other members of her National League for Democracy. There is talk that once elected she might take up a government post, perhaps leading ethnic reconciliation efforts or taking over as foreign minister.

Forging a European consensus on how best to deal with Myanmar’s rapidly changing political landscape is not proving easy, with EU governments divided on how far to go in rewarding Myanmar’s reform process.

If elections are deemed free and fair, proponents of faster engagement with Myanmar say the EU should be ready to undertake a ‘big bang’ lifting of sanctions, leaving only an arms embargo and personal sanctions on junta veterans in place. Others advise a more cautious approach, arguing that Europe should ensure that the reforms are irreversible before re-engaging fully with the country.

Both sides make a strong case. Advocates of a quick decision to lift sanctions argue that such a move will encourage further rapid political reform in Myanmar, help much-needed economic development and, crucially, highlight Europe’s ability to respond to rapid historic changes taking place within the country.

Myanmar’s reforms will only become institutionalised and irreversible if the international community provides support at this critical moment, they argue.

A rapid EU response to changes in Myanmar will result in improved European ties with the 10-member Association of Southeast Asian Nations and the larger Asia-Pacific region. On the economic side, there is concern that with competition to do business with Myanmar heating up, a failure to lift sanctions could penalise European companies vis-à-vis their Asian and American rivals.

Those favouring continued sanctions warn there have been other false dawns in Myanmar and note a lack of real progress in meeting the demands of the country’s ethnic minorities. As Burma Campaign UK points out, not all political prisoners have been released.

Most importantly, the group underlines that “almost all changes that have taken place are in effect ‘gifts’ from the military-backed government” which can be reversed at the stroke of a pen. To give away too many sanctions too soon will remove the EU’s already-limited leverage and could discourage further change, says Burma Campaign UK.

The reasons for Myanmar’s political turnaround are complicated — but largely home-grown. Clearly, the government is anxious to break away from the too-warm embrace of China and especially to end years of Beijing’s domination of the country’s economy. Keeping up with its Asean partners also played a role. Whatever the reasons for the change, all roads now lead to Myanmar, with the nation hailed as Southeast Asia’s most promising new ‘tiger economy’.

A policy of smart EU engagement with Myanmar should include increased aid for health, education and rural development but also technical assistance and help in capacity building and the development of rule of law.

There should be stronger interaction with civil society and local organisations. Myanmar can be reinstated as a beneficiary of the EU’s Generalised System of Preferences (GSP) and/or given access to the EU’s zero duty-zero quota Everything But Arms initiative for least developed countries.

Given Myanmar’s long history of authoritarian rule and violation of human rights, caution is certainly in order. However, the time appears right for a strong EU signal of its readiness to engage and advance Myanmar’s efforts at reform. A ‘big bang’ approach is likely to be more effective both as regards EU support for Myanmar’s future development and the Europe’s standing as an important actor in the wider Asia Pacific region.

The writer is Dawn’s correspondent in Brussels.