By Paul Eckert and Arshad Mohammed
WASHINGTON (Reuters) - The United States said on Wednesday it was ready to relax some sanctions on Myanmar to recognize its fledgling democratic transition, including a ban on U.S. companies investing in or offering financial services to the country.
However, U.S. Secretary of State Hillary Clinton stressed the Obama administration wanted to move cautiously, saying that the resource-rich Southeast Asian country has a long way to go to shake off decades of military rule.
Clinton hailed as a "dramatic demonstration of popular will" Nobel Peace Prize laureate Aung San Suu Kyi's gaining of a seat in the lower house in a parliamentary by-election on Sunday which yielded a landslide victory for her party.
"We fully recognize and embrace the progress that has taken place and we will continue our policy of engagement," Clinton said in a brief appearance before reporters three days after Suu Kyi's party won 43 of 45 seats available in the by-election.
The package Clinton unveiled on Wednesday reflected a modest first step toward lifting the complex web of U.S. sanctions that have contributed to the country's isolation for decades.
The United States will seek to name an ambassador to Myanmar after an absence of two decades, to set up an office of the U.S. Agency for International Development there and to support a regular U.N. Development Program operation in the country.
Clinton also said the United States was committed to "beginning the process of a targeted easing of our ban on the export of U.S. financial services and investment as part of a broader effort to help accelerate economic modernization and political reform." She provided no details.
U.S. officials speaking on condition of anonymity said some of the areas that might be ripe for an easing of the investment ban were agriculture, tourism, telecommunications and banking but said these were simply possibilities and no decisions had been taken.
Clinton said the United States was also ready to allow private U.S. aid groups to pursue non-profit activities on projects such as democracy building, health and education and to give select Myanmar officials and lawmakers permission to visit the United States, relaxing long-standing visa bans.
"A LONG WAY TO GO"
U.S. officials said they want Myanmar to free all political prisoners, lift restrictions on those who have already been released, seek national reconciliation, especially with ethnic groups that say they have long been oppressed by the central government, and to end any military ties to North Korea.
"This reform process has a long way to go. The future is neither clear nor certain. But we will continue to monitor developments closely and meet, as I said when I was there (in Myanmar), action with action," Clinton said.
President Thein Sein, a general in the former military junta, has surprised the world with the most dramatic political reforms since the military took power in a 1962 coup in the former British colony then known as Burma.
In several batches following an October 2011 amnesty, the civilian administration under Thein Sein has released more than 600 political prisoners. Activists say several hundred more may still be in custody, but the exact number is not clear.
Walter Lohman of the Heritage Foundation, a conservative think tank, welcomed the cautious U.S. approach, saying some steps should wait until after a 2015 election in which 75 percent of parliamentary seats in Myanmar will be contested.
"We need to reserve some ammunition for the real goal - the 2015 general election. Let's not give it away too quickly," he said, saying he favored easing the visa bans, opening a USAID office and sending an ambassador but reserved judgment on easing the financial sanctions "until there is more detail."
Economic analysts say that it will take time for the United States to unravel the full scope of its sanctions on Myanmar, first imposed in 1988 and subsequently expanded by five laws and four presidential directives.
A U.S. official described the sanctions as "byzantine" and said Washington would focus on easing sanctions so as to benefit the most people while avoiding giving advantage to areas - possibly including timber and gems - dominated by "repressive" elements of the authorities.
While some sanctions can be lifted by fiat, others are tied to specific progress on issues ranging from drug trafficking and money laundering to preventing the use of child soldiers - making them more difficult to remove. In the first instance, the administration plans to use waivers, licenses and other steps to ease sanctions rather than seeking to repeal laws on the books.
Aung Din, head of the U.S. Campaign for Burma advocacy group that helped put in place sanctions on Myanmar, suggested that the United States may have gone too far too fast.
"What they have achieved from the United States for giving seven percent of seats in the Parliament to Daw Aung San Suu Kyi is enormous," he said, saying she hoped the administration would take its time easing sanctions to ensure the political progress in Myanmar is "irreversible" and to consult rights groups.
(Additional reporting by Andrew Quinn; writing by Arshad Mohammed; Editing by Will Dunham and Eric Beech)