(In 4th paragraph, corrects "larger" to "panoramic" and "development" to "prosperity" in Aung San Suu Kyi quote, as delivered remarks differed from handout)
By Simon Lewis
NGAPALI BEACH, Myanmar, Feb 22 (Reuters) - Myanmar leader Aung San Suu Kyi called for investment in the crisis-hit western state of Rakhine on Friday, saying the world had "focused narrowly on negative aspects" in the state from which some 730,000 Rohingya Muslims have fled since 2017.
On a rare visit to Rakhine, Suu Kyi emphasised responsible business practices as she addressed an investment fair sponsored by Japan in the coastal state's tourist hotspot of Ngapali beach.
She made only a brief reference to the violence that have roiled areas several hundred kilometres to the north, including a fresh conflict with Rakhine rebels that has displaced more than 5,000 since December.
"For too long the international community's attention has been focused narrowly on negative aspects related to problems in north Rakhine rather than on the panoramic picture that shows the immense potential of this state for peace and prosperity," Suu Kyi said.
Her government recognised the "grave challenges" it faced in Rakhine and was doing its utmost to address them, she said.
The 1991 Nobel laureate has pledged to make Myanmar more investment-friendly as her government attempts to reverse a drop in foreign investment and tourism from the West since the Rohingya exodus sparked global outrage.
Myanmar officials will also brief investors in London next month at a trade and investment conference organised by the British Chamber of Commerce in Myanmar.
A U.N. fact-finding mission last year said the 2017 military campaign that pushed out the Rohingya was orchestrated with "genocidal intent". Myanmar denies allegations of mass killings and rape, and says its offensive was a legitimate response to an insurgent threat and that it is welcoming the refugees back.
Some experts warn that a focus on economic solutions to Rakhine's problems could cement the marginalisation of the mostly stateless Rohingya.
A Reuters special report in December revealed that officials had built new homes for Buddhists where the Rohingya once lived, making the return of many refugees to their original homes impossible. (Link: https://www.reuters.com/investigates/special-report/myanmar-rohingya-return/)
Myanmar says it has been ready to accept returning refugees since January and denies discriminating against Muslims who remain in Rakhine.
Domestic and foreign investment could play a crucial role in the state, Suu Kyi said, but she warned against irresponsible investment like "unchecked expansion of commercial fishery projects" that could damage Rakhine's coastal mangrove forests.
Despite one session on "responsible investment" in Rakhine, the conflicts in the state were barely mentioned at the event, held at a brand new high-end hotel overlooking the Bay of Bengal.
As well as those stuck in Bangladesh, hundreds of thousands of Rohingya and other Muslims remain trapped in camps and villages in Rakhine, where their movements and access to services are restricted.
Asked about the lack of discussion of Rakhine's crises, Aung Naing Oo, director-general of Myanmar's Directorate of Investment and Company Administration, said the fair was not the place to discuss politics.
"Investment is not political," he said, adding that Myanmar's laws would guarantee that projects agreed at the event would benefit all the state's people, including by creating employment.
The venue, in Thandwe township, was within miles of villages that saw communal clashes in 2013 between Rakhine Buddhists and Muslims from the Kaman ethnic group.
Locals from both communities say they now co-exist peacefully. But Kaman Muslims, who unlike the Rohingya are recognised as Myanmar citizens, say they still face movement restrictions and discrimination.
Aung Naing Myint, a Kaman community leader, said he had not heard about the investment fair until reporters contacted him about it. "We welcome this event and investment," he said, "but the question is, can the local communities get some benefit from it?"
BREAK WITH THE WEST
The investment fair began on Thursday evening with musical performances celebrating ancient kingdoms in the region and a purported visit by the Gautama Buddha, who lived two and half millennia ago. A pop song written especially for the event described the state as "the door for international relation(s)".
Most investors came from Japan, South Korea and elsewhere in Asia, reflecting a chill in Myanmar's relations with the West since the Rohingya exodus.
One company displayed its plans to construct a high-speed railway and eight-lane highway across Myanmar to China. A company official said the project, which would draw on funding from China, did not yet have official approval.
Belgian national Pascal Gerken, who is developing a high-end resort near Ngapali that he says will train and employ around 400 locals, was one of a handful of Western investors in attendance.
He told Reuters projects like his in the state would benefit "all communities of all religions" and promote understanding.
Rakhine native Htun Htun Naing's Yangon-based company, Blue Ocean Investments, runs call centres and other IT services. He said Western firms would lose out to Asian competitors if they withheld investment from Rakhine due to reputational risks.
"We wish they wanted to come," he said, "but if they don't come, we'll still find an alternative way to develop our country by ourselves." (Reporting by Simon Lewis; Editing by Nick Macfie)
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