YANGON (Reuters) - British Prime Minister David Cameron and Myanmar opposition leader Aung San Suu Kyi gave powerful backing on Friday for suspending sanctions on the country, a stark shift in stance and a boon for a pariah state eager to come in from the cold.
Cameron, the first Western leader to visit Myanmar in decades, and Nobel laureate Suu Kyi said at a news conference in Yangon sanctions should be suspended, but not lifted altogether to pressure the quasi-civilian government to continue reforms.
Suu Kyi's endorsement carries huge weight due to her international standing, with many Western diplomats admitting she has long influenced their policies towards Myanmar. The United States hinted after Suu Kyi won a parliamentary seat in an April 1 by-election seen as free and fair that it may also ease some embargoes.
Speaking on the porch of her lakeside home, which until 2010 had been a prison for much of her 15 years of detention, Suu Kyi said a sanctions suspension "would make it quite clear to those who are against reform that should they try to obstruct the way of the reformers, then sanctions could come back."
Suu Kyi and Britain have long been the biggest advocates of sanctions, imposed over the past 23 years for human rights abuses by Myanmar's military rulers. Critics argue they have kept the Southeast Asian country's 60 million people in poverty.
It is now almost certain European Union sanctions will be suspended after the bloc reviews its restrictions on April 23, which would enable a flood of investment into a country rich in oil, gas and precious stones, with huge tourism potential.
Cameron, the first British prime minister to visit Myanmar since it won independence from Britain in 1948, said he would push for all EU sanctions to be suspended, except for an arms embargo.
"They haven't done enough, there's much more that they need to do, and we will keep that pressure on. That is why suspending sanctions, rather than lifting sanctions, is the right answer," he said.
"If we really want to see the chance of greater freedom and democracy in Burma (Myanmar), we should respond when they take action," he added.
Myanmar's President Thein Sein, whom Cameron met on Friday, has stunned critics with reforms unthinkable a year ago, including the release of hundreds of political prisoners, easing media censorship and holding peace talks with ethnic rebels.
Myanmar won independence largely due to the efforts of Aung San, Suu Kyi's late father, but a 1962 coup then heralded 49 years of military rule.
That ended a year ago after the transfer to Thein Sein's quasi-civilian government stacked with former generals, a hegemony now threatened after Suu Kyi's National League for Democracy (NLD) took 43 of 45 seats in April 1 by-elections. A parliamentary election takes place in 2015.
At a meeting at Myanmar's imposing presidential palace in the remote, grandiose capital Naypyitaw, Thein Sein and Cameron discussed the importance of easing sanctions to convince hardliners in his cabinet and his army-backed ruling party that reform was the right path.
Cameron believed the changes implemented by Thein Sein were "sincere" and he was "cautiously optimistic" about the future. Suu Kyi said she believed the president was "genuine about democratic reforms".
She said: "I don't think the strength of those who do not want democracy could compare in any way with the strength of the people's desire for democracy. This is why I am optimistic, but cautiously."
Countries are now vying for business and influence in a nation rich in untapped resources and desperate to attract foreign investment. European firms fear Asian rivals are securing a foothold and already boosting their presence.
EU sanctions, which are less stringent than those of the United States, include assets freezes, bans on arms sales and investments or trade related to timber or mining of metals and gemstones. It does not prohibit investment in other sectors.
The restrictions also deny Myanmar access to the Generalised System of Preferences, which give trade privileges to poorer countries, but EU diplomats say changing that could take time.
Some experts say Myanmar's rapid opening up to foreign trade could result in rushed investments that benefit only the economic elite closely allied with the military old guard.
Cameron invited the Oxford-educated Suu Kyi to visit London in June. She has long refused to leave Myanmar due to fears she would not be allowed back by its military leaders. That stance cost her the chance to be with her husband, Michael Aris, who died of cancer while she was under house arrest in Yangon.
"Two years ago I would have said thank you for the invitation, but sorry," she said, when asked whether she would accept Cameron's offer. "Now I'm able to say 'well perhaps', and that's great progress."
(Additional reporting by Aung Hla Tun; Writing by Martin Petty and Mohammed Abbas; Editing by Janet Lawrence)