Regional News
Foreign businesses are ramping up interest in the long-isolated but potentially lucrative market of Myanmar, as signs of a thaw between its government and Western leaders raise hopes of a possible end to Western sanctions.
For now, the push is confined mainly to Asian companies that aren’t covered by tough sanctions imposed by the U.S. and Europe since the late 1990s to punish Myanmar for its poor human-rights record. Some investors held back because of concerns about risks to their reputations, while others doubted the opportunities were worth pursuing and now are changing their minds.
Meanwhile, Western companies are looking for ways to get back in, though few are willing to discuss plans in public or in depth because of a possible backlash from customers who remain skeptical about recent reforms in the country. U.S. officials say they don’t intend to lift sanctions until they see more changes in Myanmar, including more transparency in the country’s dealings with North Korea.
A visit by U.S. Secretary of State Hillary Clinton this week, the first by a U.S. secretary of state in more than 50 years, has buoyed hopes a rapprochement is in store, and some European diplomats are pressing for looser sanctions at an annual review of their laws in April 2012.
The generals in the Hermit Kingdom of Myanmar need growth, while the U.S. wants an end to the repressive regime. U.S. business — eager to get into Myanmar — may prove a means to both ends. John Bussey has details on The News Hub.
Mrs. Clinton plans to arrive in the capital Naypyitaw on Wednesday and meet former military commander and President Thein Sein on Thursday. She travels to the commercial capital Yangon, formerly known as Rangoon, on Friday, where she will visit dissident Aung San Suu Kyi and leaders of ethnic minorities.
Myanmar’s potential is too great for some investors to ignore. One of the last, large frontier markets in Asia, it is rich in oil, gas, timber and gems and has the potential to be a major rice and seafood exporter. Its tourism industry can rely on 900-year-old temple complexes and beaches to rival nearby Thailand, which attracts 15 million or more visitors a year. Myanmar also has low manufacturing wages, and Myanmar’s intellectual class speaks English, with a legal system rooted in British common law.
The obstacles, however, are large. Electricity is spotty, roads and ports are crumbling and the financial system is immature.
Precise data on Myanmar are hard to come by and government statistics are treated with skepticism inside and outside the country. The United Nations estimates Myanmar has a population of 50 million, around the size of South Korea. The International Monetary Fund says Myanmar has the second-lowest per capita gross domestic product in Asia adjusted for local purchasing power, after Afghanistan.
Among the Western brands making early inroads: consumer products giant Unilever, which quietly began to sell goods through a distributor in Myanmar late last year. The company’s products were being smuggled in by third parties anyway, according to a spokesman, who said the company sells “soup and soap” in Myanmar via its Thailand operation and doesn’t maintain an office in Myanmar.
Western sanctions mostly bar importing goods from Myanmar, dealing with top leaders and tycoons, and making certain financial transactions. Sales into the country, with the exception of arms, generally aren’t prevented.
Another Western company with business in Myanmar is U.S.-based Caterpillar Inc. According to the state newspaper New Light of Myanmar, government officials met in August with businessmen affiliated with Caterpillar to discuss sales of engines and other heavy machinery. A company spokesman didn’t confirm the report but said, “Caterpillar and some foreign subsidiaries may, under some circumstances, sell products to independent dealers that resell to users in this country.” He said the company “has no facilities in Myanmar,” and is “in full compliance with all applicable laws.”
Business delegations, meanwhile, are streaming through Yangon, including ones from Austria and Germany, while the city’s main hotels—which suffered years of dismal occupancy rates—are now largely full with tourists and businesspeople. Asian companies from Taiwan, Thailand and elsewhere are eyeing investments in a roughly 100-square mile, or 250-square-kilometer, multibillion-dollar Dawei Special Economic Zone under development in southern Myanmar that will include roads, railways and a deep-sea port.
Myanmar was one of the richest countries in Southeast Asia in the 1950s. But a military dictatorship took over in 1962, nationalized industries and systematically impoverished the country as neighboring countries powered ahead.
The regime changed to a capitalist system in the 1990s. But its reforms failed to alter Myanmar’s underlying economic structure, which reserved most of its wealth for the ruling generals and their allies. The U.S. imposed sanctions in stages that prohibited new investments by Americans, blocked Myanmar exports into the U.S. and restricted financial transactions in Myanmar.
A handful of big Western companies, including France’s Total SA, stayed, thanks to exceptions in the sanctions, including provisions allowing companies with pre-existing operations to remain. China’s Cnooc Ltd., Thailand’s PTT oil-and-gas firm and other Asian companies also expanded there.
The country started to change last year, as the regime held Myanmar’s first election in two decades. Although the U.S. and the European Union condemned the vote as a sham, Myanmar’s nominally civilian government, which is stacked with former generals, has loosened press restrictions, freed some political prisoners and engaged in talks with Ms. Suu Kyi.
The government also passed a labor law, lowered taxes on foreign trade and consulted with the IMF to fix a currency system that deters investment. Last week, several local banks were given the right to trade Myanmar’s kyat for dollars, euros and Singapore dollars and a new automatic teller machine appeared in Yangon for the first time in several years.
Outside investors are watching government plans to pass a foreign-investment law that would make it easier for foreigners to control local companies and land.
“Events are unfolding faster than anybody predicted,” said Douglas Clayton, who runs Southeast Asia private-equity firm Leopard Capital LP and has been watching Myanmar for over 20 years.
Encouraged by last year’s elections, closely held Singapore-based industrial-trading and services company Jebsen & Jessen set up a joint venture in the country in July.
“It’s such a positive vibe,” said Philipp Hoffmann, general manager of the venture, which is based in the commercial capital of Yangon. The company sells industrial chemicals, pumps and irrigation equipment to golf courses, a legacy of British colonial rule. “If Myanmar does it right, we could see it develop even faster than Vietnam,” he said.
Luc de Waegh, who runs Myanmar-focused consulting firm West Indochina, based in Singapore, said he has received a flood of calls from multinational corporations looking to reestablish ties with old local partners.
“That Secretary Clinton is going, is a huge step. It will help to rectify the misperception that Myanmar is the same as North Korea,” said Mr. de Waegh, who formerly ran British American Tobacco PLC’s operation in Myanmar before the company left in 2003 under pressure from dissident groups and the U.K. government.
“People are waiting for more reforms, especially the investment law,” said Tony Picon, associate director for research at consulting firm Colliers International in Bangkok, which recently published its first survey of real estate in Myanmar. “Once that’s dusted down, people will move in quite significantly,” he said.
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Source: The Wall Street Journal, November 30, 2011
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