TRADE & INVESTMENT – History in the Making

Things are looking bright in Burma as political and economic reforms have led to sweeping changes in what was previously a military-ruled country. As the country also known as Myanmar continues to become a part of the international community with abundant investment opportunities, US Ambassador to the Republic of the Union of Burma Derek Mitchell provides an inside look of what the future might hold

By Leon Lee


In 2011, Burma began adopting a series of political and economic reforms and has since made significant progress in opening up the country for trade and investment. Its people have seen an increase of political and civil liberties as the country, also known as Myanmar, works towards becoming a democratic state.

In November 2015, the nation held its first openly contested general elections in 25 years. Revered Burmese icon Aung San Suu Kyi and her party, The National League for Democracy (NLD), won the absolute majority of seats in the two chambers of the national parliament – meaning a candidate representing the NLD would become the new president of Burma.

As the country continues to become a part of the international community, there seems to be a wealth of potential opportunities available for foreign businesses in the largest country (by geographical area) in Southeast Asia. How will the Southeast Asian country continue to transform itself and become a destination of foreign investment? US Ambassador to the Republic of the Union of Burma Derek Mitchell provides an inside look of the opportunities and what the future might hold.

Asia’s greenfield

Since July 2012, Mitchell has been the top US official to the country he describes as “very close to his heart.” While he acknowledges the abundance of assets including natural resources in what could potentially be the last greenfield of Asia, he cautions that businesses do their research properly and understand the country before deciding to make investments in Burma.

“It seems deceptively straightforward when you look at the place,” Mitchell explains. “But you have to understand just how amazingly complex the country is.”

“If you don’t understand the context or the country, what it’s going through or how they think, you may have a hard time navigating through enormous challenges. And these difficulties can be exacerbated all around you if you don’t realize that it is not as green and simple as it appears on the surface,” he stresses. “It is about one of the most complex countries you will ever face because of the various layers of challenges.”

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One of the challenges foreign companies looking to do business in the country need to understand is just how diverse the country of 51.5 million people is. There are eight major national ethnic group throughout the vast country, and they don’t necessarily see eye to eye. Burma has been fighting the longest running civil war in the world for 70 years.

While democracy is making progress, how the country will be able to hold together peacefully is a much more important question to be addressed, Mitchell points out.

“I tell [businesses] that the worst thing you can do in an environment where [different groups of] people have their own identities and are alienated from the rest of the country is to go in and say ‘the central government said we should come in here and build a road. So we’re going to build a road.’”

“You’ve already lost because you’ve demonstrated you don’t understand the context, you don’t understand that people at local levels need to be respected,” he explains. “They need to be consulted and they need to have some buy-in in what you’re going to do.”

“So, what looks like a greenfield has all kinds of potential problems as you focus on not just what you want to do, but how you go about doing it in the country.”

Imminent reforms

With monumental events like the NLD’s election victory, a wave of reforms seems to be on the way. However, market expectations could be tempered and may head in a different direction because it is a long road ahead. The military, while no longer a majority in government, retains much influence in the country, and the structure of the country’s systems remains unchanged.

Aung San Suu Kyi, despite her popularity and position as president of the NLD, is ineligible to become president of Burma according to the country’s constitution, which prohibits such undertaking when a candidate’s spouse, children or spouses of children are foreign passport holders. Her late husband and two sons are British citizens.

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Although Suu Kyi herself cannot hold the office of president, she is poised to lead the country. She has been appointed as the head of the Ministry of Foreign Affairs and Ministry of President’s Office in the new government.

Htin Kyaw, elected to become Burma’s first civilian president in over 50 years, is a close ally of Suu Kyi and was quoted saying, “This is sister Aung San Suu Kyi’s victory.”

In conversations with Suu Kyi, Mitchell has gotten a sense of her priorities in the coming five years: getting rid of the rampant corruptions following five decades of military rule and pushing agricultural productivity – an integral role for the country’s development, especially in the rural areas.

“When you’re trying to cultivate peace and develop a country, people have to feel that democracy delivers for them equitably,” Mitchell says. “So thinking about equity in the agricultural sector can be very useful for that, and it’s a natural first step.”

The Burmese people are feeling optimistic and hopeful as they believe the new government can make a difference, regardless of some aspects short of expectations. Mitchell point outs it is important for everyone to manage their expectations of the new government as it will take time to strengthen the regulatory environment and to tackle issues like land tenure and rights.

So far, the signs are looking positive for Burma. Its economy grew by 8.5 percent in real terms between 2014 and 2015. Growth is projected to be moderate at 6.5 percent in 2015-2016 because of floods. Economic reforms have backed investor and consumer confidence.

The Yangon Stock Exchange, Burma’s first modern stock exchange, began trading at the end of March this year. Almost 113,000 shares of First Myanmar Investment (FMI), the country’s first listed company, were traded on the first day.

However, poverty is a nationwide issue, especially in the rural areas. Less than one-third of the population have access to electricity, and facilities of communication technology as well as logistics are still behind. Hence, investment and business opportunities are plentiful for companies who approach them the right way with its people.

In the near term

Burma’s abundance of natural resources in oil, natural gas and other precious materials such as jade and rubies will potentially be a revenue stream to support the development of infrastructure, healthcare and education through investment channels. Some businesses have been critical of Suu Kyi’s lack of economic policy; others about the lack of a successor and of a strong party base.

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But people should not worry too much because she has access to good advisors, Mitchell believes. “She has asked her economic committee team to work very closely with reputable economic advisors from the outside, thinking about economic policies and what signals can be sent to businesses to attract them.”

Internationally, Burma is going to have to figure out a strategy to work with China which borders the northern and eastern parts of the Southeast Asian country. It will depend on how China plans to engage Burma for a number of political and economic reasons, Mitchell notes.

Burma also faces sanctions imposed by the United States since 1997 because of human rights and political reasons. “The sanctions that are in place were imposed, for better or for worse, in order to concur with American policy’s way of trying to have leverage on the military, saying ‘we’re going to voluntarily withdraw from engaging with a regime that does this to its people,” Mitchell explains. “We do not and will not make money on the backs of the average Burmese.”

However, in light of the reforms, the United States began to moderate on certain financial and investment sanctions in 2012. In November of that year, sanctions on US dollar-denominated transactions were lifted to promote commerce into the country. However, companies and lawyers were still wary of investing into the country at the time, and many did not take the risk.

The US government is looking into making further changes to the sanctions in a step-by-step process, Mitchell acknowledges. “We do feel it is important to know who you’re working with. One of the dangers when you just open things up quickly is that you will simply empower those who have an advantage. We’re trying to do this in a way that we’re not empowering an unjust system that has been in place for some time.”


By Romain Caillaud

The 2015 landslide victory of Myanmar’s National League for Democracy (NLD) ushered out more than 50 years of direct military rule. After winning a decisive majority in the upper and lower houses of Myanmar’s parliament, the party is now a large part of a new government. The change will bring about new opportunities and challenges for companies that want to invest in what many consider Asia’s last economic frontier.

Although the win is a watershed moment for the NLD and its famous founder Aung San Suu Kyi, investors need to be aware that the military will remain a force in the government. It has a constitutional right to 25 percent of the seats in parliament and has amassed power and influence over the years. And beginning in 2011, the military embarked on a series of economic reforms – critical to the country’s survival – that were championed by former President Thein Sein.

Historical background

Myanmar once was the envy of Southeast Asia. In the 1950s, for example, Singaporeans went there for medical training. But after the 1962 military coup d’état, the country closed itself off from much of the world and became a pariah and economic backwater. Today, only about 25 percent of the population has access to electricity. Only about 50 percent of the citizens have a cell phone.

The NLD wants to change this and to continue with economic reforms while expanding civil rights. For example, the party already has announced its intention to release political prisoners and fight corruption. As of March 2016, NLD leaders have appointed the heads of all key ministries, including Finance, Commerce and National Planning.

Many ministerial and other official positions are expected to be filled with the party’s ranks; each will have a background in political and social activism. But, collectively, they will have little experience governing a country or supporting local or overseas businesses. This lack of expertise certainly will create new roadblocks and bureaucratic “snafus.”

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But it also presents a chance for those interested to engage with the country’s leaders. The NLD is pragmatic. It came to power via elections, not uprisings. There is every reason to believe that the party will be as receptive to advice from outsiders as the former government was.

For instance, under Thein Sein, Myanmar sought advice from professionals at major oil companies to help determine the best policies and approaches for the country’s energy sector.

Developing productive relationships with government officials will be essential to a foreign company’s success in Myanmar.

The bottom line

Myanmar offers tremendous possibilities for investors that do nurture collaboration with the country’s government and business leaders. With a population of approximately 52 million, Myanmar will be a significant market for many goods and services. Moreover, as the country modernizes, there will be huge opportunities to build infrastructure such as roads and power supplies.

State-owned organizations such as Myanmar Oil and Gas Enterprise will be a vital part of the economy for some time to come. In addition, large conglomerates in key industry sectors such as finance and mining are controlled by oligarchs with military and government ties. These elites will remain part of the landscape, and, in industries that still are protected, it will be necessary for foreign companies to know the important players and work with them.

The investment outlook should be one of cautious optimism. Processes likely will become increasingly complicated, and investors may have to navigate a complex web of multiple ministries and local governments. Thus, understanding those who took the reins in March, and engaging with them, will be the critical factor for success.

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Romain Caillaud is a senior director of FTI Consulting’s Global Risk & Investigations Practice, a part of the firm’s Forensic & Litigation Consulting segment. He is currently based in Singapore after having spent seven years providing strategic advice to investors entering the frontier market of Myanmar.

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