Francisco A. Laguna & Jennie Linder Cunningham
This week, we start a 2-part series on Burma (Myanmar). Located in Southeast Asia, Burma is bordered by Laos, Bangladesh, Thailand, China, the Bay of Bengal, and just west of the South China Sea. As such, the country is of interest both geopolitically and strategically. However, two decades of severe US and EU sanctions have left Burma severely underdeveloped, impoverished and (with the exception of some tourism) largely cut off from the rest of the world.
With lifting sanctions comes a renewed regional and international interest in the resource-rich country of 55 million. Japan, China and India have all expressed interest in doing business in Burma – Japan having kept its distance in accordance with Western sanctions, while China did not. Thailand and Vietnam have also been actively exploring in-country commercial relationships, and the United States has encouraged American businesses to do the same.
Reforms began as early as 2010, with the election of President Thein Sein. One of the most significant early steps was the release of Nobel Peace Prize winner Aung San Suu Kyi from house arrest, after having been imprisoned on-and-off for 15 years. Suu Kyi remains an inspirational national figure for Burma, and continues her leadership as a member of the Burmese parliament and the influential head of the opposition party, the National League for Democracy.
As outlined in a previous post, China exerts a great deal of influence in Burma unhindered by sanctions agreements with the West, China has developed a number of significant land, real estate and natural resource interests. With lifted sanctions, China enjoys not only a resource and business “head start” in Burma, but geopolitical advantage as well. Observers should expect to see continued, if not rapidly increasing, Chinese economic activity in Burma as China attempts to maintain its existing advantage, even as domestic pressure mounts for those activities to be more even-handed and beneficial for the Burmese.
Investors should be aware, however, that China’s “advantage” comes with a number of caveats about the country as a whole – Burma’s underdevelopment, poverty, and decades of isolation have resulted in a challenging business environment, and significant questions remain as to how severe human rights issues continue to be, even under a far more liberal regime. Incidences of ethnic violence have also accompanied the news of the lifting sanctions and movement toward reforms under the current leadership. Freedom House currently classifies the nation as “Not Free”, including press and internet. The legal system has to be revamped, and protections must be provided and enforced for Burmese citizens as well as foreign investors. Additionally, Burma’s population (and workforce) remains severely uneducated and inexperienced, albeit desirous to change that.
By and large, institutions remain weak, if developing. However, the regime has embarked on significant economic reforms, much needed for a population of which two-thirds depend on agriculture. Reforms include a move toward a market-based economy and attracting investment in the huge agricultural sector. Next week, we will examine some sectors of interest in Myanmar.
TransLegal has a correspondent office in Rangoon and is available to assist answer your questions concerning doing business in Myanmar, including the introduction of local partners.