Sunday 19 May 2013

Booming Burma is a win-win scenario for business in South East Asia

When a repressive regime comes to an end, there is always optimism inside and outside the country that it will herald a bright new dawn of freedom and economic growth.

Sometimes these hopes are realised, as was the case with countries such as Panama after the fall of Manuel Noriega and his drug-running henchmen in 1989.


However, as Egypt and Libya have demonstrated, the opposite can often apply. So when, a few years ago, the military relaxed its grip on power in Burma and elections were held in which Thein Sein became president and long-term political prisoner Aung San Suu Kyi was released from house arrest, the world held its breath.

As Aung San Suu Kyi herself said: “If I advocate cautious optimism it is not because I do not have faith in the future but because I do not want to encourage blind faith.”

But now, with stability returning to this once wealthy country, which had been reduced to pauper status under the army, there is almost a feeding frenzy over the opportunities for business and to engage with this fascinating nation.

When UK Trade & Investment recently staged a seminar in Manchester for Malaysia – a beacon for political and economic sense in the South East Asia region - it was no surprise that Burma, or Myanmar, as it now sometimes called, should be included too.

Such a thing would have been unthinkable a few years ago, but now mighty and prosperous Malaysia can sit comfortably with its ASEAN neighbour to the north, both sharing a common goal for increased high-growth and development.

Keith Win, a Burmese-born businessman and founder of the Myanmar Britain Business Association, now seems like a man whose birthdays have all come at once.

After struggling for years with his country’s shocking image problem, when he even acted as an emissary for Tony Blair’s British government and handed a special letter to Aung San Suu Kyi while she was under house arrest, Mr Win is, well, in a win-win situation.

“It’s incredible how much money is now flowing into the country,” he told the audience of north west business leaders.”There’s investment across the board, but especially in oil and gas and real estate.

“Prices are sky high in Yangon, and in some parts they are higher even than in New York. Jim Rogers, the former partner of international financier and investor George Soros, has been quoted as saying that if he could he would invest ALL of his money in Burma.”

And although historically the oil industry is more associated with the likes of Texas or Saudi Arabia, the first country ever to dig for oil was Burma.

“There are old black and white photographs I’ve seen of ordinary people digging down a couple of hundred feet into the soil to extract oil, and now, all these years later, there is huge potential again,” said Mr Win.

“Oil and gas, palm oil and mining make up 90% of the economy, while China is the largest foreign direct investor with 34 projects, mostly in oil and gas and manufacturing, with Malaysia second with seven projects.”

Mr Win, who launched his organisation as far back as 1995 to help British companies set up there, pointed out that not only is Burma rich in resources and potential, it is ideally placed in Asia.

“It’s right between India and China and at the heart of the ASEAN countries,” he said. “Before the political situation deteriorated British Airways used to stop over there, so it’s got great potential for transportation and logistics, and there’s a lot of economic development taking place around that.”

Another sector attracting strong interest is tourism, as Burma, which is 1,270 miles long with a population of 60 million – approximately the same as the UK - features snow-capped mountains, pristine beaches and 300 offshore islands.

“That’s on a par with the Caribbean,” said Mr Win. “So tourism is set to really take off. In 2011 we had 400,000 tourists, and it is projected that by 2014 it will be 3 million. Thailand currently gets 20 million a year, so you can see the potential Burma has.

“There is a scramble for new hotels and the service sector that goes with it.”

However, the Burmese are keen not to sell themselves short or sacrifice the country’s strong heritage for the sake of an easy dollar.

“When the ministries moved out of Yangon, which has a population of 6million, they vacated some magnificent old colonial buildings, which can be seen throughout the city. Lots of hotel chains have been looking to move in, but there is resistance among the locals who want make sure nothing happens to spoil this lovely architecture,” said Mr Win.

Although Burma accommodates scores of languages and ethnicities, the predominant religion is Buddhism, which, Mr Win says, creates are a general feeling of homogeny, although there have been disturbing reports of ethnic conflicts with Islamic communities.

“Burma is a very traditional country, and when you travel around you will see monks everywhere,” said Mr Win. “But they are not backward looking people. Education, for example, is highly revered there and there is a big demand for schools and colleges.”

One of the lynchpins of the new Burmese economy will be the construction of the major Japanese-backed $8bn Dawei deepwater port and special economic zone in the south, which will bring the economies of Burma and Thailand closer together.

Recent financial hiccups have cast doubt over the construction of the port, although the Burmese government remains upbeat about its prospects.

A major new highway, providing better access to and from China, is also being planned, and, says Mr Win, “if it all takes off it will totally change the dynamics of trade in the region as goods will be able to bypass the Malacca Straits, which can be fraught with problems.”

A new foreign investment law was put in place last year, giving a five year tax holiday for new companies, when previously it was just three.

“And the government allows 100% foreign ownership in most sectors,” said Mr Win. “But if you approach the government with a project and you’ve already linked up to a Burmese company, they will certainly look more favourably on you.

“There are a few restricted sectors where you need 20% local ownership, but generally business is getting easier in Burma all the time. All the sanctions have been removed by the EU, and although some US sanctions are still in place it won’t be too long before they have gone as well.

“Censorship has been removed, with hundreds of journals and newspapers available now, with a massive rise in the advertising and marketing sector.

“The only obstacles I can see for Burma really taking off are poor infrastructure and a skills shortage – the government is desperate to attract back the diaspora – but as we know, such things create just as many opportunities.” 

source: Global Trader
http://www.gtglobaltrader.com/news/booming-burma-win-win-scenario-business-south-east-asia

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