As Burma opens up to the world, experts warn the sharks and
cowboys among the many frontier investors converging on the scene could
exploit the impoverished nation.
“The sharks are circling and the cowboys are galloping in,”
said one Rangoon-based business consultant, who spoke on a condition of
anonymity.
“Myanmar is the perfect environment for them to flourish and
the absence of big multinationals means there’s little or no competition
or standards to adhere to.”
However, foreign investment is not a new phenomenon in Burma as
one only has to refer to the billions of dollars spent over the past
decade by countries including neighbouring giants Thailand and China,
almost exclusively to reap the spoils from the resource-rich nation’s
extractive sector.
For Maw Htun, an independent researcher who studies foreign investment, this is a huge concern.
“Myanmar needs investment which benefits its people,” says Maw
Htun, adding greater transparency was needed in screening new investment
decisions.
“We really need to see what types of investments are coming into the country,” he said.
“The government should consider how much its people will directly benefit from the foreign investment coming into Myanmar.”
The Burmese government is eager to secure foreign investment in
the wake of economic and political reforms; however, experts warn too
much capitalism too soon could be detrimental to the impoverished
country’s development.
Jared Bissinger, a PhD candidate at Australia’s Macquarie
University, says Burma could quickly fall victim to the resource curse,
which has dominated foreign investment in the past decade.
“Over the past decade Myanmar’s inward foreign direct
investment [FDI] has become heavily concentrated in the extractive and
power sectors, while investment in manufacturing, services and other
secondary and tertiary sectors has been almost non-existent,” wrote
Bissinger in his latest journal article, “Foreign Investment in
Myanmar”, which was published in Contemporary Southeast Asia earlier
this year.
“Resources can boom and other sectors of the economy can be hurt,” says Bissinger.
Maw Htun says while the Burmese government accepting millions
of dollars from foreign investors eager to exploit the impoverished
country’s rich resource reserves, little financial benefit has been seen
by local communities.
“Instead of inviting all those extractive industries, we should
have some cooperation with well-known and renowned international
companies to work with the government and improve their transparency,
accountability and corporate social responsibility,” says Maw Htun. “If
the government can do that, it will benefit everyone.”
Speaking at a conference in Geneva last month Burma’s Nobel
Peace Prize winner Aung San Suu Kyi urged foreign governments not to
allow their companies to enter into joint ventures with the state-owned
oil and gas company, Myanmar Oil and Gas Enterprise, until its improved
transparency and accountability.
“The Myanmar Oil and Gas Enterprise (MOGE)… with which all
foreign participation in the energy sector takes place through joint
venture arrangements, lacks both transparency and accountability at
present,” said Aung San Suu Kyi said.
However, while her statements might have been welcomed by human
rights lobby groups and encouraged senators to put more pressure on the
US government, they appear to have done little to deter investors, with
a Hong Kong-based corporate events company seeking a speaker from MOGE
to address hundreds of fund managers and institutional investors at an
upcoming oil and gas summit in Singapore.
It seems this is a risk that some impatient investors are
willing to take in order to reap the rewards of investing in Southeast
Asia’s final frontier.
U Ken Tun, chief executive officer and president of Burmese
junior oil and gas exploration firm Parami Energy, said scaring away
large, reputable investors would only leave more room for the scavengers
to survive.
“This is the time to attract responsible investment and
discouraging responsible investors is a negative approach,” says U Ken
Tun.
“If we scare away responsible investors, instead these scavengers come in and the whole cycle will start again.”
U Ken Tun said many operating within Burma needed to change
their mindset from being profit-taking and contribute to the greater
wealth of the impoverished nation’s economy.
However, he said this transition would not happen overnight.
“People who are used to operating on a profit-oriented mindset will find it very hard to change,” says U Ken Tun.
“I hope businessmen who really want to improve this country can take part in this movement.”
The Burmese government have appealed to western investors to
come in and change the status quo, with Deputy Minister for Ministry of
National Planning & Economic Development, Dr. Kan Zaw, telling a
roomful of foreign investors at a conference last month that western
countries would soon replace Thailand and China as Burma’s top
investment partners.
“Western investors will be the top investors in Myanmar in the
coming years,” said Dr. Kan Zaw to a crowd of participants at the 2012
New Myanmar Investment Summit on 21 June.
But for now, the biggest players in Burma continue to be
amongst the country’s ASEAN neighbours whom Burma understandably
developed stronger ties with during the years of strict western
sanctions.
However, Burma simply isn’t an attractive investment option for
many western firms, according to American lawyer Steven Dickinson, who
recently visited Rangoon to attend the investment conference.
“Other than for oil and gas, European and American companies
won’t come to Myanmar for some time,” says Dickinson who works at Hong
Kong-based law firm Harris & Moure.
Dickinson said the lack of infrastructure and high operating
costs coupled with political instability and a crippled banking system
would deter many western investors, particularly those in the
manufacturing industry.
“That’s a bad thing for Myanmar because there are people who
are going to come in here, particularly for the areas of oil and gas and
minerals and teak,” says Dickinson.
“And those investors are going to strip the country bare, leave
the money in the hands of a few top people and give very little back to
the general population,” he says.
“Many companies, especially from ASEAN, think Myanmar is a sure
bet and as a result, they will rush in and conduct business in the most
shoddy and informal methods you can find,” says one Malaysian
businessman.
“And at this moment, a number of local Myanmar businessmen seem
to hint at using this method because the policy making is really slow,”
he said.
“It’s like the Wild West here at the moment and there are a lot of cowboys coming in,” the source said.
He said the lack of formal legal structure and proper
guidelines left a huge grey area for eager investors to exploit the
system.
The challenge Burma now faces is how to sort the wheat from the
chaff in encouraging a new strain of socially responsible investors to
help redevelop the impoverished country.
Maw Htun said new, socially responsible investments were needed to improve the livelihood of local communities.
“Otherwise the local community will still be marginalized and
receive only the negative impact of the investment, which will cause
resentment,” says Maw Htun.
source: DVB
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