Robert Walsh, sometime Seattle resident and long-time friend of our law firm (we worked on a number of China deals together and we — Dan and Steve — met up with him on our last trip to Myanmar), has spent the last four years in Myanmar, where he operates a vibrant business consultancy. Robert is fluent in Chinese and Korean and, amazingly enough, Burmese (multiple dialects), having learned Burmese while working in the U.S. Embassy in Yangon many years ago.
Robert has been sending us email updates from Myanmar for some time and we post some of them on here. Back in 2014, it was Myanmar: Open For Business? and in 2013, it was Myanmar Foreign Investment. Difficult And Expensive, But Opportunities Are There. In our 2013 post I mentioned that my law firm had “been involved in a few Myanmar matters, but truth be told, Myanmar is a difficult place in which to do business and many of the companies going there are bigger companies mostly looking to get in now and make money later. In the last year.” Since that time, our Myanmar work has actually shrunk as interest in Myanmar by SMEs has greatly waned and their non-China Asia focus these days seems to be more on Thailand and Vietnam.
It was nevertheless great to get a bolt out of the blue from Robert this week in the form of a brand new Myanmar update, set forth below.
4 years water is under the bridge since we opened up shop in Rangoon.
A bunch of things have changed:
-Sanctions were relaxed, then finally revoked in toto back in October of last year. Now any foreign company that desires to do so can work with any of the formerly blacklisted military crony companies, jade/gems barons, or groups associated with narcotics trafficking. We’re seeing indications that this is happening already.
-Millions more cars on the road, newer Japanese for the most part, but Korean cars have moved in as well, and offer financing. Ford and Chevy are here with local or regional partners; not selling a lot.
-Supply of electricity has gotten steadily better, but this was achieved by a series of band-aid solutions using quickly built gas turbine or heavy fuel oil facilities.
-More places to stay, more restaurants for rich white people. Prices for hotels and rents on apartments have eased up now that supply roughly equals or exceeds demand.
-The November 2015 elections went off without a hitch, with the National League for Democracy (NLD) taking the lion’s share of seats. Daw Aung San Suu Kyi was not permitted to become president, but loopholes were found to allow her an equally powerful position. The finder of that set of loopholes, U Ko Ni, NLD’s senior lawyer, was gunned down outside the arrivals hall at Mingaladon airport last Sunday (January 29, 2017).
-The American Chamber of Commerce has a Myanmar chapter with over 100 members, but I’d say less than a dozen are really active. Sanctions or none, American business has not shown a tremendous interest in this place. Oil & Gas are here, but their presence and local footprint is no larger than it has to be to administer the constellation of service companies that follow in their wake. The only American manufacturer to date is Ball Corp, and they’re here just to make cans for Coke. Coke came in back in 2012 by acquiring a local soft drinks bottler.
-Japanese and Korean business are still by far the biggest foreign presence. Our best guess is that more than 3000 Korean families are here, not all coming out of Chaebol companies, most doing business on their own accounts. If we exclude Americans working for the embassy and USAID contractors, the number of hard-core American expats is probably less than 50.
-The largest sector in which American and European business is represented is what I and others term the “Aid and Development Industrial Complex”. An emerging sub-sector is the “Peace Process Participation Industrial Complex,” which attracts many nicely paid foreign consultants.
The lyrics are different, but the tune’s the same:
-Although the government has supposedly changed hands to civilians, many upper-level ministries out in the provinces don’t seem to have gotten the word, especially if they are headed by ex- (or not so ex-) military people. The farther away from the Naypyidaw flagpole, the more clearly this is evident.
-Laws may pass, but implementing instructions are slow to make it down to where the rubber meets the road.
-Doing anything land intensive requires one take up the diligent study of various land documents issued to owners over the past 160 years. In the fringe border areas, especially where there has been a lot of fighting since independence, land documents are especially puzzling.
-The IFC/World Bank has hosted a “Myanmar Business Forum” (MBF) with eight working groups along industrial sector lines. Its aim was to engage lawmakers and ministries to draft and pass law through the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). I sat on the agricultural/forestry working group and we were actually able to get things done, in terms of getting implementing instructions for laws passed as long as 20 years ago. The most active working groups were for anything related to land tenure or hotels/tourism. Missing or poorly represented were agricultural finance and inputs (fertilizers, agrochemicals).
– A second set of refinements to the Foreign Investment Laws were passed, but they do not help much. It still costs a lot of money to set up a business here. We have been doing a lot of work setting up companies as rep offices, once we were absolutely sure what the rules were, and what a rep office could/could not do. Most of our clients want our help in establishing a presence, opening a local banking account and administering expat immigration, and setting up shop. NGO’s are our biggest customers, as they now realize that registration as an NGO (as opposed to just a normal for profit company) rarely offers them anything and indeed adds restrictions on their movements and activities — in other words, not so different from China).
-Right now a fairly nasty set of visa and foreigners laws is up for passage. If pass as written, I think many foreigners will stay away or leave if already here. As it stands, many of the laws are currently on the books, and few expats are compliant because the government does not strictly enforce them. Should the government wish to do so, it can deport anyone and everyone who is not compliant, and do so at a moment’s notice. And we do see the government deporting foreigners who do things that excite their ire, usually for political or religious reasons, and occasionally for criminal behavior.
-Like it or not, there is plenty of unrest in this country, and large swathes of Kachin and Shan state are low-boil combat zones; the Kachin Independence Army (KIA) is still far from considering entering the National Ceasefire Agreement. A number of ethnic armed groups have signed the NCA and are now lapping up greenmail money and other territorial benefits, but the majority of them have not in fact been combat effective for a long time, decades in most cases. The KIA has formed a 5-member alliance of other groups that are equally belligerent and unwilling to sign the NCA under the government’s terms.
-In Rakhine state the slow-motion train wreck that is the Rohingya situation shows no sign of resolution anytime soon, and if anything, Trump’s election and anti-Muslim rhetoric has reduced inhibitions on the Burmese taking harsher action to force these people back into Bangladesh. Incidentally, slain NLD lawyer U Ko Ni was himself a Muslim, albeit from a family with generations-back residence in this country. The American embassy used to be pretty shrill in denouncing bad behavior towards the Rohingya, but since Trump’s election the United States has not said so much.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.