Myanmar lures Singapore Inc

By Megawati Wijaya    ...

SINGAPORE - Singapore Inc is in hot pursuit of business opportunities in Myanmar, where a recent reform drive aims to lure more foreign direct investment. A long time ally to Myanmar's former military regime, Singapore is well placed to reap first-mover advantages vis-a-vis Western countries that maintain but are slowly lifting economic sanctions against the country.
Last month, a delegation representing 74 Singapore-based companies traveled to Myanmar for networking and business matching with Myanmar counterparts in construction, education, finance, infrastructure and logistics.

Organized by the trade promotion groups Singapore Business Federation (SBF) and International Enterprise (IE) Singapore, the trip featured site visits, the signing of a memorandum of understanding to promote economic relations and trade ties, and

courtesy calls on reformist President Thein Sein and many of his ministers.

The Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), a national level group that promotes the business interests of Myanmar's private sector and coordinated the Singaporean delegation's visit, said the group was the largest to explore new business opportunities in the country.

The military has dominated and mismanaged Myanmar's economy since a wave of nationalization of assets that began in the 1960s. The country's recent ambitious pace of change, abundance of natural resources, strategic geographic location and sizeable workforce positions it for rapid growth over the next few years, SBF chairman Tony Chew said during the trip.

Participants in the delegation have sounded similarly optimistic notes, while at least one Singaporean property and construction company, Yoma Strategic Holdings, saw its share price surge on expectations of yet-to-be-announced new Myanmar-related ventures.

James Aw, business development director at Singaporean building construction group Hor Kew Corporation who last visited the country in 1996, said he saw some potential for housing projects.

"In 1996, things were still very raw. There were no roads or other infrastructure; the locals also didn't have much money to spend." he said, while noting that property prices in the former capital of Yangon have risen quickly in the past two to three years.

"People have spending power now. We couldn't build mass housing of 30,000-40,000 units at one go yet, as we are doing in Singapore. But at least we could do 15-20 unit project types now." His business group is also looking into building a 100-room hotel in Yangon with newly found local partners.

Jimmy Neo, managing director at Filtec, a logistics and heavy equipment provider, said Myanmar's more open environment makes it easier to do business compared with the more heavily restricted 1990s and 2000s.

"Things have certainly changed in the past one to two years. In the past you would need connections with high-ranking military generals if you wanted to do business in Myanmar," said Neo, who has conducted business in Myanmar for the past 15 years. "Now it is easier to navigate. There is less red tape and the business climate is more conducive now."

Neo has noticed a growing number of Singaporean businesses in Myanmar, which he suggests is a reflection of Singapore government policy. "The recent trip organized by SBF-IE shows that there is obviously some attention [from the government and trade boards] on Myanmar being touted as the next developing market with business opportunities for Singapore-based businesses," he said.

Commercial comrades
Singapore is Myanmar's fourth-largest export partner and second-largest import partner, with bilateral trade amounting to S$1.6 billion (US$1.3 billion) in 2011.

As of October 2011, Singapore was the sixth-largest source of foreign direct investment in Myanmar, with 74 Singaporean companies contributing a total of US$1.8 billion, according to Myanmar's Ministry of National Planning and Economic Development. Around 70% of Singaporean companies invested in Myanmar are involved in hotel construction, tourism and real estate. The rest are involved in agricultural, energy, mining and manufacturing ventures.

Singaporean businesses started to enter Myanmar, then known as Burma, in 1988 when the then ruling State Law and Order Restoration Council (SLORC) ended General Ne Win's dictatorial rule and started tentatively to open the hermit country to more international trade.

While Western legislators, including in the United States and European Union, imposed economic sanctions over the military's lethal crackdown on pro-democracy demonstrators, use of forced labor and government-linked narcotics trafficking, Singaporean companies continued to pour money into the country throughout the 1990s.

"While the other countries are ignoring Myanmar, it's a good time for us to go in," said Tay Thiam Peng, director of foreign operations at Singapore's Trade Development Board, in a revealing 1996 media interview. "You get better deals, and you're more appreciated... Singapore's position is not to judge them and take a judgmental moral high ground."

Singapore's pro-engagement stance mirrors that of the Association of Southeast Asian Nations (ASEAN), which Myanmar joined under a cloud of controversy in 1997. Since then, Singapore, Malaysia, and Thailand have consistently been among Myanmar's top sources of FDI, along with neighboring China and India. Those ties, however, have sometimes put Singapore at loggerheads with the US.

Asia World, one Myanmar's largest business conglomerates with diversified interests in trading, manufacturing, real estate, construction, and transportation, has strong ties to Singapore and is also on a US Treasury blacklist of sanctioned companies. Lo Hsing Han and his son Steven Law, respectively the company's founder and current chairman, have been on a US visa blacklist since 1996 for suspected drug trafficking activities.

In February 2008, they were both put on a US Treasury Department sanctions list, along with Asia World Company and subsidiaries Asia World Co Ltd, Asia World Port Management, Asia World Industries Ltd and Asia World Light Ltd, for their financial connections to the then ruling military junta. Law's wife, Cecilia Ng, owns 10 more companies under the group's banner which are situated in Singapore.

US officials have also criticized Singapore for allowing senior regime members to maintain questionable bank accounts in Singapore. Senior junta members, including former junta leader Senior General Than Shwe, frequently visit Singapore for health care. Former junta leaders' and their business associates' children are known to attend some of Singapore's top private schools.

Skewed wealth
Despite recent foreign investments, particularly in export-oriented oil and gas ventures, Myanmar remains one of the poorest countries on most development measures. There are widespread perceptions among Myanmar's citizens that the benefits of FDI have accrued mostly to a narrow and historically unaccountable military elite.

Since Thein Sein took office last year, however, the pace of reforms has taken many international observers by surprise. "During the president's inauguration speech last March, there was the acknowledgement that the country is poor," said Tin Maung Maung Than, senior fellow at the Institute of Southeast Asia Studies in Singapore. "It has also been realized that other countries have moved forward, and more things should be done in Myanmar to bring the country forward."

In that direction, Myanmar's government is drafting new foreign investment rules that could bring an end to protectionist requirements such as foreigners having to take on local partners when establishing businesses in the country and products produced by foreign firms having to be exported. Foreign investment may also be granted a five-year tax holiday from the start of commercial operations, according to a draft of the new investment law obtained by Reuters.

Other reforms, including plans to harmonize the official and black-market rates of the local currency, the kyat, are also in the pipeline. According to a recent International Monetary Fund report, recent reforms are expected to boost Myanmar's gross domestic product growth to 5.5% this fiscal year 2011-12 and 6% in 2012-13. The latter figure could rise higher if Western countries, as some have signaled, start to remove their economic and financial sanctions in reward for recent reforms.

Singapore arguably has a head start on its Western competitors. Singapore's Foreign Minister K Shanmugam reaffirmed the two countries' "good and longstanding" bilateral relationship during Thein Sein's official visit to the island state in January.

At that meeting, the two sides signed a Technical Cooperation Program bilateral agreement where Singapore agreed to offer courses in investment promotion, infrastructure building, trade, tourism development and central banking, as well as training in English language, technical and vocational skills for Myanmar's workers. On the private sector side, business promotion groups SBF and IE say they plan a second major business mission to Myanmar in May.

Many Singaporean businesspeople say there are still hurdles to making money in Myanmar, including a lack of modern banking and financial facilities as well as foreign exchange risks related to holding or transacting in the country's still highly distorted kyat currency.

Others are taking a wait-and-see approach due to political uncertainties, including prospects for stability before and after April 1 by-elections, when opposition leader Aung San Suu Kyi and her National League for Democracy party will contest 45 of 46 vacant parliamentary seats. The military and military-linked Union Solidarity and Development Party dominates Myanmar's newly created legislatures.

"The by-elections do not hold any political significance in the sense that it will not influence the power balance in Myanmar. The election is a symbolic one, to illustrate openness and stability in Myanmar," said ISEAS's Tin Maung Maung Than. "This [in turn] can show foreign investors that the country is moving forward."

To Singapore's outward looking businesses, who wins and whether Myanmar's fledgling democracy is more representative is of secondary importance.

Businessman Aw said, "The most important thing is that the elected government should be able to create an open, conducive business environment and implement pro-business policies."

Megawati Wijaya is a Singapore-based journalist. She may be contacted at megawati.wijaya@gmail.com

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