Relaxed sanctions equal lucrative opportunities for Turkish entrepreneurs in Myanmar

15:22 08 July in ARTICLES, In English, PUBLICATIONS

Todays ZamanToday’s Zaman | 08 July 08, 2011 | 

MEHMET ÖĞÜTÇÜ – LONDON – It is now a business-as-usual matter to see Turkey’s extremely mobile and risk-prone entrepreneurs in the most unlikely places all over the world. I would not be surprised if they have already started knocking on doors and forging lucrative business alliances in Yangon, Mandalay, Naypyidaw and Mawlamyaing. As we speak, they might even have taken positions and established themselves in Myanmar, formerly known as Burma, the largest country in mainland Southeast Asia – almost as big as Turkey in terms of landmass and with 56 million people.

Last November after a national election, parliament — packed with retired and serving soldiers — dissolved the junta, the State Peace and Development Council. The end of military rule was seen as a move to attract much-needed foreign investment to a country that just over 50 years ago was one of Southeast Asia’s most promising and wealthiest, the world’s biggest rice exporter and a major energy producer.

The 78-year-old paramount leader, Senior General Than Shwe, named General Min Aung Hlaing as his successor as commander-in-chief. With his top allies in key posts in the army and government, Than Shwe has effectively insulated himself from a purge by preventing the emergence of another strongman. Experts agree he is likely to maintain broad behind-the-scenes influence.

Few expect immediate political, economic or social reforms, with the same generals, now retired, in control of a country where 30 percent of the population lives in poverty and botched policies and Western sanctions have blighted its economy.

The historic handover of power by the military junta was greeted with skepticism by the international community and Myanmar’s opposition, most of whom have lived under a succession of brutal army dictatorships. Members of the junta retained prominent roles as president, vice president, parliament speaker and cabinet ministers or regional ministers.

The international community is now seeking engagement with the new government after decades of frosty ties with the junta. Western sanctions will be in focus although it is unlikely that the embargoes, considered a failure by many analysts, will be fully lifted any time soon.

The EU has relaxed some of its sanctions against members of Myanmar’s government, signaling a more flexible approach by the West. Travel and financial restrictions have been suspended for four ministers — including the foreign minister — and 18 vice ministers in the new government. It is the first easing of curbs since they were imposed in 1996 in response to abuses by the junta. It follows the swearing-in last month of a new nominally civilian government. However, critics have labeled the new so-called civilian administration a sham, since it is made up of former generals, some serving military officers and a handful of technocrats.

The EU Council said in a June 2011 statement that the application of a visa ban and asset freeze for “certain civilian members of the government” would be lifted for a year, especially for Myanmar’s foreign minister “as an essential interlocutor” with the West. “We recognize that there have been changes in the government, and we will judge the new government by its actions,” said David Lipman, the EU’s ambassador to Myanmar. All those who have had their restrictions suspended have never served in the military or, as in the case of Foreign Minister Wunna Maung Lwin, left the army more than a decade ago. The council also said a ban on high-level EU visits to Myanmar would be lifted.

However, restrictions against the rest of the country’s ministers will be maintained, and trade and financial sanctions will remain in place for at least another year. Analysts say the argument for or against economic sanctions in Myanmar is a controversial subject both inside and outside the country. Those wanting sanctions lifted, who have gained a stronger voice after Aung San Suu Kyi’s release, say they hurt everyone, rather than just the leaders they target, or that they have little impact, as foreign trade with countries like Thailand and China goes on anyway.

International sanctions against the Myanmar military regime are fast eroding under pressure from the Austrians and Germans eager to do business there. The Austro-German argument seems to be the classic “if we don’t someone else will” as Chinese, Japanese and Southeast Asian businessmen take advantage of the fact that the long-awaited elections have taken place, irrespective of the fact that they were unrepresentative of the country’s true political mix. Italy and Spain too have reportedly pushed for the modification of sanctions, whereas the United Kingdom, the Czech Republic and others urged that they remain in place.

One of the possible reasons for this dramatic reversal is Myanmar’s emergence as a significant regional exporter of natural gas. Such exports currently account for around 13 percent of Myanmar’s gross domestic product (GDP). At present the gas is exclusively exported to Thailand, but in late 2013 (should events go as planned) significant gas volumes will be piped across Myanmar and into China’s Yunnan Province. This gas will come from new fields (the so-called “Shwe” fields) that are currently being brought to the point of exploitation off Myanmar’s coast in the Bay of Bengal.

Recent feedback from the EU indicates a strong desire on the part of the EU countries to shift any gas volumes going to China to other destinations. While this strategy is principally directed at encouraging the flow of Central Asian gas westward into Europe, this line of thinking may also have an influence in the lifting of sanctions in Myanmar.

However, one should also caution that Myanmar is both a dream and a nightmare for companies. As with any authoritarian regime, the political risks are very high; the primary goal of any company is to get into the good graces of the generals by offering them the right financial terms, but this is an extremely opaque and unpredictable process, subject to power plays within the junta and the finite lifespan of any patron. What makes Myanmar worth it? Profits are clearly the attraction. Myanmar is a largely untapped commodity market offering high returns. Rising discovery and increasing energy production, including natural gas and hydropower, is making the market increasingly attractive for foreign investors. It isn’t to prevent damage to their corporate image that stops more Western companies from working there; it is the sanctions that are now in the process of being relaxed.

The Myanmar regime is so keen for investment that it is relatively easy for companies to start up projects. The lack of regulation, on the other hand, and the active support of the Myanmar government and all the resources it has to offer, just add to the attraction. As sanctions have kept so many Western companies out of the picture, Asian enterprises are having a field day in Myanmar. With less competition, Asian companies probably have to pay less to do business. Companies operating in Myanmar will likely have to give fewer concessions to secure their contracts. Moreover, due to geographical proximity and better understanding of the Myanmar market and government regulations, Asian investors might have an edge over investors from the US and Europe.

These developments signify the opening of new investment and trade opportunities. Time is of the essence for Turkish business groups to include, if they have not already done so, Myanmar in their strategic market strategies. Myanmar’s value doesn’t just rest on the country itself but also on the regional linkages that it offers through its strategic geographic location. It is a dynamic crossroad linking Southeast Asia, Western China (Yunnan) and the Indian sub-continent and serves as economic gateway to a potential vast market of over 2 billion consumers as well as a sub-regional economic nodal link. Working in Myanmar will also facilitate tapping into these regional opportunities.