The Myanmar gold rush is on

The multinationals are flooding into Myanmar. A hotel room cannot be had for love or money. A hotel that used to charge US$75 per night is now $150 and is over- booked. Everyone and his brother is queuing up for visas. People are deliberately flying from Phnom Penh to Yangon on Myanmar Air because it is the only flight where you can get a visa onboard.

Silk Air is now charging a small fortune for a business-class seat from Singapore; that is, if you can get one. The queue to get a visa in Singapore is over two hours long. In Bangkok, at the consulate off Sathorn Road, I recently showed up at 8am and the queue was 200 people long, and the visa office didn’t open until 8.30.

Opposition leader Aung San Suu Kyi is dining with rock stars when she is not accepting Nobel prizes. People who had never heard of Myanmar a few months ago are now booking tours. And The Nation, among other great publications, has decided to start calling the country by its legal name.

This is all terrific news, and long overdue, but people need to understand one key thing: The pace of economic reform in Myanmar is greatly behind the pace of political desire.

What does this mean?

The government (and the generals behind the government) is very much in support of reform. The changes being implemented are real, and will not be reversed. They are here to stay. This is not an idle claim, but a fact. Aung San Suu Kyi, who was afraid to leave the country to be at her husband’s side when he was dying, for fear she would not be let back in, has left Myanmar twice already in the last months and returned. Political prisoners are being released (though clearly not all, not yet).

But while the country is making tremendous strides politically, economic reform, though desired, is not yet being accomplished.

The banking system is a mess. There are no real loans available for businesses, no mortgages, not even ATM machines. 

The legal system is a mess. Anyone worried about the “rule of law” should stay away. 

Corruption is still endemic, and little is being done to control it.

Most people still lack cell phones. There are widespread protests against the government for failing to provide enough electricity.

The farming sector still overwhelmingly dominates the economy, and many farmers barely have enough to eat.

Property rights are still very confused.

All of these issues, and more, will change, and change may come quickly. The government is hiring world-class experts to advise them on how to reform the economy. But it will still take time. 

Despite the best intentions of everyone concerned, it is reasonable to anticipate that economic reform may happen more gradually than people want. Remember, the people that have a lot to lose (and also gain) from economic reform are the big local businessmen, who have succeeded and thrived under the old prevailing conditions. Change to them is a threat. 

What is the international businessman, who sees a great opportunity and whose home office is clamouring for action, to do?

1. Recognise the varying paces of reform, and don’t expect a new economy overnight.

2. Get on the ground fast. Whatever decision you make cannot be properly made from Bangkok, Singapore or New York. It must be made from Yangon. Establish a presence on the ground and study the terrain. Then make the decision.

3. Find the right partners. Don’t expect to do this on your own. You must seek advice from people who know the territory. One company that many people say is good for this is West Indochina (hwww.westindochina.com) who I consult for.

4. Bring international standards with you. People, quality control, laws, all may not be up to your desired levels. You can help effect change.

5. Be ready to take risks. A former ambassador from Myanmar recently told me there are risks in entering the country today, and there are risks in staying away. Each company has to analyse those risks and make the decision that is right for them.

Enter now, and risk running afoul of laws and entrenched customs. Stay away, and risk giving away first-mover advantage to your competition. The choice is yours.

 

Eric Rosenkranz (www.ethree-asia.com) spends a lot of time in Myanmar advising Myanmar companies how to improve. He runs a strategic advisory in Southeast Asia assisting 

both existing companies as well as start-ups to develop their long-term strategy and achieve success in their business.