Fifteen ways of looking at Myanmar’s political and business culture
June , 2014
- The risk associated with the 2015 elections is not as high as it is made out to be by the media and commentators. Daw Aung San Suu Kyi has shown that she is willing to compromise. The military knows that they cannot move back to the regime they had in the past. Cronies don’t want to rock the boat and in fact want to benefit from the growing economic pie and opportunities. Ethnic rebels are tired of fighting, and now that there is the prospect of greater autonomy and economic benefits accruing to themselves and to their states, they too want peace and stability. There is virtu- ally no significant segment of society that will benefit from reversing the political course.
- In the late 1980s, a leading opposition member suggested that Nuremberg type trials would take place once the military regime was changed. This one statement had disastrous consequences, and blocked any move by the military to soften its stand for the following 20 years. That hunger for retribution has retreated. The willingness of the people in general to look forward rather than backwards is hugely positive.
- The world’s eyes are trained (disproportionately) on Aung San Suu Kyi. Her party, the NLD, will likely win, but she is unlikely to be President in the first part of the term until the Constitution is changed. In that scenario, she will find a proxy and will effectively be the de facto “President”. Unfortunately, this may usher in more problems that one would like to believe. There is hardly anyone with administra-tive capability within her party, and most of the leaders are in their 70s. Moving towards democracy is one thing, sustaining it by maintaining the momentum of economic growth is something else.
- Aside from Aung San Suu Kyi, potential investors should track the ascendency of Thura Shwe Mann and Senior General Min Aung Hlaing. The latter is the Com- mander-in-Chief of the Myanmar Defence Forces and because the military is the only effective institution in the country (whether one likes it or not, this is a fact), he will likely play a major role in Myanmar politics.
- One cannot underestimate the depth and intensity of issues related to ethnicity, religion and nationality in the country. There are historical reasons for the mistrust of Muslims, the Chinese, and the Indians. The sectarian conflict will continue indef- initely, and because of the combustible nature of such sentiments, there is always the possibility that an event could trigger an explosive sequel and global reaction.
- The British colonial period led to the deep segmentation of ethnic groups and peo- ple within the country. It is not too much of an exaggeration to suggest that there exists elements of a “bumiputra policy” (the phrase comes from Malaysia) in favor of the Bamar Buddhists, who make up the majority of the population.
- The real risk in the country is not so much the 2015 elections or politics, but on the economic front. There is cause for concern if one looks more deeply into theYangon street market exchange rate competitiveness, the trend of central bank reserves, the emergence of what is known as the “Dutch Disease” effects arising from oil/gas exports, NGO money flooding in, and the telecom/mining sectors soaking up scarce resources from the rest of the economy. There is a serious lack of appreciation of the eco- nomic risk within Myanmar, and the ability of the policy makers to address them effectively.
- There are so many opportunities that businesses and individuals get tempted by the large number of projects, and it is very difficult to secure any loans. Hence, one of the most precarious situations in the economy is the very tight cash flow of many businesses. At the same time, these businesses have really not seen or experienced how destructive market forces can be – there has been a virtually “flat” cycle in Myanmar for the last 30 years. If and when there is an event- shock, whether it originates locally or globally, many businesses will be under serious risk of going bankrupt.
- As everyone knows, seeking the right partner is at the heart of doing business in any frontier country. On the subject of who is credible and who is not, the views from inside the country – i.e. of the locals and veteran foreign business people — can be very different from the view of those outside the country. Those investors who come from the outside will relate better to someone who can talk their talk, and who market in the way they can relate to. Those people inside Myanmar have a view that is influenced by how they see certain businessmen behave when times were tough. There were some local businessmen who refused to pay their debts and behaved unethically during the tough times, and only the people inside the country know who they are.
- Do not take the Foreign Investment Law (FIL) as a concrete immovable document It is actually a “work in progress”, and most aspects of foreign investment, includ- ing foreign shareholding is negotiable. It all depends on how much any investor brings to the table and how much benefit will accrue to the local economy and work- ers.
- On lobbying, while we see that there are strong protectionist tendencies, the im- pact is very different from the situation, say in Vietnam. In the latter, there is one overwhelming source of power and control. The power and lobbying structure in Myanmar at present is not as concentrated, and the dynamics at play are more fluid; there is always the scope to influence decision making much more than say, in Vietnam.
- One of the most under-rated aspects of operating in Myanmar is superstition. It would be hard to find any other place where for example, the location of the new capital city and how the currency was denominated (it used to be that the currency was denominated in 9, 90, 900) is based on superstition. Even locals who have exposure to the outside world will sometimes not partner or hire a skilled manager if he is born on the wrong day of the week (that clashes with his own day of birth).
- As the country has been in a time warp for nearly fifty years, local businesses suffer from a serious lack of exposure as to how the outside world thinks and behaves. The difficulty of dealing with local stakeholders should not be underestimated. You will also see this gap in understanding when dealing with the staff at lower levels. The working population has to return to the work ethic that comes with the new environment. In the past, whether one worked hard or not, there was very little opportunity to move ahead and get a meaningfully better life. The situation is to- tally different now. With this, the work ethic and energy that the local work force possesses will change, but it will take time.
- Perhaps more than in other places, the posture of Myanmar businesses has been molded by its past to be extremely short-term in perspective – they always needed to secure the payback and get back their returns as soon as possible, and then stash the money in some way (gold, land and previously cars), because they never knew what might happen next. After all, there had been several rounds of demonetization in the economy. This short-term attitude and a broker mentality is deeply embed- ded.
- By far the most challenging aspect in Myanmar is “execution”. There are opportu- nities everywhere but the effort to start up the business and to operate it efficiently and flexibly is the real challenge. There are a host of administrative hurdles, lack of human resources, an evolving and fluid regulatory environment and so forth. As such, a step by step approach to learn how things are done on the ground, initiate with organic growth and to track regulatory shifts are perhaps the most sensible ways to enter the market.