Home Insider Interview “KCY Still Sees Aggressiveness in Myanmar Businesses”

“KCY Still Sees Aggressiveness in Myanmar Businesses”

Interview with: Pedro Jose F. Bernardo

PRINCIPAL CONSULTING ATTORNEY OF KELVIN CHIA YANGON LAW FIRM

Questions

Firstly, could you introduce yourself as well as explain about Kelvin Chia Yangon to our readers?

I am Pedro Jose F. Bernardo. People informally called me PJ. I’ve been in Myanmar for the last six years. Originally from Manila, Philippines. I’m practicing as a licensed lawyer in Philippines and in New York, the United States. I’ve been a lawyer since 2006 and I came into Myanmar in 2013. I’m a principal consulting attorney, one of the four partners in Kelvin Chia Yangon. Kelvin Chia Yangon is a regional legal consultancy, one of the offices of Kelvin Chia Partnership, which is an international law firm headquartered in Singapore. We have offices across Indochina. We have been in Myanmar since 1995, which makes us one of the oldest international firm in the country. We grew significantly after the market opened up in 2012. After 2012, we began hiring more people and expanding operations. Currently we have around forty professionals onshore, with a mixture of foreign attorneys and practicing local lawyers. KCY is a full service commercial law firm and we do a lot of foreign investment, joint ventures, regulatory filing, labor, capital market, financing arrangement, anything that a corporation or an investor or a client may need in commercial transactions. I, myself, being one of partners here, am in charge mainly of banking, finance, telecommunication and real estate practice, but in reality all partners are capable of doing everything. Most of my clients are generally from telecommunication, real estate and FMCG.

What kinds of legal services and consultancy are being offered at KCY?

We actually provide assistance to the whole range of commercial transac
tions. From the time you sign term sheet or negotiate your term sheet up until you get your approval from regulatory authorities to regulatory filings and contracting, KCY provide all kinds of legal services that needs to be implemented. Perhaps the only limitation we have is that we cannot appear in court
or assist in contentious matters but everything else including immigration and other legal services, even structuring, that you could expect from a commercial law firm, we can support. We have competent local lawyers and foreign qualified lawyers as well as establish rapport and connections with
government entities and documents prepared in both Myanmar and English to provide cutting edge legal services based on the clients’ requirements.

What are your major clients? How do you manage to secure them?

As for me, most of my portfolios over the last six years focused mainly on telecommunication, manufacturing, real estate and financial services. When you look at our client base, we come across a broad array of sectors covering agricultural, M&A financial services and special economic zones which are majorly focused on emerging sectors in Myanmar. We also provide advices on projects associated with government entities. So in terms of client base, it is really broad with both local firms including large Myanmar owned companies listed Yangon Stock Exchange, and foreign enterprises. Initially back to 2013, they were the ones looking for us because there is really a shortage of quality in-depth legal representations in Myanmar. In the very beginning, it was a combination of business development and at the same time the clients themselves sought us out because they are aware of KCY’s expertise in commercial transactions. Recently though, particularly beginning from 2018, clients have become more demanding in terms of costs. Of course, we had already established ourselves quite solidly in Myanmar, and we have established very strong relationships with clients who have been with us for a very long time, since 2012 and some even earlier. We are very thankful toward those clients for continuing work with us over those years. In the past couple of years, the clients who ventured into new investments in Myanmar were selective in nature. Technically, the prices of legal services are at the bottom in the market, however, some law firms are trying to support services at prices lower-than-average which trigger imbalance competition among law firms. As for KCY, we ensure that we always present our strengths by leveraging on our extensive experience, and especially our lawyers, particularly our local lawyers. In terms of costs and pricing, we are very flexible and we have usually been able to accommodate clients’ budgetary requirement.

What’s the proportion of retainer vs. one-off fees like?

The clients already had their established businesses which have ongoing transactions so we enable them to arrange retainer from day to day operational requirements to corporate transactions which are more or less standard. We are able to offer them retainer fee structure that is more or less discounted because it is very routine. We hope that this arrangement makes us more attractive to clients in terms of fees. Let’s say our retainer service is charged for $1800 for the entire four or five months period of work from which

we deduct costs computed based on discounted hourly rates. Sometimes, we agree to accept a fixed retainer fee for this entire four or five month period, but we more or less agree on the total number of hours per month, or for the retainer period, that KCY will be expected to work. So it’s more regular as the retainer in that sense is supposed to be an ongoing relationship – monthto-month, year-to-year basis. For more complicated transactions such as restructuring, financing, joint ventures, merger and acquisition, and those foreign based businesses which want to establish a company and get regulatory and legal approvals, the fee structure is more varied based on what the client requires. Sometimes, we charge a discounted hourly rate and provide a fee cap. So we will charge an hourly work on the particular scope of work only up to expected amount. Sometimes, when a client requests, we operate on fixed rate regardless of how many hours we work. We are very flexible and customer centric in that sense. We are usually very open and welcoming in discussing fee structure in terms of discounted retainer, fee cap and fixed rate depending on client requirements. Fee cap is maximum amount that we will never go over or will be ever charged. Being realistic though, lawyers find it difficult to evaluate cap fees as it is hard to predict how many hours you will work on a particular task. As the market becomes competitive, clients become cost conscious and fee cap is beneficial to clients because it will provide clients a particular budget for costs relating to legal fees.

What’s the smallest and largest assignment that KCY has done?

We have done multiple large assignments so far. One of the biggest deal that I have done is MPT telecommunication transaction. In addition, I have also done a couple of significant private transactions. We assisted in Thilawa’s establishment of Special Economic Zone as well as in listing of MTSH at the Yangon Stock Exchange. I have also recently been active in supporting various private equity funds enter the Myanmar market. We have contributed to as many projects as we can build trust and strategic relationships, which were not just limited to business enterprises but also assisted in some of transformation process of the government throughout the past six years. We do not take those projects as small-scale or large-scale ones as each of them come up with uniqueness which enabled us to learn deeply about the local market and seek us out more in expanding operations and extending expertise of our core human capital.

How would clients typically decide which law firms to use?

First, of course, is the experience and expertise of the law firm. Clients – especially large multinationals or sophisticated Myanmar clients – recognize talent and expertise, and are often willing to pay a premium for dependable and quality legal advice. Of course, we cannot ignore cost, and especially for small to medium-sized enterprises – whether local or overseas – costs will play a major factor in deciding on legal representation. This is why we try our best to be flexible with our fees. I have the philosophy – “you get what you paid for at the end of the day”. If you desire any competent lawyer, they make you cost a bit more but this is market-based cost. Some law firms here we have heard charge below market-based cost and will charge very low fees just to get the transactions _

We do not take those projects as small-scale or largescale ones as each of them come up with uniqueness which enabled us to learn deeply about the local market and seek us out more in expanding operations and extending expertise of our core human capital.

however, we do not know whether the lowest costs will necessarily relate to the best advice and experience. One of prime things that we make sure to offer is precisely the experience in the core competence that our team provide. It is really important for clients not only to look at the pricing but also the depth of experience of a lawyer that they are considering.

What are KCY’s main goals in Myanmar?

We are always passionate to have correct solutions even in this situation where everything is evolving. Part of our goal of providing services toward clients is clear that we are business oriented and making sure that they are appropriate for particular circumstances of client. In that sense, KCY has done its best and often succeeded in providing clients with the level of competence and quality that clients look for. Our rankings in various peer and industry indexes show this. Another part of the goal is not only to be a good law firm but also to be a good employer. The legal market here is evolving and stepping forward to be better than ever. There is very small core of competent Myanmar lawyers around right now. By providing education and training toward our local lawyers, we hope to be able to contribute to the development of the Myanmar legal system – since it is these local lawyers who will ultimately be responsible for Myanmar legal practice. The prime goal of KCY is not only to develop an excellent legal practice that meets the needs of clients and exceeds their requirements, but also to provide a rich training ground for Myanmar Lawyers to learn cutting edge legal work, thereby hopefully raising Myanmar legal profession to a higher level.

What typical challenges did you face?

We did face abundance of challenges for the past six years I’ve been here both professionally and personally. For professional business outlook, I think everybody – firms and households- is facing the impact of economic downturn which is also true globally. The volume of work available out there in market as well as the broad range of legal service providers are in aggressive competition so it’s much more likely to reconsider the balancing act between expansion and regulating costs.

In what ways does KCY differentiate itself from other law firms?

We are the only law firm with 4 onshore partners in Myanmar, this demonstrates our commitment to the Myanmar practice. Also, I think we have a very solid core of competent local lawyers and foreign ones. One of the things that we distinguish ourselves from others is that we are able to respond very efficiently to clients’ requirement. Secondly, we’ve been here for a long time including our strategic level leaders and Myanmar lawyers. So we have seen the market evolve, we have assisted in so many commercial issues, and in certain instances, we’ve shared the laws and regulations that affect commercial legal practices in Myanmar. This is a resource that is very difficult to match because we have both the international practice and a very close understanding of local developments. This has also allowed us to establish very strong working relationships with various regulators. They know us, we know them; and they trust us. A lot of regulations are really based upon regulatory discretion, being part of MIC, DICA and Ministry of Commerce etc. As we have been incorporating with them into many projects for so long, we are able to advance our interest with them regarding to our strong relationships so it’s like we are delivering value added consultancy and legal services day by day by gathering real experiences in Myanmar’s legal environment at a closest distance to clients.

Businesses have to be patient. It is natural for business people to embrace the changes in the emerging market. Change happens incrementally.

How has the slowdown in economy affected KCY?

The slowdown has affected KCY, in the same way that it has affected most businesses in Myanmar – we have had to implement some measures to address costs; KCY, after all, is still a going concern, and we have profit margins and targets that we have to meet. On a larger level, it is very clear that people will find spending more difficult as there will be smaller disposable income in the times of a slower economy. In terms of investment and legal services, people will be a little bit more reserved in investing, people will be more guarded with respect to costs and putting money at risk. Still, in spite of this reluctance, what I have seen is that those already established businesses in Myanmar are aggressively looking for new prospects. In that sense, I suppose law firms will always have a role to play in supporting those clients.

How do you see legal professional services industry in Myanmar?

It is developing and it is developing quickly. If you ask me how it was like in 2013, I would say there are so many improvements. I often tell people especially outside of Myanmar that Myanmar is a very dynamic jurisdiction in terms of legal development. Parliament has passed laws and MIC and other line ministries have issued many regulations that have improved the predictability of commercial transactions in Myanmar. If you compare the developments of Myanmar in terms of commercial laws over the last six years, and how it was done in Vietnam, Cambodia, Laos and even Philippines, the rate at which Myanmar has issued all of these new regulations is fantastic. The development is very positive in that sense. We have now telecom laws, security laws, financial service laws, trademark laws and digital literacy laws.

What advice would you give to companies on upcoming laws and regulations that could affect them?

Businesses have to be patient. It is natural for business people to embrace the changes in the emerging market. Change happens incrementally. I usually say that it is just the sixth year since Myanmar opened up. Apart from being patient, businesses have to be brave – they have to be ready to accept more than usual level of risk, because the rewards can be significant. Of course, that’s not easy to say for companies that have shareholders to satisfy, that is why it is very important for businesses who enter into an emerging market such as Myanmar to go in with eyes wide open. There is no guarantee that changes will happen overnight or if at all but even in the face of these risks, Myanmar is not a “black box” – there are ways to mitigate the risk, both legally and commercially. That is why it is very important for these businesses to reach out to very experienced advisors – such as KCY – to guide them in doing business in this jurisdiction.

If you could recommend one change to government policy, what would it be?

There should have more coordination among ministries and policy makers in government. As I see it, information silos exist among governmental departments as one ministry does not know what the other related ministry is doing. I therefore hope that there will be a consistent policy and consistent implementation of the law and regulations. This is not impossible – we have all seen the improvements in the MIC and the DICA; but it would be very beneficial if this coordination could extend to other ministries of the government.