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As the investment boom hits Burma, eager Australian firms have been given the green light to enter the race to invest in the impoverished Southeast Asian nation.
Last week’s announcement by Australian Foreign Minister Bob Carr to lift all remaining travel and financial sanctions signalled the starting gun for Australian investors to stop jostling on the sidelines and join the hordes of foreign firms entering Burma.
A Rangoon-based business consultant says Australian construction and agricultural firms are already scoping out investment opportunities in Burma.
“There’s been interest from a Brisbane-based property development and construction company specialising in modular building systems which could possibly service Myanmar’s huge demand for hotel and service accommodation,” he says.
He says representatives from oil and gas giant BHP Petroleum recently visited the resource-rich country.
“BHP have been revisiting the previous onshore opportunities in the oil and gas sector and no doubt eyeing off the lucrative offshore market,” the consultant says.
“And if you’ve got BHP Petroleum coming in here then it would be highly likely BHP Billiton will be hot on their heels.”
He says Australia’s mining expertise could provide the essential technology to help exploit Burma’s rich resource reserves.
Nestled between the booming economies of India and China, Burma has proven natural resources including oil and gas, minerals, gems, forestry and vast potential for new agricultural projects which once saw it labelled the “rice bowl of Asia” at the height of British rule more than half a century ago.
But decades of economic mismanagement and restrictive international sanctions have crippled the country’s economy, making it one of the most under-developed countries in Southeast Asia.
However, recent political and economic reforms by President Thein Sein’s government have been rewarded by the international community as many western nations including the US, EU and Australia have eased, suspended or completely lifted sanctions restricting trade and investment and stepped up aid and development commitments.“The biggest players here are other Asian countries and in that there is a bit of an upside for Australia”
Australian economist and Burmese expert Professor Sean Turnell says Australian expertise in areas such as agriculture is in high demand in the country.
“Australia has a lot to offer Burma as we are a big, rich resource/agricultural led economy while Burma is a big but poor resource rich agricultural economy,” says Turnell.
Turnell says Australia could step up its presence in Burma as a regional superpower and alternative to Chinese investment.
“The biggest players here are other Asian countries and in that there is a bit of an upside for Australia,” he says.
“There’s a real hankering for connections with the west, mostly the US because it’s the most visible, but in a sense Australia could profit from that.”
However, Turnell says many investors are surprised by how difficult it is to do business in Burma. Limited infrastructure and restrictive legal and economic conditions are the main hindrances to international investment.
Myat Thu Winn, Managing Director of Shwe Minn Tha Enterprises Co, a family-owned group of real estate, media and printing companies, says foreign investment in the construction and tourism sectors could give a much needed shot in the arm to the country’s economy as well as provide jobs for thousands of Burmese.
“I understand if you are a businessman, you are trying to make money, but I encourage new foreign investors to think of how they can also contribute to the community,” says Myat Thu Winn.
Myat Thu Winn, who was born with cerebral palsy, runs a foundation providing workplace training for disabled people and wants new investors to create employment opportunities for local Burmese.
Khoo Kay Peng, business analyst and founder of i3M Group, a market research, business advisory and investment management firm focusing on Burma, says foreign firms should do their homework before committing to any investment decisions.
“Market research is essential and crucial for a new market such as Myanmar,” says Khoo Kay Peng.
“It is smarter and more prudent to spend a few thousand dollars on market research than to spend millions to find out if a business works on not,” he says.
A draft copy of the Burmese government’s new foreign direct investment (FDI) laws states foreign investors can provide up to 100 per cent in capital for new projects, or have the option to enter in a joint venture with a local Burmese business partner.
However, a Rangoon-based business consultant warns eager Australian firms to be prudent when considering entering into a joint venture arrangement with local Burmese companies.
During the decades of military rule, a small elitist circle of business tycoons controlled access to Burma’s business circuit with close ties to the country’s former military regime, which still control the majority of private enterprise.
“And as Burma opens up for business, foreign investors invariably have to deal with the tycoons who control access to the country’s crippled economy,” says the consultant.
“Past indiscretions could catch up with unsuspecting new investors and entering into joint ventures with these companies could be viewed by the international community as condoning the excesses committed,” says the consultant
“Therefore new investors should choose their bedfellows carefully.”
He said Asia World, Htoo Group, Zaygabar, Yuzana, and Max Myanmar were examples of business successes facilitated by a close relationship to the previous military junta.
Former chief economist of Austrade, Tim Harcourt says Australian investors have much to offer Burma.
“Australia could help Burma develop its rural industries as well as in education and training in tourism in much the same way as in Vietnam Laos and Cambodia,” says Harcourt.
“The emphasis will be in capacity building and helping Burmese people to reach their full potential… but it would be a ‘softly, softly’ approach provided the pro-democracy reforms continue.”
-Kate Kelly is a pseudonym for a journalist working in Burma.