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After Years Of Dictatorship, Burma May Be Next Asian Tiger To Roar

The Shwedagon pagoda dominating the skyline of Rangoon
The Shwedagon pagoda dominating the skyline of Rangoon
Yann Rousseau

RANGOON - Down Pyay Road, in the middle of a huge traffic-jam, children walk between old Japanese cars in the stifling heat and humidity.

Like in other cities of emerging Asian countries, the children walk through the busy streets to sell soda cans and jasmine flower bouquets that are supposed to help cool down the inside of cars not equipped with air-conditioning.

Many of the children are now also selling a little yellow pamphlet entitled Foreign Investment Rules in the Republic of the Union of Myanmar. It is 1,000 kyat ($1,1) – non-negotiable. A guaranteed best seller.

Since last spring, foreign businessmen – mostly from Japan, Singapore, the U.S. and Thailand – have been flocking to Rangoon in droves.

In the past 10 months, hotel prices have tripled. It is now $300 for a night at the Strand, where Rudyard Kipling took notes for his Letters from the East (1889). In the rare office buildings that are up to international standards, square-meters have been increasing by at least $5 a month. And the waiting lists for residential housing for foreigners are growing rapidly. “I’m already paying $5,000 a month for 60 square meters. It's more expensive than New York,” says a diplomat, who says he can’t complain for fear of losing out his apartment to a higher-paying foreigner. “It's insane,” says Patrick Robert, a French designer who has been living in the country for 25 years.

This gold rush started last year when the West recognized Burma's efforts to reform and open up. The country had long been considered a pariah state. Since the dissolution – on March 30 2011 – of the military junta that ruled the country for 49 years, the new government has gotten rid of its military uniforms, announced it was a “civilian” government and embarked on a series of reforms.

Burma released hundreds of political prisoners and allowed the election of opposition icon Aung San Suu Kyi to Parliament. In April 2012, the European Union hailed the reform process and ended its economic sanctions against Burma. In May, the U.S. lifted some of its investment restrictions. And if that wasn't enough to reassure potential investors, Obama even met with Burmese President Thein Sein, a former general.

Fearing years of stagnation in the West and worried about a slowdown of the Chinese economy, big multinational companies are now turning to Burma, the poorest country in southeast Asia.

The country, which is about the size as Texas, is rich in oil, gas and mineral resources. It is also strategically located between China, India, Thailand and Bangladesh and has a domestic market of more than 62 millions of consumers. In theory, the potential is huge.

“Everything has to be done from scratch,” says Yasuhide Fujii, from KPMG consulting. Only 5% of Burmese have mobile phones and three quarters of them have limited access to electricity. “The country needs roads, railways, a deep water port, airports, electricity, water networks,” lists the Japanese consultant, who opened an office in Burma last October, at the request of his biggest clients.

Manufacturing potential

As opposed to the U.S. or the European Union, Japan never cut its ties with the Burmese government. Japan didn’t want China – against which it leads a war of influence in the region – to remain Burma’s sole economic partner. Many Chinese groups already exploit mines and dams throughout country.

A few Japanese firms – notably the big trading companies – continued to commerce with Burma. In 2011, Japan was the biggest importer of Burmese textiles with $348 million in orders. Japan also buys 90% of its black sesame from Burma, as well as part of its soybean sprouts.

For many years, Toru Hiroe was the sole employee in Rangoon for Japanese company Itochu. He remembers the military controls at night, $3,000 mobile phones, and the difficulty of getting Internet access. “Everything has changed. Now the company has five Japanese employees posted here, and we have more than a dozen Burmese employees,” he says.

As with every other Eldorado, the textile giants are the first to come, to study the feasibility of setting up a local production. There is nothing more the textile sector loves than cheap labor. Until the end of the 1990s, Burma was one of the biggest textile factories in the world. There were about 400 specialized factories shipping clothes to Europe and the U.S. – representing 39.5% of the country’s exports in 2000.

After trade sanctions were applied more than half the textile factories were closed. But now they are reopening again. “So far, there is not enough electricity for textile manufacturing, which requires a lot of energy, but manufacturing clothes is possible here, because wages are still lower than in Cambodia,” explains Yoshihiro Kunii, the vice-president in charge of production at the Japanese clothing giant Fast Retailing, which owns the brand Uniqlo, among others. He isn’t considering outsourcing production in Burma for another three years, when infrastructures have modernized.

In their enthusiasm to benefit from Burma’s riches, companies tend to forget that the country is still facing complex political and social challenges. Much of the country is plagued by ethnic conflicts. Last week, during violent riots between Muslims and Buddhists in central Burma, at least 40 people were killed and 9,000 were displaced.

The democratic transition is far from being finished. The military still has huge interests in the economy. “The reform process was entirely designed, decided and launched by the army. Backpedaling will not happen. It would not profit anyone,” says Romain Cailliaud, an expert with Vriens & Partners, a business consultancy firm long established in the country.

Some frictions could still happen in 2015, during the next presidential elections, which Aung San Suu Kyi is expected to win. “Some of her collaborators could be tempted to exhume old grievances,” says a diplomat, who adds that the opposition icon seems ready to compromise with her former jailers in order to gain access to power. “It should be fine.”

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Photo of Taiwan President Tsai Ing-wen

Tsai Ing-wen, the President of Taiwan

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