The last 12 months has been an astonishing time for the people of Myanmar with the arrival of huge numbers of potential investors from many countries including those which had sanctioned Myanmar. Sanctions are being relaxed or lifted. Are things really so different - and what realistically can be achieved in the near future.

This year has seen remarkable shifts in political positions both within Myanmar and from the rest of the world. From a global perspective in recent years there appears to have been a sea change with pressure groups raising questions regarding the effectiveness of sanctions.

Experience in Iraq, Iran, North Korea and Zimbabwe show that sanctions rarely seem to significantly impact on the persons at whom they are aimed. Most likely they have an indirect yet significant impact on the body of persons for whom sanctions were initially imposed, namely the poorer, disenfranchised sections of society.

One commentary which carried more weight than most was the position paper produced in 2011 by the International Crisis Group that brought into severe question the effectiveness of sanctions against Myanmar - and this from a group financed by mostly western governments and led by Thomas Pickering, a former US Ambassador to the UN.

During early 2012 the internal changes in Myanmar began to crystalise. The Government began to ease restrictions and tried to reach out to certain of the minority groups. No one sees the process as something which will bring peace and harmony immediately but the developments and any improvements must be welcomed and further encouraged. In parallel the Myanmar government announced intentions to further liberalise the political scene by holding another round of elections. True to their word the elections have taken place and have received wide acclaim.

At this point, one should pause and reflect upon occurrences elsewhere in the world during the same period. Pictures on the international news channels showed the violence and widespread chaos unleashed on the countries of Libya, Egypt, Tunisia, Yemen and, latterly, Syria. These countries are paying a very high price to seek to bring about change, similar to that which Myanmar has witnessed in 2012.

International political leaders have queued for the opportunity to visit Myanmar and enjoy photo opportunities with ‘the lady’. On each occasion there was dialogue with the government and strong expressions of support for the changes being introduced.

Investors from the West have been jealously watching the growth of Chinese, Thai and other investor influence in Myanmar. There is a huge reservoir of investment money and good will seeking a home in Myanmar.

Encouraged by the actions and words of their western political leaders European, US and Japanese companies and entrepreneurs have been filling the aircraft seats and hotels of Yangon for the last nine months. Positive sentiment within and outside Myanmar is very strong and optimism is at an all-time high.

The legal structure to allow such investment is generally in good order and so the immediate issue is where to locate the investment and which, if any, legal or commercial constraints might inhibit such investment.

Whatever one’s views may be regarding English colonialism there is rarely criticism of the legal draftsmanship or the comprehensive nature of the laws. All those laws are embodied in the 13 volumes of the Burma Code that covers laws introduced from 1841 - 1954. Significant amongst these, so far as new investors are concerned, are the Companies Act 1914, supplemented by 1957 regulations, and the Arbitration Act 1944. Newer legislation of significance includes the Foreign Investment Law 1988.

Assuming that investors have identified the areas of economic activity in which they wish to engage they must next decide which legal vehicle they wish to adopt to implement their investment.

It is not uncommon for investors to seek to use Myanmar nationals as nominees to front potential investments. The prohibition on foreigners owning land or owning shares in Myanmar companies means that such a method of investment is based entirely upon trust. One might characterise such investors as having ‘a very high risk appetite’. The more sensible investor will adopt one of the established approaches.

The next step depends upon the size of the investment, to an extent the type of investment and, importantly, the likely profit to be generated in Myanmar. The Myanmar Investment Commission is designed primarily to assist and encourage foreigners investing large amounts of money. Such projects provide Myanmar with capital ‘knowhow’ influx and likely generate foreign currency as well as employing nationals in large numbers. In return for this investment the MIC will provide a basket of benefits ranging from 100 percent foreign ownership through to extended land rights, tax holidays and exemptions. A minimum investment threshold is between US$ 300,000 - 500,000 depending upon the proposed activity.

If the investment is rather more modest, then the easier approach would be to simply incorporate a company (or partnership/branch/representative office) under the Companies legislation. The limited company may be 100 percent foreign owned and the thresholds for investment are significantly lower than those for MIC promotion. A pre-requisite to incorporation, and which is applied for in parallel, is to seek a Permit to Trade which as a foreigner is subject to approval by the MIC. Applications must be lodged by hand in Nay Pyi Taw, located about 190 miles north of Yangon.

Once incorporated, the vehicle may seek permission of the MIC to use property. Qualifying foreigners may enjoy leases of 30 years (plus extensions of up to 30 years) and indeed longer for special cases of investment in less popular locations.

Any prudent investor will also assess risk by reviewing the processes for resolving disputes with contracting parties or relevant authorities. Litigation in most countries is not for the faint hearted and it will come as no surprise that in a market such as Myanmar the challenges for the prospective litigant are disproportionately high. The Arbitration Act of 1944 offers a comprehensive framework within which one may seek alternative dispute resolution. The Company Law also provides that contracting parties may at the time of entering a relationship stipulate that they submit to an ADR process. The Myanmar Chamber Commerce has a reputation for delivering impartial decisions between parties in dispute.

There are no recorded precedents involving foreigners but the Chamber does have the power to sanction a party who fails to meet an award by reporting them to the Ministry of Commerce which, in turn, has the power to suspend the recalcitrant’s Permit to Trade.

Myanmar’s increasing role in ASEAN must inevitably result in a tightening of the processes for ADR.

Sadly there are inevitable hurdles which will slow progress. This article deliberately makes no comment of substance concerning politics in Myanmar. There is very considerable world support for the efforts to liberalise and that these will involve all the ethnicities in Myanmar. The commercial hurdles included the value of the Kyat. The economy desperately needed a realistic revaluation of the domestic currency and the recent float of the currency at 818 - 1 USD is a huge step in removing some of the hurdles.

As regards infrastructure and property, domestic energy needs are a huge issue as is the availability of commercial and residential accommodation. There is significant work being done in the energy, logistics and development sectors but realistically one cannot expect more resources to be available in the course of the next two to three years. In the important field of human resources great efforts are being made to train and educate Myanmar nationals with new skills. English language skills are high but technical training is urgently needed.

On a positive note, we now have a Myanmar government that is changing for the better and we have opposition groups that are cautiously optimistic. We also see foreign governments engaging in positive and constructive dialogue.

Myanmar has a population of 50 million people seeking change for the better, Historically, they have been highly educated and are hard working. It is a country rich in natural resources. We see global investors eager for new markets to provide competitive labour and raw materials and a population with huge consumer potential. Many investors rightly believe that now is the time to establish their credentials by investing in Myanmar but they should, however, proceed in a deliberate manner and curb expectations with considerable patience.

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