Illustration: Daniel Hertzberg
President Barack Obama's trip to Myanmar in November—the first ever by a sitting president—wasn't just a state visit. It was an endorsement of the steps that the country's leaders have taken to open Myanmar to the world following 60 years of military rule.
Over the past two years Myanmar has enacted a number of reforms, including the release of many political prisoners, the relaxation of media censorship, and efforts to fight corruption. Equally important, the country has moved quickly to rev up its economy, and Obama's visit served as a vote of confidence for Western companies eager to enter a market of 60 million people strategically located between China and India.
So, too, did Myanmar's passage of a new foreign investment law just weeks before Obama touched down. Drafts of the bill had gone back and forth between the two houses of parliament for the better part of a year, with President Thein Sein and other supporters of reform fighting to keep the law investor-friendly. They won out, as provisions were made to remove most foreign ownership restrictions, including one that would have required minimum investments of at least $5 million.
Now, according to some observers, investors have the sign they need to begin moving into Myanmar. "They were all waiting for a positive step or indication from this law, and they all feel they have it," says James Finch, a partner in the Yangon office of legal consultancy DFDL. "Many are going forward."
International companies have been eyeing Myanmar since the suspension of U.S. and European Union sanctions against the country last year. Already some of the world's best-known brands, General Electric Company and The Coca-Cola Company among them, have made preliminary moves into the country. Even more promising is what the world's major oil and gas companies predict will be a vast store of natural resource wealth. That still largely untapped wealth is expected to become the country's key economic driver going forward.
But while international law firms are also eyeing Myanmar—hoping to lock up some returns of their own—they say it's still too early to commit much in the way of resources, much less contemplate a full-scale launch. "The country just opened," says Chirachai Okanurak, Bangkok managing partner for Baker & McKenzie. "It'll take time."
Baker & McKenzie, Allen & Overy, Mayer Brown JSM, Herbert Smith, Fulbright & Jaworski, Baker Botts, and Rajah & Tann have all begun to serve clients interested in Myanmar, but none have set up an in-country office yet. And so far only Baker & McKenzie has hired a Myanmar-qualified lawyer, Saw Yu Win, who joined the firm's Bangkok office in August.
There are several reasons for caution, as Finch and others note. For one thing, the foreign investment bill that President Sein signed was largely a framework for a law, and some of its specific provisions won't be finalized until the end of January. The government is still working out the implementing regulations, and therefore a number of uncertainties remain. Not the least of which is the extent to which foreign companies will be restricted from sectors such as manufacturing, services, agricultural livestock, and fisheries, according to an Allen & Overy report.
"I think a lot of clients are just trying to absorb what's been passed and what hasn't," says Simon Makinson, managing partner of Allen & Overy's Bangkok office. "The general sort of view is that [the latest version of the foreign investment law] is better than the previous version, but no one knows what the final version is going to look like."
Foreign investors will also have to be careful about whom they transact business with. U.S. sanctions still apply to Myanmar's military and to businesses owned by it. Moreover, many local tycoons who became wealthy through cooperation with the junta are on the U.S. Department of the Treasury's blacklist of "specially designated nationals" with whom Americans are barred from doing business. In April, Reuters profiled one such blacklisted tycoon, Tay Za, pointing out how hard it was for foreigners to avoid dealing with him and his ilk.
