The pervasive cronyism in Myanmar has made it one of the most corrupt places on earth. It ranked 180th out of 182 countries on Transparency International's 2011 corruption perceptions index. Only North Korea and Somalia are ranked lower for perceived corruption.
But if there is a reason to rush in, it's Myanmar's potential as an oil and gas producer. Last month an Asian Development Bank report put the country's proven reserves of natural gas at 7.8 trillion cubic feet, and its reserves of oil at 2.1 billion barrels. There's an assumption by insiders that more remains to be discovered, and international oil companies have been lining up for the right to find it. "This is one of the countries in the world that still has undeveloped fields that can still move the dial on big oil and gas companies," says Ben Smith, a Hong Kong partner with Fulbright & Jaworski.
Still, the energy sector is hardly immune to the issues that plague the rest of the Myanmar economy. According to Reuters, a tender of onshore and offshore oil exploration blocks planned for September was postponed after a number of Western companies raised questions about the transparency of their potential counterparty, state-owned Myanma Oil and Gas Enterprise (MOGE). Lawyers in the region say the Western companies may have been influenced by activists, such as Nobel Peace Prize winner Aung San Suu Kyi, who have called for foreign companies to avoid doing business with MOGE, which has close ties to the Myanmar military.
Andrew MacGeoch, Hong Kong partner at Mayer Brown JSM, says the way forward in Myanmar will not be easy. The country, he says, is "still going to have its ups and downs, bumps and bruises along the way." He likens the situation to that of Vietnam in the 1990s; others point to China in the 1980s or Mongolia over the past few years.
One advantage that Myanmar may have over those other jurisdictions is the common law legal system left behind by the country's British colonial rulers when they departed over 60 years ago. But the years of military rule left gaps in the law and the training of lawyers, so there are currently very few local lawyers capable of handling international transactions. "There are a couple of good firms, but the pool isn't particularly deep," Herbert Smith Freehills partner Richard Nelson says. Nelson, who heads his firm's Southeast Asia energy practice in Singapore, points to Myanmar Legal Services and regional tax and legal consultancy DFDL as a couple of the standouts.
An update of Myanmar's laws could take many forms, and could be influenced by the experience of other developing countries in the region, as well as international bodies like the World Bank and Asian Development Bank. But, given Myanmar's host of issues, MacGeoch is not expecting things to move fast. "The time frame for doing it will be much longer than most people expect," he says.