Crony capitalism in Myanmar makes foreign investments dicey—at least for the West; “There are very few businesses or business people that our Western investors would consider to be clean.”

Crony capitalism in Myanmar makes foreign investments dicey—at least for the West

By Naomi Rovnick — 9 hours ago

Myanmar’s economy is forecast to grow over 6% this year as new foreign investment surges into the former hermit kingdom, but Western companies have been slow to join the party. Most investment is set to come from other emerging markets in Asia or beyond, where companies are more comfortable dealing with corruption and ethically questionable partners.

Despite recent reforms, doing business in Myanmar is still a murky affair. Take, for example, the country’s gas stations—potentially a great investment in a frontier market where many people are poised to grow rich enough to buy mopeds and eventually even cars. A local lawmaker has claimed 247 state-owned stations that were privatized in 2010 were sold at “very low prices” to a military-owned trading company and other firms with close ties to the generals. (In 2010, the junta lost some of its power and Myanmar got a semi-civilian government.)

Getting into bed with the military and former junta officials could be a reputational risk too far for Western corporations. The junta leaders were responsible for gross human rights violations such as conscripting child soldiers (which still happens) and colluding (pdf p.144) with drug and people traffickers. A deal with such partners raises the risk of a boycott at home or a US Foreign Corrupt Practices Act investigation.It is extremely hard to find Burmese business partners that do not have strong junta connections. German non-profit Bertelsmann Stiftung reported  (p.3) that “military conglomerates and cronies…continue to monopolize the economy under the new government.”

Although foreigners are allowed to fully own Myanmar businesses in many sectors , it is considered unwise to operate there without a local partner, as getting business done is very much driven by personal relationships.  The nation does not have a strong rule of law or courts that can be relied on to independently protect assets or contracts. “You need a local partner, otherwise you get killed,” hotel developer Richard Friedman said in this 2012 interview.

A Hong Kong-based private equity fund manager who has spent time in Myanmar looking for deals told Quartz: “There are very few businesses or business people that our Western investors would consider to be clean. I met one prominent businessman there who has what the Myanmar people call ‘white money’ as opposed to money from military connections. Everyone is chasing him. The terms he would require for doing business with us would not be advantageous.”

So the country’s economic future is likely to be carved up between the generals and ex-junta tycoons, and emerging-markets investors without Western investors or stock market listings. The Bertelsmann Stiftung report, noting that foreign investors were cautious about their public image, concluded that “neighboring Asian countries (including Thailand, China and India) have invested heavily.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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