Myanmar Junta’s Penguins Obscure 64 Million in Blackout

Sule Pagoda stands in Yangon
Sule Pagoda stands in Yangon, Myanmar, on Dec. 20, 2011. Photographer: Brent Lewin/Bloomberg

Former Thai General Lertrat Ratanavanich remembers his regular meetings with Myanmar junta leader Than Shwe, who ran the country for 19 years. Like the time the dictator asked for some penguins.

“Than Shwe is very fond of animals, so I was requested by His Excellency to bring penguins,” said Lertrat, who retired from the army in 2007 and is now a director of PTT Exploration & Production Pcl, Thailand’s biggest oil explorer. “We also sent two giraffes.”

Putting penguins in climate-controlled pens while 64 million people suffer regular power blackouts shows the task facing Myanmar’s year-old government to undo half a century of military rule that kept Southeast Asia’s second-biggest country out of the region’s economic boom. Efforts by the generals to escape sanctions by slackening their grip on power may take years to translate into the development achieved by regional neighbors Thailand and Malaysia, said Hugh Young, managing director of Aberdeen Asset Management Asia Ltd. in Singapore.

“It’s more speculation than anything else at this stage,” said Young, who helps manage $70 billion in Asian equities. “The economic growth could be great but translating that into a good return on any equity investment, private equity or public, is another matter.”

The country had its most inclusive elections in two decades on April 1, lawmakers are revamping the financial system and President Thein Sein, who took over from Than Shwe in March 2011, signed a preliminary cease-fire with the country’s largest armed rebel force in a move to end the world’s longest civil war.

Sanctions Rollback

As a result, the U.S. agreed to lift some sanctions on investment, remove certain travel bans and name an ambassador to the country for the first time since 1990. The European Union and Canada suspended non-military sanctions and Australia eased travel restrictions for some Myanmar officials.

That may help boost economic growth to 7.7 percent a year in 2016-2020, from 4.8 percent last year, should the generals remain in control and continue with limited reforms, the Economist Intelligence Unit said in an April report.

“It’s the same people, but with a different mindset, and they are still in power and people start to like them,” said Luc de Waegh, who has been doing business in Myanmar since he helped set up British American Tobacco Plc’s operations there in 1993. “The generals were smart enough to realize that the old way of running the country was not the way of the future; that if they wanted to stay in power they have to change.”

Mobius Cautious

Myanmar needs to develop its currency and banking system for the country to catch up with its neighbors, said Mark Mobius, who oversees about $50 billion as Singapore-based executive chairman of Franklin Templeton’s Emerging Markets Group. Better infrastructure and a proper legal structure are also needed, according to Franklin Templeton.

“It’s still too early,” Mobius told reporters in Bangkok in April. “We are talking about a few years from now. Myanmar will eventually do as well as Thailand.”

In 2011, Myanmar’s gross domestic product was $54.8 billion, while Thailand’s was $219 billion and Singapore, with a population of 5.2 million, had an output of $180 billion. In 1969 Myanmar’s GDP was about $6 billion, compared with $8.8 billion for Singapore and $19.3 billion for Thailand, according to World Bank and International Monetary Fund data.

About 75 percent of the population lacks access to electricity, the Asian Development Bank said in a report last month. One in 30 people have a mobile phone and less than one percent of the population has an Internet connection, Nomura Holdings Inc. said in a March 14 report.

‘Extravagant Projects’

“The previous military government had a penchant for extravagant, wasteful projects,” Credit Suisse Group AG said in an April 20 report, noting that construction of Naypyidaw, the new capital unveiled in 2005, may have cost 10 percent of gross domestic product. “Under a democratic government, taxpayers would probably prevent such wastage.”

Myanmar lawmakers debated the fiscal 2012-2013 budget that took effect April 1, shedding light on a process cloaked in secrecy during military rule. Authorities plan to reduce military spending to 14.5 percent of total expenditures, from 23.5 percent, with social spending increasing to 7.5 percent from 5.4 percent, the IMF said in a report today.

“It is certainly a very positive step forward but at the same time we see significantly more room for fiscal transparency,” Meral Karasulu, the IMF’s mission chief in Myanmar, told reporters on a conference call.

Prisoners Released

In the past year the Myanmar government released more than 20,000 prisoners including political adversaries, eased censorship and allowed public protests subject to permission. Nobel Peace Prize winner Aung San Suu Kyi, who spent 15 of the past 23 years under house arrest, entered parliament last week after her opposition party swept 43 of 44 seats it contested in the April by-elections.

Still, a transfer to full democracy is still a long way away. Thein Sein retains the backing of about 75 percent of the 664 members in the two houses of parliament, either through his Union Solidarity and Development Party or from the military, which holds 25 percent of both houses under the constitution.

A general election isn’t due until 2015, at which time Thein Sein, 67, may step down, according to Ko Ko Hlaing, his top political advisor. Even then, Oxford-educated Suu Kyi can’t become president because her children are British, and amending that article requires support from 75 percent of lawmakers followed by a referendum.

Currency Float

Meanwhile the government is encouraging a flood of investment from China, South Korea, Japan and its neighbors in Southeast Asia. The country has moved toward scrapping a multiple exchange-rate system by implementing a managed float of its currency and is revising laws to attract foreign capital.

Malaysian Prime Minister Najib Razak led a 100-member delegation in March, a month after executives from 74 Singapore-based companies made the trip. Malayan Banking Bhd., Malaysia’s biggest lender, on March 20 agreed with four Myanmar banks to facilitate remittances. Petroliam Nasional Bhd., Malaysia’s state oil company, operates oil and gas fields in Myanmar including Yetagun, which supplies natural gas to Thailand.

Orchid Diplomacy

Singapore, which named orchids after Thein Sein and his wife, agreed in January to train Myanmar officials in economic planning, central banking, trade facilitation and legal reform.

Razali Ismail, a former UN special envoy who resigned in 2005 after Myanmar repeatedly refused him entry to the country, is back again, this time as executive chairman of Malaysia’s Cypark Resources Bhd. On March 29, Razali was in Naypyidaw to sign a preliminary agreement for a waste management and renewable energy project, according to Cypark. Razali didn’t reply to an interview request.

U.K. Prime Minister David Cameron on April 13 became the first Western leader since the by-elections to visit the country, where the British fought three wars and ruled for more than a century. UN Secretary-General Ban Ki-Moon arrived on April 29 and lauded the country’s transition to democracy.

“I have no doubt that Myanmar will quickly catch up with its Asian neighbors and our fast-changing world,” Ban said in the first address to the new parliament by a global leader. “Myanmar has within it a vast potential to become a 21st century model for peace, democracy and prosperity.”

False Dawn

This isn’t the first time Myanmar’s leadership has taken steps toward restoring a democracy only to backtrack. The junta released Suu Kyi from house arrest in May 2002, prompting the UN to call it a “major development” toward national reconciliation. By June 2003, Suu Kyi was back in detention.

“The building blocks to all the changes that have taken place over the past year really have been in place for a while,” said Thant Myint-U, an author of two books on Myanmar whose grandfather, U Thant, was the first Asian head of the UN. “It’s surprising only to people who had an incredibly narrow view of the way things were before -- fixated on the relationship between Aung San Suu Kyi and the junta.”

Military leaders in Myanmar, formerly known as Burma, drew up a seven-point “road map” in 2003 to restore democracy, unveiled by then-Prime Minister Khin Nyunt. Steps included a new constitution, which was announced in late 2007 after street protests led by Buddhist monks called the Saffron Revolution. To ease dissent, the military government promised a referendum on the new constitution the following year.

Saffron Revolution

“The process speeded up after the Saffron Revolution -- that’s what scared the hell out of them,” said David Steinberg, distinguished professor of Asian Studies at Georgetown University, Washington D.C.

To survive sanctions, Southeast Asia’s second-largest country by land area depended on its neighbors, including the members of the Association of Southeast Asian Nations, which Myanmar joined in 1997.

“Myanmar had three windows to the world -- China, India and Asean,” said Ong Keng Yong, former secretary-general of Asean and Singapore’s High Commissioner to Malaysia. “They were instrumental in helping Myanmar survive its isolation.”

Part of the reason for increasing Asean partnerships may be concern about the influence of China, said Derek Tonkin, former British ambassador to Thailand, Vietnam and Laos and chairman of Network Myanmar, which promotes engagement with the country.

China accounts for about half the $26 billion in total foreign investment Myanmar has attracted since 2008, according to the Naypyidaw-based Central Statistical Organization. China National Petroleum Corp., China’s biggest energy producer, is building pipelines in Myanmar, and China Nonferrous Metals Co. is developing a nickel mine.

China Sentiment

“The Burmese have had enough of China,” said Tonkin. “There is a strong nationalistic feeling that it’s time that they move away from the Chinese and encourage other investors.”

In September, Thein Sein halted work on the $3.6 billion Myitsone hydropower dam across the Irrawaddy being built with China Power Investment Corp., saying the project was against the “will of the people.” China Power called the decision “bewildering” and President Lu Qizhou said on March 10 it’s in talks with the government to resume the project.

Japan, Myanmar’s biggest creditor, is also stepping up efforts to engage a country it occupied from 1942 to 1945. After Thein Sein visited Tokyo last month, Japan forgave 303.5 billion yen ($3.7 billion) of debt and pledged aid and financing for ports, bridges and roads.

In a speech in March marking a year since he took office, Thein Sein said the country needed to “root out the evil legacies” in society. He urged reconciliation and said he wanted to see youths from ethnic groups using laptops instead of brandishing guns. Lertrat, the procurer of penguins, said the influence of the junta will remain.

“Myanmar is opening up and I don’t think they will go back,” he said. “Full democracy is still far away.”

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