Sept. 25 (Bloomberg) -- You could say that Myanmar won over Kevin Murphy at “min-ga-la-ba,” or “hello” in Burmese. The American first came to this isolated land in the 1980s as a student and returned in the 1990s as a journalist. In 2002, he came back again -- this time for good and as an investor.
“You can say I was hooked early on,” Murphy, 51, said in Myanmar’s capital, Naypyidaw, recently. “It’s nice to see the rest of the world catching on.”
And how. EuroMoney’s debut event in the nation that Rudyard Kipling once called “quite unlike any place you know about” attracted almost 900 participants. It was the largest influx of foreign investors Myanmar’s 55 million people have ever seen. More than 100 years later, Kipling is still right about Myanmar, formerly known as Burma, being a world apart.
Bankers visiting for the first time assumed travel agents were exaggerating about BlackBerrys and smart phones not working (they really don’t). They dismissed warnings that credit cards aren’t accepted, even at five-star hotels. All that blather about banks and merchants only taking pristine $100 bills (the slightest crease or fold and you’re toast) seemed overdone, until you found your wad of cash worthless and wondering how to pay for dinner. No, Myanmar isn’t easy.
On the bright side, Twitter works fine in a place that just a year ago was both a pariah and police state, a contrast with, say, China. You can update your Facebook page anytime you can find a WiFi signal, again something you can’t do in China. I was able to view YouTube clips of the violent 2007 crackdown on protesters by the military junta that ran the place before President Thein Sein unleashed reforms that took the world by surprise. Try typing “Tiananmen Square massacre” into search fields while visiting China. You are routed to tourism sites.
“What the world must understand is Myanmar’s opening is real and irreversible,” said Murphy, a managing director at Andaman Capital Partners Ltd. in Yangon, also known as Rangoon. “Really, take it from someone who has been here through previous moments of hope that change was happening. It shouldn’t be doubted.”
The China comparison is worth exploring further. China opened its economy without corresponding reforms to its political system. It retains an iron grip on freedom of speech, the press and the political narrative. Myanmar is doing the opposite: It’s opening socially and politically before it even has an economy of which to speak. That is creating higher expectations than many Chinese have of their leaders.
Burmese tycoon Serge Pun put it well: “A year ago, our people were afraid of the government; now the government is afraid of the people. If our leaders don’t deliver, and soon, with inclusive growth, things will get difficult and they know it.”
Myanmar’s challenges are daunting. There are huge question marks about the role and influence of the military. What if, skeptics ask, the military fails to respect a victory by Aung San Suu Kyi’s party in the next election in 2015? Confusion reigns over a recently passed investment law. How much access will foreigners really have to Myanmar’s natural resources? Too little? Too much?
Ethnic conflict is another challenge. Those in the West who idolize Suu Kyi might be surprised to know her reputation at home is more mixed. Her silent treatment of the minority Rohingya Muslims irks human-rights groups and is a blemish on her status as a Nobel Peace Prize winner.
Myanmar is already facing pressures that China didn’t until recently. The widening gap between rich and poor is a source of growing friction among China’s 1.3 billion people. Discontent is rising amid reports of the obscene wealth being amassed by members of a ruling party that is communist in name only.
Since Myanmar won’t have the luxury of ignoring these risks, its development may go smoother than, say, Vietnam’s, which investors often compare with Myanmar. Vietnam is seen as a prisoner to pendulum economics: Investor sentiment swings from heady optimism to dark pessimism.
Vietnam hasn’t built the institutions or found the right regulatory structure to shield itself from the whims of hot money. So, last month when police arrested banking mogul Nguyen Duc Kien on vague charges that many feared smacked of politics, local markets tumbled. When the plight of one man imperils your economy, you have serious problems.
Myanmar can avoid these boom-bust cycles by getting the basics right today. That means telling investors clamoring to cash in on one of Asia’s last frontier markets to take a deep breath and be patient. Myanmar must craft investment laws that benefit the broader population.
“The issue is building blocks,” said Irish entrepreneur Denis O’Brien, the founder and chairman of Digicel Group, a mobile-phone-network operator. “It’s important for an economy to be able to walk before it can run.”
Myanmar probably doesn’t aspire to become one of the Asian “tiger” economies -- it wants to be its own. With any luck, Kipling will still be right about the place a century from now.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this article: William Pesek in Naypyidaw, Myanmar, at firstname.lastname@example.org
To contact the editor responsible for this article: James Greiff at email@example.com