Next Hot Market Puts Capitalism’s Ethos to Test

June 29 (Bloomberg) -- In a world of turmoil and gloom, Aung San Suu Kyi is a beacon of optimism. Lately, though, the Burmese pro-democracy icon is sounding like a killjoy.

Suu Kyi cautions markets and executives against “reckless optimism” about Myanmar’s prospects, a position at odds with her impoverished nation’s efforts to court them. Fellow Nobel laureate Joseph Stiglitz speaks for the economic intelligentsia when he calls her “excessively pessimistic.”

Yet there’s an element to her concerns that isn’t getting enough attention: the dangers of the very capitalism that economists say will save Myanmar.

The few out there who are wary of rushing into Asia’s newest frontier question the sincerity of President Thein Sein’s political reforms. Is it an elaborate head-fake? The fear is that billions of dollars pour in amid promises of change that never comes as military rule returns. Clashes in western Myanmar involving Muslim Rohingyas already have human-rights groups crying foul.

What if the real risk isn’t the generals, but impatient investors betting on overnight transformations and quick profits?

“These are the hypes that we are currently facing,” Maung Maung Lay, vice president of the Union of Myanmar Federation of Chambers of Commerce and Industry, said in Bangkok last week. So great is the “tsunami of potential investment” that Maung says he can’t print business cards fast enough to meet demand.

Tremendous Pressure

All the excitement is putting tremendous pressure on Myanmar to implement broad reforms as the economy tries to catch up with the pace of political change. As Maung points out, the time difference between Myanmar’s biggest city, Yangon, and Singapore is 1 1/2 hours. In terms of economic development, though, they are 30 years apart.

The sudden influx of dealmakers already has locals complaining about a property bubble in Yangon (formerly Rangoon) and the capital, Naypyidaw. One would expect costs to rise a bit when a former pariah state suddenly gets nibbles from Coca-Cola Co., General Electric Co., Honda Motor Co., Standard Chartered Plc, Tata Motors Ltd., Unilever and WPP Plc subsidiary Ogilvy & Mather. The mere specter of Myanmar becoming too expensive even before the economy is formally opened to the world is reason for concern.

Myanmar’s boom will only be sustainable if it finds the right policies. The question is whether foreigners know that they themselves are also a vital part of that “if.” It’s hard to recall the last time investors were so bullish on a frontier market. They must be patient and give Myanmar the space needed to rebuild itself -- to modernize its rudimentary banking system, devise a credible judicial apparatus and improve infrastructure.

Than Nyein, Myanmar’s central bank governor, has his own lengthy to-do list: creating internationally respected legal, regulatory and supervisory frameworks. “We need to reform our markets and foreign-exchange system, too,” he said in Bangkok last week. “We need to change.”

That need is all the more pressing if Myanmar is to handle the crush of money waiting at the border. Just consider what needs to happen before reaching Myanmar’s goal of listing as many as 22 companies on a stock exchange it plans to open by 2015. Remember that 10 years of hype preceded the inauguration of Cambodia’s stock exchange in April. It features only one stock. The Laos Composite Index contains only two stocks.

Resource Curse

Enforceable laws must be in place if Myanmar is to avoid the commodities curse that befalls many developing nations. Asia is rife with examples of countries struggling to spread the benefits of vast natural resources. Too often, they enrich corrupt public officials and their cronies, not the masses.

Worried about a similar fate in Myanmar, Suu Kyi is calling for investments that promote democracy, transparency and the development of a vibrant private sector rather than those that strengthen the government’s hand. “Burma has been a command economy for far too long and we have never prospered along that rule, so that now we are opening up we want to make sure that we are opening up in the right way,” she said recently.

Suu Kyi made this plea, significantly, in Oslo, where she gave her Nobel Peace Prize lecture 21 years after receiving the honor. She is challenging a capitalist world all too prone to excesses, effectively saying: If you come to my country, do it the right way.

Ultimate Challenge

Investors will be quick to snap back: Uh, that’s not really what we do. We’re here to make money. Yet acting as stakeholders, not just shareholders, may be what’s needed if Myanmar is to avoid the “time bomb” of youth unemployment that worries Suu Kyi. The same goes for making sure that today’s opportunities pay off five to 10 years from now. In this way, Myanmar may be the ultimate ethical-investment challenge.

How, and when, will the world know if Myanmar’s renaissance is for real? To Burmese tycoon Serge Pun, it all comes down to three words: 1 million jobs. “If we create them soon, it will transform our nation,” he said. “From there, you will see great changes coming. If not, we will have some explaining to do about where all that optimism went.”

(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)

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To contact the writer of this article: William Pesek in Bangkok at

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