Can S’pore capitalise on Myanmar’s opening?

Myanmar’s political opening has caught the world’s attention, and many countries are rushing to what has been called Asia’s last frontier market. Punishing sanctions by the European Union have been lifted, while Washington DC has suspended its measures. Seized by the economic potential of the country’s large market and rich resources, Western companies have responded quickly.

So, too, have Asian corporations, especially the Japanese and South Koreans, but also the Thais and Indians. At the same time, the Chinese — who were high profile in Myanmar — have not gone away. The recent completion of the gas pipeline through the northern city of Mandalay and into the Chinese province of Yunnan signals their continuing presence.

But concerns that Chinese firms would dominate Myanmar were one reason for the government’s decision to open to the West, and the new competition has come into clear view with recent high-profile tenders. The winners were from neither China nor the major Western powers.

AND THE WINNERS ARE ...

In telecoms, some 90 companies tried for the two first licences, which were finally awarded to Norway’s Telenor and Qatar Telecom. For airports, more than 30 companies showed interest in building the new Hanthawaddy International Airport near Yangon. Licences were awarded in the end to South Korea’s state-run airport operator.

Companies from Singapore tendered but have missed out so far — Yongnam Holdings’s bid for the new airport failed, as did SingTel for a telco licence. One award did go to Singapore-based Yoma Holdings, to improve and run the airport at Mandalay. But the company is Myanmar-focused and, moreover, is in a consortium led by Japan’s Mitsubishi Corp.

Such outcomes are quite inevitable, given open competition. But the results are still surprising, considering that Singaporean companies invested in Myanmar from the mid-1990s, through the economic low points, and have wide networks and diversified dealings. The hotel sector, which is now booming, prominently features Singaporean investors.

Both the Singapore and Myanmar governments have been long-time friends, despite Western sanctions. Myanmar’s President Thein Sein made the deliberate point of visiting Singapore early last year, as reforms began to unfold, to seek assistance. There is interest from Singaporean companies to participate in Myanmar’s opening. A new Singaporean entrant is the emblematic Ya Kun Kaya Toast, which has now opened in Yangon and has plans to expand across the country.

Yet, the present attitude for many may be characterised as window shopping. Few have committed sizeable investments.

CAUTION WARRANTED

Singaporeans are not the only ones with a wait-and-see approach; reports suggest the British, Myanmar’s former colonisers, are treading cautiously. Caution is not unwarranted. Infrastructure gaps and a shortage of well-qualified workers are typical of a developing country. Rapidly rising costs for office space and housing, as well as fast-changing policies, add to concerns.

So, too, is the question of finding the right local partner. This is thought to be essential, given nationalistic pride and the wish to ensure the Myanmar people prosper. But many of the larger players have been labelled “cronies” of the past regime and the United States still maintains a long blacklist of “specially-designated nationals”.

Singaporean businessmen who have been in Myanmar for more than a decade say there is a lot of respect on the part of its people for Singapore and its leaders, who made more than a few early efforts to reach out to Myanmar after the problems of 1988 (the first official visit was made by then Prime Minister Goh Chok Tong in 1994).

During a recent visit to Yangon, one businessman said: “We’re often told that if Myanmar had had leaders like Lee Kuan Yew, maybe Singapore would be the one sending foreign workers to work here instead of the other way around. It would be a shame if we let this sense of admiration and respect go to waste and not capitalise on it by being more active here.”

S’PORE AS A ‘SECOND HOME’

The question is whether Singapore wants to and can be involved in a larger way in the new and more open Myanmar — and, if so, how? There are factors of strength in the relationship.

One is that Singapore has emerged as something of a second home for Myanmar. This goes beyond government-to-government relations, or even the elite who visit for banking and health services.

Many ordinary Myanmar nationals come to Singapore for education, training and jobs. The familiarity can help both sides work together.

A second factor is that Singaporean players have shown staying power through economic low points, and notwithstanding Western criticism and sanctions. While there is now something of a gold rush, political uncertainties lie ahead — such as peace with ethnic minorities and the 2015 elections — and the endurance of newer entrants remains to be tested.

A third factor is the ability of Singapore to go beyond the hard infrastructure aspects to soft skills. Take the training that Singapore has provided to many Myanmar officials at different levels. Singapore can serve more as a reliable partner and trusted adviser, rather than as just another bidder. This can be especially helpful in larger, long-term planning where integration is key.

A fourth and newer factor is Myanmar’s connectivity with the Association of South-east Asian Nations (ASEAN), which it will chair from next year. Singapore as a major hub and leading finance centre in the region could help Myanmar integrate more quickly and smoothly. Some may also invest and hold their interests in Myanmar through holdings in Singapore.

CONTROVERSY A TELLING SIGN

There will, of course, be controversies. Take the current dispute between the shareholders in Myanmar Brewery, run by Singapore-listed Fraser and Neave (F&N), with a military-backed shareholder since the 1990s. With further market growth anticipated, and F&N acquired by Thai Beverage, differences have just come to the fore.

How this and other differences in long-standing ventures can be managed and settled will bear watching, as much so as the announcement of tenders and new projects. These may be taken as indicators of prospects for long-term thinking in business, or of whether the current interest and openness are only temporary and passing.

When the West sanctioned Myanmar, there were accusations that Singapore and others in ASEAN were wrong to pursue constructive engagement and invest. Yet, by pursuing a different path, Singapore gained — and has maintained — an early foothold.

Today, with so many others rushing to get in, there is a danger that the long-standing relationship between the two countries might be lost in the jostle. Yet, that relationship — marked by endurance and familiarity over some two decades — can serve as a foundation for both governments and the private sector. Singaporean interests in Myanmar, and vice-versa, should and will continue to grow.

ABOUT THE AUTHORS:

Simon Tay and Nicholas Fang are, respectively, Chairman and Executive Director of the Singapore Institute of International Affairs (SIIA). The SIIA visited Myanmar recently at the invitation of its Ministry of Foreign Affairs.