Myanmar horizons

All lawyers who have been to Myanmar (previously known as Burma) recently will agree that the country is undergoing dramatic changes at an extraordinary pace. An obvious sign is the soaring number of foreign visitors spotted in Yangon, the nation’s former capital and its largest city.

Foreign lawyers are adding to the increasingly crowded expat community in Yangon. It is said that at an international investment conference held in Myanmar last month, partners and representatives from 11 large international firms were present.

Robert Pé, head of Orrick Herrington & Sutcliffe’s Asia dispute resolution practice, is one frequent flyer to Myanmar. Based in Hong Kong, he travelled there seven times in 2012 on various matters. Each time he saw more changes, more foreign businessmen and, at the same time, higher hotel prices.

Space race

“The inflation in hotel prices is a strong indication of the tremendous interest from the rest of the world in Burma,” says Pé. “There are lots of conferences going on in Yangon and many foreign companies are sending executive delegations to assess the market and explore business opportunities. There’s a sense of a gold rush - everyone wants a piece of Burma right now.”

Today, the average rate for a standard room in a decent hotel in downtown Yangon can easily reach $400 (£250) per night. Just 18 months ago it was possible to find a presidential suite costing just one-fifth of that. With the increasing number of companies being set up in Yangon, growing demand and limited supply of high-end office buildings have also resulted in higher rentals for office premises.

According to Yangon-based partner Edwin Vanderbruggen of VDB Loi, a south-east Asia tax and legal services provider, there are only three upmarket office buildings in downtown Yangon, which is why even a B-grade office in Yangon can fetch $80 per square metre a month. The best offices rent for no less than $200 per square metre - more expensive than some rents in the City of London.

Business travel in Myanmar takes a completely different form to anything known in the West. Patchy mobile phone coverage, no BlackBerry service, rare acceptance of credit cards, scarcity of WiFi connections, regular power cuts and long and bumpy road trips are among the things foreign travellers have to adjust to. Money transfer is also cumbersome. Myanmar installed its first ATM in November 2011; only a year later did it start accepting international payment cards.

“The modernisation we take for granted these days has not yet happened in Myanmar,” says Herbert Smith Freehills Singapore partner Alastair Henderson, who has also been a regular visitor to Myanmar in the past year. “The country needs power, roads, railways, telecommunication infrastructure, sophisticated oil refineries and a modern financial system among many other things. By the same token, this means there are tremendous opportunities for foreign engagement which didn’t exist until last year.”

The work

Until recently, little investment from the West went into Myanmar and international firms had limited involvement in corporate and transactional work in the market. For most, starting a Myanmar practice is a greenfield project.

Baker & McKenzie was one of the first global firms to establish a dedicated Myanmar practice. The firm launched a Myanmar centre in its Thailand office in April 2012 and four months later appointed its first Myanmar-qualified lawyer, Saw Yu Win, from Myanmar Thanlwin Legal Services. Two junior local lawyers will soon join Saw Yu Win.

Clive Cook, co-head of Bakers’ Myanmar centre, notes that the launch of the group is a result of high growth potential in the longer term.

“Since its establishment we’ve received an overwhelming number of enquiries from global clients,” he says. “Most clients are still at the stage of doing research, assessing risks, understanding the environment and trying to make decisions but recently a number of enquiries have come to fruition. The transactions generated are mostly in the oil and gas and telecom sectors.”

Although the scope for international firms’ involvement is limited, the most immediate opportunity lies in the oil and gas and telecoms industries. Myanmar has invited foreign energy companies to explore 23 offshore oil and gas blocks and will grant two telecoms operating licences to foreign outfits through public tender.

Many of the world’s largest oil companies and telecoms groups are preparing for the tender process.

A number of international and local law firms have already been called in to assist with the research and bids.

Herbert Smith Freehills advised Australia’s Woodside Petroleum on its recent acquisition of a 50 per cent stake in an offshore oil and gas exploration block in Myanmar. VDB Loi was also engaged by Woodside for the acquisition.

“In the last part of 2012 there was a clear transition from general interest to real commitment among some multinational companies,” says Henderson. “We are now working on several real transactions in Myanmar.”

Freshfields Bruckhaus Deringer is another international firm that has done transactions in Myanmar. Its recent instructions include advising a Malaysian oil and gas company on the acquisition of interests in Myanmar and advising an international consumer goods company on the establishment of manufacturing and distribution facilities in the country.

Apart from international firms, large regional players, particularly those based in Singapore, Malaysia and Thailand, have shown great interest in the country. Singaporean firm Rajah & Tann and Malaysian firm Zaid Ibrahim & Co have both confirmed plans to enter Myanmar in the first half of this year.

“Foreign companies are making a beeline for investment opportunities, with the Chinese and Japanese taking the lead,” says Chew Seng Kok, managing partner of Zaid Ibrahim. “Since last July we’ve been monitoring the situation in Myanmar, mainly in response to requests by clients for assistance. We will be establishing our office in Yangon within two months.”

The few

All firms looking to grow their Myanmar practices will face a common constraint - the dearth of local lawyers well-versed in advising on commercial and corporate transactions.

“Due to years of sanctions and military rule, almost no local lawyers have been exposed to commercial transactions - most have chosen to focus on litigation and other retail types of work,” says Chew.

There are about 49,000 lawyers in Myanmar, consisting of around 9,000 advocates and 40,000 higher grade pleaders. According to lawyers familiar with the local market, only a small number of these lawyers have commercial experience, and most of these are in their 70s.

“A key feature of the Myanmar legal profession is the lack of young lawyers trained to do work for foreign business clients. There are older lawyers doing this, but what’s needed are entry-level people to absorb the boom in Myanmar’s economy,” says James Finch, partner and managing director of DFDL in Myanmar and head of the firm’s local association firm Myanmar Thanlwin Legal Services.

As a result, the local firms working on commercial matters and receiving work from international firms are few in number and small in size. In addition, most are allied with firms from other Asian countries. For example, Myanmar Legal Services is affiliated with Bangkok-based Thai firm Chandler & Thong-ek Law Offices and Myanmar Thanlwin Legal Services is exclusively associated with pan-south-east Asia firm DFDL. Nevertheless, their expertise in Myanmar law is sought-after by international firms.

“We have been contacted by at least 100 foreign firms looking for opportunities in Myanmar,” says Finch. “Only a small percentage are interested in a presence here but many are looking to gain expertise, particularly in specialised fields such as telecoms or infrastructure.”

Rule of law

One of the landmark developments in Myanmar in the past year has been the enactment of the Foreign Investment Law. The law, signed by president Thein Sein on 2 November 2012, has sent out a positive and welcoming message to foreign investors. While Western multinationals are enthusiastic about the promising market, the majority remain cautious and are waiting for more clarity and transparency on the implementation of the law.

“The investment law is a statement of the government’s intention to welcome and attract foreign investment,” says Pé. “It’s generous and lenient in places, but broad-brush and vague in others. There hasn’t yet been a flood of investment into the country. It’s important to update and revise black-

letter law over time but, more crucially, there is a need to rebuild the rule of law.”

Pé stresses that restoring the rule of law is an urgent task for the government and that the work needs to start with the basics such as training law draftsmen and instructing judges and civil servants on how to interpret, apply and implement the law fairly.

Clean sweep

“Under 50 years of military rule the country’s legal system was in hibernation and its judicial system eroded,” he adds. “To gain investors’ confidence the government must take action to improve the practice of law.”

He goes on to quote from a speech given by opposition leader Aung San Suu Kyi last year: “Even the best investment law would be of no use if there were no courts independent and clean enough to administer those laws justly.”

Pé has committed to dedicating 20 weeks of 2013 to Myanmar to work for Aung San Suu Kyi as a member of her legal advisory team. He will advise her on a number of issues, such as making suggestions on the implementation of the investment law and issues arising out of the Committee for Rule of Law and Tranquility, which was formed by the lower house of the parliament and chaired by Aung San Suu Kyi. All work will be done on a pro bono basis.

“It’s gratifying to participate in the country’s legal and democratic development,” Pé says. “The country faces many complex issues

and it takes a long time to iron them out, but it used to be one of the wealthiest countries in south-east Asia and the great potential that was realised in the past will be realised again.”

Perhaps not many lawyers can spare 20 weeks of their year to work on Myanmar’s legal progress like Pé, but many will share his enthusiasm and positive outlook. After all, Myanmar is a vast and untapped market, and there are not many places left in the world like that.