Greed will lead to bursting of Myanmar’s bubble
IT was wonderful to see Aung San Suu Kyi and Myanmar President Thein Sein sitting down with Barack Obama and other world leaders. It is not so wonderful to see the greed that’s starting to form in Myanmar and to anticipate the bubble that is growing and will soon explode.
Reform is here to stay in Myanmar and the country is opening up to tourism and international businesses. On my trip there a week ago, I met people from all walks of life who are deeply focused on creating a new economy.
Unfortunately, I also met people trying to take advantage of the situation. Let me tell two short anecdotes about trying to get a hotel room, and then make a larger point.
The hotel I always stay in when I go to Yangon charges US$75 (RM230) a night. I booked as usual and was informed the new rate was US$150 (RM460).
With a deep sigh I accepted, and received written confirmation by fax. Two days before my stay I received another fax, informing me of the new rate of US$225 (RM690). With another sigh I cancelled the booking.
I booked another hotel at US$75 and paid a one-day deposit. When I checked in, the hotel reception demanded full payment, in advance, of my three-night stay, in addition to the one-night deposit I had already paid. I asked, do you pay for a meal at a restaurant before you eat? The manager refused to speak with me.
These two stories serve to illustrate what is happening throughout this beautiful country. Land prices are soaring. Businesses are starting to demand multiples unheard of. Arrogance is starting to set in.
Cast a glimpse eastwards a bit. To Vietnam. Where a bubble that has been present for years is now exploding. Bursting all over the land.
Real estate development has stopped dead. Projects have run out
of money and are sitting there, incomplete, with no workers. Banks have over-extended themselves and have no more cash to lend. There have been several runs on banks and many prominent businessmen are being brought in for questioning. The stink has gone as high as the Prime Minister’s Office, and he recently barely survived a confidence motion.
Now let’s go back to Myanmar. Freedom is in the air. Western delegations are booking every hotel in sight. Everyone is “fact finding”. But who is buying? No one. Western businesses are scared of the lack of legal procedures. Laws are passed and then changed. Investment laws are considered and then rejected. An investment law passed a month ago was just revised and newly passed. Will it be changed once again? No one knows which end is up, or which law will be changed next.
What Western business is going to buy in Myanmar when they cannot be sure of what regulations will be around next week, and whether the price they are paying is too high? So everyone is looking, “kicking tyres” so to speak, but no one is putting real money on the table.
Billboards for Coke and Pepsi dot the landscape, but where are Coke and Pepsi’s investment? And now the carpetbaggers are coming. Time for a quick history lesson. After the American Civil War in the 1860s, the South was economically depressed. Many northerners came (with luggage made of used carpets) to take advantage. They tried to use their knowledge, experience and money to buy up at cheap prices valuable southern assets. They portrayed themselves as friends of the South, and experts. They were widely despised.
Many people are now coming to Myanmar to try to take advantage. They portray themselves as Myanmar experts although they have only visited the country once or twice. Most Myanmar businessmen are quite savvy, and see through these 21st century carpetbaggers quite quickly.
Myanmar is an amazing place, full of hope and opportunity, with wonderful people who now have the chance to succeed. They are wary of others, and prefer to work with people they know. I have been there dozens of times, but do not yet even begin to claim to understand the place.
What I do know is that there is a bubble forming, that it will grow and burst, and after that happens we can get down to some serious business building. — The Nation/Asia News Network > Eric Rosenkrantz runs a strategic advisory in South-East Asia assisting existing companies as well as start-ups to develop their long-term strategy and achieve success in their business.