Slated by some in the business world as the last frontier, Myanmar, located between Thailand, China and India, contains a wealth of precious minerals, oil and gas, a cheap labor force and a potential market for goods and services that has had little contact with the rest of the world for more than 50 years. Yet, despite the promising business environment, businesses face a range of challenges and risks in this emerging economy. At the forefront of these risks are land use and ethnic conflict.
Myanmar is coming out of an economic shell, hidden from the rest of the world by a repressive government that nationalized the economy and closed its borders to the outside world. Once a British colony, the Union of Myanmar remained under the firm control of the military junta until 1999, when mass opposition to the corrupt practices of the government eventually led to the easing of totalitarian control and an opening of the economy. Soon thereafter, countries from around the world began to enter Myanmar in the hope of taping into the countries wealth of resources and people. However, the panacea soon met reality as businesses recognized that the country lacked the necessary infrastructure to support any significant economic development. Roads, telecommunication, electricity and an educated workforce were all absent in Myanmar. As a consequence, economic development, while moving forward at a relatively rapid pace, was tempered by the reality on the ground.
Today, Myanmar is seeing the slow but steady development of its infrastructure. Mobile telephone systems have come online this year, more than 41 new power plants are due to be built by 2030 and urban growth is booming as reflected by the office complexes and luxury hotels opening in the major urban areas. As economic development moves from the country’s urban centers of Yangon, Mandalay and Naypyidaw into the countryside, some harsh realities face businesses seeking new locations to operate and expand.
The Realities of Land Use
Like many countries around the world that have not developed western-style land use systems that include formalized land titling and conveyance, ownership by private citizens and the like, Myanmar is only now coming to terms with land ownership in the western sense. Traditional forms of land use, in which communities and indigenous people use the land on which they live are giving way to the exigencies of economic reform. For many years, land considered valuable by the military junta was seized from local communities, leaving largely rural populations without homes and without the means to survive in the struggling agricultural society. Arriving with hopes of cheap land for economic development, businesses large and small have acquired property from the military-led government, often oblivious to the simmering and sometimes explosive conflicts surrounding them. A prime example of this problem can be found at the Thilawa Special Economic Zone, an industrial complex being developed 23 km southeast of Yangon city center in Myanmar. It is the flagship project of the Japan International Co-operation Agency (JICA) in cooperation with the Myanmar Government and Japanese and Myanmar companies. Residents in the small village located on the proposed 400-hectare site were forcibly relocated to a nearby plot of swampy land that was unsuitable for anything but breeding mosquitos. JICA and the various Japanese companies planning on developing the site have found themselves in a protracted struggle with local residents seeking fair compensation for their loses. This scenario is occurring with greater frequency throughout the country. Companies are often told that land they are acquiring from the central government is abandoned of fallow, only to discover that once work commenced, the land was held by the local community for a range of uses not previously disclosed. This systematic practice by the Myanmar government has led to a second problem that can directly impact the progression of development: ethnic conflict.
Ethnicity and Development
Burma’s military, largely of Burman descent, has been at war with most of the ethnic minority groups for decades. According to the U.N., one of the longest internal conflicts between the central government and Karen rebels, has spanned more than 60 years. Today, it is estimated that more than 400,000 people are internally displaced, living in refugee camps in the southeast of the country as a consequence.
|Ethnic group||Proportion of population||
|Karen||7 percent||Kayin State in eastern Myanmar bordering Thailand|
|Kachin||1.5 percent||Kachin State in the north, bordering China|
|Karenni||0.75 percent||Kayah State, on the border with Thailand|
|Chin||2.5 percent||Chin State in western Myanmar, bordering India|
|Mon||2 percent||Mon State in southern Myanmar|
|Rhakine||3.5 percent||Rakhine State in western Myanmar|
|Shan||9 percent||Shan State, bordering Thailand|
|Wa||0.16 percent||Wa Special Region, on the border with China|
|Rohingya||0.15 percent||Northern townships of Rakhine State, bordering Bangladesh|
While a number of ethnic groups have taken up arms, perhaps the greatest tragedy, in terms of ethnic conflict, is the ongoing forcible removal and internment of the Royhinga people, an ethnic Muslim population located largely in the northwest of the country. A UN human rights envoy says severe shortages of food, water and medical care for Rohingya Muslims in western Myanmar are part of a long history of persecution against the religious minority that could amount to “crimes against humanity”.
The Implications for Business in Myanmar
At first glance, the relevance of these two problems may seem remote for businesses entering into this Southeast Asian country. Much of the economic development is centered around the major urban areas, where land rights and ethnic conflict seems physically distant. However, such is not the case. An assurance that land is properly acquired or that the local population is without ethnic differences ignores the reality on the ground. Companies entering Myanmar must take special caution when opening up large footprint facilities and employing Myanmar nationals. It is critical that companies undertake a comprehensive due diligence process, paying particular attention on the origins of land possession, if not ownership, and a keen awareness of the underlying ethnic tensions that could impact its workforce.
For example, a recently announced solar power plant to be built in the Meiktila district of the country, located southeast of Mandalay, was recently the scene of violent ethnic fighting between Buddhists and Muslims. Since 2012, hundreds of people have died and tens of thousands of people have been displaced due to the conflicts between Buddhists and Muslims in Myanmar. Cities such as Meiktila and Lashio have been devastated. Earlier this year, a BBC reporter said he saw about 20 Muslim bodies, which local men were trying to destroy by burning in the town of Meiktila. In the midst of this ongoing conflict, infrastructure development is underway with the risk of damage or destruction to the development projects combined with the real risk of labor problems that may arise from hiring practices that favor Buddhists over Muslims and the broader problem facing local communities excluded from the solar power distribution system.
If these political risks on the ground seem removed from the reality of operating in Myanmar, the reputational risks posed by these dual points of conflict can have a profound impact on the profitability of any development in this slowly emerging economy.