Could Myanmar's economic reform bring business to war-torn ethnic regions?

Myanmar has passed a new foreign direct investment law. Now a cease-fire in the country's war-torn Karen state has some entrepreneurs hoping to attract foreign investment.

By , Correspondent

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    Myanmar factory workers stage a rally outside Myanmar Labor's Office in Yangon, Myanmar, Friday, Sept. 7. Elected President Thein Sein launched economic and political reforms when he took office last year after almost five decades of military rule, foreign sanctions and restrictive laws that kept the economy stagnant.
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On the heels of recent reforms in Myanmar, aspiring entrepreneur Shar Phaung established Shar Mu Lar Mining Co. just two months ago, sensing economic opportunity in a war-torn state close to the Thailand-Myanmar border.

The Karen National Union (KNU) has fought the Myanmar government in the Karen state, where Mr. Shar Phaung lives, since the late 1940s. The on-again, off-again jungle conflict has driven hundreds of thousands of people from their homes, left thousands killed or maimed, and made it a struggle for families to make ends meet. 

Now a cease-fire has been coupled with Myanmar President Thein Sein's pledge to prioritize economic reform one of Asia's poorest countries. The government and the KNU met last week in the latest round of peace talks, discussing troop positions.

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“Overall we can say things are improving as this is the third time the government and KNU meet, and publicly the government praises the KNU,” says Susanna Hla Hla Soe of the Karen Women's Action Group, an observer at last weeks' negotiations here in Hpa'an.

The lull in fighting means that even in this ramshackle riverside town of around 50,000, a six-hour drive from Yangon, entrepreneurs such as Mr. Shar Phaung now see business opportunities.

“The KNU and the government have the cease-fire so we can go to the places like Kyaiseikgyi near the Thailand-Myanmar border, where there is the antimony,” he says, referring to a potentially lucrative element mostly used in batteries and flame retardants.

Antimony is just one of an array of natural resources prompting a surge in investor interest in Myanmar, which is better known for its gas, gemstones, timber, and oil. Given that antimony is also used sometimes in bullets, it is a grim irony that Shar Phaung could soon be mining in a region home to what is commonly described as the world's longest-running civil war.

Still, both Ms. Susanna Hla Hla Soe and Shar Phaung acknowledge that a political settlement is a long way off. “It is just cease-fire for now: They have many things to discuss still,” says Shar Phaung.

The Karen and several of Myanmar's other large ethnic minorities have long sought substantial devolution of central control to their regions, something the Myanmar authorities have resisted, fearing that minority regions could try to break away from Myanmar.

Hurdles await

Big issues await discussion, and even settling on the names of places and people could be problematic. Just as Burma is the old name for Myanmar – the official country name imposed by the ruling military in 1989 – “Kayin” and “Hpa'an” are official names for what are better-known as Karen state and Pa'an respectively.

Moreover, analysts say it will take more than peace to ensure significant economic change in Karen state.

“We need outside investment, outside technology,” says Shar Phaung, who has yet to sign a contract with the government to mine the antimony. “We are hoping to get a bigger foreign partner to work more effectively,” he says. “We can only mine by hand right now, we don't have machines to do this properly yet.”

A new foreign investment law was passed by Myanmar's parliament on Friday after several months debate, during which Western countries relaxed or suspended economic sanctions on Myanmar. The law scratched several potential investment-deterring provisions from the original draft, such as a $5 million minimum initial spend for any foreign company wanting to invest. It could also help bring in the know-how and equipment Shar Phaung is after.

That might take time, however. “Foreign investors are looking to see the extent to which peace can be brokered, achieved, and maintained in conflict areas prior to commitment of resources,” says Alessio Polastri, managing partner at P&A Asia, a consultancy that offers legal advice to companies seeking business in Myanmar.

Another sticking point is the current mining law, which requires 30 to 70 percent profit sharing between an investor and the Myanmar government, which also seeks royalties and tax. The law is another likely deterrent to the sort of partner Shar Phaung wants, says Mr. Polastri, but one the government says it will revise soon.

‘We are still very poor’

However, for others in Hpa'an, the lingering effects of war mean a daily struggle to make ends meet.

Jerome Na makes shirts and dresses from the living room of her family home in a quiet, semi-rural street on the outskirts of town.

Eight years ago she brought her family 40 miles from Kama Maung because of the constant dangers of jungle skirmishes there between the Army and the Karen National Liberation Army, the KNU's armed wing. “There are landmines around, and back then it was not safe, and there was no way to earn a living,” she says.

Ms. Jerome Na says that the family did not have running water or electricity in their home village, typical of most of rural Karen state. “Business is still the same for me as it was last year and the year before,” she says, despite the cease-fire. “I think it is the same still for most people, we are still very poor.”  

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