American Law Firm Grows Opportunities In Myanmar

December 17, 2013

By Jon Springer/
The law firm of Herzfeld, Rubin, Meyer & Rose Limited (HRMR) announced itself as the first 100% American owned law firm in Myanmar on July 29, 2013. While the United States has reduced the number of sanctions it has against the former nation of Burma in the past year, there are many U.S. sanctions still on the books that make it more difficult for American companies to do business in Myanmar than companies of any other country. I had a series of conversations with Eric Rose of HRMR about his parent law firm’s global brand, its specialty in emerging and frontier markets and why it has chosen Romania and Myanmar as its two outposts in these markets.

In the interview below, Mr. Rose candidly speaks about the opportunities and risks in Myanmar where he expects GDP to at least triple in the coming 20 years. While representing his law firm, his answers provide a clear view of investing opportunities, business prospects, sanction situations, Myanmar’s history, current stability and international relations.

Jon Springer: During your legal career, you have done a lot of work in emerging and frontier markets both in private practice and as an in-house lawyer for corporations. When did you first work in Myanmar?

Eric Rose: I set up the strategy for American Standard, the kitchen and bath goods manufacturer, in Myanmar in the mid-1990s. At that time, U.S. sanctions were limited. Major sanctions came in 2003.

JS: Was this experience part of why HRMR decided to open an office in Myanmar?

ER: Our firm specializes in emerging and frontier markets. We chose both Romania and Myanmar for similar reasons. Both countries at the time we arrived were newly open to American business. They both have large, literate populations. In both cases they were or are countries starting with a low GDP basis, a high need for infrastructure development, an incredible wealth of natural resources and a strong relatively cheap workforce.

JS: When you say your firm specializes in emerging and frontier markets, what is the range of countries your firm’s attorneys have worked in and range of services provided?

ER: A law firm is only as good as the attorneys it has. Our attorneys have lead transactions in over fifty countries on five continents, the majority of which were then, and some still are, emerging or frontier markets. For example, in the early 1990s, I guided companies like John Deere and Tyco Toys in countries of the former Soviet Union, South Africa and China.

In the middle ’90s, I lead American Standard’s and Trane’s entrance in Vietnam, Burma, Egypt and Eastern Europe. Later, I helped Wabco Automotive and Diasorin penetrate India and China. More recently, I steered Cybertel and Perry Equipment transactions in Latin America and Eastern Europe. The firm has over 200 practitioners in six affiliated offices on three continents, and offers a full range of legal services to its clients, which range from individuals to Fortune 500 companies the world over.

JS: Specifically looking at Myanmar, it has been touted as early as 1885 as the greatest place to invest in the world in Archibald Colquhoun’s Burma and the Burmans: Or, “The best unopened market in the world”. What is different now?

ER: In the first half of the 20th century, Burma was the richest country in Southeast Asia, the largest producer of rice in the world and the number one producer of beans and pulses. Rangoon, at the time, had the best universities and was the hub airport for travel throughout Asia and beyond. Today, Myanmar is the poorest country in Southeast Asia, 75% of its population does not have access to electricity, and only 10% have access to cell phones. What has changed is that, for the first time since Myanmar’s independence, all of its citizens from all ethnic groups, as well as the government and the army, are sharing the same goals.

JS: Thus, the case is that the communism and dictatorship the country experienced after British colonial rule ended in 1948 led to the current malaise and the country is now democratic and primed for capitalist success?

ER: Not quite! Myanmar has experienced civil war since its inception. It is now on the threshold of nationwide peace, it had free by-elections last year, it has freed almost all of its political prisoners, has adopted freedom of the press and association legislation and ended press censorship and it has passed a number of laws and regulations which have opened up most of the country to foreign investment. At the same time, much of industry is still controlled by companies associated with the military and cronies of the former government, land rights are in doubt or disputed, rule of law is still in its infancy, and the country is still rated very low on the corruption index of Transparency International. The effect of the sanctions can still be felt everywhere.

For example, in 2002, the Myanmar garment industry exported 75% of its product to the United States. After 2003, when the major U.S. sanctions began, 300 factories closed and 80,000 people were laid off. Assuming on average that those factory workers, most of whom were women and the breadwinners for the average family of 5, the sanctions in that industry alone directly impacted 400,000 people. Now that the U.S. has lifted import restrictions, being able to export garments to the U.S. will, by itself, substantially help grow the economy. For example, in nearby Cambodia, once restrictions were lifted in 1997, exports of garments grew from $175 million to over $2.5 billion during the next dozen years.

The same applies to the U.S., once again, granting Myanmar the GSP status, which it lost in 1989. GSP would cover a large percentage of agricultural products, minerals, plastics and rubber products, as well as wood products. All other developed countries have granted GSP to Myanmar, it is the U.S. alone which has not. Generally speaking, the U.S. today – while the GSP program has lapsed – is collecting $2 million/day in duties from the poorest countries on earth, Myanmar included [The U.S. Congress did not renew GSP legislation prior to its expiration July 31, 2013. The legislation to renew it is still pending]. In the first six months since the U.S. import ban against Myanmar has been lifted earlier this year, Myanmar’s exports to the U.S. amounted to only $14 million. Yet, over $8 million were GSP-eligible products, with an average duty of 4.2% when they would be paying zero under GSP.

JS: Could you briefly elucidate the U.S. sanctions currently in place and what is needed to remove them?

ER: Currently, the U.S. sanctions regime against Myanmar is still in place, five laws and at least five executive orders. Most of the sanctions have been suspended by the president, but can be re-instated on short notice. No other country continues to have sanctions against Myanmar, except as to its military. By itself, the simple existence of such laws and executive orders hampers the ability of American business to invest in Myanmar, with little, if any, discernable current positive effect on the people of Myanmar.

In addition to the bar on deals with the Tatmadaw (the Myanmar military), or its controlled business entities, there continues to be a bar on transactions with Myanmar entities and individuals listed on the Office of Foreign Assets Control’s Specially Designated Nationals list, and on the importation of certain jewels. Furthermore, American companies and individuals alone have to annually report on their investments exceeding $500,000, certain payments to the government, dealings with the national oil and gas company, and a plethora of other requirements. Although large corporations are well equipped to deal with these reporting requirements, small and medium and enterprises (SMEs) are not. Thus, these reporting requirements put a disproportionate burden on SMEs investing in Myanmar.

JS: There have been questions about the stability of Myanmar going forward with occasional notes in the news of ongoing fighting. How stable is it?

ER: There are 135 official minorities in Myanmar that make up 33% of the population. Most of the minorities are near the surrounding border states of Bangladesh, India, China, Laos & Thailand. In the country, depending on how you count, we have 11, 13 or 17 groups under major arms. There are ceasefires or peace agreements between the government and all major groups under arms within the country. Are there still skirmishes? Yes, but there are few and they are usually over local issues.

All these groups came to a common platform in November, 2013. The central government had acquiesced or agreed to the terms contained in this platform, including requests of the Tatmadaw.

These negotiations are the first time that multiple ceasefires and peace accords were reached since Burma was created in 1948. This is in part due to the initial incorporation of several regions that had been under separate colonial rule when the British governed India & Burma. The Shan and Karen regions went from having separate rule to being lumped into a single larger state. Some immediately declared war in 1948 and their first peace agreements are only happening now, 65 years later.

JS: With these various complexities in mind, what is the range of your firm’s clients in Myanmar?

ER: We represent a number of large companies which I cannot identify due to the attorney-client privilege. As three examples, we represent a mid-size American oil and gas construction and equipment company, a large Asian pharmaceutical company, and a mid-size Myanmar based company. We simultaneously are helping foreign companies penetrate Myanmar’s marketplace and assisting Myanmar-based companies re-enter foreign markets.

JS: Your firm has a number of well-established native Myanmar attorneys on your staff. Did you buy out a local firm or hire each of them individually?

ER: We take great pride in being associated with some of Myanmar’s best lawyers. Each of them came to us last spring, and expressed their interest in being considered. Despite being independent practitioners before joining HRMR, they have developed an unequalled esprit-de-corps both working in teams among themselves as well as with the foreign attorneys affiliated with HRMR.

JS: You began making trips to Myanmar regularly two years prior to your office opening. Were there other countries HRMR was looking at to open its first office in Asia, or was Myanmar always the clear choice?

ER: The clear choice was Myanmar. As stated earlier, there is a compelling case for being in Myanmar, both from a business, as well as legal standpoint. Furthermore, we have been welcomed with open arms by both government, as well as by the business community, primarily because we bring a new type of legal practice to the country. Our attorneys are helping Myanmar change its laws, adopt the rule of law, provide unequalled pro bono activities defending the rights of the innocent and persecuted alike, and advise U.S. government entities. All our local attorneys have voluntarily adopted the American Bar Association’s code of ethics.

JS: Among your staff in Myanmar, Dr. Andrew Ngun Cung Lian is distinctly listed as a government policy professional and is the only American educated member of your legal team fluent in Myanmar’s language. His full bio notes he was a revolutionary against the government in 1988, then a refugee in India, and then came to the U.S. in 1996 on a Burmese Refugee Scholarship from the United States Information Agency. He ultimately went on to complete a Doctor of Juridical Science at the Indiana University Maurer School of Law and launched an impressive career. How did you come to meet him?

ER: I heard Dr. Lian speak at the Center for Strategic and International Studies in Washington D.C. about 2 years ago. I spoke to him after his presentation and we both agreed, on the spot, to start a law firm in Myanmar.

JS: It would seem Asian countries such as China, Japan, South Korea, India and Singapore which have not had similar sanctions against Myanmar have been there longer and may have a competitive advantage. With the competitive disadvantage U.S. firms face with more sanctions in place than any other country, why should American firms work to enter the Myanmar marketplace now?

ER: The simple presence of various Asian-based competitors does not necessarily translate into a universal disadvantage for American business. Some of these investors have brought with them a heavy baggage of neo-colonialist practices, which are resented by the people (and government) of Myanmar. Examples abound. See the issues surrounding the building of theMyitsone Dam, the Letpadaung copper mine, the two 793 km pipelines, and so on. U.S. companies are bringing a new way of doing business which, although impeded by the current sanctions and reporting requirements, can and does overcome such restrictions. Examples abound here as well: Chevron’s long presence in the country, Coca-Cola’s new re-entry, Ford and Chevrolet entry or re-entry, Pepsico’s licensing deal, et cetera.

JS: In Eastern Europe, your firm has helped set up American Chambers of Commerce (AmCham) in Romania, Moldova and Montenegro. Does your firm plan to do this in Myanmar and other Asian countries?

ER: We are a founding member of the AmCham Myanmar chapter which was set up with the cooperation of AmCham Thailand. At this time, we are concentrating on making this AmCham a success. The American Chamber of Commerce Myanmar chapter is also working with its members to implement recommended practices that will allow businesses to achieve, simultaneously, their corporate investment goals while upholding the corporate social responsibility standards we are accustomed to in the U.S.

JS: As a first-mover for Americans in Myanmar, what is your relationship with the U.S. State Department and other branches of government?

ER: HRMR attorneys have been asked by various branches of the U.S. government (e.g. the State Department, Office of the United States Trade Representative and so on), to consult on a number of issues, and we have enthusiastically responded every time. We believe that our government has a central role to play in advancing the rule of law in Myanmar, and it contributes every day in a number of initiatives. The business community is responding, in turn, with initiatives that U.S. government entities are invited to support (e.g. AmCham Myanmar chapter programs).

JS: What is your outlook for the prospect of U.S. sanctions against Myanmar unwinding?

ER: We do not expect the broad sanctions to be removed before 2015 when national elections are scheduled to be held. If those elections are certified as fair, democratic and open to all, we believe that the Obama administration will respond in-kind by asking Congress to dismantle the sanctions regime.

JS: What are your expectations for economic growth in Myanmar over the next 20 years?

ER: I take great comfort in knowing that McKinsey and the World Bank appear to be on the same page in predicting that the GDP of Myanmar will, at least, triple during that period.

99B Myay Nu Street, LAMAI Condo, Suite 6D, Sanchaung Twp., Yangon 11111, Myanmar - Phone: +95 1 230-5935
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