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Junta seizes profitable joint-ventu
- Subject: Junta seizes profitable joint-ventu
- From: darnott@xxxxxxxxxxx
- Date: Thu, 26 Oct 2000 15:10:00
--=====================_3769612==_.ALT
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>Envelope-to: darnott@xxxxxxxxxxx
>X-Mailer: Microsoft Outlook Express 5.50.4133.2400
>Date: Fri, 27 Oct 2000 02:33:58 +0900
>Reply-To: TIN KYI <tinkyi@xxxxxxxxxxxxx>
>Sender: Burmese Scholars and Students Around The
>World <MAYKHA-L@xxxxxxxxxxxxxxxxxxxx>
>From: TIN KYI <tinkyi@xxxxxxxxxxxxx>
>Organization: BYVA
>Subject: FEER - Mandalay Migraine
>To: MAYKHA-L@xxxxxxxxxxxxxxxxxxxx
>
>Far Eastern Economic Review
>Issue cover-dated November 2, 2000
>BURMA - Mandalay Migraine
>The Rangoon junta's seizure of a joint-venture brewery could test Asean's
>resolve and its ability to protect foreign investors
>--------------------------------------------------------------------------------
>By Shawn W. Crispin/BANGKOK and Bertil Lintner/CHIANG MAI
>--------------------------------------------------------------------------------
>
>SINGAPORE BUSINESSWOMAN Win Win Nu has spent the past two years vainly
>battling in Burma's courts over the government's seizure of her investment
>in a thriving joint-venture enterprise in her former homeland.
>
>Her calls for help to the Association of Southeast Asian Nations, or
>Asean, have been met with silence. How her case is resolved, if at all,
>will speak volumes about Asean's ability to protect foreign investment in
>the region through its untested dispute-settlement mechanism.
>
>The case, if taken up by Asean, could also serve as a test of Burma's
>commitment to the organization. Burma first saw Asean as a ticket to
>participation in the region's economic growth of the mid-1990s. Since
>then, however, it has come to regard membership as a liability because it
>helps to put the ruling military's repressive policies under the spotlight.
>
>Win Win Nu's case is a compelling one. When Burma opened its doors to
>foreign investment in the early 1990s, she spotted a good business
>opportunity. Helped by influential contacts in the ruling State Peace and
>Development Council, including intelligence chief Lt.-Gen. Khin Nyunt, Win
>Win Nu forged a joint venture between her Singapore-based company, Yaung
>Chi Oo Trading, and the government's Ministry of Industry No. 1 in 1993 to
>bring the bankrupt Mandalay Brewery bubbling back to life.
>
>Win Win Nu, who took a 45% stake in the venture, was in charge of
>operations and marketing while the ministry handled the books. Profits
>would be shared.
>
>The fresh infusion of modern management, technology and capital worked
>wonders. In six months, output increased 10-fold, salaries leapt 20-fold
>and cash flows soared. Mandalay Beer became a recognized brand name after
>the brewery opened more than 40 pubs nationwide. The company also became
>one of the country's largest domestic taxpayers.
>
>Burma's experiment in opening to foreign investment was paying off
>handsomely, stimulating local economic activity while generating revenues
>for the depleted state coffers.
>
>But the joint venture came to an abrupt halt on November 11, 1998, when
>armed soldiers and police seized the brewery on the orders of SPDC
>Chairman Gen. Than Shwe. Win Win Nu says her local bank accounts were
>frozen and claims she was threatened with arrest for misappropriating
>funds, which she denies. She fled the country as the junta took over
>operation of the brewery just three months after the final payment of her
>pledged $6.3 million initial investment.
>
>"Because we were so successful, the brewery became an easy target for
>greedy soldiers and bureaucrats," Win Win Nu says. "We fell on the wrong
>side of the power struggle and as a result lost our business.
>Unfortunately in Burma that's what matters--political connections, not law."
>
>Burmese law explicitly bars nationalization of foreign investments. But
>after fighting her case unsuccessfully through the local courts for 18
>months, Win Win Nu was forced to liquidate her share in the company.
>
>Court papers indicate she was facing an uphill battle by going through
>Burma's murky legal system. The first team of liquidators was not even led
>by a lawyer but by local tycoon Steven Law, whose family runs Burma's
>largest privately owned business group. The junta most probably enlisted
>the services of the Laws because of their perceived business acumen, a
>rare commodity in military circles in Burma.
>
>Win Win Nu is now lobbying to have her case put before Asean's untested
>dispute-settlement mechanism on the grounds that Burma's seizure of
>Mandalay Brewery directly violates the commitments to protect foreign
>investment that it entered into upon joining Asean in 1997.
>
>Asean Secretariat officials in Jakarta say they would be charting new
>territory if they took on the case. So far, the regional body, which has
>shown consistent impotency in mediating regional disputes on both
>political and economic fronts, has failed to respond to appeals for
>arbitration sent by Win Win Nu's Singapore lawyers. An Asean official
>claims the complaint was not filed through the "proper channels."
>
>Under normal circumstances, the businesswoman should have grounds for
>confidence, judging by the results of an independent report into her case
>commissioned by the government's Myanmar Investment Commission and
>released in June last year. Local PricewaterhouseCoopers representative U
>Hla Tun found the takeover was conducted "without legal sanction" and that
>the charges of misappropriation of funds against Win Win Nu were
>unsubstantiated, according to a copy of the confidential report seen by
>the REVIEW. The investigation also warned that the takeover could "tarnish
>the 'open market economy' policy declared and prescribed by the government
>of the Union of Myanmar."
>
>While Win Win Nu seems to be the first foreign investor to have been
>targeted for de facto nationalization, Burma's reputation as an attractive
>destination for foreign investment had already started turning sour. Ever
>since the mini-boom of the mid-1990s, red tape, bureaucratic hassle and
>enduring worries of political instability have slowed foreign investment
>to a trickle. Now, the SPDC's apparent unwillingness to abide by both its
>own and international laws protecting foreign investment could further
>dampen potential investors' spirits.
>
>"Although the policies on the books are unchanged, the SPDC attitude
>towards small-scale foreign investment has changed 180 degrees since the
>crisis," says a Bangkok-based lawyer who has clients with investments in Burma.
>
>CLOSING DOOR
>
>The takeover of Mandalay Brewery gives more ammunition to those who argue
>that the junta is moving away from its flirtation with economic openness,
>a position Khin Nyunt once trumpeted, to the chagrin of army commander
>Gen. Maung Aye. When the local currency, the kyat, plunged during the
>Asian Crisis, the Maung Aye group seemed to prevail with their argument
>that too much openness, too fast, was a threat.
>
>Until now, many looked at SPDC leader Than Shwe as the moderating force
>that kept these two power bases from breaking into factions. But Than
>Shwe's order to seize Mandalay Brewery may signal that the ailing chairman
>will give his blessing to Maung Aye regarding economic openness.
>
>Win Win Nu says Than Shwe ignored numerous warnings from Khin Nyunt's
>office about the negative international fallout that nationalizing the
>brewery might incur. (Burma's Investment Commission, the Ministry of
>Economic Planning and Economic Development and Than Shwe's office didn't
>reply to faxes and phone calls from the REVIEW.)
>
>Meanwhile, Asean's reputation and overall viability have continued to sag.
>Investment in the region has almost ground to a halt since the crisis,
>particularly in Burma. Asean has worked to restore investors' confidence
>in the region by sending promotion missions to the United States, Japan
>and Europe in recent months, while also pushing to enhance the
>transparency of member nations' investment regimes.
>
>So far, though, that has been a hard sell against the political
>uncertainties in Indonesia, the Philippines and even Thailand. And without
>a firm response to the junta's takeover of Mandalay Brewery, that sell
>could become even harder as perceptions grow that investment protection
>codes are only so much unenforceable parchment.
>
>But perhaps one clear lesson from the Mandalay Brewery case is the
>pervasive influence of nepotistic policies and an arbitrary legal system
>on the success or failure of any foreign business in Burma.
>
>"If rules and regulations are not enforced for the layman, that is bad for
>Asean, bad for me, bad for everyone," says Win Win Nu.
>
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<br>
<blockquote type=cite cite>Envelope-to: darnott@xxxxxxxxxxx<br>
X-Mailer: Microsoft Outlook Express 5.50.4133.2400<br>
Date: Fri, 27 Oct 2000
02:33:58 +0900<br>
Reply-To: TIN KYI
<tinkyi@xxxxxxxxxxxxx><br>
Sender: Burmese Scholars and Students
Around The
World
<MAYKHA-L@xxxxxxxxxxxxxxxxxxxx><br>
>From: TIN KYI
<tinkyi@xxxxxxxxxxxxx><br>
Organization: BYVA<br>
Subject: FEER - Mandalay Migraine<br>
To:
MAYKHA-L@xxxxxxxxxxxxxxxxxxxx<br>
<br>
<font face="arial" color="#800000"><b>Far Eastern Economic Review<br>
</b>Issue cover-dated November 2, 2000<br>
</font><font face="arial" size=4 color="#800000"><b>BURMA - Mandalay
Migraine<br>
</b></font><font face="arial" color="#800000">The Rangoon junta's seizure
of a joint-venture brewery could test Asean's resolve and its ability to
protect foreign investors<br>
</font><font face="arial">--------------------------------------------------------------------------------<br>
<b>By Shawn W. Crispin/BANGKOK and Bertil Lintner/CHIANG MAI<br>
</b>--------------------------------------------------------------------------------<br>
<br>
SINGAPORE BUSINESSWOMAN Win Win Nu has spent the past two years vainly
battling in Burma's courts over the government's seizure of her
investment in a thriving joint-venture enterprise in her former homeland.
<br>
<br>
Her calls for help to the Association of Southeast Asian Nations, or
Asean, have been met with silence. How her case is resolved, if at all,
will speak volumes about Asean's ability to protect foreign investment in
the region through its untested dispute-settlement mechanism.<br>
<br>
The case, if taken up by Asean, could also serve as a test of Burma's
commitment to the organization. Burma first saw Asean as a ticket to
participation in the region's economic growth of the mid-1990s. Since
then, however, it has come to regard membership as a liability because it
helps to put the ruling military's repressive policies under the
spotlight.<br>
<br>
Win Win Nu's case is a compelling one. When Burma opened its doors to
foreign investment in the early 1990s, she spotted a good business
opportunity. Helped by influential contacts in the ruling State Peace and
Development Council, including intelligence chief Lt.-Gen. Khin Nyunt,
Win Win Nu forged a joint venture between her Singapore-based company,
Yaung Chi Oo Trading, and the government's Ministry of Industry No. 1 in
1993 to bring the bankrupt Mandalay Brewery bubbling back to life.<br>
<br>
Win Win Nu, who took a 45% stake in the venture, was in charge of
operations and marketing while the ministry handled the books. Profits
would be shared.<br>
<br>
The fresh infusion of modern management, technology and capital worked
wonders. In six months, output increased 10-fold, salaries leapt 20-fold
and cash flows soared. Mandalay Beer became a recognized brand name after
the brewery opened more than 40 pubs nationwide. The company also became
one of the country's largest domestic taxpayers.<br>
<br>
Burma's experiment in opening to foreign investment was paying off
handsomely, stimulating local economic activity while generating revenues
for the depleted state coffers.<br>
<br>
But the joint venture came to an abrupt halt on November 11, 1998, when
armed soldiers and police seized the brewery on the orders of SPDC
Chairman Gen. Than Shwe. Win Win Nu says her local bank accounts were
frozen and claims she was threatened with arrest for misappropriating
funds, which she denies. She fled the country as the junta took over
operation of the brewery just three months after the final payment of her
pledged $6.3 million initial investment.<br>
<br>
"Because we were so successful, the brewery became an easy target
for greedy soldiers and bureaucrats," Win Win Nu says. "We fell
on the wrong side of the power struggle and as a result lost our
business. Unfortunately in Burma that's what matters--political
connections, not law."<br>
<br>
Burmese law explicitly bars nationalization of foreign investments. But
after fighting her case unsuccessfully through the local courts for 18
months, Win Win Nu was forced to liquidate her share in the
company.<br>
<br>
Court papers indicate she was facing an uphill battle by going through
Burma's murky legal system. The first team of liquidators was not even
led by a lawyer but by local tycoon Steven Law, whose family runs Burma's
largest privately owned business group. The junta most probably enlisted
the services of the Laws because of their perceived business acumen, a
rare commodity in military circles in Burma.<br>
<br>
Win Win Nu is now lobbying to have her case put before Asean's untested
dispute-settlement mechanism on the grounds that Burma's seizure of
Mandalay Brewery directly violates the commitments to protect foreign
investment that it entered into upon joining Asean in 1997.<br>
<br>
Asean Secretariat officials in Jakarta say they would be charting new
territory if they took on the case. So far, the regional body, which has
shown consistent impotency in mediating regional disputes on both
political and economic fronts, has failed to respond to appeals for
arbitration sent by Win Win Nu's Singapore lawyers. An Asean official
claims the complaint was not filed through the "proper
channels."<br>
<br>
Under normal circumstances, the businesswoman should have grounds for
confidence, judging by the results of an independent report into her case
commissioned by the government's Myanmar Investment Commission and
released in June last year. Local PricewaterhouseCoopers representative U
Hla Tun found the takeover was conducted "without legal
sanction" and that the charges of misappropriation of funds against
Win Win Nu were unsubstantiated, according to a copy of the confidential
report seen by the REVIEW. The investigation also warned that the
takeover could "tarnish the 'open market economy' policy declared
and prescribed by the government of the Union of Myanmar."<br>
<br>
While Win Win Nu seems to be the first foreign investor to have been
targeted for de facto nationalization, Burma's reputation as an
attractive destination for foreign investment had already started turning
sour. Ever since the mini-boom of the mid-1990s, red tape, bureaucratic
hassle and enduring worries of political instability have slowed foreign
investment to a trickle. Now, the SPDC's apparent unwillingness to abide
by both its own and international laws protecting foreign investment
could further dampen potential investors' spirits.<br>
<br>
"Although the policies on the books are unchanged, the SPDC attitude
towards small-scale foreign investment has changed 180 degrees since the
crisis," says a Bangkok-based lawyer who has clients with
investments in Burma.<br>
<br>
<b>CLOSING DOOR</b><br>
<br>
The takeover of Mandalay Brewery gives more ammunition to those who argue
that the junta is moving away from its flirtation with economic openness,
a position Khin Nyunt once trumpeted, to the chagrin of army commander
Gen. Maung Aye. When the local currency, the kyat, plunged during the
Asian Crisis, the Maung Aye group seemed to prevail with their argument
that too much openness, too fast, was a threat.<br>
<br>
Until now, many looked at SPDC leader Than Shwe as the moderating force
that kept these two power bases from breaking into factions. But Than
Shwe's order to seize Mandalay Brewery may signal that the ailing
chairman will give his blessing to Maung Aye regarding economic
openness.<br>
<br>
Win Win Nu says Than Shwe ignored numerous warnings from Khin Nyunt's
office about the negative international fallout that nationalizing the
brewery might incur. (Burma's Investment Commission, the Ministry of
Economic Planning and Economic Development and Than Shwe's office didn't
reply to faxes and phone calls from the REVIEW.)<br>
<br>
Meanwhile, Asean's reputation and overall viability have continued to
sag. Investment in the region has almost ground to a halt since the
crisis, particularly in Burma. Asean has worked to restore investors'
confidence in the region by sending promotion missions to the United
States, Japan and Europe in recent months, while also pushing to enhance
the transparency of member nations' investment regimes.<br>
<br>
So far, though, that has been a hard sell against the political
uncertainties in Indonesia, the Philippines and even Thailand. And
without a firm response to the junta's takeover of Mandalay Brewery, that
sell could become even harder as perceptions grow that investment
protection codes are only so much unenforceable parchment.<br>
<br>
But perhaps one clear lesson from the Mandalay Brewery case is the
pervasive influence of nepotistic policies and an arbitrary legal system
on the success or failure of any foreign business in Burma.<br>
<br>
"If rules and regulations are not enforced for the layman, that is
bad for Asean, bad for me, bad for everyone," says Win Win Nu.<br>
</font></blockquote></html>
--=====================_3769612==_.ALT--