Myanmar’s Privatization Plans

Courtesy of The Wall Street Journal, an interesting look at a flurry of privatizations of key state enterprises in Myanmar which is raising speculation about whether the country’s military regime is planning more market reform or simply trying to cash out before an election expected later this year.  As the article notes:

“…The Myanmar government plans to sell a number of major assets, including a network of 250 state-owned gas stations, and ports handling a large percentage of the country’s trade, according to local industry officials and Reuters news agency. It also is planning to sell factories, cinemas and warehouses, and may be contemplating a sale of the country’s international airline, among other assets.


Obtaining complete information about the moves is difficult, as it is with any government activity in Myanmar, a country notorious for its secrecy. The regime rarely speaks to foreign journalists, and attempts to reach the government to confirm details, such as as sales prices and buyers, were unsuccessful. Than Shwe is the country’s top military leader, but he doesn’t often speak openly on policy, and it isn’t clear which senior junta members are driving the latest privatization push.

But core elements of the push, including the sale of ports and gas stations, were confirmed by the Union of Myanmar Federation of Chambers of Commerce and Industry, which represents Myanmar’s business sector, and by economists and dissidents familiar with the government’s plans.

“We expect more” privatizations to come, said Maung Maung Lay, secretary-general of the federation, in a telephone interview. “The government wants to go according to international norms” and expand the role of the private sector, he said.

Local media have reported that Myanmar’s Kanbawza Bank, one of the many private banks that proliferated amid reforms in the 1990s, will buy up to 80% of state-controlled Myanmar Airways International, while the government would hold the remaining 20%. An employee at the airline said only that a deal was “not officially announced yet.” Efforts to reach Kanbawza were unsuccessful.

Buyers of the newly privatized assets are expected to be mostly local companies, Mr. Maung Maung Lay said. U.S. companies are, for the most part, prohibited from operating in Myanmar because of sanctions against the regime, which is accused of an array of human-rights violations. But other investors, especially in Asia, may seek to play a role.

Asian companies have entered a number of joint ventures with Myanmar’s government over the years and are keen to expand in the country because of its vast natural resources and potential consumer market of 50 million people.


The privatization effort appears to be an acceleration of market reforms started in the late 1980s. At the time, the goal was to undo socialist policies imposed after the military took over in 1962—including the nationalization of key industries—that held Myanmar back while neighbors such as Thailand boomed.

Since then, privatizations have helped to boost growth and have brought more efficiency to some industries. But momentum has ebbed and flowed over time, depending on the whims of the regime, and the government has refused to let go of many of its most lucrative assets, including investments in infrastructure and natural resources.

A broad array of critics of the regime have long complained that the program lacks transparency, which increases the odds that assets wind up in the hands of allies of the regime. Many of Myanmar’s biggest private companies—including some believed to be in the running for the latest assets—have close ties to military leaders and are targeted by U.S. sanctions. Myanmar consistently ranks among the most corrupt nations in the world, according to annual indexes produced by Transparency International, an advocacy group.

Momentum for the program appears to be building again, though, most likely because of national elections planned for later this year. Analysts generally believe the regime is holding the election as a bid to boost its legitimacy in the eyes of residents and foreign governments. Few expect it to be a free and fair vote, given the country’s record of abuses.

The last vote, in 1990, was won by opponents of the regime led by famed dissident Aung San Suu Kyi. But the regime ignored the result and now holds Ms. Suu Kyi under house arrest. Officials on Saturday released Tin Oo, a leading dissident who helped to found the National League for Democracy opposition party along with Ms. Suu Kyi.

Still, some observers have predicted the election may trigger more economic reform, as the regime looks to curry favor with supporters. Other analysts suspect officials simply want to cash out now, in case the election—whose date is still unknown—has an unexpected result.

Even if the vote is rigged, it is widely believed some top military figures will retire or leave office, resulting in a possible leadership shuffle that could lead to instability or other changes.

If it is possible to sell assets, “while you’re utterly in control of the country, with soldiers in the streets and everything locked down, why not do it?” says Sean Turnell, an expert on Myanmar’s economy at Macquarie University in Australia. “This is about locking up wealth now.”

The proposed sale of fuel stations is particularly sensitive given the importance of fuel costs in the local economy. In 2007, a government decision to cut fuel subsidies helped trigger protests that ended in a harsh government crackdown, killing at least a dozen people.

According to Irrawaddy, a Myanmar-focused news organization based in Thailand, a contract to operate at least some state fuel stations has already been awarded to local entrepreneur and alleged arms dealer Tay Za, who is targeted by U.S. sanctions because of ties to the military regime. The publication cited unnamed business sources in Myanmar.

Attempts to reach Mr. Tay Za were unsuccessful. Mr. Maung Maung Lay at the Federation of Chambers of Commerce and Industry said the stations, which are owned by a state vehicle under the Ministry of Energy, hadn’t been sold yet but that the fuel-station privatization would be complete soon, possibly by the end of March.

Other planned privatizations include three Yangon ports owned by Myanmar’s Port Authority under the Ministry of Transport.

At least one other port in the region already is operated by a private company, Asia World, a Myanmar conglomerate whose managing director also is on a U.S. sanctions list.”

This entry was posted on Friday, February 19th, 2010 at 7:18 am and is filed under Myanmar.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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