The end of long-standing U.S. sanctions on Myanmar companies linked to the former military government is cause for celebration in both countries, opening up a slew of previously off-limits business and investment opportunities.

The U.S. Treasury Department lifted all financial sanctions on the Southeast Asian nation Friday after months of dogged appeals by its de facto leader, State Counselor Aung San Suu Kyi. This included taking some 100 companies and business leaders off the Specially Designated Nationals and Blocked Persons list, or SDN list, of entities barred from doing business with American companies. The list, aimed first at pressuring on the military government and later at facilitating the democratization process, has hampered economic growth since going into effect in 1997.

One such blocked businessman, Executive Chairman Zaw Zaw of conglomerate Max Myanmar Holding, called the lifting of the sanctions a dream come true, saying that Friday was a historic day for the country. The Max group began operations in 1993 importing used cars from Japan. It has since expanded into such sectors as finance and real estate, ringing up sales of more than $200 million in the year ended March 2015. Group member Ayeyarwady Bank has become Myanmar’s second-largest financial institution.

This rapid growth landed Zaw Zaw on the SDN list in 2009 on suspicion of collusion with military officials. Business between American companies and the Max group was banned, and non-U.S. companies shied away for fear of damage to their reputations. With the shadow of the sanctions now dissipated, Max Myanmar will have an easier time working with foreign investors to grow in such fields as infrastructure and capital markets, Zaw Zaw said.

New ground

American companies once wary of doing business in Myanmar now have a good deal less to fear. A source at General Electric said a handicap on American businesses, which is “creating an uneven playing field versus other multinational corporations,” has been removed.

GE headed back to Myanmar in 2012 after an absence. The start of the journey from military to civilian rule in 2011 led the majority of sanctions to be lifted, creating footholds for American businesses. GE has since focused on the energy sector, obtaining a contract for turbines at what is to be the country’s largest natural-gas-fired power plant, in the northern city of Mandalay. The company now aims to grow health care and aviation operations as well.

American direct investment in Myanmar in the year ended March came to just $2.6 million — less than 0.1% of the $9.5 billion total investment from all countries. But U.S. companies are becoming more interested in the Southeast Asian nation. Microsoft set up its first Myanmar office in late September, after it became clear that sanctions would be lifted. Citibank and insurer American International Group are thought to be planning forays as well.

Necessary compromise

Businesspeople and companies with state ties that amassed power under military rule still wield a good deal of influence in Myanmar. Asia World, previously on the SDN list, runs Yangon’s Asia World Port Terminal, the country’s largest port, as well as terminal facilities at Yangon International Airport. Suu Kyi’s push for an end to sanctions was likely aimed at gaining these powerful players’ cooperation in managing the economy as tensions between the military and the ruling National League for Democracy lessen.

Compliance issues have long made companies from such nations as Japan hesitant about partnering with state-linked enterprises in Myanmar. But “opportunities to work with Asia World on infrastructure development now are set to grow,” a source at a Japanese trading house said. Such partnerships will also let local companies more easily rope in foreign capital.

Japanese companies are generally upbeat about the increased access. Myanmar “will become a more open country,” according to a source at trading house Mitsubishi Corp. But a source at Kirin Holdings, parent of Myanmar Brewery, warns that “staff training will become more important as the entry of U.S. companies ratchets up competition for top talent.” Companies settling the new frontier will need to prepare for a fight.

Link: http://asia.nikkei.com/Business/Trends/Post-sanctions-Myanmar-the-new-frontier-for-global-business