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Our hope rests with the rule of law

 

08 September 2014

Much needs to be rebuilt and renewed in Myanmar, including its legal system.

Six decades of military dictatorship have left the rule of law diminished and badly undermined. It is not that the legal system has disappeared altogether. It’s there but it needs to be brought back to full life if the country is to have any chance of attracting the sort of inward investment it so desperately needs.
 
We went back into Myanmar in 2012. Part of the motivation for that move was to try and get a better understanding of how the legal system worked and how it interacted with government ministries that we knew would be of interest to our clients.
 
We found a pretty substantial Attorney General’s office, staffed by about 2,000 lawyers many of whom are scattered across some 11 regional offices. This is the country’s largest body of lawyers, although, in truth, they are basically government officers.
 
Elsewhere the judiciary had a poor reputation – it had been badly dumbed down during military rule. In the civil courts, particularly in Yangon, there was still a pretty active Bar with a few competent good lawyers. During sanctions, opposition party members involved in civil rights cases would often be represented by those lawyers - although those taking on these cases often had their licences withdrawn.
 
In the commercial sector the situation was far worse. Although there were a number of sole practitioners, their work tended to be procedural – conveyancing work, company incorporations and the like. It’s a world away from the sort of international commercial law we practice and that our clients rely on to do deals. Even now there are only a handful of local law firms even achieving a reasonable standard.
 
Ahead of setting up our Myanmar office we decided to engage with key legal players and ministries to gain insights for our clients and to offer our help in modernising the system. We have provided the Attorney General’s office with training modules on joint ventures, M&A, investment treaties, arbitration and project financing. Providing this training and support is part of a long-term pro bono commitment we’ve made to the country to help develop the rule of law.
 
We’ve also helped to set up the Myanmar Centre for Responsible Business – alongside the Institute for Human Rights and Business – which is working with foreign investors and Myanmar companies to make sure existing and new investments in the country meet international human rights standards and best practices.
 
We have been working with the Supreme Court on issues relating to international arbitration. We’ve worked closely with the ministries of National Planning and Electric Power and run courses at two universities. Before establishing our own office in late 2013 we had a senior lawyer from our Sydney office on secondment with a local law firm.
Myanmar actually has a recognisable law system, however dusty it has become. It’s based on English law and was imported from India. For instance there is a Companies Act (1914), which, while not up to date is nevertheless familiar and workable.
 
So what are the chief worries and risks that investors talk about? Not surprisingly they are concerned about the work of local courts. Will they provide a level playing field? Is there enough expertise in them to ensure that judgements are fairly made?
 
Another concern is about how new laws will be made and old laws rewritten. Will they be too vague and vest too much discretion in government departments? That is certainly a worry. It’s questionable whether the country should start writing new laws if what comes out is just opaque – that will not inspire confidence. It might, in many cases, be better to start with the old laws and bring them carefully up to date. Much will depend on the outcome of elections in 2015 and what sort of government emerges from the process. To date, Parliament – expected to be a bit of a lame duck – has actually shown itself to have real teeth, which is a positive feature of the new Myanmar but has resulted in delays to new laws being passed.
 
And investors are returning. Japanese companies are in the fore, certainly in terms of scouting for deals. You see quite a lot of consumer groups – food household products, beverages - on the ground. The power sector has sparked wide interest and, following a competitive process to award two operating licences, the telecoms sector has really come to life. Banks will also come in, we think, although there is resistance from the local players who fear they will be unable to compete.
 
While change on the ground is quick, underlying reform is happening relatively slowly. But given Myanmar’s recent history, we are seeing a level of progress few would have dreamt possible three or four years ago.

It’s often said that information is power. In developing markets in general, and in South East Asia in particular, that certainly rings true - information is proving to be a hugely important driver for economic growth and the benefits will be felt right across the global economy.

 
Communications infrastructure is the foundation for delivering the information services that will accelerate education, logistics, financial services, government interaction and almost every aspect of life. In the Asia Pacific region Allen & Overy has focused on delivering these large, complex and bespoke projects for its clients.
 
A number of telecommunications operators are building regional footprints in South and South East Asia. Telenor from Europe, Ooredoo from the Middle East, SingTel from Singapore, Axiata and Maxis from Malaysia and Bharti from India all have a significant presence, and Vodafone has a strong position in India. At stake is a market of many billions of potential customers across a spectrum from the highly developed Singapore market to rural Myanmar.
 
These operators cannot simply replicate the business models they are using in more advanced economies. They need to provide the widest possible coverage at a price point that is affordable to all sectors of the population. Their networks and services must be market specific to meet the most urgent demand.
 
As a result they are all developing unique approaches to building their networks, unique service offerings and unique pricing strategies.
 
The accent is on mobile technology. To guarantee reasonable returns we’re seeing operators sharing the passive infrastructure around which these networks are being built – notably tower sites– and relying on 2.5G to 3G technologies rather than the high cost 4G systems now being built out in markets like Europe. In the future more active network sharing is expected to develop, as has become prevalent in Europe. The emphasis is on affordability, through the reduction of capital spending and tight control of operating costs.
 
Despite using networks of more limited bandwidth, they are controlling expenditure and delivering sufficient bandwidth to provide those important services that have the greatest economic potential – online banking services, news, government information, market price data, distance learning and education programmes and social media. These are, of course, far more productive than the ability to stream high bandwidth services like video entertainment.
 
Our work with Telenor in Myanmar – that won a national operating licence in 2013 – has provided a fascinating insight into how these network strategies are evolving. Just think of the challenge of connecting 60 million people in a country, which is just emerging from six decades of military rule and which stretches across incredibly difficult terrain, from flood plains in the south, through dense jungle, right up to the Himalayas.
 
Network strategies, therefore, have to be flexible and carefully plotted. High cost low value elements of the network are being outsourced to third parties and shared, allowing the carriers to focus on services. Different approaches are being taken in rural villages than in urban centres and cities. A tower in a village or remote area might use lower bandwidth technology but provide access to low cost handsets or even a local WiFi access network around a village as well as community based services, all at an affordable price point for the local population.
 
All this has a wider global significance. As mobile and internet technologies began to take off, we used to talk about a digital divide within countries, between people who were connected and people who were not.
 
Now it has become a global issue and is one of the most significant differences between developed and emerging economies that, until now, have missed out on all the educational and entrepreneurial potential that these technologies can unlock. These new networks will, in reasonably quick order, narrow the information and education gap.
 
They will also bring new efficiencies to viable local industries offering them the chance to compete much more effectively. Even a strong agricultural sector will be improved with better access to farming techniques, weather information, commodity prices and logistics providers. Information services will lift the tide of performance across all existing sectors and open new sectors for the future.
 
Just think of how communications has helped transform the economic power of China and India in the last 20 years, allowing, amongst other things, India to establish itself as a global software services hub and China to race into the global front line of hardware development.
 
No wonder a country like Myanmar, in opening the doors to international investment, focused first of all on opening up its telecoms market. Though commercial, political, financial and legal challenges abound, there is a clear recognition that a modern communications system has the power to bring about huge economic transformation.
 
 
 

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