ON THE COVER

less peace DOMINIC FAULDER and GWEN ROBINSON

Less than a decade ago, reached out to the West and was transformed from a pariah state to a symbol of the power of democracy. Sanctions were relaxed and investment flowed in as companies geared up to tap a new frontier market. Now that progress looks to be in peril. The United Nations has accused de facto leader Suu Kyi of standing by as the Myanmar military committed atrocities against the Rohingya, while the jailing of two Reuters journalists in the country has sparked an international outcry. Ethnic violence in many of Myanmar’s remoter regions remains rife. As the criticism intensifies, tourism and investment from the West is slowing. But money continues to flow in from China, Thailand and other countries in the region, while an influx of Asian tourists is offsetting falling numbers from elsewhere. Can Myanmar’s economy deliver on its promise without Western involvement?

The bustling streets of are a world away from the strife plaguing the country’s

remoter regions. Getty Images

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The Rohingya crisis has displaced hundreds of Senior Gen. Min Aung Hlaing and thousands of people other Myanmar military leaders and brought harsh have been accused of genocide condemnation in the and crimes against humanity. West against Suu Kyi. Reuters Reuters

YANGON/BANGKOK A full generation has erals. On the same day as the release of a damn- outside the court was that the pair had been framed by the police some 16 security personnel killed. grown up since the State Law and Order ing United Nations report on Myanmar, Facebook who gave them the documents. A police captain who confirmed State Counselor , Myanmar’s de facto head Restoration Council (SLORC) of Senior Gen. Saw suspended the accounts of Senior Gen. Min Aung as much in court in April has himself been punished. of government, was also castigated by the U.N.’s departing head Maung seized power on Sept. 18, 1988, putting a Hlaing and a handful of other senior officers. “We Only seven days earlier in New York, Hau Do Suan, Myanmar’s of human rights, who accused her of whitewashing atrocities. bloody end to a nationwide pro-democracy upris- believe that their use of Facebook may have fueled permanent representative to the United Nations, was forced to re- “She was in a position to do something,” Zeid Ra’ad al Hussein ing that lasted some six weeks. An estimated ethnic and religious tension in Myanmar,” said spond to a U.N. fact-finding mission that concluded there was ev- told the BBC. “There was no need for her to be the spokesperson 3,000 people died in the crackdown, which Facebook spokeswoman Ruchika Budhraja. idence of genocide and crimes against humanity “perpetrated on of the Burmese military.” re-established direct military rule by a junta. While many observers consider the curbing of a massive scale” in Rakhine State. The findings came more than While nobody doubts the difficulties facing Suu Kyi -- and it The nation was bankrupt and the central exceptionally toxic social media in Myanmar long 20 months after at least 700,000 terrified Rohingyas, members of a is clear she exercises no direct control over the military -- she has Kachin State government controlled none of the frontier overdue, some in Yangon noted the usefulness 1.3 million Muslim minority in the Buddhist-dominated country been remarkably tone deaf to the international outrage at the dis- areas back then. The threadbare military gov- of the social network for gaining insights into the of some 53 million people, fled into neighboring Bangladesh. The proportionate military response in Rakhine State. ernment immediately launched a brutal military mind. report accused the Myanmar military of murder, rape and “geno- Speaking in Singapore the previous week, Suu Kyi provoked late wet season offensive against the Karen “We can write critical pieces against the military cidal intent,” and called for the prosecution of Min Aung Hlaing outrage by describing three generals in her cabinet as “rather MYANMAR National Liberation Army ranged but there is still an invisible line that you have to be and other officers. sweet.” One of the three is responsible for the interior ministry, along the rugged border with careful about crossing,” Kyaw Zwa Moe, a senior Hau Do Suan blamed the press for distorting the events. He which has pressed the prosecution of the two Reuters journalists. Naypyitaw Thailand, escalating a decades-old editor at , an online news portal, told said “facts were conveniently discounted or ignored by main- Over the years, she has frequently and proudly alluded to the role conflict that still simmers. the Nikkei Asian Review. stream media” after government outposts were attacked, and of her father, the pre-independence hero Gen. Aung San, in creat- Rakhine The SLORC also launched a sustained Facebook’s action was but one in a remarkable ing the Burma Army. State campaign against intrusive foreign media, par- string of events that highlighted the growing stand- Many observers in Yangon believe there is now more strife in ticularly the BBC, Voice of America, and All off between Myanmar and Western companies the country than when Suu Kyi, who won the Nobel Peace Prize Yangon Myanmar’s GDP growth (in percent) India Radio. Their broadcasts, dismissed and institutions. in 1991, took the helm of government after her National League by government propagandists as a “skyful The decades-old war of words between Myanmar begins Aung San Suu Kyi becomes de facto leader for Democracy party swept elections in 2016. While she is still Karen State 10 reaching out of lies,” penetrated the closeted country, al- Myanmar’s rulers and independent media ratch- to the West Floods and slowing adored in cities and throughout much of the country, she may legedly spreading misinformation about eted up once more on Sept. 3 when two Reuters foreign investment find she has lost ground among minorities when national elec- 8 take toll on growth the junta’s political repression and human journalists, Wa Lone and Kyaw Soe Oo, were sen- tions are held in 2020. rights abuses. tenced to seven years imprisonment for receiving There have been near-constant reports of clashes with 6 Thirty years later, SLORC may be gone, “secret” state documents while reporting military Kachin, Karen and Shan insurgent forces. In late July, the but the military retains a firm grip on the atrocities in northern Rakhine State against mi- 4 Kachin Independence Army in the north produced graphic country. On Aug. 24, it was a new kind of nority Rohingya Muslims. The consensus among 2011 ’12 ’13 ’14 ’15 ’16 ’17 ’18* ’19* photographic evidence showing that six Ta’ang National Western media company that angered the gen- the Western journalists, diplomats and supporters *Forecast Source: Asian Development Bank Liberation Army female medics had been captured, raped and

Nikkei Asian Review - Special excerpt from Sept. 10-16, 2018 Print edition. Nikkei Inc. No reproduction without permission. ON THE COVER

murdered on July 11 by soldiers from bearing China, but the thaw is facing chal- China leads investment in Myanmar has improved sufficiently for decent company ac- the 88th Light Infantry Division. The lenges. In the aftermath of the Rohingya FDI by country in 2018 (in billions of dollars) countants to be able to command $3,000 a month. 44th LID in Karen State is meanwhile re- exodus, Germany has decided not to post 0 5 10 15 20 “Most of our generation want to have jobs abroad, ported to have twice seriously violated a a military attache to Myanmar for at least China 20.05 but we have strict family bonding,” Grace said. cease-fire agreement this year. two years, and other Western powers may Singapore “Parents here want their children to come home.” After the coup in 1988, western be planning to make do with only regional Thailand The material improvements in Yangon, the for- European countries froze trade and diplo- representation. The U.S. took steps to mer capital that remains Myanmar’s largest city, are Hong Kong matic relations, including by withdrawing sanction a few culpable senior military obvious. The newly opened Junction City is as mod- U.K. their military attaches. Such steps ignored officers in August, and human rights ern and well-stocked a shopping mall as one would the fact that military diplomats had the groups have called for the prosecution of South Korea find in Bangkok or Singapore. Power supplies are best access to the government, and might the generals by the International Criminal Vietnam relatively stable. The streets drain after heavy rain. therefore have some useful influence to Court at The Hague. Malaysia New tenements, gated communities and overpasses Ken Kobayashi exert. The SLORC went down a dark hole, Meanwhile, the influence of China Netherlands Total have sprung up. and the country saw no political develop- and other Asian nations appears to be re- Japan There are decent pharmacies selling items that 76.85 Tourists are still keen to ment for over two decades. The departure surgent, with investment pouring in as Others previously could only be found erratically on the Thailand (16%), Myanmar’s two largest source of senior diplomats may have satisfied po- Western companies pull back. black market. Restaurants offering local and South markets, while Japan has held steady. visit Myanmar’s Buddhist temples and other sites, litical requirements at the time, but it se- “The Rakhine situation makes it harder Based on approved investments Asian fare are clean and reasonable. Shops selling Along with the Rohingya issue, observers point by permitted enterprises as of July 31 despite violent unrest riously impeded the West’s influence and for any Western listed company to invest Source: Myanmar’s Directorate of Investment smartphones and internet access line the streets to the bloated prices tourists were forced to pay in areas of the country. communications channels with the secre- in Myanmar today,” said Luc de Waegh, and Company Administration around Sule Pagoda in the central downtown area. and the very poor infrastructure outside Yangon. tive military government. the founder and managing partner of West Taxis are cheap and plentiful; the streets are choked Myanmar also has yet to secure the kind of Western countries may be at risk of Indochina, who has been in the country for with traffic and air-conditioned buses. repeat visits that are so much a feature of neigh- losing their influence in Myanmar once 25 years. “For some, potential opposition Perhaps best of all, Yangon has managed to re- boring Thailand’s vastly larger and better estab- again. The country finally opened up to from shareholders, stakeholders, NGOs companies will be filled by Asian inves- tain its remarkable, melting pot charm. The stupen- lished industry. the West in 2011, in part to offset an over- is simply adding too much to the risk of tors -- particularly from China, Japan and dous Buddhist pagodas, the British Victorian and Yet Supalak Foong, owner of the new 209-room doing business in Myanmar.” Thailand. He noted that investment from Edwardian buildings, the broad, tree-lined bou- luxury Rosewood Yangon Hotel, a $140 million The Asian Development Bank forecast other parts of Asia is already being chan- levards, the Muslim, Indian and Chinese quarters renovation project in downtown Yangon, is bullish. Reuters journalist Wa Lone that Myanmar’s economy will be flat neled through Singapore. -- all continue to thrive in a city that is rich and di- “While some Western visitors have been deterred was defiant after a Yangon court sentenced him and colleague this year at 6.8% and resume growing verse, culturally and religiously. we don’t feel it will dramatically change things,” Kyaw Soe Oo to seven years next year. CHOOSING TO STAY Win Pa Pa Myo It’s not all positive, of course. Many back streets she told Nikkei. “We are seeing an increase in high- in prison on Sept. 3. De Waegh says any gap left by Western (Grace), marketing manager at The Strand, are still slums in dire need of renovation. There is value tourists, including Thais and other Asians the iconic British colonial-era hotel in also plenty of grinding poverty in outlying areas drawn by Myanmar’s many Buddhist sites, and a Yangon that was once billed as the finest like Seikkyi Kanaungto across the Yangon River, general increase in Chinese and Japanese visitors.” hostelry east of Suez, was born during the North Okkalapa, Shwe Pyi Thar, and Hlaingthaya, More luxury properties have soft-opened nearby prodemocracy uprising in 1988 that shook a satellite town created in the aftermath of the 1988 in recent months. They include The Excelsior in a all of Burma, as Myanmar was still known. uprising to help clear the capital of restive slum converted colonial-era building, and the Pullman A generation has passed, and the hotel dwellers. Many still cannot earn enough to meet with rotten plumbing, ceilings liable to col- basic needs. “It’s all about borrowing from money- lapse in the rainy season, a fat complaints lenders and falling progressively down the ladder A shift in visitors book and military intelligence officers of debt and despair,” one long-term expatriate told International arrivals in Myanmar (in percent) scouring the guest list has been completely Nikkei. “More and more people are falling off what- Australia, refurbished. Its 32 suites rent out for over ever bare-bones ‘safety nets’ existed.” New Zealand 2017 Total $300 even in the low season, and it expects 765,543 to start filling up as the peak season gets ECONOMIC POINTERS After the boom years in Europe Thailand China Japan Other underway in September. 2015 and 2016, when Western tourists flocked into U.S., Canada South Korea Africa/ “We have a niche market, and I am the once closed and ostracized country, the tour- Singapore Middle East pretty sure we are the icon of Myanmar,” ism industry has seen overall arrivals up just 2% in Grace told Nikkei. After three years study- the year to July. As hotel capacity rises, many are 2018 ing in Sydney, Australia, she had opportu- less than half full. The outcry in the West over the nities that would have been unthinkable Rohingya crisis has contributed to a 26% decline Total 777,393 three decades ago. She chose to make her in arrivals from Western Europe. That has been

Reuters career in Myanmar, where the economy offset by strong increases from China (34%) and For first half of each year Source: Myanmar’s Ministry of Hotels and Tourism

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THE VOICE OF A GENERATION

Min Ko Naing, chairman of the All Burma Federation of Student Unions, 30 years on

Private equity investors DOMINIC FAULDER Associate Editor, Nikkei Asian Review are keen to tap Myanmar’s

Ken Kobayashi growing middle class.

YANGON If anyone personi- -- and as many as 500 Yangon Centrepoint, a top-tier Accor property with Myanmar Brewery, owned by the military-backed fied the idealism and heroism while the ominously named nearly 70 of more than 200 rooms available. Myanmar Economic Holdings -- but are now of the nationwide uprising junta, the State Law and And despite the political and humanitarian sit- showing more hesitancy. “People at our head- in August 1988 in Burma, as Order Restoration Council, uation, private equity firms are still able to raise quarters in Tokyo are concerned, but the pressures Myanmar was then known, it established itself. Min Ko “ money for Myanmar funds following some highly on Japanese companies are much smaller than was Paw Oo Tun, a 25-year- Naing paid a huge price for Hundreds profitable deals. TPG, founded by U.S. billionaire Western ones,” an executive at a Japanese trading old ethnic Mon zoology his boldness. He was arrested of millions of David Bonderman, boasts the country’s biggest company told Nikkei. student at Rangoon Univer- in March 1989 and, along sity. He went by the nom de with many other students, dollars are not deal to date after divesting a 50% stake last year in Sean Turnell, a special economic consultant to Myanmar Distillery Company to Thai Beverage. Aung San Suu Kyi, concedes that the refugee crisis guerre of “Min Ko Naing” sent to the infamous Insein here, because The deal was valued at nearly $500 million from has hurt the country and the economy. “It has been -- Conqueror of Kings. prison, built by the British of Rakhine TPG’s initial investment of $150 million in 2015. a huge direct impact,” he recently told local media. “I’ll always be with the colonial government in Delta Capital, which calls itself a “first mover” “Hundreds of millions of dollars are not here, be- people. I’ll never die,” he 1887. He was kept in solitary Min Ko Naing in 1988, basically. shortly before his arrest in the country’s private equity business, has raised cause of Rakhine basically.” He places some hope said in early October of that confinement there and at and today at age 55 $120 million for two Myanmar-focused funds. in the government’s new Myanmar Sustainable year when we met secretly more remote prisons such as

Anthem Asia has just launched its debut $50 million Development Plan (2018-2030) published in at a diplomat’s home. Sittwe until November 2004. Photos by Dominic Faulder ” fund with an initial investment of $34.5 million from August, which offers a broad framework for tack- “Physically I might be dead, “There was no three Western development financial institutions: ling inequality, upgrading infrastructure and stim- but many more communication, no human Havel, the last president of He has never accepted the U.K.’s CDC Group, the Dutch Good Growth ulating key sectors like agriculture. Min Ko Naings would appear contact, no reading,” he Czechoslovakia, who died in a position in her National Fund, and the World Bank’s investment arm, IFC. New investment and companies laws that to take my place.” recalls. “I lost my private life 2011. While he mostly stays League for Democracy. “I Executives at both private equity firms say it is bet- recently came into effect provide an improved I photographed Min Ko completely.” He was closely away from politics, he is don’t want rank or a salary, ter to engage with the country and help develop its legal framework for investors. Sectors such as tele- Naing with his face covered watched after his release, and about to embark on but I can help as an ordinary Myanmar’s exchange private sector than to isolate it. coms and microfinance have been liberalized and by a bandanna brandishing people who contacted him a six-week speaking tour of person and as a community rate heads south (in thousands of kyat per dollar) Nick Powell, Delta Capital’s managing partner, given new regulatory frameworks. Turnell says a list of demands, and also were intimidated. In 2006, the U.S. leader. I am cultivating the acknowledges that the Rakhine crisis has made the Myanmar’s economic growth remains healthy, de- uncovered showing his he was imprisoned for three Last year, he married new generation. In the old 1.30 investment environment “more difficult” but says spite some warnings of further economic fallout wispy mustache and spare months. After another failed Thiri Lwin, 33, a doctor who education system, there were Myanmar has already “come a long way.” from the condemnation over the Rohingya crisis. physique. It was agreed the pro-democracy uprising, he studied in Australia. She first no ethics.” “The bigger picture is that this is an important, “I think growth could undershoot a little, but is straight portrait would only was arrested again in August fell in love with the gaunt He is concerned about 1.35 strategic country that we want to support,” Powell still amongst the highest rates in the region,” said appear after his arrest. 2007, and moved between student rebel when she saw national divisions, including told Nikkei. “From an investment perspective, the Turnell. The larger economic question for the NLD To confuse officials, prisons over a four-year the photograph taken in the plight of the Rohingya in many students and activists period, including to remote 1988. They share a Chihuahua Rakhine State. 1.40 macro remains compelling -- there’s very little com- government is whether Myanmar can tackle crony- petition for deals that can lead to outsized returns.” ism and implement reforms. posting flyers used his name Kengtung in Shan State. but no children yet. “I worry “If they are citizens, they Delta recently invested $7 million in local firm “I worry about a lack of boldness in economic re- during the six weeks of Min Ko Naing, now 55, has if I can be a dutiful father,” should have full rights,” he 1.45 Easy Microfinance, which provides funds to smaller forms,” Turnell said. “The opposition from the old nationwide pro-democracy been free for seven years, he said. said. However, one of the businesses. “We like businesses that provide goods interests is strong.” demonstrations that ended since a political thaw initiated Min Ko Naing occasionally main problems facing the and services sought by the growing middle class. with a brutal reassertion by former president and encounters Aung San Suu Rohingya is proving their 1.50 We tend to avoid sectors that come with high gov- of military power on Sept retired general . He Kyi. “It is a little difficult to citizenship in Myanmar. 18. Min Ko Naing was paints -- a pastime he picked criticize her,” he said. “She is “In 1988, we only wanted ernment involvement and regulatory risks.” Dominic Faulder is associate editor at Japanese companies have made some substan- everywhere and nowhere. up while behind bars -- and busy with so many strategies democracy. Now we need to 1.55 Nikkei Asian Review, and Gwen Robinson is editor-at- Jan. Apr. July tial investments -- notably the $560 million invest- large at the Nikkei Asian Review; Additional reporting An estimated 3,000 people aspires to become a -- she is driving an old car know about federalism and 2018 ment in 2015 by Kirin Holdings for a 55% stake in by Nikkei Yangon Bureau Chief Yuichi Nitta died during that period playwright like Vaclav with new policies.” ethnic rights.”

Nikkei Asian Review - Special excerpt from Sept. 10-16, 2018 Print edition. Nikkei Inc. No reproduction without permission.