Myanmar-Based Herzfeld Rubin Meyer & Rose Law Firm Limited (HRMR) closed its Yangon office last month. The firm has since undertaken numerous high-profile transactions on behalf of international and local clients. Why did the firm quit?
A three-legged stool. The sanctions are the first leg. Six years after the US sanctions started being removed, no American bank will finance trade with Myanmar, nor finance investments in Myanmar, and any American company here cannot send dividends back to the US, because no American bank will accept funds directly from Myanmar. The second leg is the Rakhine situation, which has made the reputational issue untenable for most publicly traded companies, and certainly for SMEs.
The third leg is the domestic economic policies of the current government, which came to power two years ago with a great deal of hope. Unfortunately, this agenda has not been realized. And that is not because there has been interference from the military or the cronies. It has been purely due to the inactivity of the government itself.
Even though the new company act introduces shareholder derivative lawsuits and includes certain rights that do not currently exist for minority shareholders, it takes away the administrative remedy available today to shareholders. The point is the new law does away with a shareholder’s right to this particular administrative remedy. The result is that a minority shareholder can only file a complaint in court. Unfortunately, Myanmar courts are ill-equipped to rule on issues involving minority shareholder rights for a number of reasons. It’s a real question whether foreign investors will feel that they have a way to protect their investment in court.
Reform requires a well-established plan, competent implementation, patience and steady progress – what Winston Churchill called ‘KBO’ – Keep Buggering On. All that takes time, but it also needs a government that is committed to reforms, not just in words but in deeds.