SANCTIONS Archives

15/06/2020by EOS Intelligence EOS Intelligence No Comments

Iran’s Tourism Industry Sprouts despite US Sanctions

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For several years, the US sanctions on Iran continued to have a detrimental impact on the economic growth of the country, with tourism sector being severely affected throughout the period under sanctions. The 2016 sanctions removal brought many visible changes to the development of the country, with hopes for tourism industry to benefit from the potential influx of travelers and new opportunities for the industry players.

Iran’s tourism was severely affected by the US sanctions

Iran was in a quivering state for more than 35 years owing to the never-ending political tensions with the USA post the 1979 Iranian Revolution. This led to no formal diplomatic relationships between the countries since 1980, and considerable sanctions imposed on Iran over the years. The impact of these sanctions was visible through a range of profound economic problems such as inflation, unemployment, poverty, and underdevelopment of virtually all industries in the country.

One sector that faced severe repercussions of the sanctions was Iran’s tourism industry. A negative image of the country was reinforced by the mainstream media as a flag-burning, west-hating nation, a fact that caused a major dent to Iran’s tourism industry. Adding to it, lack of resources to tackle this negative discourse had further left Iran in an international isolation over all these years. Despite being rich in culture, natural history and landscapes, a country with such an image could not persuade foreign tourists to visit.

Moreover, the US sanctions drastically affected Iran’s economy, which resulted in lack of proper resources to establish a well-equipped transportation sector, including airlines, trains, and buses, which in turn led to Iran becoming even less attractive to tourists. In addition, lack of proper hospitality infrastructure such as hotels, restaurants, roads, etc., further negatively impacted international tourists’ interest in Iran. Adding to it, the US sanctions also created greater tensions between Iran and the USA which led the US government to issue a travel advisory over all these years, which restricted its citizens to travel to Iran due to safety risks, such as getting kidnapped or arbitrary arrest and detention in the country. Thus, this resulted in almost no tourist from the western countries visiting Iran.

Iran’s tourism sector did witness a very modest growth over the years, largely thanks to pilgrimage tourism visiting the shrines and originating mostly from regional countries such as Iraq, Azerbaijan, and Turkey.

According to The World Bank data, the number of international tourists’ arrivals in Iran fluctuated, increasing from 2.7 million in 2006 to just 4.9 million visitors in 2014. Iran’s tourism industry was suffering particularly badly not only from the lack of arrivals of American tourists, but generally more affluent, well-spending tourists from western hemisphere, who were universally deterred by sanctions, poor state of the tourism infrastructure, as well as the negative image of the country created by international media.

According to official figures by Iran’s Culture Heritage Organization, during the sanctions period, tourism sector contributed around 2.0% to the country’s GDP (an average of US$7.5 billion in a year), leading to sluggish infrastructural development throughout that period. Iranian tourism sector’s hopes for change and better growth started budding when Iran signed a nuclear deal with six countries in July 2015, an event that led to the US sanctions being finally lifted.

The nuclear deal came as a ray of hope

Even before the US government removed the sanctions, the country started witnessing a slight increase in the number of foreign visitors. This was thanks to the nuclear deal signed between Iran and a group of six countries (the permanent members of the United Nations Security Council – Russia, France, UK, USA, and China, plus Germany) and the EU in July 2015. The deal included Iran’s commitment to restricting its nuclear activities, agreeing to keep check on the uranium stockpile, among other agreements.

The deal immediately mellowed down Iran’s negative image and released a positive message of lowered risks associated with visiting the country. This gave a slight boost to the tourism sector with a moderate growth of 4.5% with 5.2 million foreign tourists visiting the country in 2015, the highest arrivals number till date.

Another upward push on the growth trajectory came the following year, when the US government removed sanctions from Iran in January 2016, as part of the nuclear deal. This was expected to have a major impact on tourism sector as it offered hope for much needed economic stimulation, along with investments and development in the economy, and tourism sector in particular.

Post lifting of sanctions, tourism sector rejoiced with developments

The nuclear deal and removal of sanctions brought growth to the tourism sector, owing to removal of restrictions on imports of financial and transportation-related services. As a result, some European airlines, such as British Airways and Lufthansa, resumed direct flights to the country. As visa requirements were increasingly relaxed, tourists from western countries started to arrive. This in turn slowly raised the demand for accommodation leading to skyrocketing prices of hotel rooms. These changes finally generated higher income for local businesses such as hotels, restaurants, tourist guides, local transportation providers, and other players in the market. Iranians excitedly welcomed foreign tourists, including the Americans, along with the positive outlook for the sector’s growth.

The Iranian government, following the sanctions removal, initiated efforts to attract foreign investments with a clear agenda of reducing Iran’s oil dependency and boost the country’s economy, by betting on increasing revenues from tourism sector.

The initiatives included the launch of a scheme called “100 Hotels, 100 Businesses” that outlined 174 projects to be introduced to investors interested in hotel construction. This is was an ambitious scheme led by the Iranian government focusing on bringing the hotel industry of the country back on track. This scheme aimed at attracting investments for the construction of 100 hotels across 31 provinces with priority given to most popular regions such as Tehran, Kashan, or Mashhad. Also, through this scheme, the government focused on initiating joint ventures with foreign companies, benefiting both the government and foreign investors.

The government also announced other major plans for the development of tourism industry. These included creating regulations to facilitate investment, creating brands of hotels and restaurants, promoting new types of tourism such as sports, climate, and industrial tourism, developing knowledge-based human resources, creating a comprehensive system of standards, balancing inbound and outbound tourism by improving political relations, and creating a system for the protection and restoration of historical and natural sites.

The Iranian government further assured about the transfer of capital and profits overseas as per the foreign investment law of the country and full protection for the investors against any non-commercial risks such war or border conflict, confiscation or corruption, etc.

The government also started working on changing the image of the country and its tourism industry in the eyes of potential foreign visitors. One major change to this was to allow increased access to the internet, e.g. over social media, for the local players, which gave the restrained westerners a far greater insight into the country without the filters added from the mainstream media.

These efforts undertaken by the Iranian government were welcomed by several foreign investors, as they brought a sense of encouragement and stability to prospects of investing in the country.

This soon led to emergence of international hotel chains, the first being Novotel (296 rooms) and Ibis (196 rooms) hotels by the French hospitality company Accor which came to Tehran already in 2015. The company’s chief executive Mr. Bazin, at the launch of the venture, was optimistic in bringing up the chain of budget hotels such as Ibis and mid and upmarket hotels such as Novotel, Sofitel, and Pullman in 20 cities of Iran, but with no particular timeline given. Another hotel that came up in 2017 was Spanish Melia in Caspian Sea in 2017, built in partnership of Melia and its Iranian partners in Tehran, where the Iranians invested more than US$250 million while the management is taken over by Melia. The hotel includes 319 luxurious rooms, two residential towers, a sports center, and other services in an area of 18,000 square meters. Similarly, the Abu Dhabi’s Rotana Management Corporation planned to open four hotels in Iran’s major cities, Tehran and Mashhad, two in each. One of the hotels (a five-star hotel with 275 rooms and suites in Mashhad) was built within one year in 2017.

Overall, investments in the tourism sector started growing at a moderate level post the removal of US sanctions. According to World Tourism and Travel Council (WTTC) data on the capital investments in Iran’s tourism sector, 2016 witnessed an investment of US$2.75 billion contributing 3.25% of all investments in the country, as compared to the investment of US$2.63 billion in 2015. Since then, capital investments have been growing and are estimated to reach US$3.75 billion in 2028 with a share of 4.86% of all investments.

As a result of increased investments and rise in tourism sector, the GDP of the country also witnessed a slight growth. According to WTTC data, tourism industry’s share in the country’s GDP increased to 7.1% in 2015 contributing US$26.04 billion, up from 6.5% (US$24.38 billion) in 2014. However, it stabilized in the following years (6.8% in 2016, 6.4% in 2017, and 6.5% in 2018), with expected contribution to GDP of 6.52% amounting to US$35.39 billion by 2028. With developments in the tourism sector, the ministry of tourism is hoping to host nearly 20 million tourists per year by 2025.

But as the country started seeing benefits of the sanctions removal, with its improved economy thanks to rise in export and import, infrastructural developments, increase of foreign investments from 2016 to mid-2018, and boost in tourism sector and many other industries, the US government shocked the country by re-imposing sanctions in August 2018. The re-imposition was a consequence of the USA withdrawing its participation from the nuclear deal in May 2018 over political differences. This brought a blow to the Iranian economy with restrictions over imports and exports, thus again leaving Iran in economic struggle due to recession through shrinking oil exports.

EOS Perspective

The economic trembles coming from crude oil export ban led the Iranian government to increase its focus on tourism industry to offset the lost revenues. While American tourists are again restricted to travel to Iran, the country is still witnessing an increased influx of tourists from other regions, including the Middle East and Asia, a fact that cushions the impact of re-imposed sanctions.

Although a blessing in disguise for Iran, one of major reasons for the rise in tourism despite the US sanctions was the almost threefold fall of Iranian currency against US dollar which made travelling to Iran a low-cost affair for many foreign tourists, especially in comparison to other Middle Eastern destinations. This has contributed to the foreign tourists’ influx especially from the western countries – tourists with budget constraints as well as tourist arriving for medical tourism purposes. At the same time, the fall in rial value against the US dollar increased travel expenses for Iranians going overseas. This has constrained the outbound tourism, resulting in a decrease of 6.5% during 2018 (March 21- June 21 of Iranian Calendar).

The weakening of the currency was just one of the reasons that contributed to the slight growth in the Iran’s tourism sector, despite the US sanctions. The country continued to communicate its selling points and positive image to foreign audiences. Iran has been working on reinforcing its position as destination of religious pilgrimages, place with improved infrastructure, natural landscape, and cultural history. Through these messages on social media, the country seems to have attracted various sorts of tourists, from leisure travelers to artists to businessmen and more, resulting in growth of the industry.

According to deputy minister of the Cultural Heritage, Handicrafts and Tourism of Iran, the number of tourists’ arrivals increased by 24% during the first seven months of 2019 (starting from March 21 as per Iranian Calendar) compared to the same period previous year. In terms of tourists’ arrivals numbers, between March 2018 to March 2019, Iran witnessed 7.8 million foreign tourists visiting the country as compared to 4.7 million tourists from March 2017 to March 2018.

Encouraged by the growth in the sector, Iranian government undertook further initiatives to ensure the inflow of foreign visitors continues (and increases). In August 2019, a functionalized center was established in Cultural Heritage, Handicrafts and Tourism Organization, with a task to make decisions on reducing the negative impact of the US sanctions on tourism industry.

Following the US State Department’s warning (issued in May 2018) against travelling to Iran, citing it being an unsafe travel destination, the risk of fall of other western tourists’ arrivals increased. The Iranian government, to compensate for the fall, focused more on attracting tourists from regional countries. For instance, visa fees for Iraqi tourists (accounting for 24% of inbound tourists in 2018) were removed, while visas for Omanis were waived off.

Iran is also looking for tourists in more remote markets, especially in countries that are known to frequently stand against the USA in the international area. China is one such market which Iran is hoping to attract leisure tourism from by allowing visa-free entry of the Chinese nationals into Iran as of July 2019. Iran has an ambitious plan to increase the number of Chinese visitors from just over 50,000 in 2018 to 2 million in 2020.

Furthermore, in order to encourage foreign tourists to visit Iran, the Iranian government decided not to stamp their passports to help them avoid issues with subsequent attempts to travel to the USA. Additionally, the government is also trying to spur medical tourism by developing health tourism hubs, especially in Shiraz with a vision to increase the tourists travel for medical purposes as well.

These measures have been quite successful in promoting Iranian tourism growth, even though the American and other western visitors have (to some extent) been replaced with arrivals from the Middle Eastern and Asian countries. However, looking at the current situation of unrest, with the killing of Iranian general Qassem Soleimani in January 2020 by US military, and Iran responding to this with missile attacks on the US military troops in Iraq less than a week later, the conflict between the two countries is nowhere near its end. This political unrest, if continues, has a potential to again severely affect Iran’s tourism industry, as the country will be unable to grow the sector without reliance on western visitors. Tourists’ sentiments are tightly linked to political climate; therefore, it can be expected that only improved relations with the USA, and through this a better image, will allow Iran to truly develop its tourism industry and its economic situation in general.

26/11/2015by EOS Intelligence EOS Intelligence No Comments

The West vs. Russia: Will Russia Really Survive The Impact Of Sanctions?

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Russia trampled international laws with annexation of Crimea (previously part of Ukraine) to its territory and is reeling under wrath of sanctions imposed by the EU, the USA, Australia, Canada, Norway, and Switzerland, among others. Over a period of time, the sanctions have expanded to inflict economic damage to Russia by targeting its financial, energy, and military sectors. Even though the ball has always been in Russia’s court, the country has only deepened the damage by retaliating with food embargos and standing adamant on its decision to hold on to Crimea against Ukraine’s sovereignty.

The sanctions are intended to limit trading relationships with Russia, which in turn have adversely affected both the EU and the USA. The economic impact is more intensive on the EU member countries and Russia, as they were engaged in high volume and value trading relationship.

Russia’s economy is suffering under the contracting GDP, growing inflation, capital flight, as well as Ruble depreciation. Economic turbulence has been further intensified with plunge in global oil prices — as Russia’s is one of the world’s largest oil producers, with oil and gas exports accounting for 70% of its export income.

The sanctions also had a crumbling effect on the Western companies operating in Russia. Several luxury and consumer goods companies had previously flocked into Moscow to capture the growing middle class market, however, Russia lost its attractiveness and image to being a ‘malignant country’ post Crimea annexation. After the sanctions were imposed, several consumer goods companies shut down their operations — Zara, a Spanish fashion brand, closed flagship store in Moscow in 2014. Wendy’s (an American international fast food restaurant chain), Esprit (China-based clothing brand), and River Island (British fashion shop) are also planning to end their operations in Russia. Consumer spending and retail sales reflect the economic sanctions with retail sales falling 7.7% y-o-y in February 2015.

In August 2014, Russia devised a strategy to retaliate against Western countries by banning agricultural import of certain products from the USA, the EU, Canada, Australia, and Norway. Presently, the Russian government is encouraging domestic production to reduce reliance on imports. However, it will take at least five years, if not more, before import substitution starts yielding real impact on domestic food availability and the Russian economy.

EOS Perspective

There is no doubt that sanctions along with falling oil prices have damaged Russian economy. Decline in oil prices strained the availability of domestic liquidity, which could normally be compensated with foreign debt market borrowings. However, borrowing has been prohibited by the ban on Western debt and credit, which intensified the situation and put crushing pressure on the Russian economy.

It is expected that the sanctions are not going to be lifted any time soon, which is projected to bring absence of foreign loans, which in turn is likely to be paired by significantly reduced of foreign investment. This could be a major challenge for Russia, as the FDI tends to be one of the key sources of capital and technologies in emerging nations. With this isolation, Russia might not be able to keep the necessary pace of growth due to lack of capital and limited trading relationships.

Under the pressure of sanctions, Russia can be expected to undergo a transformation to rebalance its economy — with Western companies exiting Russia, their place could be taken by Asian counterparts or domestic companies. For instance, in October 2014, Russia signed 40 agreements with China spanning energy, financial, and technology sectors. Further, Chinese banks agreed to offer credit lines valued at US$ 4.5 billion to Russian banks and companies. These recent agreements clearly show that Russia has been seeking to deepen its strategic ties with Middle Kingdom, intending to improve trade between the two countries to double it to US$ 200 billion by 2016 end.

Sanctions are likely to continue to deeply impact Russia’s key choices in its internal policies as well as the international arena, with expected focus to increase domestic production and choosing Asian allies over Western partners to establish trading relationships.

16/03/2015by EOS Intelligence EOS Intelligence No Comments

Russia’s Energy Economy Sanctioned

A host of countries are of the view that Russia is intentionally trying to destabilize Ukraine by allowing infiltration of arms and ammunitions to support Ukraine’s separatist groups. These countries also believe that Russia desires Ukraine to be a part of the newly formed Eurasian Union and be in its circle of influence. This is pinching more to the western group of countries because they, on the other hand, want to integrate Ukraine with the West and make it a member of NATO. Conflicting interests have resulted in the infliction of sanctions from both sides, Russia being the bigger victim.

In order to dilute Russia’s efforts towards annexing Ukraine, western countries imposed sanctions on Russia which initially followed a route of barring entry of people close to the Russian leadership and blocking their assets in those countries, but this strategy proved futile. The result was a series of new sanctions aimed at Russia’s various sectors in an attempt to further pressurize the country by slowing down its economic growth and deteriorating its investment atmosphere.

The latest series of sanctions (those released in July and September 2014) were articulated to weaken Russia’s economy by mainly influencing oil production and its exports (in 2013, exports constituted 28.4% of Russia’s nominal GDP, of which oil and natural gas exports had a share of 68%).

Major Russian energy giants such as Rosneft (integrated oil company majorly owned by the Government of Russia), Transneft (world’s largest oil pipeline company), Lukoil (Russia’s second largest oil company), and Gazprom Neft (fourth largest oil producer in Russia) were directly brought under the purview of sanctions.

The ‘energy sanctions’ prohibit western companies to share energy technologies and invest capital in any Russian offshore oil-drilling projects based out of the Arctic regions, Russian Black Sea, and western Siberia’s onshore. In addition to technology constraint, western companies are debarred from financing Russia’s key state-owned banks for more than 90 days in order to build up financial pressure on Russian energy companies indirectly.

Rosneft and ExxonMobil’s Discovery of Oil at the Universitetskaya-1 Well

One of the major projects under the Rosneft and ExxonMobil partnership was to discover oil and gas reserves in Kara and Black Seas through a joint venture established in 2012. The two companies had also agreed on other projects such as an attempt to conquer the Arctic region’s oil and gas reserves through establishment of the Arctic Research and Design Center for Continental Shelf Development (2013), understand feasibility of developing a LNG facility in Russia (2013), and a pilot project for tight oil reserves development in the shale basin of Western Siberia (end of 2013). Talking about some hard cash involved in research and development activities, Rosneft invested US$250 million while ExxonMobil gambled US$200 million.

In September 2014, the two companies announced their success at discovering oil at the Universitetskaya-1 well in the Kara Sea which became Russia’s second offshore Arctic project. This discovery was a big finding and they initiated drilling activities quickly through the West Alpha rig (originally owned by Seadrill subsidiary of North Atlantic Drilling but under a contract with ExxonMobil till July 2016). Till this time, the partners were under the assumption that they won’t be affected by western sanctions imposed on Russia but to their disappointment, the new sanctions restrained ExxonMobil to cooperate (restricted energy technology transfer) with Rosneft on this project any further. To their dismay, drilling came to a halt in October 2014 as Rosneft could not utilize ExxonMobil’s West Alpha rig.

Rosneft is presently on a lookout for a new rig managed by companies located in the East, China, or South Korea. An attempt to find a new rig and then adjust it at the Kara Sea’s well site is going to be a enormous task and expected to delay things at least till mid-2016. Meanwhile, China (through Honghua Group, for instance) is strengthening its chances of getting positioned as a substitute provider of energy sector technology to Russia, but it is doubtful if it will be able to match the capabilities of western companies. It will be a humongous challenge for Rosneft to find a rig provider which has the expertise to ensure safety operations in such a tough part of the world.

The objective of recent western sanctions appears to not only limit present oil production but harm the future of Russia’s energy sector. 90% of current oil production in Russia comes from conventional oil fields such as West Siberian brownfields which do not require highly advanced western energy technologies, but the problem is that these fields are depleting rapidly. Russia, therefore, faces an urgent need of finding new oil sources to retain its position of being one of the main players in the world’s energy sector (3rd largest crude oil producer – 10.44 million bbl/day, 2013; 2nd largest crude oil exporter – 4.72 million bbl/day, 2013; 2nd largest natural gas producer – 669.7 billion cu m, 2013; largest natural gas exporter – 196 billion cu m, 2013).

Delay of the Rosneft project is slowly fading Russia’s aspirations of increasing oil output as tapping of Universitetskaya well’s oil reserves (estimated to be up to 9 billion barrels) could have added approximately US$900 billion to the government coffer over the next 10-12 years. Similar projects might have led to discovery of new oil reservoirs in the Kara Sea where oil reserves are estimated to be around 13 billion tons (way more than Gulf of Mexico’s and Saudi Arabia’s independent reserves). As per Merrill Lynch, Russia might lose US$500 billion of direct investment and US$26-65 billion of budget revenue during the next 10 years, as energy investors from other parts of the world also become uncertain of Russia’s economic stability.

If western sanctions remain at this level, it would make it difficult for Russia to discover and exploit oil resources in areas like Arctic, as it is primarily western companies (BP, ExxonMobil, Shell, etc.) which have the required expertise and technology to do so. Since the Russian energy sector almost single-handedly drives the country’s economy through exports, impact of the western sanctions, which is already impacting various facets of Russian economy, will be felt heavily in the long-term.

15/05/2013by EOS Intelligence EOS Intelligence No Comments

As Myanmar Works Towards Stability, Communal Violence Holds The Nation Back.

In mid-2012, we published a report on Myanmar, looking into its potential as a new emerging market with considerable investment and trade opportunities for foreign investors (see: Myanmar – The Next Big Emerging Market Story?). Almost a year later, we are returning to Myanmar, to check and evaluate whether the political, social, and economic changes envisioned and proposed by the quasi-civilian government have really translated into actions to push the country forward on the path to becoming the next big emerging market story.

Being plagued by uninspiring and inefficient governance for more than six decades, Myanmar for long has been proclaimed as Asia’s black sheep. The Chinese named it ‘the beggar with a golden bowl’, asking for aid despite its rich natural and human resources. However, having embarked on a momentous yet challenging political revolution, the nation is said to be on its way to open a new chapter in the Asian development story.

Contrary to what was believed to be just hollow promises and sham, the reforms initiated by the Thein Sein government have gathered much steam in quite a few cases. Bold moves over the last year have also immensely helped the country in gaining goodwill internationally. We are looking at some of the game-changing reforms enacted over the past present year in Myanmar.

Media Censorship

In August 2012, the government put in actions their proposed end to media censorship. As per the new system, journalists are no more required to submit their reports to state censors prior to publication. To further strengthen the power of media, in April 2013, the government abolished the ban on privately run daily newspapers – ban remaining in force for over 50 years.

Foreign Investment Law

In January 2013, the Thein Sein government passed a foreign investment law that was initially drafted in March 2012. The law allows foreign companies to own up to 80% of ventures across several industries (apart from activities mentioned on the restricted list –including small and medium size mining projects, importing disposed products from other countries for use in manufacturing, and printing and broadcasting activities). This acts as an important milestone in opening up the Burmese economy to heaps of foreign investment.

Opening Up Of Telecom Sector

Myanmar, one of the least connected countries in the world, has embarked on the deregulation of its much neglected telecom sector by initiating the sale of 350,000 SIM cards on a public lottery basis. It plans to offer additional batches on a monthly basis. As a more tangible effort to revolutionize the sector, the government is auctioning two new 15-year telecom network licenses to international companies. These companies are to be announced in June 2013 from a list 12 pre-qualified applicants, namely, Axiata Group, Bharti Airtel, China Mobile along with Vodafone, Digicel Group, France Telecom/Orange, Japan’s KDDI Corp along with Sumitomo Group, Millicom International Cellular, MTN Dubai, Qatar Telecom, Singtel, Telnor, and Viettel. Despite the current 9% mobile penetration claimed by the government, an ambitious goal has been set to reach 80% penetration by 2015.

The World Responding To Myanmar’s Progress

As Myanmar works towards attaining political stability, introducing economic reforms and easing social tensions, the world is also opening up its arms to increasingly embrace the otherwise banished land. In April 2013, the EU permanently lifted all economic sanctions against Myanmar, while maintaining the arms embargo for one more year. The USA, on the other hand, has not permanently removed the sanctions, but has had them suspended since May 2012. This allows US companies to invest in Myanmar through the route of obtaining licenses. The definite abolishment of these sanctions by the EU puts pressure on the USA to act soon and lift them as well, to avert the risk lagging behind in the race to tap this resource-rich market. The USA has already begun working on a framework agreement to boost trade and investment in Myanmar. Japan has also been improving its relations with Myanmar to gain a foothold in this market.

With the EU, the USA and Japan encouraging investments in Myanmar, several international companies have directed investments to this previously neglected country.

In August 2012, a Japanese consortium of Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation contracted with the Burmese government to jointly develop a 2,400 hectare special economic zone in Thilawa, a region south of Yangon. The Myanmar government will hold a 51% stake, while the Japanese consortium will own the remaining share in the industrial park, which will also include large gas-fired power plant. In the first phase of the project development, the companies plan to invest US$500 million by 2015 to build the necessary infrastructure on the 500 hectares area in order to start luring Japanese and global manufacturers.
In August 2012, Kerry Logistics, a Hong-Kong based Asian leader in logistics, opened an office in Myanmar. Recognizing the immense potential in the freight forwarding and logistics sector (underpinned primarily by growing international trade), European freight forwarders, Kuehne + Nagel, also began operations in this country in April 2013.
To cash upon a booming tourism market, in February 2013, Hilton Hotels & Resorts initiated the development of the first internationally branded hotel in Yangon, which is expected to open in early 2014. The hotel will be a partnership between Hilton Worldwide and LP Holding Centrepoint Development, the Thai company that owns the 25-storey mixed-use tower, called Centrepoint Towers, which will house the hotel. Hilton has signed a management agreement with LP Holdings to operate the 300-room property.
In February 2013, Carlsberg, the world’s fourth-biggest brewer, announced its plans to re-enter Myanmar, after it left the country in mid 1990’s owing to international sanctions.
Fuji Xerox, a joint American-Japanese venture, set up its office in Myanmar in April 2013. The company, which is the first player in the office equipment industry to start direct operations in Yangon, looks to revive its internationally declining business through this venture.
In April 2013, JWT, an international advertising firm, entered into an affiliation agreement with Myanmar’s Mango Marketing, in anticipation of opportunities in this country, given an increasing interest in Myanmar expressed by a number of international players who are likely to seek advertising and marketing services.

Civil Unrest Still Stands As a Major Concern

While Myanmar has made great strides in reforms over the past year, the ongoing unrest between Myanmar’s majority Buddhists and minority communities (primarily Muslims), and the lack of a concerted effort by the government to address it, poses a major threat for the nation to descend into ethnic-religious war. In October 2012, the Rakhine riots between the Buddhists and Muslims claimed 110 lives and left 120,000 displaced to government setup refugee camps around Thechaung village. A similar case followed in April 2013 in Meiktila, where the death roll of Muslims reached 30. Strong international condemnation for the growing racial and religious violence in the region has caused concerns of losing international support gathered over the past few years. Moreover, the use of military force to suppress the Meiktila riots raises fear about the army once again seizing power in the name of restoring order to the nation.

Myanmar’s attempts to transition into a democracy from a highly repressive state have yielded positive outcomes over the past year. While Myanmar seems to be on the right trajectory for future growth and stability, the government must address internal conflicts immediately before the nation stands at risk of tumbling back into chaos, with possible outcomes similar to those seen in Yugoslavia. Therefore, it is safe to say that although political and economic developments are increasingly seeing the daylight, underpinned by the government’s pro-development course, the recent spate of religious, ethnic and communal violence as well as the magnitude of reforms still to be introduced, might still question the nation’s ability to attract and sustain foreign investments and economic development in the long run.

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