Myanmar's Mr Clean says he takes 'red tape road' to profit (updated)

Yoma Strategic Holdings

28/04/2016 03:33

(Adds quote from IFC representative in the 15th paragraph) 
    By Timothy Mclaughlin 
    YANGON, April 28 (Reuters) - Scaffolding around the 139-year 
old Burma Railway Headquarters, a red-brick colonial relic at 
the centre of a half billion dollar property development in 
central Yangon, hasn't seen much action since the project was 
announced four years ago. 
    Serge Pun, the 63-year-old project developer and one of 
Myanmar's richest men, says his Landmark development - which 
includes office, residential and hotel space - has been 
strangled by red tape and costly delays all because of his 
adherence to clean business. 
    It's a frustrating contrast to the luxury and high-end 
property boom in other parts of the Myanmar's commercial 
capital. 
    "It has been a very long and arduous red tape road," Pun 
said in an interview. 
    "Good governance always has a price to pay and the price we 
are paying is a delay." 
    Companies and international agencies have long identified 
corruption and a lack of transparency as major obstacles to 
doing business in Myanmar. 
    Pun's grievances underscore the challenges the newly-elected 
National League for Democracy (NLD) faces as it seeks global 
investment for urgent development needs. 
    And despite his own clean credentials, Myanmar's complicated 
business environment means Pun has at times dealt with 
internationally blacklisted entities with key market positions. 
    Landmark, a 10 acre development, was first announced in 2012 
and is one of the country's most high-profile international 
investments. 
    Despite prominent backers - including the International 
Finance Corporation, a branch of the World Bank that finances 
private ventures; Asia Development Bank and Mitsubishi 
Corporation - the project hasn't yet broken ground. 
    The latest deadline for lease extensions from the Ministry 
of Rail Transport, which owns the land, was missed at the end of 
March. 
    A senior ministry official said refurbishment of the old 
building is in progress but needed to be carried out "without 
affecting the heritage values." 
    The official didn't comment on the status of the lease 
extensions or explain why it had yet to be granted. 
    It remains a crucial issue for the project. 
    "The lease extensions have a significant impact on the 
project's financial viability both from a debt and equity 
perspective," said Vikram Kumar, IFC's Myanmar manager. 
        
    GO-TO PARTNER 
    For investors keen to break into the frontier market, Pun 
serves as a go-to partner to help navigate local complexities, 
notably international sanctions still in place on many Myanmar 
nationals and businesses. 
    Pun built his conglomerate, Yoma Strategic Holdings 
 YOMA.SI , from scratch and his business empire includes real 
estate, banking, aviation and cars. 
     Over three decades, he has become one of Asia's richest men 
while cultivating a reputation as "Mr Clean" in a country long 
known as anything but. Neither he nor his companies have been 
subject to international sanctions. 
    Companies from American fast-food chain KFC to Indonesian 
healthcare operator Lippo Group have partnered with him. 
    However, the business reality in Myanmar means some 
otherwise straightforward business ventures run through 
blacklisted companies. 
    One of KFC's Myanmar outlets, for example, is at the new 
Yangon airport terminal, which was built and run by businessman 
Steven Law, who is on the U.S. sanctions list. 
    Pun said that the deal doesn't violate sanctions because it 
was done through Yoma, not KFC, and that it complies with Yoma's 
code of conduct. U.S.-based Yum! Brands  YUM.N , which owns KFC, 
did not respond to emailed requests for comment. 
    U.S. Treasury said it doesn't comment on the "existence or 
possibility of sanctions violations." 
   The NLD is yet to release a plan addressing remaining 
sanctions, but recently slapped curbs on the value of gifts 
officials can accept, a small step to fulfilling its pledge to 
eliminate graft. 
    For now, U.S. sanctions still create headaches, often 
indirectly tying up Myanmar-related bank transfers, even if they 
don't involve blacklisted entities. 
    "When you actually try to do business, everybody doesn't 
understand whether you are a jade miner or not - they just say 
it is too troublesome to transact your fund remittance," Pun 
said. 
 
 (Editing by Sam Holmes) 
 ((Timothy.Mclaughlin@thomsonreuters.com;)) 
 
Keywords: MYANMAR BUSINESS/SERGEPUN