Myanmar is an emerging market ripe with opportunities for foreign investors, as evidenced by the rollout of numerous large infrastructure projects over the last few years. One of the challenges facing foreign investors in Myanmar, though, is how to develop infrastructure projects in a way that benefits local stakeholders while maintaining the overall business integrity of the investment. Engaging stakeholders is all the more complex in areas outside of full central government control, such as is in the Shan or Kachin states. Ironically, it is these areas that could benefit most from infrastructure development. Here, foreign investors must advance their business objectives while simultaneously balancing the needs of local communities and of Nay Pyi Taw.
To successfully execute a stakeholder engagement program in such peripheral areas, investors should clearly communicate their goals to both local communities and to Nay Pyi Taw (often times via a local partner who understands customs and the language). Investors should also explain the requirements they need to fulfill when developing a project, such as those related to regulations, corporate governance, and financial compliance. Of particular note here is the principle of Free, Prior, and Informed Consent (FPIC), a common prerequisite for project financing that requires the full participation and consent of affected communities prior to a project’s construction. Explaining FPIC requirements to local communities and Nay Pyi Taw would help these vital stakeholders understand why both groups’ concerns must be addressed in order to secure financing and bring infrastructure projects to fruition.
It is also critical for investors to identify and pursue overlapping goals that they share with both local communities and Nay Pyi Taw, not just one or the other. Nay Pyi Taw, for instance, could support giving land rights to an investor in order to develop an infrastructure project that benefits Myanmar’s overall economic productivity; this could, however, alienate local communities that are displaced from that land, as happened during land-grab struggles around the Dawei SEZ. A project that enhances economic autonomy for a local community, on the other hand, may be resisted by Nay Pyi Taw because such a development could be perceived as undermining central government authority in that area. Investors must secure buy-in from both sides because a rejection by either local communities or Nay Pyi Taw threatens a project’s prospects.
An example of an engagement program that would benefit all parties (the local community, investors and Nay Pyi Taw) could be workforce training. For the local community, the upsides are clear: education, employment, and economic development. From the perspective of an investor, training a local workforce can reduce operational costs over the long run (local employees would likely require lower salaries than expatriate workers). From Nay Pyi Taw’s perspective, workforce training would address discontent in impoverished or marginalised areas, and would also increase Myanmar’s capacity to maintain and service infrastructure investments.
There are numerous potential pitfalls to community engagement programs, however. Three that investors should be particularly aware of in Myanmar are:
– Investors must clearly understand their own capacity. Honesty with stakeholders about investors’ ability to deliver development programs manages expectations, thereby preventing disappointment and resentment from stakeholders.
– Investors should make sure that a local community does not become dependent on the provision of basic services by the company and that the company does not supplant government services. This situation is ultimately unsustainable for investors; it also inhibits the natural development of local governance capacity.
– Communities that are indirectly affected by projects will also want a share of the benefits. Investors need to address such aspirations with appropriately scaled development programming lest the investor’s overall engagement program grow beyond control as more and more indirectly affected groups seek compensation.
The ongoing struggle between Nay Pyi Taw and regional authorities in Myanmar’s periphery is one of the fundamental obstacles to the country’s political and economic development. By pursuing goals that align with both parties’ interests, investors could play an important role in bringing them into agreement during the course of the development of infrastructure improvements.
Such advances would also have a multiplier effect for Myanmar as a whole: Myanmar’s capacity to absorb foreign investment is constrained by its lack of infrastructure. As more roads, banks, power grids, and cell towers are built, this will accelerate Myanmar’s potential rate of modernisation, allowing Myanmar to provide its impoverished citizens with the opportunities they need to improve their quality of life. Community engagement programs therefore, if properly designed and employed, have the potential to benefit investors as well as to facilitate Myanmar’s overall development.
Nicholas Borroz is an independent analyst of energy geopolitics and investment strategies, specialising in energy-related infrastructure. He works for a DC-based risk consultancy and has previously worked for the US government in international affairs with a focus on development, energy, and economics. You can reach him on Twitter at @NBorroz or on his blog, www.nicholasborroz.wordpress.com.
The views and opinions expressed here are the author’s own and don’t necessarily reflect Myanmar Business Today’s editorial opinion.