YANGON As Myanmar implements reforms and foreign investors jet in, most find precious few ways to make money. There is no stock market. A new foreign investment law is delayed. And the biggest local companies are entangled in U.S. and European sanctions.
Zaw Zaw, one of Myanmar's most powerful businessmen, wants to change that in a complex transaction in Singapore that would blaze a path for foreign investors into a company at the heart of Myanmar's economy - and help Myanmar's sanctions-hit tycoons rebrand themselves.
In an interview in his Yangon office, he said the transaction - a planned S$70 million reverse takeover of Singapore bed linen maker Aussino Group AUSN.SI - was moving forward and he expects Singapore regulators to complete a review of his books in three to six months, clearing the way for Aussino's transformation into a Myanmar-backed company harnessed to Zaw Zaw's energy division.
Few tycoons in Myanmar are more powerful than Zaw Zaw, whose holdings range from timber, gems and rubber plantations to construction, luxury resorts, petrol stations and banking.
Annual revenues of $500 million make his Max Myanmar Group a domestic leviathan. But his past friendship with former dictator Than Shwe makes him "a regime crony", according to the U.S. Treasury Department, which blacklisted him under targeted sanctions three years ago.
A 2007 U.S. diplomatic cable described how "Zaw Zaw actively seeks favour with the senior generals".
Washington has suspended some sanctions and embraced Myanmar's leaders but left embargoes in place against businessmen whose companies are accused of helping generals plunder the economy and commit human rights abuses during 49 years of military rule.
Zaw Zaw says he thinks it is a matter of time before business leaders are embraced by the West, too.
"The government is doing very well. They've released political prisoners and their reforms are very good. I don't think sanctions can last for very long."
He expects progress during a visit to the United States by reformist President Thein Sein next week and in a separate U.S. trip that began on Monday by opposition leader Aung San Suu Kyi, the Nobel Peace Prize winner.
But Washington has called for the release of all remaining political prisoners and Myanmar has failed to acquiesce. Although more than 700 have been freed since last year, an amnesty on Monday included only 88 dissidents, say rights groups, leaving several hundred behind bars.
Washington may reward other signs of progress, possibly relaxing a ban on imports of Myanmar-made products, but it is unclear how far they will go. Most analysts expect targeted sanctions on connected tycoons to remain for some time.
That leaves Zaw Zaw at the mercy of regulators in Singapore, where his reverse merger is being watched closely as a potential model for other sanctions-crippled companies in Myanmar.
TIMES HAVE CHANGED
Reverse takeovers give private companies such as Zaw Zaw's Max Myanmar access to international capital markets by merging with a publicly traded shell such as Aussino, which has bled red ink for three straight years. Aussino has been on a Singapore Exchange watchlist since September 6 last year, and will be delisted unless it can turn a profit.
Under the terms of Zaw Zaw's proposed deal announced in June, Aussino will issue new shares to buy Zaw Zaw's Max Strategic Investments, a Singapore-based investment holding company, which will operate his petrol kiosks in Myanmar, providing Zaw Zaw with new tools to finance an expansion of his energy business.
"People can buy our shares."
Such transactions, however, often escape the same intensive regulatory scrutiny faced by companies going public.
Teams of Singaporean regulators and lawyers are scouring through his books at his headquarters in a converted hospital in the commercial capital Yangon, he said. But the deal is no sure bet.
Some bankers harbour doubts that Singapore will approve the plan due to Zaw Zaw's presence on the U.S. government's list of "specially designated nationals". People who appear on the list will have their assets blocked and "U.S. persons are generally prohibited from dealing with them," the Treasury Department says on its website.
Still, investors appear optimistic. Aussino's stock has risen almost 268 percent this year, outperforming a 16 percent gain of Singapore's benchmark Straits Times Index.
Zaw Zaw says times have changed since the military ceded power last year to a semi-civilian government. Many of Myanmar's former military cronies, like Zaw Zaw, are cultivating a new image, promoting charitable work, building ties with Suu Kyi and recalibrating business empires that once depended on a system that reserved lucrative contracts - often in jade mining, timber and tourism - to favoured businessmen.
In Zaw Zaw's office, a glossy 75-page book detailing his company's charitable donations sits on a desk next to the door. He hopes his company can, at some point, issue stock directly to investors in Myanmar, but a local stock exchange is not expected until 2015.
"I am helping this country. I am creating jobs. I am helping people. But still I am under sanctions," he said. "Myanmar needs to be re-branded and we are part of that." (Editing by Robert Birsel)