Myanmar has emerged as one of the bright spots in an otherwise sluggish and uncertain economy. Having recently emerged from decades of rule under a military junta, the country has been attracting considerable foreign investments. Unfortunately, however, this period of growth is causing friction between the old ways and new ways of doing business. Now, the Burmese military, which owns Myanmar Brewery Ltd. is in a dispute with investors.

Burmese military

Burmese military owns part of Myanmar Brewery

As in many countries long ruled by communist or military juntas, the Burmese military owns a large amount of the country’s assets. The crown jewel is Myanmar Brewery, which is Burma’s largest brewer and also largest single taxpayer. Now, the military finds itself in a business dispute with Fraser & Neave, marking the first time a state-owned company has found itself embroiled in a serious conflict. The military owns 45% of the company while Thai billionaire Charoen Sirivadhanabhakdi owns the other 55%.

Specifically, Myanma Economic Holdings Ltd. (MEHL), a military-owned investment vehicle, is trying to buy out Fraser & Neave, which has thus far resisted the move. Fraser & Neave was bought out by Charoen Sirivadhanabhakdi earlier this year, and he assumed control of the company’s stake in Myanmar Brewery.

MEHL has insisted that the conflict does not highlight any breakdown in investment laws, but is purely a commercial conflict, which certainty is not all that uncommon in advanced economies across the world. Still, some analysts are worried that if the conflict persists, it could dampen investor confidence at a crucial time.

Fraser & Neave buyout

MEHL says that it has a clear and contractually defined right to buy out Fraser & Neave (OTCMKTS:FNEVY) after the Singaporean company apparently failed to uphold one or more undisclosed contractual obligations. According to MEHL, it is following the letter of the law and is merely exercising its agreed-upon contractual rights and is not resorting to political pressure or other measures.

According to sources close to the conflict, a clause in Frasier & Neave (OTCMKTS:FNEVY)’s contract stipulates that its stake may be bought out by either side in the event that ownership of the company changes. Thus, when Charoen Sirivadhanabhakdi bought out Frasier & Neave, MEHL had a right to purchase the company’s stake in Myanmar Brewery.

MEHL negotiations with Frasier & Neave

MEHL has been in negotiations with Frasier & Neave (OTCMKTS:FNEVY) since September but so far no resolution has been reached. The military now accuses the company of trying to unjustly politicize the situation in order to gain an advantage in negotiations, and is insisting that it is following the code of the law. The military now finds itself walking on a tight rope. On one hand it feels like it is exercising its rights fully within the letter of the law. On the other hand, a protracted and public conflict could damage the country’s reputation even if both sides are acting within the boundaries of the law.