Nov 21, 2012

Angling for Myanmar's Business

Marubeni's CEO Says Challenge Is to Turn Firm's 70-Year History Into a Competitive Advantage

Marubeni Corp. Chief Executive Teruo Asada is at the forefront of corporate Japan's charge into Myanmar. The 64-year-old executive is guiding the Tokyo-based conglomerate as it considers at least 10 potential projects in the former dictatorship, ranging from multimillion-dollar orders to fix power plants to a multibillion-dollar deal to modernize an important railroad.

Marubeni Corp. CEO Teruo Asada discusses the company's investments in Myanmar and the opportunities and challenges that accompany them. Video by WSJ's Yoree Koh.

Last month, Mr. Asada visited Myanmar for the first time, in a two-day round of meetings that included President Thein Sein and 500 of the country's business and political elite.

The son of a former president of Japan Airlines Co., Mr. Asada is becoming known for bold moves. Earlier this year, he arranged Marubeni's deal to buy U.S. grain distributor Gavilon Group LLC for $3.6 billion, which would be one of the most expensive purchases in Marubeni's 154-year history.

Mr. Asada talked recently about the company's plans and challenges in Myanmar. Edited excerpts:

WSJ: What are some of the difficulties in getting business in Myanmar?

Mr. Asada: The biggest problem is competition from foreign companies. Marubeni boasts a 70-year history in Myanmar, with a good track record. And Myanmar, in turn, is emotionally attached to us, and that's important to us. But China, South Korea, and of course the U.S. and Europe—they're all increasingly getting into Myanmar. So although Myanmar is a promising market brimming with great prospects, in order to survive there, we need to convey our knowledge and ideas to the country in a way that it ties into new business for us, and that's extremely challenging.

WSJ: When you recently met with President Thein Sein, he told you that Japanese companies move too slowly. What are your thoughts on that?

Mr. Asada: He means compared to other countries. In addition to the normal Chinese investment, South Korea has been quite aggressive in going on the offensive recently. It may seem to the president that we are slow compared to the pace those countries set. But Japan recently said it would virtually forgive ¥300 billion [roughly $3.5 billion] of Myanmar's ¥500 billion in overdue debt, and with that comes certain steps that need to be taken. It's not like "anything goes."

WSJ: What about Marubeni's speed?

Mr. Asada: Marubeni's sense of speed is overwhelmingly fast. We've been fast to advance and open an office in the capital of Naypyitaw. We have seven employees from Japan posted there now, which I believe is more than other trading houses. I've never considered us to be slow. We shouldn't be doing something just because other countries do it. We have no intention of saying, "I'm sorry." Other countries may be enthusiastically sending out love calls of, "Myanmar, Myanmar!" But rather than make hasty moves that lead to big mistakes later it's better to gather information and use Japan's know-how and technological advantages wisely.

WSJ: Japanese companies have been held back by waiting for Japan to restart financial aid to Myanmar. Would Marubeni consider using its own money to fund projects?

Mr. Asada: Yes. Although that doesn't mean we plan to go in without any [assurances it will work]. For example, we could consider power plants, an area where we have a track record [in other countries]. We know what sort of structure would work to finance a project on our own. Myanmar doesn't have solid laws for this kind of thing, but since we have a wealth of knowledge, we should propose [financing plans] to them. If we depend on yen loans or grants, some projects may not be able to move forward.

WSJ: What does Marubeni want to accomplish in Myanmar in the next two years? What would be realistically possible?

Mr. Asada: First, we want to do infrastructure in the big sense: projects like building a new 500- or 600-megawatt power plant. We want to build gas-fired power plants. There may be cases where we'd like to get deeply involved in the plant management. Marubeni was subcontracted to construct a hydroelectric power plant in 1960 called Baluchaung. We'd work on improvements for Baluchaung, or improvements and rehabilitation for other thermal power plants near Yangon—things that are smaller scale than the construction of a new power plant—by proposing various financial packages such as yen loans or export credit or our own financing. Another big thing in infrastructure is railways.

WSJ: What can you accomplish for the proposed industrial hub in Thilawa by 2015?

Mr. Asada: I don't know, to be honest. The results of the feasibility study will come out next year. It seems to have been delayed by three months. I am not sure if we can complete [the development] by 2015.

WSJ: Does the Myanmar side understand that properly?

Mr. Asada: No, I don't think so. In terms of communication and other matters, there are some things like the political system or bureaucracy that haven't fully developed yet. So I think there are situations in which we're not communicating fully.

Source: The Wall Street Journal