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In two short years, a reform movement led by ex-generals has transformed a junta-run backwater into Asia’s new investment attraction. But there's a catch. Yangon is no ready-made Shanghai. Long neglected, the country's infrastructure leaves much to be desired. And many of the resources that make Myanmar so compelling in the first place lie in the jungle under the careful watch of guerrilla fighters. Still, the companies have come, and the money is flowing. Cue the gold rush. GlobalPost's Patrick Winn investigates.

No longer a pariah, Myanmar courts Western investment partners

As sanctions subside, a broken nation revels in the limelight and seeks foreign businesses to help it cash in.

sector dominated by hydro-dams, oil jetties and gas pipelines. But any Western newcomer seeking a slice of this market will find that it is already dominated by the Chinese.

As Beijing struggles to power its development spree, Chinese energy projects have overwhelmed Myanmar’s foreign investment picture. According to government spreadsheets, a staggering 83 percent of current foreign investment pledges, most of them from Beijing, are classified under the headings “power” or “oil and gas.”

If realized, Beijing’s grand designs could transform Myanmar into China’s gas station and its de facto second coast.

As it stands, oil tankers inbound from the Middle East must chug for weeks around mainland Southeast Asia. But by 2013, 600 miles of oil and gas pipelines will connect Myanmar’s coast directly to China’s booming Yunnan Province. In addition to Arabian oil arriving by ship, the pipelines will also pump Myanmar’s own oil and gas deposits from rigs erected offshore.

These energy-focused developments are planned in tandem with a series of coastal ports that will receive cargo from all points west of the region. A web of Chinese-built superhighways will link Myanmar to the far coast of Vietnam and every major city in between. “It’s very strategic for the Chinese,” Kyaw Zaw Maung said. “You can save fuel and you can save time.”

This deluge of Chinese investments has been secured in the old way of doing business, namely closed-door agreements with generals and their confidantes. But a growing number of Myanmar-based enterprises are eager for a business model that treats Yangon CEOs as equals and props up their projects with Western technology.

“We look for companies that share with us and treat us with respect,” said Ken Tun, the energy conglomerate CEO. He claims to reject outsiders who expect his firm to broker with officials behind the scenes, take a check and step out of the way.

“People come to my office and say, ‘Hey, I want this project. Can you influence the government?’” Ken Tun said. “I’ve had enough of this. I say, ‘No, if you want that, go find another partner.”

A Boom Town in Flux

Romantics fall hard for Yangon, where golden spires glow above a low skyline of British colonial structures in decay.

But any executive drunk on Myanmar’s hype will sober up shortly after landing in the city. Though evolving fast, it remains a hostile place to those weaned on business-class convenience.

Hotels cannot not take Visa or Mastercard, although Visa announced recently that visitors will be able to use cards "within a matter of months." The decrepit power grid shorts out on a near-daily basis. Sluggish internet speeds recall the 1990s era of screechy dial-up modems. Open sewers abound.

Moreover, many foreign firms will find themselves paying through the nose to set up shop here. Yangon, one of Asia’s poorest major cities, is reeling from a speculation-fueled property bubble.

“It’s like being a star overnight,” said Antony Picon, a Yangon-based associate director of research with the Colliers International real estate services firm. “For any country, that’s difficult to deal with.”

After an extensive study, Picon has determined that Yangon offers just 60,000 square meters of office space. That's paltry: the largest office building in neighboring Thailand holds nearly triple that space. The supply crunch, Picon said, has sent Yangon’s going rate soaring to $60 per square meter. He expects the figure to peak at $150 — overshooting typical rates in Beijing ($140) and New York ($120) — before slinking back down.

Those who control Yangon’s properties have overestimated the depth of foreign firms’ pockets, Picon said. “They think guys are going to come in with billions of dollars, helicoptering in and saying ‘Here you go. Here’s your briefcase,’” he said. “It’s not going to happen.”

This is a symptom of what Yangon marketing mogul Moe Kyaw terms “jade disease.” Locals who’ve grown rich “exporting that green rock to China,” he said, have led a spree of speculation purchases in the high-end property market. “What they did, because they’re not that educated,” he said, “is buy property.”

“I do think there will be a burst in the bubble soon,” Moe Kyaw said.

Such are the uncertainties that scare off the meek and make wildcat investors salivate. To stoke their appetites, the government is offering a flurry of incentives: five-year tax holidays, cheap rents at industrial zones with 24-hour electricity and the right to own companies outright with no local partnership.

Myanmar’s true test will not come until 2015, the year its army-backed parliament has vowed to hold the first truly free election in 25 years. But those bullish on Myanmar contend that its ascent is guaranteed — provided the generals and their cronies continue relaxing their stranglehold on Myanmar’s markets and its people.

“This is a beautiful country. People fall in love with the place,” Picon said. “Even through adversity, people will develop an even stronger connection. Even investors will have a sentimental edge.”