KOREA, MYANMAR & SINGAPORE: STAYING AHEAD IN EVER-CHANGING ASIA

May 29, 2013

Myanmar – New Opportunities and Risks

Asia Business Forum – SeattleMay 29, 2013

3

Brief Legal History

Pre-British British Waves of Invasions and Acquisitions The Raj and Afterward to 1937 Post-1937, World War II to Independence in 1948 The Panglong Agreement, The Constitution, and U Nu U Ne Win, the NLD and SLORC, the SPDC, to the present

USDP (Union Solidarity and Development Party) and new capital in Naypyitaw

4

What Burma Was – The Prize

The only colonial medical school from where a graduate could go directly to the UK

Resource rich – rice, timber, oil, gems, other Semi-independent governance since 1937 – a model for the

coming Commonwealth

5

The State of Law and the Legal Practice

Based on English Common Law Singapore in 1962 a good example From 1962 on a very limited legal practice Winding down businesses due to expropriation – some still on-

going

6

The State of Law and the Legal Practice – Cont.

Private land transactions Criminal and family law The occasional commercial dispute Commercial law practices just died Laws school operated but mostly as a viable means to

continue English language studies The SLORC/SPDC constructively killed the university system,

including the law school, around 2003 Distance education certificates from a variety of sources

available, but not in Myanmar law

7

After 1992, under the SLORC, a series of new, commercially oriented laws to address the opening of the economy to both Myanmar citizens and foreigners

The opening of the economy to both Myanmar citizens and foreigners

Foreign Investments Law Banking laws, others New laws, regulations follow

However, the real burden is on the administration

8

Issues

Administrative capacity – too few trained people with too much to do

Land tenure, ownership, leases – private and government Environmental Labor Taxes Corruption Who is good and who is bad; the US SDN List, other means Residency Cost of living, housing, education, other Due Diligence

9

John F. PiercePartnerDLA PIPER LLP (US)

701 Fifth AvenueSuite 7000Seattle, WA 98020Tel: 206 839 4815Email: john.pierce@dlapiper.com

Dale GoffForeign Entity Structures

• Problem Statement

• How to optimize revenue at a global scale?

• Structure products to keep IP safe & maximize profits:

• Royalty based

• Inventory based

MANAGING PRODUCT STRUCTURE

• Asia Pacific Operations Center (APOC) in Singapore• APOC is master subsidiary entity of Microsoft Corporation USA

• All Countries are Marketing Subsidiaries of APOC• Annual budget allowance provided to near zero $ remaining

• All sales contracts & fulfillment managed out of APOC• Saves over $500M/year just for Japan $3B revenues

• Operational costs in Singapore lower than North Asia• Over 100 Japanese working in Singapore just as if in Tokyo

• Caution to understand IP Tax laws by Country• SG is designed for physical good commodities; not Royalty

REGIONAL SUBSIDIARY SET-UP

Q & A

Thank you!

Te n s i o n i n K o r e a n P e n i n s u l a :H o w i t ’ s a ff e c t i n g K o r e a n E c o n o m y

29 May 2013Seungcheol Lee

EconomistG20 Economic Organization Division

Ministry of Foreign Affairs

A g e n d a

I. Security Challenges on the Korean Peninsula 1. North Korea’s Recent Provocations

II. Impact of North Korea risks on Korean Econ-omy

1. KOSPI in the past 2. Financial markets: CDS premium and Stock Market 3. Exchange rate and exports 4. Foreign Direct Investment in 1st Quarter 5. Tourism 6. Summary

III. Future relationship between the North and the South

1. High-Intensity Armed Clash to Occur Again on the Peninsula? 2. President Park’s Inter-Korean Policy Initiative

17

18

Rocket launch(12th Dec 2012)

3rd Nuclear Test(12th February)

Announced its decision to void the War Armistice(5th Mar)

Declared its entering into ‘state of war’ against South Korea(30th Mar)

Announced its decision to pull out all North Korea’s workers and temporarily suspend the operation of Gaeseong Industrial Complex(GIC) (8th Apr)

Warned foreigners off South Korea(9th Apr)

Short-range Missile Test( 17~19th May)

UN Security council Resoluton 2087(22 Jan)

UN Security council Resoluton 2094(7 Mar)

I. Security Challenges on the Korean Penin-sula 1. North Korea’s Recent Provocations

II. Impact of North Korea risk on Korean Economy 1. KOSPI in the past

19

After the Cheonan’s sinking in 2010 After the shelling of Yeonpyeong in 2010

20

■ 2013 vs past (on the day basis)

- 2013: Not serious compared to the past

II. Impact of North Korea risk on Korean Economy 2. Financial markets: CDS(Credit Default Swap) premium

-15

-5

5

15

25

35

27

21

9

-2

2 5

0 -3

0

Change of CDS premium(bp)

In 2013

Foal Eagle Drill, 1 May - 30 April

Key Resolve Drill, 1-20 May

2010~2011

Death of Kim Jong-il

(Dec '11)The 3rd Nuclear

test(12 Feb)

UN's addi-tional sanc-

tion(8 Mar)

Declaration of entering into 'state of war'

(31 Mar)

Announcement of suspending

the operaton of GIC

(8 Apr)

Warning for-eigners leaving

south Korea (9 Apr)

Launching short-range

missle (20 May)

Release of a report on

sinking Cheo-nan

Navy ship(May '1o)

Artillery at -tack on

Yeonpyong island

(Nov '10)

21

■ CDS premium: 2013 vs Past (time series)

0

50

100

150

200

250CDS premium of Korea

(bp)

Due to Release of a report on sinking Cheonan Navy ship

Increase of Eurozone risk

Degradation of Japan's credit rating

Due to Re-cent NK risks

18 bp(during40days)

132(during 3 months)27

(on the day)

II. Impact of North Korea risk on Korean Economy 2. Financial markets: CDS premium

22

■ CDS premium: Korea vs other countries

0

100

200

300

400

500

600

700Korea Japan China Spain Itary

(bp)

248

73

II. Impact of North Korea risk on Korean Economy 2. Financial markets: CDS premium

23

■ 2013 vs past (on the day basis)

- 2013: More sensitive than CDS premium

II. Impact of North Korea risk on Korean Economy 2. Financial markets: Stock Market

-400

-300

-200

-100

0

100

200

300

400

500

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-324.2

43.5

-204.9

115.5

-190.2

-51.4

-321.7

-68.6

80.8

-1.8

-0.2

-3.4

-0.3 -0.1 -0.4

-0.4

0.1

-0.2

Foreigner's stock net purchasing(L) (%)

Release of a report on sinking

CheonanNavy ship(May '1o)

Artillery attack onYeonpy-ong is-land

(Nov '10)

The 3rd Nuclear

test(12 Feb)

Death of Kim Jong-il(Dec '11)

Declaration of entering into 'state

of war'(31 Mar)

In 2013

UN's ad-ditional sanction(8 Mar)

2009~2011Foal Eagle Drill, 1 May - 30 April

Key Resolve Drill, 1-20 May

Announcement of suspending

the operaton of GIC

(8 Apr)

(milion $)

Waring for-eigners leav-

ing south Korea (9 Apr)

Launching short-range

missile (20 May)

24

■ 2013 vs Past (cumulative time series)

II. Impact of North Korea risk on Korean Economy 2. Financial markets: Stock Market

(40)

(30)

(20)

(10)

0

10

20

30 Cumulative net purchasing(Bil $)

-5.6 bil $-5.8 bil

$-9.2 bil $

25

■ Recent exchange rate(JPY/USD) and Korean export

- Weak Yen vs North Korea risk

II. Impact of North Korea risk on Korean Economy 3. Exchange rate and exports

11/Apr

11/May

11/Jun

11/Jul

11/Aug

11/Sep

11/Oct

11/Nov

11/Dec

12/Jan

12/Feb

12/Mar

12/Apr

12/May

12/Jun

12/Jul

12/Aug

12/Sep

12/Oct

12/Nov

12/Dec

13/Jan

13/Feb

13/Mar

13/Apr

(15)

(10)

(5)

0

5

10

15

20

25

30

Korean Export JPY/USDYoY(%)

2-Jan

-12

2-Feb

-12

4-Mar

-12

4-Apr

-12

5-May

-12

5-Jun

-12

6-Jul-

12

6-Aug

-12

6-Sep

-12

7-Oct-

12

7-Nov

-12

8-Dec

-12

8-Jan

-13

8-Feb

-13

11-M

ar-13

11-Apr

-13

12-M

ay-13

1,750

1,800

1,850

1,900

1,950

2,000

2,050

2,100

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

KOSPI(L)NIKKEI(R)

(pt) (pt)

26

■ Foreign Direct Investment(FDI) growth rate for 1Q 2013 in Korea : 44.7%

1Q 2011 1Q 2012 1Q 2013$2.0 billion

(30.1%)$2.35 billion

(17.0%)$3.39 billion

(44.7%)

- YOY growth rates shown in parentheses- Figures are based on reported investment

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130 2 4 6 8

10 12 14 16 18

12.8 11.6 11.3 10.5

11.7 11.5 13.1 13.7

16.3

3.4 3.1 3.1 2.2 1.6

2.7 1.7 1.5 2.0 2.4 3.4

Annual($, billion)

II. Impact of North Korea risk on Korean Economy 4. FDI on South Korea during 1Q 2013

27

■ Foreign Direct Investment(FDI) by Country

(billion $)

From Q1 2011 Q1 2012 Q1 2013 Growth rate

US 0.47 0.43 1.70 298.6%Japan 0.37 0.92 0.60 -34.9%

EU 0.43 0.58 0.44 -25.2%China 0.07 0.10 0.05 -44.9%Others 0.40 0.15 0.47 22.7%

- Figures are based on reported investment.

II. Impact of North Korea risk on Korean Economy 4. FDI on South Korea during 1Q 2013

28

■ Foreign Direct Investment(FDI) by Industry(billion $)

From Q1 2011 Q1 2012 Q1 2013 Growth rate

Manufactur-ing

0.79 1.50 1.14 -23.0%

parts and ma-

terials

0.68 1.11 0.39 -64.9%

Service 1.20 0.84 2.25 169.5%Other sec-

tors0.02 0.03 0.01 -85.2%

- Figures are based on reported investmet.

Agriculture, forestry&fishing

0.2%Manufacturing

33.5%

Service66.2%

Others0.1%

FDI by industry in 1Q 2013

Real estate and

renting50%

Business service

32%

Others18%

Services in 1Q 2013

II. Impact of North Korea risk on Korean Economy 4. FDI on South Korea during 1Q 2013

29

■ Monthly Tourist Arrivals and Departures of Incheon International airport

– The growth rate of Incheon airport’s tourists on April: 2.5%

11.4

11.5

11.6

11.7

11.8

11.9

11.10

11.11

11.12

12.1

12.2

12.3

12.4

12.5

12.6

12.7

12.8

12.9

12.10

12.11

12.12

13.1

13.2

13.3

13.4

0.3

0.8

1.3

1.8

2.3

2.8

3.3

3.8

4.3

-5

0

5

10

15

20

14.3

2.5

Toursits(LHS) Growth rate(RHS)

(Million) (%)

11

II. Impact of North Korea risk on Korean Economy 5. Toursim

30

North Korea risks’ Influence on

CDS premium: Small and temporary

Stock Market: More than CDS premium, but a weak Yen is more intimidating factor

Foreign Direct Invest: No, at least for American

Tourism : A little, but appreciation of Won and slow down of global economy were also influential factors

II. Impact of North Korea risk on Korean Economy 6. Summary

31

■ 60 Years’ Experiences of Armistice

– Armed Clashes, Assassination Attempts, Maritime Infiltration, Torpedo and Artillery Attack: Limited and Contained

■ Lesson Learned

– Whatever the rhetorics, escalation contained

– Major War in nobody’s Interest

■ Stark Comparison(2011)

– Populations : South 49.4m vs North 24 m

– GNI : South $1,119B vs North $29B

III. Future relationship between North and South 1. High-Intensity Armed Clash to Occur Again on the Peninsula?

32

■ Trust-building process: Safeguarding peace and making peace

– Safeguarding peace : Strong deterrence through overwhelming defense ca-pabilities

– Making peace : Leading North Korea to make the right choice

III. Future relationship between North and South 2. President Park’s Inter-Korean Policy Initiative (the Trust-Building Process)

Thank You

Q & A