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In isolated Myanmar, sanctions breed bogus US franchises

Experience a tiny “Wal Mart” and a “KFC” that serves fries with chopsticks.

YANGON, Myanmar — Those who have wandered the fluorescent-lit aisles of America’s largest superstore would hardly recognize the “Wal Mart” in Myanmar’s crumbling city of Yangon.

For starters, the store is scarcely larger than a typical Wal-Mart parking spot. Only two incongruous items are sold there: cellphones and washing machines. The teen clerks must shoo out intrusive stray mutts and, by the showroom, a half-exposed sewer gurgles under the tropical sun.

Ask for the manager and out comes Phyo Khat Wai, 23 and chipper, a teal sarong swishing at her rubber sandals. Though she has never set foot in a legitimate Wal-Mart — or even outside her impoverished homeland — her shop’s sign is a faithful recreation of the logo recognized around the world: “WAL MART” in blocky words separated by a star.

“I just heard it’s some famous department store in America,” said Phyo Khat Wai, her shoulder-length hair streaked by a sepia-tone dye job. Her tiny shop is one of many imitation US retail stores in Myanmar. “I’ve never been to the other Wal-Mart and don’t expect I ever will.”

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For decades, US sanctions against Myanmar have blocked the vast reach of American franchising that scatters McDonald’s, 7-Eleven and Gap outlets across the planet.

There is a Starbucks in Saudi Arabia. There is a Pizza Hut in Ho Chi Minh City. But thanks in large part to US business blockades, these multinationals have yet to open shops in Myanmar, the Southeast Asian nation formerly titled Burma.

Two decades worth of embargoes, designed to drain power from a corrupt cabal of ruling generals, have created a American franchising vacuum. In this void, with few domestic intellectual property laws to stop them, Myanmar’s entrepreneurs have been free to brand their own shops with the names and logos of America’s top eateries and retailers.

Some trademarks are lifted outright: there is a rogue Holiday Inn in Myanmar’s Mandalay State and a Best Buy imitator in Yangon’s outskirts. Others such as “MacBurger” and “Burger Queen” tweak well-known titles for a veneer of not-so-plausible deniability. In one of Yangon’s slick new malls, the fried chicken outlet ICFC sports a logo in which the I and the C and mushed together in the likeness of a K. The french fries are served with ketchup and chopsticks.

Myanmar’s trademark impunity, however, is likely in its last days.

In the words of former junta general-turned-President Thein Sein, Myanmar is “engaged in an adventure to build a more democratic, open and inclusive society.” The White House has applauded the release of political prisoners and the loosening of strangleholds on trade and expression.

In response, the United States has cut a sharp foreign policy U-turn, aggressively suspended sanctions and allowed eager US companies to enter Myanmar. General Electric, Ford Motor Company and Coca-Cola have already pounced; Thein Sein, in a development unthinkable in years past, is expected to visit the White House this month.

But as American multinationals begin flooding into Myanmar, they will come face to face with their imitators. Many local entrepreneurs who’ve poured cash and capital into borrowed brand names will have no intention of standing down.

“How can the American Wal-Mart ask me to change my shop?” Phyo Khat Wai said. The prospect of a cease-and-desist order, she conceded, has never occurred to her. “They can’t do that. I was here first!”

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KFC meets ‘KFC’

Intellectual property (or IP) is a relatively unknown concept in Myanmar.

The nation’s economy is just now emerging from a long chapter in which the military maintained a tight grip on trade and just about everything else. In a country still reveling over restored liberties to protest, publish uncensored news and criticize authority, the rights of multi-billion dollar conglomerates to protect brand names is a distant priority.

“In the past, people weren’t familiar with international trade. Our eyes were closed. They still don’t know IP should be a right,” said Thein Aung, a senior associate with the Myanmar Trademark and Patent Law Firm.

As one of the country’s few IP lawyers, he counts KFC, Panasonic, Adidas and scores of other well-known corporations among his clients. In recent months, he has had to issue cease-and-desist orders to a bogus KFC with a Yangon storefront so convincing that the American embassy welcomed its arrival on Twitter.

“Frankly, most people have never heard of IP. Even very successful businessmen,” he said. “Even if they know about it, they just don’t think it’s important.”

As it stands, the country’s IP protections are cobbled together from a few vague statutes as well as laws dating back to British colonial era, in which Myanmar (then Burma) was ruled as a part of India. Attorneys still resort to legal interpretations of the antiquated “Burma Copyright Act of 1911,” which concerns itself with the rights of playwrights, and the ancient “Merchandise Marks Act,” which governs how importers should fix labels on oil lanterns and iron spigots.

Thein Aung and his peers have led a charge to convince the government that dismal IP protections will scare off potential investors and ultimately sabotage a long-awaited ascent to modernization. “My clients have said, ‘How can we invest if you can’t protect our technology? Technology is our soul,’” Thein Aung said. “I told the government that we must have IP laws or else no one will come here.”

Given the creaky condition of Myanmar’s IP protections, foreign firms are wise to consider a “wait-and-see approach,” said Mark Litvack, a partner in the US-based, globally focused Pillsbury legal firm, which has advised clients on doing business in Myanmar.

“Myanmar is an extremely attractive opening market with over 50 million consumers, terrific location for trade and ample natural resources,” Litvack said. “Companies are coming.”

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But he cautions that the nation will be “viewed as a pariah unless it accepts its responsibility to protect the legitimate IP interests of Western and other foreign firms. As IP is a driver of value and profits, corporations will not be willing to invest in countries that are not willing to protect that investment.”

The push for better regulation, however, is finally making headway. A proposed law, written in part by Thein Aung, is in its 10th draft and will be submitted to parliament soon. With no objections, the law could pass within six months, he said.

The law in its current iteration seeks to wipe out most standing trademark and copyright filings and request all businesses — domestic and foreign — to re-register on a clean slate. “A company like 7-Eleven would have to re-register. The infringer could re-register too,” Thein Aung said. “But they would not have the evidence. So they’d lose.”

This process is ripe for complicating factors: judges befuddled by new IP laws and well-connected local operators among them. Copyright infringers, particularly those who’ve built up borrowed foreign brand names with their own investments, will seek out-of-court settlements, Thein Aung said.

“The infringers won’t just go away,” he said. “They won’t immediately surrender. It will take much time.”

‘We built this. It’s ours.’

There are no blue-light specials at Yangon’s “K-Mart.” When the city’s shoddy power grid shorts out — as it does incessantly during hot season — there are no lights at all.

Since 1996, the downtown shop has sold the sort of goods that, while commonplace in theUnited States, can be tough to locate in Myanmar. Think Coco Pops, Raid bug spray and disposable Pampers.

Yes, the owners are familiar with that other Kmart. But they insist the shared name is just a coincidence. This “K-Mart’s” title is derived from the name of its founder, Ko Htoo, according to an English-speaking associate named Jo Jo.

“Ko Htoo has never been to America and he’s definitely never been to a Kmart,” said Jo Jo, 55, a Myanmar national who emigrated to San Francisco but recently returned to start an airport shuttle service.

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“Why should he be worried about trouble from Kmart anyway?” he said. “They can barely keep stores open in America. If they complain, we’ll just call it K-dot-Mart. It’s different enough.”

Just outside “K-Mart’s” doors, a “Burger Queen” street stall serves up hot dogs and cheeseburgers along with “Gold Fish Ball” and “Crab Stick.” The aproned grill operator, resting on a cheap plastic stool, insists she has never heard of Burger King.

Nor has the clerk at the shop across the street (“7-Day”) heard of the planet’s most abundant convenience store (7-Eleven) despite the striking familiarity of its green, orange and red signage. The shelves are stocked with Coke and Red Bull but “7-Day” has no Slurpees, no Big Gulps and no cash register. The shopkeeper gives change in tissue packets when she runs out of small bills.

“Did you say 7-Eleven?” she asks. Her face betrays no flicker of recognition. “Maybe the owner has heard of it. But I haven’t.”

Appropriating American consumer imagery is most effective on shoppers who pick up morsels of US culture through pirated DVDs or the internet, according to Wuttha Mg Mg, the 37-year-old owner of Yangon’s “iCloud” electronics store. (He has already registered the name as his own.)

“Even if they don’t know ‘iCloud’ refers to Apple’s online storage, they can tell it represents cutting-edge technology,” he said. “That’s what we want to associate with the shop.”

Inside the eateries and shops with titles that siphon US branding power, shoppers will encounter few items recognizable to American consumers. “Wal Mart” sells Chinese-made Huawei phones; ICFC’s chicken thighs are skimpy and breaded beyond recognition.

But Nan Thein, the barefoot, 58-year-old proprietor of “Best Buy,” offers a pure, undiluted cut of American consumer goodness. Her roadside shop is filled with products that were actually sold in a legitimate American Best Buy and flown to Myanmar. Her chief importer is the husband of her daughter, who sells gems in New York City.

The imitation “Best Buy’s” business model is a study in globalization-era complexity: US firms manufacture items in neighboring China, ship them to America, sell them at retail prices to her son-in-law, who piles the goods in his luggage and unloads them at the Yangon shop on trips home.

The shop — a tiny, open-air storefront overlooking a patch of sunbaked dirt — offers non-counterfeit Beats by Dre headphones, copies of the video game Halo for Playstation 3 and AT&T mobile phones. Its marquee is an impressive depiction of the blue-and-yellow Best Buy logo, recreated in a Yangon signage shop.

“Best Buy is a store with a strong logo and a good reputation. So we thought it would be perfect,” said Nan Thein. She suspects most of her customers grow familiar with the Best Buy logo when they go online to check the US selling price of certain electronics. “If people can’t spend much, they go with Chinese stuff,” she said. “But if they’ve got money, they want real US products.”

And if a representative from the legitimate Best Buy appears someday at her cement-walled shophouse? “I would tell them to sit down and negotiate with me,” Nan Thein said. “We built this. It’s ours.”