Dramatic changes afoot in Burma have whet the appetite of foreign investors who are eyeing a slice of the frontier market’s rich and largely untapped economic potential.

As the new army-backed government steps up its reform agenda after nearly five decades of outright military rule, the West is considering easing sanctions that have stifled development since the late 1990s.

But when the measures are eventually lifted and multinationals are given the green light to invest, they will discover a country weakened by half a century of military rule and economic mismanagement.

An abundance of natural treasures — including gold, gas, teak, oil, jade and gems — could make the country rich, as it was before the generals took power.

The country also has a pool of low-cost labour and English is widely spoken, a legacy of more than a century of British rule until independence in 1948.

And the Southeast Asian nation of 60 million people is tipped as a hot tourist destination thanks to its appealing colonial architecture, picturesque temples and golden beaches.

“The numbers are exploding. There are no empty rooms in hotels in high season anymore,” said a foreign businessman involved in the tourism sector.

Doing business is also becoming easier, he said. “Licences which took weeks to obtain can be got in a day. Things that were impossible to do are now authorised.”

The European Union is considering lifting sanctions against Burma as soon as February, according to diplomats in Brussels, while Washington has promised further reforms will be met with US rewards.

But firms hoping to rush in should bear in mind that the new parliament has yet to pass any laws on investment and the judiciary lacks the competence and the independence to ensure contracts are respected, observers say.

“The law is obsolete so people find their way by themselves. They don’t want to break the law but they have no choice,” Toe Naing Mann, son of key regime figure Shwe Mann, the lower house speaker, told AFP.

In the meantime, the black economy has boomed, notably cross-border trade and the illegal migration of workers from Burma who go overseas to work, particularly to neighbouring Thailand, and send home money.

Burma’s banking system has never really recovered from a major crisis in 2003 and illegal money changers flourish thanks to an exchange rate almost 100 times better than the official one.

A few Western corporations such as French oil giant Total do have a presence because the sanctions framework permitted firms that were already operating in the country at the time to stay.

The US and EU measures ban a range of imports from Burma but, with certain exceptions, do not stop companies exporting goods to the country, although many firms refrain from doing so anyway for fear of an activist backlash.

Asian allies such as China and Thailand already have a foot in the door and their firms are involved in the construction of hydropower, deep-sea ports and gas pipeline projects.

Others are also beating a path to the door, with Japan’s trade minister this month leading a delegation of Japanese business chiefs to scout for potential business opportunities.

A group of US corporate executives is also expected in Burma later this month to assess the economic landscape.

So far junta-friendly Burmese tycoons have been the main beneficiaries of economic development, but experts say the headaches for foreigners of doing business are gradually easing.

“The new government is trying to open up and to reduce the existing restrictions, controls and transaction costs with a view to create a favorable investment and business climate,” said Winston Set Aung, co-founder of the Asia Development Research Institute in Rangoon.

The junta, which ruled until March 2011, also set in motion a programme to sell state assets such as petrol stations and Rangoon’s port.

But a dearth of infrastructure means the downstream oil and gas sector is still not profitable enough to attract foreign giants, said Toe Naing Mann.

“Sometimes we protect our national interests too much,” added the businessman, who now works as a political aide to his father.

Like Vietnam in the 1990s, when the United States lifted a trade embargo and restored diplomatic relations with Hanoi, lawyers and consultancy firms are likely to be the first to become well-established in Burma.

The resources and tourism sectors will also be deluged with requests for licences, predicted Aekapol Chongvilaivan, a fellow at Singapore?s Institute of Southeast Asian Studies.

But problems such as corruption, mismanagement and inadequate economic policies need to be addressed, he added.

“Particularly, industrial and financial market reforms have desperately struggled in the midst of inadequate infrastructure, policy uncertainties, and bleak business climate,” he said.