Burma has the world’s worst legal system for doing business, retaining a position it has held for the last five years despite recent reforms, according to a report released on Wednesday.

It remains “the country offering the least legal protection for foreign companies”, said British risk analysis group Maplecroft, in a warning to investors attracted by the prospect of Western sanctions being lifted.

Other poor performers on the annual ranking of 197 countries included North Korea, Somalia, Cuba, Afghanistan, Syria and Cambodia, but resource-rich Burma is singled out for posing “significant operational and strategic risks”. “With recent political reforms and the likelihood of sanctions being lifted, Burma offers huge potential for oil and gas firms,” the report said.

Ongoing uncertainty in the energy-rich Middle East and North Africa “has made Myanmar’s [Burma's] hydrocarbon resources even more attractive globally,” it said, but warned improvements in the legal climate were urgently needed. “Tangible improvements in the rule of law, including increased judicial independence and greater transparency in the regulatory system, will be required before the long-term potential of the economy can be realised.”

Energy rich South Sudan, Turkmenistan and Libya also pose “extreme” risks for oil and gas companies, according to the study, which focuses exclusively on countries’ respect for the rule of law. Burma’s new nominally-civilian government came to power last year following controversial November 2010 elections and has since surprised observers with a number of positive moves including a major release of political prisoners.

The reforms have caught the attention of foreign investors, eager to do business in the resource-rich nation strategically placed between China and India. But infrastructure problems, the absence of a law governing foreign investment and the urgent need for banking reform remain key entry barriers.

In a separate report released earlier this year, the International Monetary Fund said that Burma has “high growth potential”, estimating real GDP growth in the 2011-2012 fiscal year could hit 5.5 percent. This could increase to 6.0 percent in 2012-2013, the fund said.

“[Burma] could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world, into its advantage,” it added.