Why Invest in Myanmar

Following recent democratization measures, including the release of hundreds of political prisoners, cease-fire agreements with ethnic rebels, and the incorporation of long-time human rights champion Aung San Suu Kyi into the political process, it is apparent that Myanmar is determined to become fully integrated into the international community. After being isolated for the better part of the last three decades, Myanmar is emerging as a potentially high growth target market for private equity investment due to its abundance of natural resources, including oil and gas, attractive tourist destinations, and young, well-educated labor force eager to work at regionally-competitive wages. These attributes, coupled with its strategic location bordering China, India, Thailand and Laos, give Myanmar the potential to emerge as one of the most dynamic economies of the twenty-first century.

  • Government Dedicated to Reforming the Economy
    • Central Bank has implemented a managed-float of the local currency (Kyat)
    • Process to register foreign companies and joint ventures has been reduced from one year to three weeks
    • President Thein Sein announced a “second wave” of economic reforms to reduce the state’s role in education, energy, forestry, healthcare, finance and telecommunications
  • Suspension of Economic Sanctions
    • High-profile visits from foreign ministers, including William Hague (UK) and Hillary Clinton (U.S.) are paving the path for improved relations
    • The US, EU, and a host of other nations have lifted and/or suspended all major economic sanctions against Myanmar as of May 2012
  • Increased International Support
    • World Bank/IMF agree to provide technical assistance on financial and economic issues after a 25 year hiatus
    • UN Secretary-General Ban Ki-moon urges countries to end all remaining sanctions against Myanmar (May 2012)
    • India has provided Myanmar with US$ 500m credit in attempt to boost trade and energy ties (May 2012)
  • Location
    • Myanmar sits at the crossroads of three of the most important economic engines of the 21st century – China, India and ASEAN
    • Construction of Dawai deep-sea port will link the Indian and Pacific Oceans while by-passing the Strait of Malacca
  • Natural Resources
    • Myanmar is endowed with off-shore oil and gas reserves
    • It also has many minerals, precious gems, and timber
    • There is fertile land for production and processing of agricultural commodities
    • It has aquaculture, livestock farming and processing potential
  • Geography
    • National treasures, such as pristine beaches along the Andaman Sea and Buddhist temples at Bagan, are destined to become prime tourist destinations
    • Myanmar holds the largest landmass in mainland Southeast Asia, including vast forests, navigable rivers, fertile deltas and a vast coastline with natural deep-sea ports
  • Increasing Trade Integration
    • WTO member since 2004
    • ASEAN membership offers regional trade benefits
  • Improving Transport Connectivity
    • Railroad system is being rehabilitated
    • An additional international airport is being built at Bago
    • Railroad, roadway and oil pipeline from southern China (Kunming) to Rhakine State are under construction
    • Deep-sea ports at Dawei are being built in the south
  • Under-penetrated, Growing Domestic Consumer Market
    • Exceptionally youthful demographics ensures rising domestic demand (61% of the population is under 25 years old)
    • Workforce participation, household formation, and urbanization will all show robust growth over the next decade
  • Future Upgrade of Stock Exchange
    • Japan’s Daiwa Securities and the Tokyo Stock Exchange signed an MOU with the Central Bank of Myanmar (CBM) to modernize Myanmar’s securities market (May 2012)

The Role of Private Equity

In spite of economic reforms to decentralize the state’s role in the economy and restructure the financial system, the development of Myanmar’s private sector is inhibited by a lack of financing options and technical expertise. Myanmar’s banking sector suffers from stifling regulation. Laws stipulate that loan terms must not exceed one year and banks cannot lend without collateral of a greater value than the loan. These provisions ensure that obtaining a loan is near impossible for the majority of citizens. And while the country hosts Myanmar securities Exchange Centre, the bourse only lists two companies and is considered the smallest, if not the most primitive exchange in the world, rendering it practically obsolete. Furthermore, after years of government control of the economy and “crony-capitalism”, Myanmar’s business class lacks technical know-how. However, partnering with private equity firms can provide businesses with critical financing capital and technical expertise that will ultimately foster a strong and sustainable business community in Myanmar.