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Sanctions, capital curbs, untested legal arena hold back foreign businesses
Bloomberg
29 March 2012
Myanmar’s emergence as Asia’s next tiger economy is more potential than reality as a rush of investors finds little to spend money on besides a limited supply of hotel rooms after six decades of isolation.
‘Every day, another delegation, another delegation, another delegation, and no one’s putting money on the table,’ says Tony Picon, associate director of property broker Colliers International Thailand.
‘The business community that’s visiting Myanmar must be honest and say ‘We’re just looking, we’re not going to buy,’ and not leading a false sense of anticipation from the local community,’ he said.
Investors’ first hurdle is the sanctions maintained by the US and Europe, which policy makers are preparing to review following by-elections next week that include dissident Aung San Suu Kyi. Even then, restrictions on capital flows, lack of a developed stock exchange, an untested legal environment and rudimentary infrastructure will offer plenty of reasons for holding off putting money in the former dictatorship.
A flow of corporate executives and tourists to Yangon, the former capital and largest city, has ‘astronomically’ lifted hotel prices in the past few months to as high as US$400 per night, according to Mr Picon. At the same time, many businesses are balking at long-term deals, making local agents reluctant to deal with foreigners, he said.
‘Nobody is putting money anywhere at the moment,’ said Luc de Waegh, founder of business-advisory company West Indochina Ltd who helped set up British American Tobacco plc’s Myanmar operations in 1993. ‘It’s a difficult market, it’s a small market, it’s a market where people don’t have much disposable income. The future looks very bright, but in the meantime there isn’t much money there.’
Opportunities in the country of 64 million people are clear. Investor Jim Rogers, the chairman of Rogers Holdings who predicted a global commodities rally in 1999, said on Feb 22 he’d put all his money in Myanmar if he could.
Myanmar’s total land area, second only to Indonesia in South-east Asia, contains deposits of gold, copper and gemstones. The nation is positioned between India and China, astride maritime trade routes between Europe and East Asia and was in British colonial times the world’s largest rice exporter - a title now held by neighbour and one-time enemy Thailand.
France’s Total SA, Chevron Corp of the US and Malaysia’s Petroliam Nasional Bhd entered the nation years ago to tap offshore energy reserves. Even so, large swathes of its waters sit unexplored, indicating the potential is greater than the proven gas reserves that the BP Statistical Review estimates to amount to one-eighth the size of Malaysia’s.
‘Arguably though, Myanmar’s gas reserves are much higher given the unexplored areas of its extensive coastline,’ CLSA Asia-Pacific Markets said in a research note this month. ‘The development of Myanmar’s energy resources, along with the connecting of the Asean transportation network, will boost foreign investment flows into the region.’ Myanmar’s per capita gross domestic product amounts to US$2.25 per day, about half that of Vietnam and 14 per cent of neighbouring Thailand’s, according to International Monetary Fund estimates.
Only one in 30 people has a mobile phone and even fewer have Internet access, Nomura Holdings Inc said in a March 14 report.
The nation attracted about 800,000 tourists in 2010, 20 times less than neighbouring Thailand, as its hundreds of kilometres of coastline sit undeveloped. The total amount of office space in Yangon is equivalent to about a third of that available in Empire Tower, the biggest office building in Bangkok’s central business district, according to Colliers.