MYANMAR: The new frontier
Myanmar is rapidly opening after 60 years of isolation. Despite the hype, it’s unlikely to be plain sailing
There was just one international cashpoint in Myanmar this summer and it was broken.
The stock exchange was stillborn on its launch 15 years ago, and just 1% of all Burmese have a bank account. Fewer than 0.1% of people own a mobile phone and for good reason: the feeble network often fails completely, and until recently, a SIM card cost over $5,000.
And yet its hard to move in Yangon these days without tripping over business delegations. Every week seems to bring a new troupe of global corporates to Myanmars largest city, each keen to tap into the potential riches of this rejuvenated south-east Asian country.
In early July, the cream of the UKs business community rode into town, led by Standard Chartered, Shell and BP. The US delegation came next, spearheaded by secretary of state Hillary Clinton and backed by 70 of Americas largest corporations, including Coca-Cola, Google and Ford.
France followed, then Germany, Italy and Australia. Each delegation appeared to meld into the last, with only the dates, accents, tongues and corporate names changing. There were and are good reasons for these corporate thrills.
Myanmar, formerly known as Burma, is opening up after 60 years of mostly self-imposed isolation, and international corporates are desperate to be the first to fill this breach and offer the countrys 60 million people shampoo, blue jeans, mobile phones and air conditioners.
As an official from the US state department told Emerging Markets over a coffee: Get a global copy of the Fortune 500 list and go down it, ticking the names off. Each was here, is here, or will be here. Theyd be stupid not to be.
But four facts, in reverse order of gloominess, should be well remembered by corporate and capital investors as Myanmar opens up to the outside world.
First, this remains a desperately backward place, despite the investment that has continued to flow in western sanctions notwithstanding from China, Singapore and Thailand.
According to the IMF, the average Burmese earned $832 last year, placing the country alongside Tajikistan and Zimbabwe on the lower rungs of global wealth.
LACK OF CLARITY
That makes Myanmar less an emerging market than a frontier nation and a basic one at that. Last year, Singapore consultancy Vriens & Partners ranked Myanmar 19th and last among all south-east Asian nations in terms of corruption, political stability and the rule of law. The World Bank couldnt rank Myanmar in its global 2012 Doing Business report: there simply wasnt enough reliable data available.
Second, economic, social and political progress, though rapid and even astonishing in its speed and scale since the accession of the reformist Thein Sein to the presidency in March 2011, can easily be reversed.
The US eased sanctions against American firms investing in the country this July.
Europe, Australia and Canada followed suit. US president Barack Obama praised
Myanmars significant progress along the path to democracy, following the release of Aung San Suu Kyi and the approval of independent trade unions.
New laws loosening the states grip over the media and boosting foreign direct investment are expected by the end of the year.
But sanctions and reforms, at this stage in a countrys development, are fragile concepts, dependent on a host of national events, not least elections.
For this reason, says Thura Soe-Paing, managing director of All Myanmar Investment Partners, a $50 million private equity firm jointly owned by Singaporean and Vietnamese investors, everyones eyes are on the general elections in 2015.
If as expected voters turn against the Union Solidarity and Development Party (the militarys political wing) and elect a fully democratic government, the military has two choices. It can either accept defeat and become part of the new economic firmament but with a diminished role, or cast aside the reform process and revert to full military control. Only then, believes Soe-Paing, will we know if these reforms are for real.
This creates a conundrum for foreign investors: to jump into the frontier state feet first, as General Electric and Coca-Cola are, picking up the rules as they go along, or to wait until 2015, when the countrys future for better or for worse is clearer.
Most here believe that current reforms are for the best even many USDP advisers who, interviewed for this story, insisted the army has given up the fight and just wants to become a normal part of a normal country. Others arent so sure. All these reforms are reversible very easily, says Gareth Price, a senior research fellow and Myanmar expert at Chatham House in London.
But Myanmar has vast potential. Virtually no one here owns a branded product or has a bank account, but that is precisely what makes the country so exciting to global corporates, particularly those searching for the next emerging-markets story.
Plus, it is rich in other ways. Energy minister Than Htay in August estimated the countrys recoverable oil reserves at more than 200 million barrels, and its natural gas reserves at 22.5 trillion cubic feet, a figure that would catapult Myanmar into the energy-producing big leagues.
Other treasures lie in and under the countrys rich soil, from copper and iron ore to timber, agricultural products and precious metals.
If Myanmar does all the right things setting out laws to attract FDI and then working alongside foreign firms economic growth could purr along at over 8% annually for the next decade, reckons the Asian Development Bank.
The final point is more nuanced. In his 2011 book Monsoon: the Indian Ocean and the future of American power, Robert Kaplan depicts Myanmar as a global hinge vital to Asias and the worlds prosperity, acting as Indias buffer against China, and a natural barrier between the Gulfs leading energy producer and Beijings oil-hungry model of state capitalism.
The outside world, it seems, needs Myanmar just as much, if not more, than this country of 60 million people needs reciprocation. After six decades of isolation, global corporations are inundating Myanmar, one of the worlds last great untapped frontier nations.
Time will be the only arbiter of their investment decisions. But for now at least, Myanmar is the hottest ticket in town. I wouldnt be anywhere else, says Soe-Paing, born in Yangon, educated in America and Britain and back home via a corporate job in Beijing.
Myanmar is the only place to be, he says. We have waited 60 years for this opportunity. We arent going to let it slip through our fingers.