SINGAPORE (June 21): When Nobel Prize winner Aung San Suu Kyi swept to victory in Myanmar’s 2015 polls against the then-ruling Union Solidarity and Development Party, euphoria and expectations were high.

Growth forecast was at 8-9%, and Myanmar’s economy was poised to boom.

But, fast forward four years, and the euphoria seems to have faded.

Is Myanmar still a viable investment? Market experts that spoke to The Edge Singapore seem to think so. But here are some things you need to know before you invest in the last frontier market in the South-east Asian region.

1. It isn’t going to be smooth sailing

Joshua Morris, CEO of Emerging Markets Investment Advisers (EMIA), a Singapore-registered private equity fund manager, says there are challenges to running a business in Myanmar.

For starters, there is a lack of an official credit bureau, which would help in evaluating potential business partners by verifying credit history.

Also, most citizens don’t have bank accounts. Almost 80% of Myanmar’s 53 million population is still unbanked, while less than 10% own credit cards.

This can make it hard to get financing and flow of capital in and out of the country is sometimes tangled in bureaucracy.

Corporate governance is also still a work-in-progress, as the Companies Act was just recently enacted and implementation is steady, but slow.

2. Growth in Myanmar is still strong

Myanmar’s GDP growth currently hovers around 6%, with the Asian Development Bank predicting it to reach 6.8% by 2020.

That is still robust, driven by growing wealth and the influx of large-scale development projects, as is typical of emerging markets.

In comparison, The World Bank estimates that the regions’ growth (excluding China) will only reach around 5.1% in 2019.

Even manufacturing powerhouse China is recording growth of around 6% annually since it took a downturn from 6.9% in 2015 to 6.2% in 2019.

Enterprise SG’s regional Director for Myanmar, Audris Tan, tells The Edge Singapore that Myanmar’s strategic location, young and highly-literate population and increasing income levels make it a market with plenty of opportunity.

“We see opportunities for Singaporean companies in agriculture and aquaculture, infrastructure – especially in utilities, power and urban development – as well as in the manufacturing and consumer sectors. The education sector, covering preschool to higher education also holds potential for more Singapore companies to enter the market, given Singapore’s track record in this sector,” says Tan.

3. Ethnic and religious conflicts are still a problem

The 700,000 Rohingya refugees who were forced to flee to Bangladesh is a weeping wound on Myanmar’s reputation.

When Aung San Suu Kyi came to power, there were widespread expectations that she would have been able to rectify the situation.

However, till today, anti-Muslim sentiment is still being propagated by hard-right nationalist Buddhist groups, which disrupts the peace process in Myanmar’s ongoing civil conflict between the military, and the ethnic states seeking self-determination.

This has cast a pall on the domestic economy, and damages Myanmar’s reputation in the global sphere.

This impact can be clearly seen, at least from the perspective of foreign investment.

The flight of the Rohingya began sometime around August 2017. Data issued by the DICA showed FDI in 2018 was the lowest since 2013.

Between 2013 and 2014, FDI was at US$4.1 billion, and peaked at US$9.5 billion between 2015 and 2016, which was when the NLD came into power.

It declined to US$6.65 billion the following year, then to US$5.7 billion in 2017, and plunged to US$1.74 billion by mid-2018.

4. Infrastructure support still a challenge

As with any developing country, the lack of access to capital and financing, opacity in business dealings, and the long wait for robust infrastructure and legislative frameworks, are just a few of the major pain points that have investors' patience wearing thin.

By the Myanmar government’s own admission, a lack of coordination between the NLD and regional governments on development policies, red tape and a weak implementation of new laws, have hampered the flow of FDIs into Myanmar, said U Aung Naing Oo, permanent secretary of the Ministry of Investment and Foreign Economic Relations.

According to a report in the Myanmar Times, Naing Oo said “political uncertainties, poor physical infrastructure, lack of skilled labour, an underdeveloped capital market, high taxes and a legal system with a hodgepodge of laws dating back to the British colonial era has held back investors.”

5. Have a long term plan

Myanmar is full of opportunities for Singaporean businesses, but it’s not for those who take a short-term view of things.

The way EMIA’s Morris sees it, there is reform happening. But the changes have been slower than expected.

“So it really becomes a matter of how patient you are, and how long you have to see those reforms come through,” he says.

“To get to the golden pot at the end of the rainbow, is to be here, in Myanmar,” says Gerald Lee, the managing director of Myanma Food For Thought (MFFT). “If you come here [looking] to make a quick buck by putting the systems in place, hire lots of people, but operate it from overseas, that isn’t going to work.”

Read more about this in our cover story, “Myanmar: The long game”, in The Edge Singapore (Issue 877, week of June 24), which is available at newsstands now.

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