SINGAPORE (Jan 28) Investors’ euphoria in response to Myanmar’s new political chapter seems to be over. The country’s economy grew around 6% for each of the past three years, a significant slowdown from 2013’s 8.4%.
Yet, according to Lim Chong Chong, Myanmar’s growth story is just starting. In an interview with The Edge Singapore, the co-founder of Ascent Capital Partners calls Myanmar a “misunderstood” market.
On Jan 15, Ascent Capital Partners launched its Myanmar-focused investment fund. The Ascent Myanmar Growth Fund I LP (AMGF) will invest in the consumer, education, financial services, healthcare, technology, media and telecommunications sectors.
So far, the fund has raised more than US$50 million ($68.03 million) from backers, including the Asian Development Bank (which has invested US$10 million in the fund), Singapore sovereign wealth fund Temasek Holdings and Philippines conglomerate JG Summit Holdings. Lim has attracted some prominent individual investors as well, including the two co-founders of Myanmar Distillery Co, Aung Moe Kyaw and Singapore’s Tony Chew, who has been investing in Myanmar for more than two decades.
Lim admits that interest in Myanmar has waned over the last couple of years, but he is not deterred. “It is factually correct to say that the level of FDI [foreign direct investment] and interest in Myanmar has decreased over the last five years. It’s a combination of factors. The country back then was opening up; people were curious. They knew the opportunities were there, but so were the challenges,” says Lim.
“Some say, ‘Oh, Myanmar is not pro-FDI, it’s so difficult to start a business,’ but this is constantly evolving. Bear in mind that I have been there since 2013. I was there at a time when the business environment was even less [conducive] than now,” he adds.
Prior to Ascent, which he co-founded in 2017, Lim worked at Temasek, EY and KPMG. He was also the chief financial officer and head of strategy at Capital Diamond Star Group in Myanmar. His co-founder at Ascent is Malaysian Pneh Tee Keong, former CEO of Maybank Private Equity.
Myanmar’s development is a work in progress, but over the last five years, Lim has seen much improvement in terms of the readiness of the regulators and stakeholders in Myanmar to develop its economy.
In February, the government released the Myanmar Sustainable Development Plan, which aims to “connect and align the country’s numerous policies and institutions for the purpose of generating implementable solutions to achieve genuine, inclusive and transformational economic growth”.
The plan encompasses five goals, 28 strategies and 238 action plans, aligned with the United Nations’ Sustainable Development Goals and the 12-point policy released by the government of Myanmar.
The government also formed a new Ministry for Investment and Foreign Economic Relations in November 2018 to improve cooperation between the various ministries for investment purposes.
This is why Lim is confident, despite the underlying political risk in a country such as Myanmar, where the all-powerful military still rules the country and not its democratically elected leaders.
However, is this confidence misplaced? Political pundits predict that Aung San Suu Kyi, with her international reputation tarnished over her handling of the Rohingya crisis, may not find the 2020 general election a walkover, further throwing into disarray Myanmar’s plans for development.
Lim does not see these potential upsets as insurmountable obstacles, as he is in it for the long haul. The unusual structure of the fund reflects this long-term view. “A typical fund life is 10 years, but ours is 14. The long period is a risk, but on the other hand, it allows us to ride out short-term volatility. The fact is, any frontier or emerging market will have a certain degree of uncertainty. There is definitely no guarantee [of political stability],” he says.
“But can Myanmar generate the risk-adjusted returns for us and our investors? This is where I’d say we have done our analysis. Our team of investors believe so, and we are encouraged by that,” he adds.
Lim sees a few key underlying trends in the fund’s favour over the long run. For one, Myanmar’s sizeable population of 51.4 million is relatively young. This demographic will help underpin income and economic growth.
“Our investment thesis is the Myanmar growth story. The GDP is a [crude] way of looking at growth and is aggregated. If you look at the sectors we focus on — education, finance and so on — growth is well in the double digits,” he says.
Still, Lim is under no illusion that it will be smooth sailing, even with his experience and the backing of his investors. “We are focused on ESG (environmental, social and governance) principles and we recognise that the level of corporate governance among companies in Myanmar may not be ready for us to invest in from day one. So, we have to work with them to restructure ownership and improve governance before we can deploy capital,” he says.
Ascent’s fund is the third Myanmar-focused fund, and the first from Singapore, as far as Lim is aware. He believes he has early-mover advantage. “It’s definitely not a market where we’ve missed the boat,” he says.
