Spring 2012

INSIDE VIEW: Eyes on Myanmar

MonksFollowing a recent visit to the country, Xin Jiang, from Matthews International Capital Management, details some of the reform processes underway and looks at potential investment opportunities.

Myanmar's parliamentary by-elections are scheduled for April and will be the first election involving the National League for Democracy, led by political campaigner Aung San Suu Kyi, since 1990.

What may be just as important as the election outcome for the Nobel Peace Prize winner is the level of transparency in this election process so far.

The government’s new spirit of openness and co-operation is encouraging and Matthews International Capital Management will continue to monitor the impact of these changes.

Since the United States declared the Asia Pacific region to be a new priority, its strategic moves in southeast Asia have included a visit to Myanmar in December last year by Hillary Clinton, the US secretary of state.

The visit was generally seen as an endorsement of the reform processes that Myanmar has slowly begun to roll out over the past year.

On a recent trip there, I was able to take a first-hand look at some of these developments.

Myanmar’s verdant and tropical capital city of Yangon struck me as having a calm and pleasing atmosphere. The air held a bit of a haze as many residents use wood-burning fires for cooking because there is a lack of sufficient electricity or gas.

There is also a dated quality to the city that one might expect from a country long isolated – both diplomatically and economically – from the west because of the actions of its former military junta. The vehicles on Yangon’s bumpy roads are at least several decades old and mostly imported. Infrastructure is sorely lacking.

Rolling power blackouts occur at least two or three times a day, affecting many people. However, some businesses, such as the hotel I stayed in, maintain their own diesel generators.

As Myanmar’s hotel rooms are still limited, rates have doubled over the past few months and are still on the rise, along with tourism.

The country boasts numerous beautiful temples and stunning beaches. There is also much buzz over prospects for the entrance of international hotel chains, new serviced apartments and condominiums.

Already, land prices in Yangon have shot up. Yangon’s property market is expected to stay strong as plans for infrastructure development promise to boost real estate.

Foreigners are not legally able to buy land so the surge in interest from business people and investors from Vietnam, Thailand, China, Singapore and Malaysia should also stimulate Yangon’s rental market.

Judging from Myanmar’s modern – yet still under-utilised – airport, the country seems ready for the influx of attention from abroad.

What struck me most during my visit was the general makeup of the people. From the hotel and restaurant staff to local business people, they had a warm and easy manner.

The population is predominantly Buddhist. It is skilled and well educated. Myanmar has a literacy rate of about 92%, higher than other frontier markets such as Laos or Cambodia.

In several separate conversations, residents pointed to an increasing number of Burmese who are currently living abroad are considering repatriating to Myanmar as more opportunities arise.

Despite the foreign interest, however, the country still faces many challenges.

First and foremost, it needs to demonstrate political and financial stability. Myanmar has no local stock exchange. Its complex and confusing foreign-exchange regime also requires a major overhaul.

Fortunately, the International Monetary Fund is already reviewing ways to help unify the country’s foreign exchange system and lift restrictions on international transactions.

Many in the region see Myanmar as a potentially attractive investment alternative to Thailand. Myanmar’s reforms should also benefit the region.

Thailand, for example, already supplies a significant portion of Myanmar’s cement needs. We expect this demand to grow as infrastructure develops.

Myanmar has abundant reserves of oil and gas. Many global resource companies already have a presence in the country, which is also a big exporter of gems such as jade, rubies and sapphires.

Xin Jiang is a research analyst at Matthews International Capital Management

©2012 funds global

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