Myanmar – investing in a far frontier
Frontier investors have been excited by the opening up of Myanmar’s market since its quasi-civilian government came to power in 2011, after nearly half a century of military rule. But investors also complain that there is very little to invest in. This one is a deep frontier – there is no real stock market, and investors have tended not to go directly into local companies.
Myanmar is seen as ripe for business expansion, given only an estimated 30 percent of the population have access to electricity, for example. And the IMF predicts growth of 8.5 percent in the country this year, one of the fastest growth rates in the world, due partly to rising gas production.
London-listed All Asia Asset Capital recently increased its holding in a Myanmar and Thai-based power generation firm and is also invested in a Thai hospitality and gaming company which has a resort across the border in Myanmar.
Frontier investors across the globe look for annual double-digit returns in long-term investments such as private equity, though there can be transparency risks in these small, unlisted companies. In this new market of Myanmar, the returns could be especially attractive, says Sri Hartati Kurniawan, All Asia Asset Capital’s CEO, who sees potential returns in Myanmar among the best in the region:
We are aiming for 20 percent a year – we are coming in early. We are taking into consideration we are investing in a frontier market, there are certain risks associated with that.
Myanmar is rushing to catch up and make itself attractive to international investors as a place to do business, Kurniawan adds.
There are a lot of things going on, a lot of property development, infrastructure development, they are building new roads – I was surprised myself. Hotels are quite good for business people.
But for portfolio investors restricted to listed companies or debt, Myanmar’s borders remain closed. According to Wells Fargo fund manager Anthony Cragg:
There is quite a lot of private equity in Myanmar, such as oil and gas and agricultural products. But there are no direct listed plays.