NEWS
Market veterans highlight risks and rewards of investing in Myanmar
16 January 2013
Category:
News, Myanmar
By Toby Garrod
A panel of experts at the Asian Financial Forum offering advice to potential investors in Myanmar on Tuesday (January 15) displayed clear consensus on the need for investment across the agriculture and hospitality markets, while stating that changing regulation and bureaucracy are the key risks.
“What I have noticed is that the business environment in Myanmar today is very similar to 1994 Vietnam, when [US] President Clinton visited,” says Don Lam, CEO and founding partner of VinaCapital. “That was when the trade embargo was lifted. A huge amount of reform took place following that visit. With [US] President Obama visiting last year, I see some similarities in Myanmar. We are likely to see a lot of foreign interest emerge in the coming few years. But given some of the business problems we have seen in Vietnam, along with the successes there, a cautionary approach is advisable.”
While opportunities are in clear supply, the country displays some fairly unique complexities and risks that should be acknowledged, they say.
“Myanmar of course has great potential, particularly in regard to agriculture,” says Herve Touraine, executive director of Sunwah Commodities. “It was actually an exporter of rice even before Thailand. Meanwhile, it has a large young population, with half still living in the countryside. But risks are always present. When you are coming to a new country to trade commodities you need to know what kind of companies you will be working with and competing against; government owned or private, for instance. Often these companies are highly diversified, which can be dangerous. In Vietnam, we met with a coffee exporter that was also the country’s biggest importer of karaoke machines. It can be hard to understand exactly what you’re dealing with.”
Crucially, the rapid pace of change that typifies emerging markets, particularly in the early stages, is a source of both opportunity and risk.
“The risks in investing in an emerging market often relate to changing rules and regulations there, as well as red tape and bureaucracy,” says Mr. Lam. “Finding the right partner is also very important. We definitely see opportunities in the agricultural sector. Many of my partners note the investment opportunities in the mineral and mining space. Which is true, but at the moment that seems too risky to me. That sector is currently quite sensitive and requires a lot of capital. It’s too early to invest, unless you are a very big company. We also like the hospitality sector. Two years ago my regular hotel charged me US$40 a night. Today at the same hotel in the same room, with nothing changed, it costs me $250. At some point however, excess capacity is likely to emerge.”
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