Myanmar - 'No going back to square one'

Foreigners outside once-isolated Myanmar may still be sceptical about whether recent reforms will be sustainable, but those living inside the country have no such doubts.

"I would request that Thai people not miss the boat. Although the risk is there it is very small and we need to grow together with Myanmar," said Sai Sam Htun, the president of the Loi Hein group of companies.

He was not alone. At a recent event Mr Sai attended in Bangkok, executives of other larger companies, one of them listed on Singapore's stock exchange, had similar things to say about Myanmar and the policies of its government.

"There is no way to go back to square one," said Mr Sai.

So what makes these people think the changes are irreversible?

Political pundits and businessmen all feel that Myanmar's military junta learned from the Arab Spring that it could not keep an iron grip on the country and its people forever.

The result has been "controlled" democratisation, which the junta saw as a way of helping to take the country to the next level and avoid any kind of uprising such as the one seen in 1988. Though the election held in November 2010 was widely criticised, the new government's commitment to reform has surprised the entire world.

Closed to the world for five decades, Myanmar is now reviving its economy. Foreign investors are weighing the potential returns from infrastructure as well as manufacturing and services including healthcare and hospitality.

"There are vast opportunities available but there are various problems as well, such as the lack of unified currency or use of plastic money," says Mr Sai.

"We are 20-30 years behind the others due to the closed-door policy."

Mr Sai says he's taking the positive view given his country's position between two huge and economically powerful neighbours, China and India.

Until recently Chinese companies dominated infrastructure and other areas but now companies from other parts of Asia, be they Thai, Malaysian or Indian, have been able to bag contracts. The government has also signalled that it does not want to be reliant on a single country given prevailing economic and geopolitical conditions.

To attract foreign investors, Myanmar places no limit on foreign shareholding in many ventures, unlike the 49% limit on various industries in Thailand.

Interest in the real-estate business, a strength of Thai companies, is likely to surge as demand in cities such as Yangon has been on the rise.

"Prices of condominiums and apartments are one-third of those in Thailand and lot less than the $100-120 per square foot in Singapore," said one leading investor who declined to be named, adding that rental yields could be up to 10-12% for good property in Yangon.

Another interesting growth area is the automotive sector, as most of the vehicles on Myanmar's roads are second-hand cars, many at least two decades old. Demand for motorcycles is also rising fast, as are prices, while distributors are still scarce.

Building materials also show potential as construction gains momentum. Currently, Siam Cement products imported from Thailand are the most widely available in Myanmar.

But experts warn that entering new markets has its perils and investors need to carefully study the issues.

"[Entering Myanmar] slowly and steadily with all the information would be the most advisable thing to do," said Setsuo Iuchi, the chief representative for Asean and South Asia of the Japan External Trade Organisation.

Areas that have been identified, apart from the extraction of natural resources, are tourism, real estate, manufacturing and infrastructure such as electricity generation and port development.

Italian Thai Development Plc (ITD) has already become a major player in Myanmar as the lead developer of the multi-billion dollar Dawei complex.

But the rise of Myanmar has many businesses in Thailand worried that the prospect of jobs and prosperity at home will lure back the nearly 2 million migrant workers who power Thailand's labour-intensive industries.

"This is a natural evolution and we have to ... look at a higher value chain and not just rely on the cheap labour," said Chanitr Charnchainarong, the president of the Market for Alternative Investment (MAI).

He said too many Thai companies were paying out too much in dividends to shareholders and not reinvesting enough of their profits in expansion. For medium-sized Thai companies, he said, the best strategy could be to expand to neighbouring countries in Asean since setting up businesses in huge markets such as India or China would be prohibitively expensive.

Umesh Pandey

Bangkok Post Business

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