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SOVEREIGN MAN

Boots on the ground in Burma

Burma ceiling

May 25, 2012
Yangon, Burma

If you’re sick and tired of all the doom and gloom that pervades the US and Europe, and should your personal circumstances allow, I unreservedly recommend that you hop on a plane and go and check out Burma.

20120520 181059 300x225 Boots on the ground in BurmaThis is a rare good news story, and it may very well be one of the most exciting economies in the world.

Shut off from economic sanctions since the early 1990s, Burma (aka Myanmar) is starting to emerge once again. From the looks of things on the ground, it’s not just hype.

The retiring generals seem to have decided that the best way to protect their accumulated wealth and not ending up like Hosni Mubarak is to open the country up and introduce democratic reforms.

This way, they hope, they won’t be remembered as tyrants, but as visionaries who initiated a ‘peaceful transition to democracy’. I imagine all sorts of back-room deals have been struck with western diplomats to ensure Burma’s current leaders won’t be prosecuted.

As a result of this change in the political landscape, economic sanctions imposed by Europe and the United States have been suspended, and Yangon today is awash with opportunity.

The reason is simple. This is a market with huge potential. Burma has a young (median age 24), growing population of 56 million that is exceedingly rich in natural resources.

20120522 162334 225x300 Boots on the ground in BurmaAt the time of the military coup in 1968, in fact, Burma was actually the richest country in South East Asia. Neighboring Thailand, which is roughly the same size, and has a similar population, today boasts an economy eight times larger than Burma’s.

Clearly there’s huge potential for catch-up… and my observations on the ground in Yangon confirm this assertion:

- Many goods and services that we take for granted in the West, for instance, are in limited supply. Others simply do not exist.

- With a few exceptions, the country’s entire fleet of motor vehicles looks like the cast offs from a bad used car dealership.

20120522 162825 300x225 Boots on the ground in Burma- Mobile phone penetration ranks 215 out of 217 countries in the world, behind only Bhutan and North Korea.  Burma is the only country I’ve ever visited where my Hong Kong mobile phone can’t roam on the local network.

- The leading business hotel downtown does not accept credit cards. Payment must be made upfront, in cash, in US dollars.

- The few ATMs that do exist are not connected to the outside world.

- Internet access is patchy at best and non-existent for long periods… assuming you can even find a connection.

- Power outages are commonplace. And that’s being polite.

Banking, infrastructure, and telecommunications are some of the most obvious industries crying out for substantial investment.

Yet while the military regime that has ruled the country for the past 45-odd years has finally decided to reform, many issues remain unclear.

There is, in theory, a rule of law based on a British Common Law tradition as a result of the country’s colonial past. But its application and interpretation can be arbitrary.

There is a Foreign Investment Law– a legacy from when the country enjoyed a brief period of economic sunshine in the early 1990s.  But it is currently being revised, and it remains unclear what the exact changes will be.

The series of meetings I’ve had in Yangon have all been useful, and the people here are universally positive on the country’s outlook. But at this early stage, there is more watching and waiting than actually investing and doing.

The local stock exchange, for example, has only two listed companies. And they trade only a handful of times each month.

The head of the exchange told me there are only 11 public companies in the entire country. Two are listed; another two are “qualified” to list, but don’t want to. The rest are too opaque and don’t meet the acceptable standards of disclosure expected of listed companies.

It is possible for a non citizen to own 100% of a local company, however it is currently illegal for foreigners to buy shares from locals. That means, for now, if you want to invest in Burma, you have to start something from scratch.  There are few pure passive opportunities.

For the right person, with the right idea, as well as the energy and talent to execute on it, I would rank the business opportunities in Burma among the most attractive anywhere.

There are still many moving parts, and the business landscape remains in a state of flux. But already many ambitious young people, including highly educated Burmese who grew up abroad, are here on the ground. A certain percentage of them will undoubtedly become wealthy beyond their wildest dreams.

The field is wide open. If you want to be among them, there should be nothing holding you back.

Until next time,

Tim Staermose
Chief Investment Strategist
Sovereign Man

About the author: Born to a Danish father and British mother, in Dar Es Salaam, Tanzania, Tim Staermose has led an international life since the day he was born. Growing up, he also lived in Egypt, Denmark, and Singapore, before eventually settling in Australia, where he completed his education and took out citizenship. Since then he has also lived and worked in Hong Kong, and Manila, Philippines, in the field of equity research — both for a bulge-bracket Wall Street investment bank, and for an independent investment research firm. Today, when not traveling the globe looking for investment and business opportunities for the Sovereign Man community and catching up with his diverse, multinational group of friends, he divides his time between Hong Kong, and the Philippines.

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Comments on this entry are closed.

  • Luke_Cane

    Has the Myanmar government yet passed its foreign investment reforms?  If I recall correctly, it had provisions for things such as 100% foreign ownership, 5-7 year tax haven, minimum requirements for domestic work, etc.

    Is farmland available to foreign investors, or is it protected like in Thailand / off limits like in China?

  • Arthur T Williams IV

    Probably a big opportunity for English teachers too, wouldn’t you imagine?
     

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  • Joe P

    Can you buy property there as a foreigner ? The problem in most of these countries is that majority ownership must be local which  means if there is a sudden boom the foreign partner can have a lot of legal (and in some cases threats or actual violence).

    Dont think the military will give up their sources of income easily. See what happens in Thailand every time there is a threat the  unamed power holders of bribes, kickbacks, prostitution and drugs.. They have a coup. 

    I plan to go to Burma  in July. Can you suggest resources for places to stay or easy ways to integrate ?  I’ve heard the main hotels are packed to the gills with the big chains trying to stake a claim.  

  • http://profile.yahoo.com/27PPH7LNKTXZ5C34TIMO45WT34 Robert

    How about distributed antenna systems for mobile telephone coverage? It is all the rage in Europe and the US, and I am sure it can be set up in Myanmar and allow them to leapfrog infrastructure currently established in the west…..

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