Investing in Myanmar

We met with a private equity company while we were in Myanmar and learned a lot about the history and sociology of the country as well as the investment environment.


In 1988m the U.S and Myanmar were very close, with senior military officers studying and training in the United States and active intelligence cooperation.  According to the people we talked to, the CIA even helped Myanmar start its drug trade.  At the time, the U.S. perspective was all about containing China.


When the U.S. changed its policy towards Myanmar, China saw an opportunity and moved into Myanmar in a big way, coming to dominate its economy.  China was easy for Myanmar to engage with because China didn't worry about democracy or human rights, key issues for the U.S.


Now, the government wants Western investment.  There is corruption in Myanmar, but not as bad as in other Southeast Asian countries like Indonesia.  But, you must have the right local partner to do be successful in this country.  You have to be clear that bribery is not something you'll engage in.


To be successful, a company must commit people and time to Myanmar.  If you're not on the ground, showing a commitment to the government or a local partner, you won't get what you need from either to be successful.


Land is almost entirely owned by the government.  In 1962, the Burmese Socialist Party nationalized everything, allowing very few families to keep title to their property. So, today, if you want to invest in a real estate project, you can get a 50 year land lease from the government with 2 10-year extensions, not too different from doing business in China.


It's very difficult to establish title to property since there is no single land registry.  A land title document becomes the asset.  If you want to invest, you must see proof of ownership and the actual dimension of the land you want to buy or lease. 


Myanmar is an entrepreneurial country with lots of small shop owners.  When Burmese ex-pats decide to come home, there will be a tipping point in terms of entrepreneurship.  In the past, large conglomerates have been favored, but now small and medium sized businesses are becoming important.


Coca Cola is creating 6000 jobs in Myanmar and has donated $2 million to women's and children's programs, a lot of money in Myanmar.  While there are some environmental laws, it will be NGO's that have the biggest influence on environmental protections in the future.


Most of the construction materials come from Singapore.  The cost of renovation is cheap, but it's important to closely supervise the work.  Staffing is a big problem since Myanmar is new to the concept of hospitality and customer service.  While there is a small union movement, there is no understanding of what a union really does.


There are the first stirrings of civil institutions and a free press.  The press is just beginning to write about injustice and courts are now being forced to address injustices.  The rule of law is present.


A political transition is taking place.  The 2015 elections will be very important to investors.  There is a big need to create laws to ensure investments are protected.  Aung San Suu Kyi's party is weak and many question if she is able to become a leader, but she is very popular.  The constitution would need to be changed if Suu Kyi were to become prime minister because the current constitution prohibits anyone with foreign ties to hold the highest offices (and Suu Kyi's husband was British as are her 2 sons).  But, this is an exciting time to be in Myanmar and a good time to prepare to invest.

Myanmar's Ford dealership

Our group atop a popular Ford truck in Yangon

I'm going to get back to my blogs about Myanmar, such a beautiful and fascinating country.  Our trip there was last fall, so I'm a bit behind, but next I'll move on to our completely business-oriented trip to Southeast Asia in January.  Next round--our planning trip to Southern Africa (Namibia, South Africa, Zambia and Botswana) in April.


While we were in Yangon, we visited a brand new Ford dealership, solid evidence of the turnaround in U.S. policy towards Myanmar as it slowly makes political changes.  But, don't expect rapid democratization yet.


It is very expensive to buy cars in Myanmar because of the hefty duties and taxes.  A Rolls Royce is over $1 million US.  People pay cash because, as yet, there are no banks that can handle the foreign exchange needs.  So, imagine who has the money to pay $1 million for a car--not your average shopkeeper or farmer.  People actually pull up to the Ford dealership with a trunk full of cash to buy a Ford, which is very popular.  Their average car costs about $70,000 US (for a Ford Focus).

A favorite Ford in Myanmar

It's impossible to quote a price on a car until it actually arrives on the showroom floor because the duty may change.  Right now, Nissan is planning to build cars in Myanmar, with the Azusa already assembled there.  That puts Ford at a price disadvantage.


We've driven on the best roads in Yangon, but once you get outside the city, there are huge potholes.  The biggest car repairs are suspension related and, since Ford has a very strong suspension, it is popular.  They can't keep their cars in stock.


Highway safety is not a priority yet, though no doubt will be soon as driving is hazardous.  Because more people can buy cars today, the accident rate is way up.  Many cars have no lights for night driving and some drivers who do have lights use their high beams because they can see better, but they don't understand the impact of their brights on oncoming drivers.  Road etiquette is still in the future.


This Ford dealership is a joint venture, where Ford's partner owns the land.  Average wages are $200 per month, good for Myanmar.  Ford is focused (no pun) on teaching its employees key skills, from English to how to read a manual to the technical parts of Fords to mechanics.  The Burmese are highly motivated and work hard to learn the skills they need to be successful.  Because they have such a big need for trained people, this dealership is training people in 4 weeks for jobs that take 4 years training in the US.  This means that there must be at least 1 very strong technical person in each area to oversee and train employees.