Myanmar: Full of Hope or All Hype?

Myanmar is often described as Asia's last frontier. The long-isolated country has more than 60 million people, yet many industries have little or no competition. 

Does this make Myanmar ripe for investment?

The past
For investors who are not up to speed on the developments in Myanmar over the last few years, here's a brief recap.

In 1962, the military enacted a coup and took control of the country (called Burma at the time), marking the beginning of socialist rule for nearly the next 50 years. Western sanctions prevented economic growth and expansion, and Myanmar was closed off from the outside world. In 2011, talks of reform began to take place. In 2013, the EU and the United States lifted most economic sanctions, paving the way for foreign investment to return to the country after decades. 

The present
If the California Gold Rush was the "Wild West," then Myanmar is the "Wild East." Companies are scrambling to become the first movers in a new, growing market.  

Construction in downtown Yangon (2012). Source: Mike Fee (author).

A year ago, Coca-Cola opened a manufacturing facility in Yangon with local distribution partner Pinya Beverages at a cost of around $200 million.

Coke products have been imported to Myanmar from Thailand for decades. Anyone willing to spend around $1.50 could get a can of Coke. Coke's new factory is expected to allow its products to reach more than 100,000 retail outlets, creating a wider presence and lowering prices for Coke products in Myanmar. Establishing a local presence builds the strength of the iconic Coke brand. The only two remaining countries without an "official" Coke presence are North Korea and Cuba. 

Coke is taking care not to jeopardize its reputation as it moves into this troubled nation. For example, the Coca-Cola foundation is working with local organization Pact to offer business classes to nearly 25,000 Myanmar women. And in a statement, the company said:

The Coca-Cola Company's well-established global standards for corporate ethics are being incorporated into Coca-Cola's business practices in Myanmar. This includes strict adherence to its global human and workplace rights policy, supplier guiding principles, code of business conduct and anti-bribery policies.

In June, The Gap announced it will be the first U.S. retailer to have garment factory operations in country, likely drawn by the large garment-related workforce and relatively low wages.

Significant potential risks
Despite reforms, significant political, religious, and social tensions persist throughout the country. If tensions escalate, Western companies might feel pressure from social-media campaigns and public scrutiny. Sanctions that were recently lifted could suddenly be reversed.

Myanmar's President Thein Sein, who took office in 2011 and introduced the reforms that led to the country's transformation, has announced he will not run for re-election in 2015. And Daw Aung San Suu Kyi, the pro-democracy opposition leader who is popular among Myanmar's citizens, will not be allowed to run for president. The U.S. has expressed disappointment with the ruling, and there are no other frontrunners at the moment. This leaves a lot of uncertainly regarding whether the sweeping reforms will last.

Downtown Mandalay, Myanmar (2013). Source: Mike Fee (author).

The future
Myanmar has potential, but it will be a trial-and-error environment over the next few years. Investors would be wise to stay on the sidelines and continue to asses the risks and evaluate the progress. Being a first mover is not always the best strategy. Businesses need to make smart decisions with qualified local partners and constantly asses the risks in an ever-changing environment. For these reasons, do not get too excited about Myanmar -- yet.

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Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 23, 2014, at 9:17 PM, tomjang wrote:

    be good, things will come our way. the envy of the world is not a big deal. from looking around, we can be big. i got two acts. one is we can be the richest country in the world. two is that we control our own destiny.

  • Report this Comment On June 23, 2014, at 11:46 PM, mikefee wrote:

    Thanks for the comment. I appreciate the feedback.

    I also believe Myanmar can prosper-- through a disciplined approach.

    The article is a brief overview on some observations I have made. I wrote another article regarding Hilton and the hotel and tourism industry. I also believe that Myanmar has am abundance of natural wealth. There are huge natural gas reserves and significant mineral deposits as well.

  • Report this Comment On June 26, 2014, at 9:27 PM, consultmyanmar wrote:

    Yes, Myanmar is not for the faint hearted. For those investors that are investing their retirement money and are looking for steady safe return - you should stay away from emerging markets like Myanmar.

    Currently most of the investors that are going into Myanmar are business people who have experience investing in emerging markets like China, Russia, Indonesia or Vietnam for the last 20 years and are comfortable with the risks they are taking. Most of the investments are going into infrastructure projects, and commercial property developments.

    The IMF has revised Myanmar's GDP growth from 7.7% to 8.5% in this fiscal year. Myanmar is the only economy in Asia that is projected to grow by above 7% per annum for the next 20 years. If you are short-term investors and need money for your retirement - STAY AWAY FROM MYANMAR!

  • Report this Comment On June 27, 2014, at 6:24 AM, mikefee wrote:

    consultmyanmar:

    Thanks for the comments. I agree with your analysis as well. Infrastructure projects are being awarded to private companies and organized through governments. As a small investor, I do not think that there is much to get excited about. However, it is interesting to see the push being made by western companies at this time.

    Visa entered the country in 2012, and will likely benefit in the long-term. The company said it will take 2-3 years to get its debit and credit card system set up to handle just 5,000 merchants.

    Brands including McDonalds, Yum! Brands, and Starbucks have all expressed interested in entering the market, but I have heard the same thing about Cambodia, Vietnam, and Laos. These companies either have little or no presence in these countries today and Vietnam is a fast-growing country with nearly 90 million people.

    Maybe the biggest winners will be the energy companies, but again, I have heard it before. Chevron has been in talks to work out a delayed offshore deal with Cambodia for years. Other smaller companies have packed up and left.

    Eventually, Myanmar ETFs will probably be created. I would exercise extreme caution.

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