As part of our continuing field research, Ruchir Desai, co-manager of the AFC Asia Frontier Fund, recently traveled to Myanmar for an investor tour. Photos courtesy of Asia Frontier Capital.
In 2011/12, there was excitement when Myanmar first opened to the outside world after nearly 50 years, followed by the victory of Aung San Suu Kyi’s National League for Democracy in the 2015 general election. This has sparked investor expectations for further opening of the economy in terms of reforms and regulation. While the country’s long-term prospects remain very bright, as in many developing markets, reform and regulation have been relatively slow to implement.
However, things seem to be moving in the right direction, the insurance industry has opened up to foreigners and foreign banks are now also allowed to lend to local businesses. Despite the slowing pace of economic/market reforms and bad publicity related to the refugee crisis, the country continues to attract attention due to its geographic location, natural resources and untapped consumer base. Judging by its location on the map, Myanmar appears to be evolving into a country that is in the midst of a “great game” between China, India and Japan, all three seeking to use Myanmar’s geographic location to gain access to logistics, resources and greater geopolitical influence. In particular, Japanese investment in industrial parks and ports has generated strong interest in the country, and Toyota recently announced that it will build its first assembly line in the country. Foreign direct investment is on the rise, rising 77% to $2.3 billion in the first half of 2019.
Rising Asian powers will view Myanmar’s geography from a strategic perspective
(Source: Google)
(Source: International Monetary Fund)
On the consumer side, the country remains an untapped frontier In Yangon, one can easily realize that the consumer sector has huge potential due to the relatively low penetration of modern retail in supermarkets, malls and food and beverage products. A visit to one of the few modern shopping malls like Junction City to see the food court is popular among the middle class eager to experience the latest offerings, similar to any other developing country, with well established F&B brands such as BreadTalk, Crystal Jade and Ippudo operate in the mall. The mall also houses CGV Cinema, a South Korean cinema chain that also has a strong presence in Vietnam. In addition to the shopping mall, Junction City also houses the Pan Pacific hotel and office complex.
Junction City Mall in Yangon
(Source: Boston Consulting Group)
Since I participated in the shareholder visit organized by Yoma Strategic Holdings [Yoma]we visited the company’s food and beverage product, KFC fried chicken [KFC], Yoma owns the exclusive franchise rights in Myanmar. We visited the KFC store on busy Bogyoke Road, opposite the upcoming high-end Peninsula mixed-use project by Yoma. KFC currently has more than 30 stores in Myanmar and plans to expand rapidly in the near future, while Yoma also has exclusive franchises for other well-known restaurant brands such as Little Sheep and Auntie Anne. In addition, the company recently acquired YKKO, a local restaurant chain known for its noodle products, which has 37 branches in Myanmar.
The busy Bogyoke Road where the upcoming high-end mixed-use development on the peninsula is located (right of the picture)
With more than 600 KFC outlets in neighboring Thailand and just over 30 in Myanmar, there appears to be plenty of room for growth in the dining opportunity in Myanmar. With a population of 53 million and per capita income rising from a low base of $1,200, consumer-focused industries such as food and beverages could have plenty of room to grow in the coming years. Fast food isn’t the only thing Yangon has to offer. Due to its geographical location, Myanmar has a fusion of South Asian, Chinese and Southeast Asian cultures, which is also reflected in the variety of cuisines that one can experience in the city. Shan cuisine is definitely worth a try, while Yangon Tea House also offers a variety of local delicacies.
Daily street scene in Yangon
Furthermore, financial services, especially mobile financial services, have huge potential in Myanmar as most of the country is still unbanked. It is estimated that there are only about 3 bank branches per 100,000 people. Disruption is also taking place in the financial services industry in Myanmar through Wave Money, a mobile financial services partner between Telenor and Yoma, as we have seen with Bkash in Bangladesh, Paytm in India, Easypaisa in Pakistan and Mpesa in Kenya Variety. Wave Money is now the number one mobile financial services provider in Myanmar and, like its regional peers, plans to tap its user base into the digital payments space for general cash-in/cash-out services.
In the offices of Wave Money – the company can see very high growth in the future
No visit to Yangon is complete without a visit to Shwedagon Pagoda, which contains the relics of the Buddha. It is considered one of the holiest Buddhist shrines in Myanmar and is estimated to be over 2,500 years old. The gold-plated tower is majestic, and the top of the dome is set with several diamonds.
Shwedagon Pagoda – some restoration work going on during my visit
Apart from this tourist attraction, Myanmar has a lot to offer. The ancient city of Bagan with its many temples and pagodas recently received UNESCO World Heritage status, and I think this site is on the same level as Cambodia’s Angkor Wat. Ngapali has pristine beaches and is only an hour’s flight from Yangon. Given the tourism product, Myanmar’s tourism industry has yet to reach its potential, with the country receiving only about 1.4 million tourists according to the latest available data, a figure that is significantly lower compared to its counterparts in Cambodia, Laos, Thailand and Vietnam.
(Source: Asia Frontier Capital)
As I was waiting at the airport to catch my flight back to Hong Kong, I was pleasantly surprised to find DFS Duty Free selling the latest products, while the entire airport is modern with coffee beans and tea, food and beverage outlets such as Gloria, jeans coffee, and Burger King. There are also stores selling the latest clothing brands such as Levi’s, Timberland and Nike. Other markets in our universe should probably learn from Yangon International Airport when it comes to airport retail, as they lag behind in this area.
Very modern duty free shop at Yangon International Airport
Myanmar has huge potential, and while recent moves such as opening up banking and insurance are positive, the government should consider building its capital markets. To this end, Myanmar should introduce the necessary regulations and allow foreigners to invest in locally listed stocks (although there are only five listed companies on the Yangon Stock Exchange), and encourage other companies to list to attract more investor attention and realize their economic potential . Yangon’s cultural diversity is a big draw and I look forward to visiting again to track the country’s progress.
Since foreigners currently do not have access to locally listed stocks, exposure can be gained through Myanmar-focused companies listed in Singapore, London and Thailand.Youma Strategic Holdings [YOMA SP] is a conglomerate investing in real estate, food and beverages, automobiles and financial services, while Singapore Myanmar Investment Corporation [SMI SP] Focus on the retail sector.Myanmar Investment International [MIL LN] and Myanmar Strategic Holdings [SHWE LN] Diversified investment, Thailand listed Mega Life Sciences [MEGA TB] is a pharmaceutical company with a substantial presence in Myanmar.
