Singaporean Investments In Myanmar See Significant Increase

DEALSTREETASIA: The amount of FDI flowing into Myanmar from Singapore has seen a significant increase in recent years. Investment by Singapore organisations in Myanmar has risen 41.5 percent from 2012, hitting $311.4 million in 2013, with a focus on urban development, connectivity and finance, according to Lai Shu Ying, the Southeast Asia director of International Enterprise (IE) Singapore.

Lai was previously the divisional director for IE Singapore’s China division.

Singapore’s bilateral trade with Myanmar is valued at S$3.23 billion $2.37 billion) in 2014.

Lai attributed this surge in investment to Myanmar’s abundant natural and human resources. Its strategic location, where China, India and Southeast Asia converge, also meant that this offered significant advantages, especially when making investments into the logistics and transport industries in Myanmar.

In a report by IE Singapore, it was noted that: “Myanmar has the advantage of a favourable geographical position, low wages and a large potential consumer market. Its recent political and economic reforms have inspired optimism among foreign investors. However, despite the positive outlook, investors need to be cognisant of the risks and challenges of transacting with a market that has only recently emerged from decades of isolation.”

With this in mind, Singapore has been capitalising on its excellent diplomatic relations with Myanmar ever since its economy liberalised.

Since Myanmar’s economic liberalisation in 2012, economic growth has rocketed. One in four Asian enterprises surveyed is intending to expand into Myanmar this year, according to a survey by the United Overseas Bank (UOB) in 2014.

Market Situation

Singaporean restaurant group Les Amis has opened two restaurants, House of Singapura and Peperoni Pizzeria, in Yangon. This came about as a result of establishing a joint venture with a family-owned business in Myanmar, with an initial investment of S$250,000.

According to Raymond Lim of Les Amis, businesses in consumer sectors faced minimal competition, as well as a first mover advantage.

However the benefit came with certain costs, as Les Amis had to import extensively, in order to overcome problems associated with a deficit of reliable supply chains and decor options in Myanmar.

Lim stated: “Investment-wise, cost isn’t prohibitive. We must have a foothold early. Myanmar’s consumer base will increase when a middle class and middle-income economy take shape, but how long that will take is uncertain.”

Other Singaporean firms with a presence in Myanmar are Interra Resources, the largest onshore oil producer in Myanmar with two producing oil fields. FNN, another Singaporean firm, has a 55 percent stake in Myanmar Brewery Limited (MBL), which was established in 1995. Since then, MBL has grown into the market leader, dominating the market with a share estimated at 60-70 percent.

Despite this surge in investment, investors may want to look at making longer-term investments in the infrastructure space, particularly in logistics, supply chain management, telecommunications and transport. While consumer sectors may make for an attractive investment destination, much of the industrial and commercial sectors that underly it, are also ripe for investment.

With Myanmar in a state of transition, as the economy develops, market issues like land ownership, training & development of local manpower and working within and around the limitations of physical infrastructure will emerge. Lai noted that “Singapore companies should take a long-term view when investing in Myanmar and focus on sustainable partnerships that are mutually beneficial.”

Dr Maitrii Aung-Thwin, associate professor of Southeast Asian history at the National University of Singapore (NUS) said: “Myanmar has changed visibly in the cities, but less so in the countryside. Housing and living costs have gone up, making it difficult for the everyday urban citizen to meet day-to-day expenses. My sense is that Singapore companies need to be prepared to expect returns only in the medium to long term.”