Low risk tolerance investors waiting for results of 2015 election to invest

According to a report by consulting firm New Crossroads Asia – low risk tolerance investors are waiting for the results of the 2015 election before investing in Myanmar.

Aung Naing Oo, director general of the Directorate of Investment and Companies Administration (DICA) said there was some truth to this. “Reports that foreign companies are waiting to invest big in Myanmar after the 2015 election are right and wrong,” he said, adding: “Some may be waiting, but some are already here.”

The 2015 Myanmar election is slated to be held in the November. The general consensus among the business community in Myanmar is that regardless of who becomes the next President of Myanmar – the political and economic reform would continue.

While major brands like Coca Cola, Unilever, Carlsberg, Jaguar, Chevrolet, Novotel, etc have planted their flags and started operations in Myanmar. Many smaller investors are sitting on the side-line due to a lack of experience operating in emerging markets and a lack of sophistication in terms of financing options.

Our experience working with our clients have shown that those businessmen that have experience operating in emerging markets such as China, Vietnam, Indonesia, etc tend to be the first to grasp the opportunity presented by the opening of Myanmar. They see the uncertainty and the poor infrastructure as an opportunity and a barrier to entry to more establish risk-adverse but bigger brands and competitors.

One of the entrepreneurs that I spoke to recently that runs a chain of successful F&B outlets talk about the window of opportunity in Myanmar as about maybe 5 years in building a successful F&B chain in Yangon. He said he was willing to spend up to US$90,000 building each retail outlet and he intends to have 10 outlets by the next year (2015) so that he will have the scale before the big brands come in. He intends to franchise out his concept in 2 years when the market boom as the more risk-adverse investors come in. Most of these entrepreneurs are savvy businessmen who have operated successfully in other emerging markets before. For example one of them told me that he is losing a lot of opportunity to make money on home food delivery in Yangon to expat and middle class households as there is a ban on motorcycle in the city and the traffic congestion is getting from bad to worse.

The Chinese word for danger (危机) consist of 2 components – risk (危) and opportunity (机). You need to know what your strengths are and what the opportunity and risk are in an emerging market like Myanmar before you sink in your money. If you have experience operating successfully in other emerging markets the inefficiencies and uncertainty in Myanmar is a great opportunity to reap great profit. If you have never operated in emerging markets before then get a good business partner that has or get a good business adviser.

Author: Andrew Tan – Managing Director, Consult-Myanmar Co Ltd

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