Myanmar investments: another corporate casualty of Myanmar’s ‘harsh realities’

London-listed Myanmar Investments International (MIL), the latest of several foreign investors to turn its back on Myanmar, has blamed its decision to wind up on the impact of the conflict in northern Rakhine, a “complex” political situation and what it calls the slow pace of reform.

Although MIL was a relatively small player with a market capitalisation of just £26.32 million (US$32.4 million), its decision to wind up will strike other investors as a resounding vote of no confidence in Myanmar’s future after riding a wave of optimism at its launch in 2013.

Since late 2017, big name companies quitting Myanmar have included New York-based law firm Herzfeld & Rubin PC, London-headquartered Bryan Cave Leighton Paisner and insurer Samsung Life. Starbucks called off plans to set up in Yangon, while online travel guide company Travelfish suspended its research on Myanmar. Reliance Industries and Norway’s Statoil also decided to hand back their offshore blocks. Reasons cited for leaving have included sluggish reforms and politics.

MIL, which launched on London’s Alternative Investment Market in June 2013, this week reported a pretax loss of $2.4 million for the year to March and announced it planned to wind up. Its stock, untraded on Wednesday in London, was last quoted at $0.85 a share, down 28 percent over 12 months.

Its net asset value fell 12pc to $33.3 million in the year to March 31 due to a reduction in the assessed value of investments in microfinance company Myanmar Finance International and pharmacy chain Medicare.

The company said factors contributing to its decision to close down included “the post-Rakhine crisis difficulties in raising significant capital in western markets, a fragile domestic banking system, increasingly complex political landscape and the slow pace of reform.”

“Given the slow pace of change in Myanmar and expectations that the next few years are likely to be difficult and volatile for the country’s economy, the Directors believe that the Company’s current strategy is unlikely to generate an appropriate risk adjusted return commensurate with an investment in a frontier economy,” it said in its annual report.

MIL chair William Knight said the decision “reflects the harsh realities of both trying to raise significant new funds for investment in Myanmar as well as identifying suitable investments in Myanmar.”

U Aung Htun, a British citizen of Myanmar-Thai descent, founded MIL and said at its launch that it would be a “long-term investor in Myanmar” and as a LSE-listed holding company “we can be patient.”

The company said it is now holding around $3 million of cash and will seek to dispose of its investments in Myanmar Finance International and Medicare.

The military’s mass expulsion of Muslims from northern Rakhine and Daw Aung Suu Kyi’s response have been widely condemned by the international community, with the threat of economic sanctions hanging over the country.

Since 2016, the State Counsellor has built on the reform programmes, seen most notably in two new corporate laws and the Myanmar Sustainable Development Plan. But it was not until last year that her government started to prioritise the economy, while efforts to attract investments by then have been undermined by the northern Rakhine crisis.

Despite the slowdown in reform and a sharp drop in FDI, Myanmar’s GDP growth forecasts remain well above the international average. The IMF estimates that growth could increase to 6.6pc in the fiscal year 2019-20. Approved FDI in the year to September 2018, however, fell to its lowest since 2014.

MIL directors earlier this year turned down a merger offer by Myanmar Strategic Holdings (MSH), also a London-listed company which focuses on Myanmar, saying the terms offered were not acceptable to shareholders.

Commenting on MIL’s winding up, MSH CEO Enrico Cesenni said Myanmar could have managed its economy better but the difficulties are not insurmountable.

MSH is a holding company and runs subsidiaries it controls, while MIL was simply a fund with investments but little or no control which made all the difference, he added.

“In Myanmar, to be successful today, you need to be on the ground and have a management team operating in the country,” he said. “Willingness to roll up your sleeves and build businesses on the ground” is necessary for success.

Source: Myanmar Times

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