Myanmar’s Economic Outlook and How Private Equity and Venture Capital Can Make A Difference

As Myanmar concludes voting for its general election, Ascent Capital Partners Pte Ltd (Ascent Capital) takes a look at the road ahead for the country’s economy and how investors will support its continued development and growth.

As a long-term private equity investor in Myanmar, Ascent Capital strongly believes in the long-term potential of the country. In the short term, we expect the economy to face very strong headwinds due to the domestic and global impact of Covid-19.

In the mid-long term, we believe that Myanmar’s prospects remain very positive. However, we believe the next five years are very crucial years for Myanmar’s economic transformation, and the next government needs to make the right moves.

In particular, to attract much-needed foreign investments, it is important that the country accelerates the actual implementation of its various strategic plans, such as the new Myanmar Economic Recovery and Reform Plan (MERRP).

Since the country opened up its economy, the focus has been on overseas investments from traditional sources like foreign corporations and developmental finance institutions. Now, as Myanmar works to regain its footing in the wake of lockdowns caused by the Covid-19 pandemic, the time is ripe to pursue other sources of investment capital such as private equity (PE) and venture capital (VC) firms. As well as being a source of valuable funds, they bring many strategic advantages. For example, when investing in local companies, Ascent Capital usually take a minority stake, enabling us to play a supporting role rather than taking control away from the enterprise’s local owners. Additionally, we bring to the table valuable knowledge, market and sector expertise, and international networks which can be deployed to support transformation and improvement.

Key Areas of Opportunity for Myanmar’s Future

While Myanmar’s economic reforms in the last seven years have been impressive, we are of the view that there is always room to do better, and the country does face challenges on many fronts. We hope that the next government will continue and further accelerate economic reforms, especially in the following three areas:

1. Accelerate efforts to develop Myanmar into an industrialised nation:

The country has huge potential to be a leading regional manufacturing hub, in light of the potential shifts in global supply chains caused by COVID-19. For Myanmar to rise to the challenge and take advantage of these disruptions, the two key ingredients of reliable power generation and logistics infrastructure need to be significantly improved. This is a gap that we seek to close in our investment activities.

2. Continue promoting digitalisation as a key transformation pillar:

Myanmar has always had the potential to leapfrog the digital evolution. With Covid-19, digitalisation trends have accelerated globally. Now more than ever, it is essential for the government to leverage on digital technologies across all sectors to drive economic growth and private sector development. Today, these tools are the main ways for people to access information, news and resources, enabling

them to continue their education via e-learning, do business and overcome the limitations of physical distancing.

When investing in companies, Ascent Capital adds value by helping traditionally managed businesses upgrade their operational processes. This includes leveraging our digital expertise and network in the regional technology sector to come up with strategies for digital technologies, transforming and improving their processes for future growth.

3. Double down on human capital development.

The country’s underdeveloped human capital remains, in our opinion, the single biggest impediment to Myanmar realising its true potential. We hope the next government can dedicate more public sector resources and efforts in improving key sectors that contribute to human capital development, and consider greater collaboration with the private sector to develop the country’s human capital, such as public-private-partnership models. This is also a key reason that healthcare and education are among Ascent Capital’s target sectors for investment, with our approach guided by both the Myanmar Sustainable Development Plan (MSDP) and the United Nations Sustainable Development Goals (UN SDGs) of No Poverty, Quality Education, Gender Equality, and Decent Work and Economic Growth. This is in line with our vision to generate measurable positive social, economic or environment impact, alongside financial returns, through investing in sustainable businesses.

Capital from PEs and VCs like Ascent Capital can play a crucial role in creating more job opportunities as our investments enable local businesses to expand. Our presence also fosters awareness and practice of good governance and corporate culture, based on international best practices customised accordingly to Myanmar’s unique circumstances. These cultural shifts, in turn, produce better hiring practices and workplace ethics, including competitive wages, an emphasis on employee well-being, upskilling and fostering learning opportunities for employee development.

As Myanmar’s newly elected government settles in, Ascent Capital looks forward to the next stage in this country’s exciting development. With companies steadily gaining a better understanding of private equity, we are confident that we can help support long-term economic growth.

Lim Chong Chong is the Founder and Managing Partner of Ascent Capital Partners Pte Ltd, which manages the US $88-million Ascent Myanmar Growth Fund, the largest Myanmar-focused private equity fund. He serves as the Deputy President of the Singapore Association of Myanmar, a member of the Alumni Advisory Board of Nanyang Technological University’s Nanyang Business School, and on the Board of Directors for the Myanmar Private Equity and Venture Capital Association.

Source : Mizzima

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