May 21, 2014
Hong Kong
[Editor’s note: This letter was penned by Sovereign Man Chief Investment Strategist Tim Staermose]
I just got back from the Myanmar Investment Summit.
Things are improving rapidly in the country since they started to open up a couple of years ago, and the opportunities are incredibly exciting.
Just imagine: 50 million people who have suffered from trade sanctions for so many years, they don’t even know the taste of Coca Cola.
Now for the first time ever, there’s a surge of trade, both imports and exports. And it’s bringing in a lot of new capital into the country.
Locals have seen their standards of living increase dramatically. Don’t get me wrong, Myanmar is still exceptionally poor. But it’s less poor than before. And the growth trend is clear.
The major challenge is that Myanmar lacks the basic business infrastructure for foreigners to deploy capital and invest.
The banking system is practically nonexistent. And bureaucratic delays still create huge obstacles to those trying to get in and do business in the country.
What little infrastructure exists is absurdly expensive.
Despite being such a poor country, real estate, for example, can be absurdly expensive. The number of ‘international quality’ apartments in the commercial capital of Yangon is critically low.
Yet demand is so strong from all the foreigners looking to do something in the country, it has pushed rents into the stratosphere.
There are some foreigners (and locals alike) making a fortune turning run down flats into higher quality residential or office rental units, and I’d expect this will continue to be a great business.
Another very exciting possibility is agriculture.
Myanmar is a lot like Chile. It is a country that spans a multitude of climatic zones, encompassing nearly all types of growing conditions.
Plus Myanmar has all three key ingredients for agriculture in spades: lots of sunshine, extremely fertile soils, and abundant water resources.
This is a wide open opportunity: few people are looking at Myanmar for real estate, and unlike developed property prices in major cities, farmland prices and lease rates are incredibly low.
My advice remains that the best way to have a shot of making money from this frontier investment market is to roll up your sleeves and GO THERE.
One thing is for certain. Investors in Myanmar have to be prepared to take a long-term view. There is no fast, easy money here.
