M'sians advised to tread warily in Myanmar

Tuesday April 24, 2012, By THOMAS HUONG huong@thestar.com.my ...  


Opportunities abound but investors should be cautious with forays by Malaysian companies

PETALING JAYA: Investors should be cautious about the exploratory forays of Malaysian companies into Myanmar as uncertainty still hovers over the pace and depth of economic and political reforms in that country.

Analysts pointed out that speeding up the pace of these reforms was still “a long shot” and that there was no certainty that the reforms initiated would continue.

Therefore, analysts said investors should continue to monitor the pace of reforms even as companies sign agreements with the local parties to explore business opportunities.

Among the agreements signed was one by integrated environmental engineering and technology provider Cypark Resources Bhd with First Myanmar Investment Co Ltd (FMI) last month.

FMI has a diversified portfolio in banking, real estate, automobile, plantation, hospitality industry, infrastructure development and environmental consultation.

“We do not think investors should be too gung-ho about the potential returns for Malaysian companies investing in Myanmar now. Recall that in 2008, a lot of Malaysian companies also announced forays into Vietnam, which has a much larger economy compared with Myanmar. It takes at least a few years before companies see sizeable returns from investments in such emerging markets,” an analyst said.

OSK Research head Chris Eng said while opportunities abound for Malaysian companies going into Myanmar, risks remained and business people would still have to tread cautiously in the coming months before their efforts bear fruit.

“Despite having lobbied for Myanmar's entry into Asean in 1997, Malaysian companies have been somewhat slow in leveraging on the goodwill generated from this gesture,” said Eng in a report.

The report noted that besides Cypark, Malaysian companies such as AirAsia Bhd, Axiata Group Bhd, Felda Global Ventures Holdings and Tan Chong Motor Holdings Bhd had either started to invest or were keen to explore opportunities in Myanmar. It cited Myanmar offering vast opportunities in the areas of agriculture (including oil palm), oil and gas, timber, tourism and telecommunications.

Myanmar has a population of 60 million and a gross domestic product (GDP) of only US$50.2bil or RM154bil (slightly more than 20% of Malaysia's GDP).

“Its GDP per capita is less than 10% of Malaysia's. Myanmar remains largely an agricultural nation with urbanisation at only 34% and agriculture comprising 43% of the GDP.

Nonetheless, precisely because of its low-income level, investors perceive plenty of upside in terms of opportunities as and when income levels begin to rise as foreign investment pours in following the reforms,” said Eng.

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