I visited Burma (Myanmar) in 2013 just as the Asian country opened its borders to the outside world to understand what made the country unique in its culture, history and its future potential for investment. Does Myanmar, formerly known as Burma, have the potential of becoming one of Asia’s wealthiest countries? With its wealth of natural resources in oil and gas, an abundance of timber and the potential for tourism Burma has become quite an appealing prospect for the corporate world and investors.
For decades the country was ruled by a military dictatorship and was essentially in seclusion until 2011. The release from house arrest of opposition leader Aung San Suu Kyi and new parliamentary elections eventually led to the election to President Thein Sein who had also been Prime Minister. Aung Suu San Kyi’s political party National League for Democracy boycotted the elections and classified the event as a sham. However, this eventually led to a civilian government that was sworn in on March 30, 2011. This was seen as perhaps a step in the right direction by countries such as Britain and The United States who had imposed economic and other sanctions on Myanmar during the years of dictatorship. British Prime Minister David Cameron visited the country on the 13 April 2012 and American President Barack Obama did the same later in the year in November 2012. The European Union lifted its sanctions its sanctions after its policy advisor Catherine Ashton met with Aung Suu San Kyi in April, 2012. The dictatorship changed the countries name in 1989 to Myanmar and Rangoon to Yangon.
A 2013 film reviewing of the economic situation inside Burma (Myanmar) by Kevin Murphy.
With the sanctions having been eased in 2013 foreign firms such as Americas Caterpillar, Coca Cola and Ford were considering or already had opened offices in Rangoon (Yangon) as well as British Companies such as container manufacturer Rexam and financial services company Standard Chartered.
What can organizations wanting to enter the Burma market place expect and where are the best areas for growth? One of those areas is in the hospitality commercial and residential property market and not just in Rangoon (Yangon).
When I arrived in Rangoon (Yangon) in 2013 my first impressions making my way into the city was the age and disposition of so many of the buildings. Most are of the old Colonial architectural style and while they are being inhabited many are in need of repairs. While the visitor saw new modern structures being built, mainly high rise apartments and offices, until then little construction had occurred since the 1990’s because of economic sanctions. With the new influx of business and tourist travellers there has been an attempt being made to re-purpose some these old structures to accommodate the needed space. A good example of this is the popular Strand Hotel in the city of Rangoon. Originally built in 1901 and a favorite place for Rudyard Kipling and Somerset Maugham the hotel became derelict for many years during the dictatorship only to be given a new life in the 1990’s by local developers. Today its not only a hotel but a popular gathering spot at the bar for American and British expats. Other luxury hotels including the Yangon Excelsior are now quite popular. Not surprisingly with almost 90% of the population Buddhist beautiful gold pagodas are all around including the city’s most famous landmark the Shwedagon Pagoda.
As expected with the large influx of business investors and tourists this had a measurable impact on local prices. In a report published in the Wall Street Journal in 2012 Rangoon residential prices were already increasing by as much as 39%. Office space was also hit with increases doubling since 2011 to 75 USD per square meter or 11 square feet. Hotel rates had risen almost 65%. Land costs also were adversely affected with private equity investors reporting land prices at 5,000 USD to 7,000 USD. This caused investors to turn away from development. The government then responded with increases in taxes and price caps to curb the rocketing prices.
Researchandmarkets.com reports that currently:
"The hospitality sector is experiencing a challenging period, affected by low tourism arrivals and the wider business environment. Coupled with a number of high-end openings in H2 2018, this has created downward pressure on occupancy and sales. Nonetheless, interest in the hospitality market remains from overseas investors, with several new projects expected to bring a significant number of rooms onto the market in 2019 and 2020."
A new Marriott Hotel is planned for Yangon with Travel Asia reporting recently:
"Marriott has signed a landmark agreement with one of Myanmar’s leading property developers, Yoma Land, to bring the Westin brand to Myanmar in late 2021."
"Under the agreement, the new-build Westin Yangon will feature 281 rooms and suites alongside 90 premium serviced apartments with spectacular views overlooking downtown Yangon and the iconic Shwedagon Pagoda."
"The 26-storey hotel is being planned as a part of the Yoma Central integrated real estate development which has been designed by acclaimed architect Cecil Balmond OBE."
Mandalay is the second largest city in Burma and has become an important tourist destination and popular for hospitality investments. From religious shrines, Buddhist monastery’s to tours of the Irrawaddy River have become popular. Its location is welcome relief from the heat and humidity that is found in Rangoon.
Another important destination is the ancient city of Bagan. While Cambodia has Angkor Wat I think its safe to say that Bagan is going to become more popular. Pagodas and stupas from the 10th Century are easy to visit and very few restrictions on visitors.
Boasting beautiful resorts and traditional Burmese living is the Inle Lake region in the Shan State. Most resorts are built on the lakes many tributaries offering excellent services and cottage-like accommodations. I took any number of boat rides throughout the lake area where most of the inhabitants live on homes above the water on stilts.
While the attention being given to Burma by foreign organizations and the tourism industry were and still a boon to the local citizens there were still problems that need to be resolved. First was in the bank and credit sectors as ATM machines were rarely available for local banks and their customers but today that has changed and are widely found around the cities of the country.
Other problem areas included 2013 included education and health for the Burmas' 60 million citizens. Most youngsters receive only a fourth grade education and then would go to work for local family businesses or agricultural work on the many farms that exist throughout Burma. The University in Rangoon founded in 1878 had been closed due to student protests in 1996 but is now being revitalised. This when I visited presented the obvious problems of finding qualified help for businesses with companies looking to neighbouring countries such as India and Thailand for qualified employees particularly in the IT/IS fields.
Computer and internet services began in the country in 2000 for use and limited to very few businesses and citizens. But as of 30 June 2017 Myanmar it is reported that Burma has 13,747,506 internet users, 25.1% population and 11,000,000 Facebook users.
Investment in healthcare throughout Burma been limited and as a result Britain pledged to give Burma £60 million in aid each year towards modernizing its healthcare facilities, care services and for education as well.
The United States National Library of Medicine has reported that Burma in 2019:
'Since a new ruling party took office in April 2016, the systematic fortification of healthcare in Myanmar has accelerated. A new National Health Plan (NHP)[2017–2021] was launched, with a goal to establish basic essential packages of health services throughout the country by 2020. Since the World Health Report, 2006, Myanmar has been listed as one of the 57 crisis countries facing critical health workforce shortages. However, efforts have been made to move out of crisis mode, as recent data indicate an increase in the health workforce in all cadres of health professionals.'
As for the investments needed for infrastructure and facilities :
'Myanmar healthcare mostly relies on the public sector, and the number of health facilities in the private sector still needs to improve to increase healthcare coverage and improve quality of care.'
For its part in the Ministry of Planning and Finance released the Myanmar Sustainable Development Plan (MSDP) to bring economic stability and private sector expansion with the Myanmar Companies Act signed by President U Htin Kyaw on6 December 2017 and went into effect on 1 August 2018.
This was meant to assist investment in particular for the nations growing tourist sector as the his market sector has increased with international visitors from 194,000 in 1995 to 4,681,000 in 2015. For 2015 domestic tourism had 2.5 million domestic tourists, who spent an estimated MMK 733.2 billion on hotels and guest houses in a review by the Organisation for Economic Co-operation and Development.
The OECD analysis finds:
'Increased investment will be needed to drive further growth in travel and tourism.'
'Indeed, FDI has been an important source of capital in the sector. Approved FDI in hotels and tourism totalled USD 300 million in 2012-13, representing 21.1% of total FDI. This share has since declined, falling to 3% in 2015-16 before increasing slightly to 6.1% in 2016- 17. Much of the investment in the sector comes from other countries in the region. In 2015, investments from Singapore in hotels and commercial complexes came to USD 1.5 billion, or 56.5% of the annual total.'
'These initiatives for fostering the development of travel and tourism are important for driving growth and development, as the sector can be a significant creator of jobs and income. In 2016, it was estimated that travel and tourism directly supported 804 000 jobs (or 2.7% of total employment). Including indirect employment, that figure rose to 1 662 000 jobs (5.7% of total employment). Over the next ten years, it is forecasted that direct employment from travel and tourism will increase by 4.8% annually and that indirect employment will grow by 3.8% a year, totalling 1 296 000 and 2 387 000 jobs in 2027 respectively (WTTC, 2017). As many of these positions will require specific skills, training programmes will need to be a central plank of the sector’s development and growth.'
In 2019 the Myanmar Times reported that Myanmar is a “potential gold mine” and the “last frontier for” investors despite its low ranking in ease of doing business, said a Singaporean investor at a business to business matchmaking event in early November.
'Singapore has the largest FDI in Myanmar for 2019 overtaking China, date from the Ministry of Investment and Foreign Economic Relations showed.'
Peter from A&B films, a window film installer and applicator based in Singapore stated:
'“There’s no doubt that Myanmar is a future investment destination. The potential is great.'
For 2020 the Myanmar economy is expected to increase 6.6% in a report by the World Bank with increases of 6.7% in 2021 and 6.8% in 2022.
One local senior businessman from a Yangon-based cargo consolidator told the Myanmar Times:
“Our country’s geographic location is at a very strategic position between China and India. We are also China’s backdoor. So, if the political situation is stable, many investments will be entering.”
But the International Monetary Fund reported in April this year that the Myanmar economy may be 'losing momentum' with one official of a films company saying:
“I think in Myanmar it’s gradually getting better compared to eight years ago when I came here. I still feel that there are still some things holding back the whole market. Maybe it’s the foreign direct investments that are not trickling down to the middle market."
"We need a good marketing class in order to have good spending power. I feel that the money has not flow down to the working class yet.”
A Singaporean businessperson from an engineering solutions company said:
“Our country is seeing many changes and we experience new things. When I come back to Myanmar I would see new things every month. So, I strongly believe and am confident that positive things will come for the Myanmar economy,."
“Singaporeans are familiar with the Myanmar market. For Myanmar, Singapore as a brand is trusted and their quality reassures them compared with products from other countries. As Singapore investors expand their businesses, Myanmar consumers and business owners will receive good quality products and services as well other positive effects.”
New Property Construction
Researchandmarkets.com reports that as a result of the Condominium Law for the second half of 2018:
'The Condominium Law finally came into force in H2 2018, after years of uncertainty and delay. Its impact is already being felt, with developers having started to register projects with local Condominium Management Committees. The new law may also open up a bigger spectrum of financing options for homebuyers. However other pieces of legislation, such as the Apartment Law and Real Estate Service Law, are still in a draft stage.'
One new luxury condominium development is the 68 Residence with 26 storeys in the heart of Yangon by the Ascott Group of Singapore. Started in 2014 its expected to be completed in December of 2020. More large scale developments are planned next year.
Shweproperty.com’s founder U Kaung Thu Win says:
“Yangon has very few iconic or outstanding buildings on its skyline. The coming 68 Residence will become a landmark to represent the city.”
The 68 Residence has already won three awards at the Myanmar Real Estate Award held in October 2019. The 26 storey condominium development has four basements and the capacity to park 400 vehicles.
The condo project has 11 different layouts starting at 1080 square feet to 2098 square feet giving buyers the choice of styles they would like to have with the 230 apartments, which already 150 having been purchased. Depending on the floor plan the price per square foot ranges from US$351 to US$429 per square foot, and the price increases by two dollars for every ascending floor.
68 Residence Yangon
U Aung Naing Moe says:
“We’ll install large generators, so the residents won’t even know the feeling of a power outage. As it’s a 27-storey building, witha location-specific fire alarm system installed."
"Fires can be extinguished at the exact locations, and as soon as they start,”
"Located on busy Kaba Aye Pagoda Road, a ring road is also been constructed with the aim of reducing traffic congestion for both the residents and other people after the project is completed."
Reserachandmarkets.com in its forecast of Yangons property market:
"Overall, the Yangon real estate market appears to now be emerging from a challenging period, with progress on legislation and financing options likely to encourage more sales going forward, particularly in the mid-range market. We still expect to see more project cancellations and delays, however, as developers reassess the viability of projects that were originally planned several years ago and are no longer feasible in current conditions."