UK private equity firm cruises into Myanmar as sanctions ease

By Staff Reporter

Jul 19, 2012 12:59 PM EDT

The easing of sanctions in Myanmar is encouraging western portfolio investors to start looking at the previously-restricted economy, with one London-based private equity firm planning to invest in pleasure cruisers there.

The country of 50 million people is rich in natural resources such as oil and metals, and its temples and colonial buildings should attract tourists, but Myanmar has major infrastructure needs such as for power generation.

Asian firms already have a presence in Myanmar through direct investment, and a number of Asian private equity firms, who invest in unlisted companies, have said this year they are raising funds to invest there.

But sanctions, only recently eased by the European Union and the United States, have prevented Western investment. With developed markets increasingly correlated and few stellar returns to be had, investors are keen for a new avenue.

High-profile commodities investor Jim Rogers said in an interview last week with that Myanmar was "probably the best investment opportunity in the world right now", comparing it to China when it opened up in 1978.

"Myanmar has received a lot of international attention, there is a renewed effort and focus in trying to get involved in the country," said Zain Latif, head of private equity firm TLG. "There is a lot of infrastructure required, particularly in tourism."

TLG is planning to set up a company operating cruises on the Upper Irrawaddy river, via a similar company in Cambodia in which it invests.

The firm, which concentrates on smaller private equity deals, is going through due diligence at the moment in the hope that it can start operating the cruises next year, and is likely to invest a few million dollars.


Hong Kong's Cube Capital and Marc Faber-backed Leopard Capital are among Asian private equity firms lining up nearly $500 million aimed at Myanmar, hoping to tap into its rich natural resources and fill its infrastructure void.

Sanctions were eased by the United States last week and by the European Union in the last few months following the completion of democratic by-elections in 2012 -- the country's first since the military junta refused to accept opposition leader Aung San Suu Kyi's victory in 1990.

U.S. Secretary of State Hillary Clinton's visit late last year to Myanmar and Suu Kyi's tour of Europe last month have sparked interest in doing business in the country, particularly among large corporations.

General Electric Co. became the first U.S. company to restart business in the country when it secured a medical equipment deal with two hospitals in Myanmar a few days ago. MMeannwhile, the British government's trade promotion body, UK Trade & Investment opened an office in Yangon this month.

But with no real stock or bond markets, there has been little to attract fund managers so far.

Julian Mayo, co-chief investment officer at Charlemagne Capital, who visited Myanmar earlier this year, compares the country to frontier market Vietnam in the mid-1990s.

"In 1995, there were a number of asset managers setting up in Vietnam. No-one really made any money for the best part of a decade," he said, adding that in Myanmar:

"There are going to be a lot of frustrated people hanging around hotels and looking for something to invest in."

Real estate, tourism and infrastructure are among the likely favoured sectors for private equity firms, market participants say, but the country lacks a strong regulatory framework and there are concerns about foreign ownership laws.

"Operational and strategic risks will remain a challenge for Western and Asian investors alike," political risk consultants Maplecroft said in a note. "Reforms will ... be pivotal to ensure macroeconomic stability in the long term."

Doing business is by no means an easy task. Myanmar scores 1.5 out of 10 on Transparency International's Corruption Perceptions Index, placing it at number 180 out of 183 in the rankings.

A foreign investment law to protect foreign investors' assets and clarify rules for foreign companies operating in the country is expected to be endorsed by the end of the month.

Naidah Yazdani, general manager of Cambodian cruise firm Compagnie Fluviale du Mekong in which TLG invests, said Myanmar needs to prove it is open to foreign capital.

"They have to show a commitment to attract more FDI (foreign direct investment)," he said. "As soon as that happens, there'll be investment from all over the world."

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