City&Country: Myanmar opens for business

There were a number of surprises on my first visit to Myanmar. In the capital city of Yangon, some immigration and customs officers spoke English. So did people in the shops and receptionists in the hotels, including the cleaning lady at the hotel where we were staying.

We were told that despite the country having been isolated for many years, the government did not stop the teaching of English but allowed private schools and colleges to operate.

The other surprise was that all the signboards in Yangon are in both English and the local language. When I bought a set of maps from a street vendor, they were also in English and the local language.

I had been to Vietnam at the start of its business revolution and saw its transformation into a modern country. Now, seeing Myanmar and Yangon starting to open up, there seems to be greater opportunity for the country to accelerate its development and improve its economy as it already has some fundamentals of international communication.

I was in Yangon for two days as a guest of my Myanmar host, who had contacted Malaysia Property Inc (MPI) for information on master-planned cities.

The Yangon authorities want to expose the city to the development strategy that Malaysia has employed over the last 30 years to become a developed economy and are particularly impressed with the Petronas KLCC development.

So, MPI was asked to brief the chief minister of Yangon on the opportunities for design and development of a similar project. The knowledge and technology on projects and development would be available from Malaysia.

We spent some time driving around the city and the driver apologised for the minor traffic jams. Since last year, he said, the number of cars had increased tremendously. No new cars are allowed to be brought in but second-hand cars are easily available — these looked new even though they had to be at least a year old.

In most of the shops, customers could be seen and there were a couple of small shopping centres that were well patronised.

Singapore, China, Vietnam and Japan have been major participants in Myanmar’s economic development over the past 15 years. Just like in Ho Chi Minh City in Vietnam, you can see the visible presence of Singapore government-linked companies (GLCs), such as Keppel Land and CapitaLand in Myanmar.

The next day, we met the chief minister of Yangon. His office is in the old Parliament building in Yangon since a new Parliament House has been built in Naypyidaw, a five-hour drive to the north.

Surprisingly, though a translator was present, the chief minister spoke excellent English. That made it easier to conduct our presentation on Malaysia’s success and how we were able to transform ourselves in the last 25 years into a modern economy. It also helped that our prime minister was visiting Myanmar at the same time, and though he did not visit Yangon, his visit made the headlines in the national press and on TV.

In the presentation, I stressed how the private sector and GLCs have worked together to make Kuala Lumpur the modern city it is today. I explained that Malaysia has strict regulations on property development and that the Housing Development Act protects the consumer. Malaysians and foreigners are also able to own leasehold and freehold property.

Of particular interest to the chief minister was MPI’s proposal on how Yangon could develop a portion of 70 acres of land between two railway stations into a major project like KLCC or Iskandar Malaysia.

While we briefed him on opportunities, we warned him that we did not think Myanmar had the economic capability to sustain such a project in the short term.

He, in turn, suggested that we let overseas investors come in to invest in the property. We explained to him that it would only be possible if the entire project was done in stages. However, the chief minister wanted to have a master plan that can be used as a showcase of Myanmar’s ability to develop a modern city in a modern country and to give the citizens a future they could believe in.

We promised to help, and suggested an immediate strategy for a Malaysian developer to take over an unused colonial building and turn it into a luxury boutique resort. Another suggestion was for a Malaysian developer to build a green, international standard office tower of about 100,000 sq ft for multinational corporations, on land allocated by the Yangon authorities, with comprehensive services of the highest standards to set the tone for the city’s future image. We were invited to submit proposals to Myanmar Investment Corp in June.

As a frontier economy, Myanmar offers both promises and pitfalls for businesses. While its people are skilled and the country is rich in resources, most of the population is unaware of the opportunities and almost all the funds and opportunities are in the cities.

The country is predominantly rural and infrastructure is of very low standard. Major infrastructure investment is needed to improve connectivity, such as better quality highways linking the major cities.

While the world marks Earth Hour on March 31 every year, during which everyone is asked to turn off the lights for one hour, in Myanmar and Yangon, Earth Hour happens every day. For the three days we were there, the power supply was erratic, with frequent lapses during peak hours.

A major issue that has to be overcome is the slow process of approvals and contracts.

The country’s decrepit telecommunications system also needs to be overhauled as international delegates coming to Myanmar often find that their telephones don’t work.

There is also a need to rebuild the civil service to be the main driver of the country’s development.
So what does Myanmar offer? The country has a population of 55 million and shares its border with Bangladesh, India, China, Laos and Thailand. Yangon, the commercial capital, could be one of the region’s most strategic international ports in the future.

The economy expanded 5.5% last year and will probably grow at the same pace this year.

Myanmar produces more than 50% of the world’s jade and rubies, and has 60% of the world’s teak forests.  It is rich in minerals such as copper and has huge deposits of gas and oil.

Gas is the biggest earner, with most of the supply going to Thailand and China. A huge gas pipeline from the Bay of Bengal to China’s Yunnan province is being constructed. Upon completion, gas and oil exports to China are expected to surge.

There are 17 local private banks in the country, and 11 banks have been approved to conduct foreign banking services.

So, while Myanmar faces lots of challenges, there is no doubt that its sense of confidence has grown.

The tripling of real estate values in the last 15 months has a lot to do with the belief that the people now believe that they finally “own” their country.

I enquired about capital values in the city centre and was surprised to find out that the average price for development land is US$700 (RM2,181) to US$800 psf, which is similar to that in the KLCC.

Unfortunately, the challenges faced in construction, building design and planning, and obtaining approvals are major problems and will take time and lots of meetings to resolve.

The appeal of democracy icon Aung San Suu Kyi as a marketing asset cannot be denied, and she remains the best ambassador for the country at present.

Foreign direct investments will double this year. From April last year to January this year, foreign investments amounted to US$4 billion. The government has proposed reforms, including tax holidays.

We believe Myanmar has great potential. Malaysian developers wishing to enter into joint ventures or that see the development potential there can take comfort in the fact that the country has a similar time frame and learning curve like China and Vietnam in the 1990s and the early 2000s.
Preferably, such development efforts in Myanmar should be via a government-to-government basis, like Singapore, China and Japan are doing. Myanmar is officially open for business.

Kumar Tharmalingam is chief executive officer of MPI, a government initiative to bring foreign direct investments into real estate in Malaysia

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 912, May 28-June 3, 2012