ASIA NEWS NETWORK
WE KNOW ASIA BETTER
Myanmar watchers expect jump in M&As next year
Publication Date : 06-09-2013
Myanmar could see a surge in mergers and acquisitions next year as foreign investors prepare to dive into the resource-rich country, a Bangkok summit heard.
"Every sector in Myanmar will grow. Some local companies are now the targets for takeovers. For 2014, there will be more than 100 M&A deals," Alisher Ali, managing partner of Silk Road Management and founder of Silk Road Finance, said yesterday.
His company has seen overwhelming interest from companies in Thailand, Japan, Singapore, South Korea and the rest of the world to do business in Myanmar, he told the "CNBC Summit on Myanmar".
During the "CNBC Conversation with Martin Soong", he said buying stakes in Myanmar companies was the best way to make inroads into the country. He also suggested investing in venture-capital funds and small companies whose business philosophy should drive their growth in the coming years.
From a low base, the corporate sector in the country will grow very fast, cashing in on the integration of Asean nations, he said.
While the stock markets in some Asian nations including Thailand, Malaysia and Singapore now enjoy huge capitalisation of more than US$400 billion, in 2020 Myanmar's market capitalisation is estimated to be about $15 billion.
"Businesses from energy to food and beverages and property are the backbone of the economy," Ali said.
Myanmar plans to launch a stock market in 2015, amid doubts from some investors over its readiness. Opened up after the removal of most sanctions by the United States last year, the country has yet to invest hugely on many fronts to get itself ready for the influx of foreign investment.
The country's infrastructure is still in a very poor state after five decades of isolation, while policy continuation is now the issue ahead of the 2015 presidential election.
A recent report by management consultancy McKinsey forecast that gross domestic product could quadruple to $200 billion by 2030 as Myanmar reaps dividends from foreign investment. However, to reach its full economic potential, huge infrastructure improvements are required.
For instance, facilities to support the influx of foreign investment are very poor. Expatriates will need good schools for their children and well-appointed accommodations.
To support the tourism industry, more hotel development is necessary besides roads to take visitors to tourist destinations. Health services must also be improved.
Despite the poor conditions now, most panelists at the half-day summit sponsored by Berli Jucker and PTT Group shared their bullishness in the newly opened economy, though not without some concerns over the government's policy on human capital development.
"Myanmar can't reach the trajectory without massive investment in human capital," said Heang Chhor, senior partner of McKinsey and Co.
Tevin Vongvanich, president of PTT Exploration and Production - one of the leading foreign investors in Myanmar - said the company was committed to helping enhance local capabilities, which would also help it win public trust and support the group's plans in the country.
About 70 per cent of the workforce for PTTEP's Myanmar operations are locals and some are undergoing proper training so that they can take up higher responsibilities. About 40 students have been sent to Thailand for vocational training, for instance.
The process is under way and now foreign investors are looking to shop local products.
Aswin Techajareonvikul, chief executive of Berli Jucker, said his company was looking for partners who "share the same business philosophy" to grow together in Asean.
Local companies know their prices, though. If approached, Wai Phyo, managing director of Yathar Cho Industry, said he was open to opportunities.
"But at this juncture, it's 'No'."