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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Myanmar: The Next Asian Tiger? 2 comments
    Jan 31, 2012 9:28 AM

    Myanmar, also known as Burma is a country in Southeast Asia that is bordered by India, Bangladesh, China, Laos, and Cambodia. Myanmar is a unique and largely unknown country. This is largely due to the fact that for the last fifty years of so the country has been isolated as a result of being ruled by a military junta that took power in 1962 during a coup. The country has been ruled by the same military rule and had adopted the typical failed socialist policies that have doomed so many other countries around the world to poverty and backwardness. However in recent months many things are changing in Myanmar that has put the country on my radar screen as a possible investment destination.

    I have had Myanmar on my list of potential countries I would like to invest in for years. However due to economic sanctions that were put on the country by the US and many other countries I was precluded from investing there. Back in 2008 the country's military rulers finally decided to have elections and in fact changed its name from the Union of Myanmar to the Republic of the Union of Myanmar. I do not think the military decided to have elections out of some new found streak of Jeffersonian democracy that came over them. Rather they are surrounded by countries that have for the last 20-30 years have enjoyed extreme rates of economic growth. Because of the stupid socialist economic policies the country was following coupled with the sanctions put on them the country has lagged badly behind its neighbors and in fact it is one of the poorest if not the poorest country in Southeast Asia.

    This is on cusp of changing and I believe it will change very rapidly. Two of my main investment themes are that just a few political changes at the margin for a poor backward country like Myanmar can lead to massive increases in economic growth and prosperity. The other is to get positioned before the wave of liquidity hits. Doing that means being ahead of everyone else and getting positioned before most people in the west have even heard of the country. That was the thought process behind my very profitable forte into Mongolia, which by the way is still only getting started. The reason that I think things will change rapidly is because the rulers in Myanmar want to get rich just like everybody else in Asia. The first generation of leaders after the coup I am sure were idealized and adopted what were fashionable economic theories i.e. Socialism. I believe this generation of rulers sees what is happening in China, Thailand, Vietnam, and even Cambodia and would like to share in the riches.

    At one time, during British colonial rule, the country was the largest exporter of rice in the entire world and the second wealthiest country in Asia. The country exported 75% of the world teak and even today supplies 90% of the world's rubies and a substantial amount of other precious stones. The country has excellent agricultural potential and has excellent prospects for tourism with 1200 miles of coastline yet only 750,000 people visited the country last year. By contrast Thailand had around 14 million visitors last year. The country also has substantial amounts of hydrocarbons both onshore and offshore that have not been developed due to the sanctions and mismanagement of the economy.

    As I said earlier things are beginning to change in Mynamar. The government has released many political prisoners including Aung San Suu Kyi, allowed political parties to form, and will allow them to field candidates in future elections. In addition the government has signed peace treaties with ethnic minorities that it had been fighting in the northern part of the country. The country has had a record of severe human rights abuses but this is also changing as documented by various human rights watchdog groups. The change has been so fast and inexplicable that many in the west are not sure if they are in fact real or not or if they will stick. Nevertheless, Secretary of State Hillary Clinton visited the country late in 2011 and the US relaxed sanctions on foreign aid in Nov 2011 and resumed diplomatic relations with Myanmar on 13 January 2012. The US has stopped short of lifting economic sanctions on Myanmar but Secretary Clinton said that sanctions could be lifted if Myanmar continues in its reforms. Unfortunately for US citizens it is not currently possible to invest directly in Myanmar because of the sanctions. This is not the case for Chinese and Indian companies which have been pouring into the country. In fact I saw one Chinese businessman quoted as saying he hoped the sanctions would never be lifted as he did not want the competition.

    With respect to sanctions it is my view this is not a question of if but a question of when. If the country continues to reform itself politically the sanctions will be lifted and the rush will be on. Granted there are still issues in Myanmar as the country is ranked 176 out of 180 in corruption, the infrastructure is in complete disrepair, and the country is the second largest grower of opium. Nevertheless, I am sure some of the same things could have been said about Thailand 30 years ago. I am also sure that if you would have got into Thailand 30 years ago you would be very wealthy now. The facts are that, with the exception of Africa, we are beginning to run out of very poor underdeveloped ground floor opportunities. I believe Myanmar will, like its many neighbors, be one of these Asian success stories; it is just a matter of time and money. I do know of one company that trades on the Singapore Stock Exchange called Yoma Strategic Holdings that has most of its business interests in Myanmar. I am not recommending anyone buy it as I do not even know if it would be legal for US citizens to purchase the company stock, plus it is way overvalued as people are pouring money into it as a proxy for Myanmar. It is just an example of one of the vehicles that has already been developed to take advantage of the growth that is to come in what is very possibly the next Asian Tiger. I will continue to follow and update as more information becomes available.

    Here is a link to a Reuter's article about the burgeoning real estate market in Myanmar.

    Businessmen are quietly flooding in, too, sensing that the country -- with its oil, gas, timber and gems and a population untouched by the consumer boom seen elsewhere in Asia -- could be the next big investment story once sanctions are removed or softened, which may be soon.

    As a result, Yangon, which ceased to be the capital after the junta suddenly relocated to remote Naypyitaw in 2005, is in the midst of a property boom, felt especially keenly at the top end of what little proper office space there is, and for the type of housing Western executives expect in large Asian cities.

    "The prices here are outrageous," said an American businessman sitting in the lobby of a posh Yangon hotel, one of only a handful in the city, most of which have been fully booked over recent months.

    The man, who lives in Bangkok and gave his name only as James, gives a resigned sigh when asked how his search for a home in Myanmar was going.

    "This place is just exploding with investor interest."

    James visited a year ago to "scope out opportunities" and accommodation, but villas that were available for rent then at a few thousand dollars a year now cost up to $50,000.

    "And you don't get much for what you're paying. There is very little choice," James added, before heading off to meet a lawyer to hammer out details for a deal.

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Comments (2)
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  • haiguike
    , contributor
    Comments (939) | Send Message
    Thanks, John. Myanmar is also on my radar (second to Mongolia) and I plan to visit sometime this or next year. Currently, there is too much money poured into existing real estate from the Chinese. Overall, the long term growth potential over the next 30 years in Myanmar is tremendous.
    1 Feb 2012, 12:26 PM Reply Like
  • Mark Wallace
    , contributor
    Comments (21) | Send Message
    Great Stuff John. We're headed to Myanmar as well this year, also Cambodia and Mongolia.


    Meanwhile we'll be monitoring the situation closely, it's fascinating how quickly things are changing there!


    2 Feb 2012, 10:26 AM Reply Like
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