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Around Asia in Several Pieces Part 1; Burma, Cambodia, and Laos.

     Dear readers, this around the world discussion of emerging market economies continues, now with our turning to Asia, and exploring potential possibilities that exist in this area of the planet.  Thus like humanity we begun our journey in Africa.  We’ve met the Neanderthals in the caucus’ and Levant, and now we’ve continued across the great Asian landmass over to the small countries that exist in the beautiful tropical surrounding of South East Asia.  This area is now a hotbed of investment prospectors.  Can these countries become compliments to China, will they grow with their great sprawling neighbor?  Who can say, but whatever the future brings with the knowledge garnered from these articles we will surely be more prepared than we would otherwise be, for that which  looms over the brilliant horizon.

 
Burma is a country with a somewhat unstable government.  If one may recall they recently had the issue in which Buddhist monks may or may not have been massacred while they were protesting the current regime which is often described as a “military junta”.  None the less, Burma is still a country where one may potentially find suitable investment vehicles so who know, its always worth a look.  Like many emerging markets this country is thus gifted and cursed.  It has rich natural resources but poor infrastructure and governmental programs, thus we have potential depending on the desired risk profile one has decided to shoot for.  Burma is not as developed as some of the countries discussed in the African section of this “Round the World” series.  One can sense this immediately by looking at their GDP composition breakdown.  In this cases the tell tale sign of underdevelopment is the 42.9% allocation to agriculture.  After this we have a small amount of industry amounting to 19.8% of the economy and the service sector rounding things out at 37.3% of the economy.  
Within this framework we have several resources that stick out as key “investability” targets.  Several of which have already been developed, and or are in the process of being developed.  None the less it may not be too late to get in on the action, who knows.  For, Burma is a country rich in resources.  Undoubtedly one of the most valuable of these resources is the natural gas which is not serving as somewhat of a booster for this fledgling economy.  Apart from this there are also some mining and logging operations which one may choose to regard if one is regarding this specific country.  The mining operations include operation aimed at procuring copper, tin, tungsten, iron, and phosphates, as well as jade and other precious gems.  Thus things could be worse.  However, the fact that Burma has been economically burdened by sanctions from countries such as Australia doesn’t make these sorts of temptations to invest quite as appealing.  Apart from this one would probably also have to grease quite a few palms to get anything done per se since the country is also noted for its corruption.  None the less it never hurts to know, so at least now we all know what sort of potential lies behind the smog of corruption which currently holds orbit over this small country.  
Apart from these analysis it may be wise to see how the countries economy has been growing recently.  For this figures; we find that in 2003 Burma’s economy grew by 3.3%, it shrank by .5% the next year, 2004.  In 2005 it similarly contracted by 1.3%.  Surprisingly th next year it grew by 5.2%, growing until the present, 3.0% in 2007, 3.8% in 2008, 1.1% in 2009, and a projected 1.0% growth for this year.  Thus perhaps Burma is beginning to approach climbing the long hill to prosperity.  None the less, until the government has been reformed to a certain extent, and or one has powerful connections within the country it may be best to sit this option out until a later date.
 
Next on the list we have Cambodia.  Cambodia is another country in this region which is often overlooked, and which the vast majority of the world would probably be unaware of were it not for the events surrounding the Vietnam War.  None the less, into the foray we go!
 
Cambodia does not possess the same sort of international “notoriety” as does Burma however it does possess the great wealth of resources and much much more.  If I had to give a quick yes or no answer as to whether or not for a company or individual to invest in Burma I would give it an understated “check” because Cambodia looks like a great prospect.  Its economy is not laden with potential for primitive operations per se involving the appropriation of resources such as bauxite, precious stones, and gold, and iron, but it also has a booming garment production industry.  Thus it is sort of like if oil had been found in Lowell Massachusetts back in the days of the industrial revolution in the United States.  Thus in analyzing the countries GDP composition we see that the agricultural sector, though large is still dwarfed by the services sector and is on par with the industry sector, for we have an agricultural sector which comprises 29% of the local economy, an industry sector which comprises 30% of the economy and a services sector which comprises the remaining 41% of the economy.  The service sector is boosted by the increased tourism that Cambodia has begun to see streaming into the country as of recently.  Perhaps motivated by TV shows like those centered around odd foods, or those dreamlike escape films like “the beach”, for whatever reason people have begun coming to Cambodia in droves, making a journey surely similar to that taken by the title character in that lesser known Conrad novel, “Lord Jim”.  None the less Cambodia’s economy is firing on all cylinders and we’re looking at a hot prospect.  This prognostication is further reinforced by the long term growth the countries economy has experienced as of recently.  In Cambodia we see a veritable dynamo of economic growth as of the last decade.  Things start of at a trot in 2003 with economic growth of 5.2% from the previous year, we see a 5% growth figure for the next year, 2004, and a 5.4% growth figure for the next year, 2005.  In 2006 we see a stunning 13.4% growth figure for Cambodia, followed by a simmering 7.2% percent growth figure quickly followed by another leap into a 10.1% growth figure for the next year, 2008.   In 2009 things begin to slow down to 5% growth and sadly the global downturn takes its toll on Cambodia, bringing with it economic contraction cause contraction of 1.5% in 2010.  Things were great while they lasted there and in 2006, Cambodia’s economy was the 5th fastest growing economy in Asia to put things into perspective, but none the less, this may leave one wondering if now would be a good time to hop on the train now that its moving slower.  The one downside is that Cambodia isn’t alone in cranking out garments, and that since 2005, when a WTO trade agreement collapsed, the country has been competing against other local giants like Bangladesh, China, and India in the market for said garment production.  None the less, if more people get out of the country and into the cities, whether they answer the clarion call of tourism or the hum of automation in factories, we’ll begin to see growing demand for consumption of quality foods and products.  Quality as defined by non-cottage goods, as in non-homespun goods.  Thus I bet people wish they could have known that China was going to grow like it did so that they could get into now massive Chinese grocery chains when they were smaller, and though Cambodia is surely no  China per se, opportunities of a lesser scale may none the less present themselves to the savvy investor.
In rounding out this piece lets take a look at another country of Vietnam War fame, Laos.  Laos is like a high school football player per se, because he’s got potential but we’re not going to see him make it big for a least several more years.  Laos is like its massive neighbor, a one party communist state.  It has none the less begun to open its doors to outside investment and has done so with a somewhat more sped up state than one might expect.  It is beginning to lay the tracks to a successful future, but the proverbial locomotive is still being produced by the local factory if you follow.  Its got some times to go before it will really become a really open market and the UN Development Program believes that it should be so by at least 2020.  Thus it never hurts to familiarize ourselves with the countries economy so we’d might as well take out our magnifying glasses and put on our thinking caps.  In Laos we have somewhat conflicting views on the GDP breakdown but lets take a look at how things are believed to be distributed.  The agricultural sector is according to some, 29.9% of the economy, according to others, its 40%.  Given that it is not developing from a communist framework, and knowing the communist love of farming, one may be tempted to lean towards the 40% mark.  None the less, it is believed that industry rounds out 33.1% of the economy, and that services are estimated to account for 37% of the economy.  If I had to guess I’d say that the services sector account is inflated, and that the agricultural sector account is underrepresented in these figures but who can say for sure.  Thus we have Laos’ economy in its relatively primordial state as in the contemporary not as much outside investment has taken place as in other examples discussed in these pieces.  None the less the economy of Laos is growing.  In 2003, the countries economy grew by 5.5%, it grew by 5.5% again in 2004, it grew by 6% in 2005, 7.3% in 2006, 7.4% in 2007, 7.5% in 2008, 7.5% again in 2009, and slumped back down to 6.4% as is projected for this year, 2010.  Thus seemingly embodying the measured steps of many less revolutionary communist government we see a slow creeping acceleration into success.  Perhaps in further analyzing Laos we may see how it may show how Communism could work minus the presence of a firebrand like Stalin, or Mao, who greatly shaped their own countries interpretations of Marxism.  None the less, it certainly isn’t capitalism, and perhaps Laos government deserves a tip of the hat for their seemingly perfect planning if they somehow managed to lead a country in such a way that its economy could grow by a stable .1 percent for several years in a row.  None the less, more growth and liberalization of investment policies would certainly surely help the situation, and we should expect to see these sorts of policies enacted and flower by about 2020.  Thus, it is no Cambodia, but it isn’t as bad as Burma either, so maybe it would be wise to keep Burma in the back or our minds for future research once things begin to emulsify to a certain extent.
 
Thank you for reading this latest piece in my “Around the World” series of articles analyzing emerging market economies, I hope you enjoyed reading the article as I truly enjoyed writing it.
 
All the best,
D. Stafford
 


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