In Myanmar, Flirtations by Investors Turn Into Commitments

NAYPYIDAW, Myanmar — Foreign executives who flew into this dirt-poor country over the past year to tap into what is described as Asia’s last major frontier market often came away skeptical, befuddled or outright disappointed.

“Look, listen, learn — and leave” was the catch phrase that described trips here by executives who saw first-hand the lack of electricity, terrible roads, eager but very undereducated work force and overwhelmed government officials.

Now, two years after Myanmar’s civilian government came to power, the country appears to be moving into another stretch of its journey from military dictatorship to democratic market economy. Flirtations by foreign investors are turning into commitments, vague promises into dollars.

Some of the world’s most prominent multinational companies — Coca-Cola, Unilever, General Electric, Philips, Visa — have started doing business in the country.

“We’re prepared to be very patient,” said John G. Rice, a vice chairman of General Electric, who attended a World Economic Forum conference of foreign executives in Naypyidaw that concluded Friday. G.E. has leased aircraft and sold medical machinery and turbines in Myanmar in recent months and announced it would donate $7 million worth of training to engineers and health care workers.

The overall scale of the company’s investment remains small. G.E. opened an office earlier this year with considerable fanfare but it has only two employees in the country.

“The world is getting used to the fact that Myanmar is no Shangri-La,” said Peter Maher, the head of Southeast Asian operations for Visa. “This is frontier stuff,” he said. “We take it on faith that there will be a market here.”

Since December, when automatic teller machines were reintroduced into the country, the number of A.T.M.’s accepting international credit cards has gone from zero to 160 and spending by foreign cardholders in the country has totaled about $7 million. But as a measure of the still tiny size of the market here, in neighboring Thailand, which has a similar population but a much more developed economy, foreign cardholders spent 400 times as much during the same time period — about $3 billion, Mr. Maher said.

Companies from China and other Asian countries have long had a strong presence in Myanmar, but with the lifting or suspension of European and American sanctions, Myanmar is increasingly turning to the West for assistance in building a country that was impoverished by five decades of military rule.

One of the biggest tests of the country’s ability to attract investors is the auction for mobile phone licenses scheduled to be completed later this month. Fewer than 10 percent of the people in Myanmar have mobile phones, compared with 80 percent in neighboring Bangladesh.

Jaspal Bindra, the group executive director of Standard Chartered Bank, said the winners of the mobile phone licenses would need to invest billions of dollars.

“That’s where you will see investment dollars quicker than later,” he said.

Companies selling food and other consumer goods are also moving quickly. For decades, packaged food and drinks have been imported — and smuggled — into the country from Thailand and China; companies are now seeking to move production here.

Daniel Sjogren, managing director of Carlsberg Myanmar, is presiding over the construction of a brewery in Bago, a city an hour and a half outside the country’s commercial capital, Yangon.

With annual consumption of beer in Myanmar about five liters, or little more than one gallon, per person, compared with 20 liters per person in a more developed territory like Hong Kong, the brewer anticipates years of growth.

But Carlsberg’s investment plans also underline some of the challenges foreign companies face in setting up operations. Yangon, where Mr. Sjogren is moving with his family, is strained by the influx of foreigners. He had difficulty getting his two young children enrolled in an international school and the house he has rented in Yangon is only marginally less expensive than the apartment he is leaving in Hong Kong, one of the world’s most expensive cities.

“If you want a decent house in an area of Yangon with secure electricity, you’re talking $10,000 a month,” he said.

Electricity supply is also an issue at the planned brewery in Bago — the company must install its own electricity supply.

U Soe Thane, a minister and key aide to President Thein Sein, does not hesitate when asked the most frequent complaint by foreign investors: “Electricity,” he replies. Only 13 percent of households have access to electricity, according to a report released earlier this month by McKinsey, the international consulting firm.

“Without electricity it’s just talk,” said Mr. Rice of G.E. “Just about everything you do requires a plug.”

Article source: http://www.nytimes.com/2013/06/08/business/global/in-myanmar-flirtations-by-investors-turn-into-commitments.html?partner=rss&emc=rss