The Irrawaddy Business Roundup (April 22)

By The Irrawaddy 22 April 2017

Investment Group Plans New Ventures

Myanmar Investments International (MIL) is planning two new ventures into tourism and pharmaceuticals, according to DealStreet Asia.

The company, which is listed on AIM, the London Stock Exchange’s international market for smaller growing companies, has already invested in Apollo Towers and microfinance operator Myanmar Finance International (MFI).

The first of the latest new joint ventures is being set up with a well-established local tour operator and travel agency that will develop its business and invest in tourism related assets, MIL said in a statement. Tourist arrivals are expected to grow significantly in Burma in coming years, the company noted.

The second new joint venture in pharmaceuticals is being set up with two partners. One is a retail group that runs more than 50 pharmaceutical, health and beauty outlets in Asia. The other is an “industry veteran” with experience in large retail operations in Asia.

“MIL is excited at the prospects for the pharmacy, healthcare and personal care retail sector given the expected rise in consumer spending power,” the statement said.

MIL reported that its microfinance operations in Pegu and Rangoon had a borrower base of more than 42,000 and had given out loans of 7.8 billion kyats (US$5.7 million), as of February 2017. Apollo Towers has 1,800 towers in its portfolio and is planning another 2000.

UOB Facilitating Investments

Singapore-based United Overseas Bank (UOB) has facilitated more than US$830 million of investments into Burma since it opened operations in Rangoon in 2015, according to the Straits Times.

The capital flows have come mainly from multinational and regional firms based in China, Malaysia, Singapore and Thailand, and the firms are mainly in the manufacturing, hospitality and commercial property sectors.

UOB has provided corporate loans and project and supply chain financing, according to the report.

“Myanmar’s strong demand for critical infrastructure is attractive for long-term investors interested in the country’s economic progression. Over the last 24 months, we have helped hundreds of companies from across the region to make investments supporting Myanmar’s continued economic development,” said Ian Wong of the bank.

Last year UOB conducted a survey of 2,500 enterprises from Singapore, Malaysia, Indonesia, Thailand, China and Hong Kong. A total of 20 percent said they planned to expand into Burma within three to five years.

Local Investors Focus on Property

Domestic investors put 2.767 trillion kyats (US$2.0 billion) into the property sector over the past year, as of March, according to government figures.

The investments in property were the highest of any sector in the country, according to Property Report. Property investments accounted for almost 21 percent of all investments, it said.

Burma investors placed 13.1 trillion kyats into 1,241 enterprises across 11 sectors.

Manufacturing saw 2.4 trillion kyats in investments, followed by transport with 2.3 trillion kyats. Tourism and hotels saw 1.4 trillion kyats in investments.

Agriculture and livestock and fisheries only accounted for 0.38 percent and 0.53 percent of investments, respectively, according to the report.

Foreign direct investment over 2016-2017 was US$6.6 billion, down 30 percent from the previous year due mainly to a dearth of new oil and gas exploration projects. Foreign investment in Burma’s transport and telecommunications sectors surged to $3.08 billion, a 60 percent increase.

Opportunities Seen in Health Market

Burma has strong potential for healthcare investors, according to a principal investment officer of the International Finance Corporation (IFC) in Hong Kong.

Jiadi Yu said that the IFC had kept a ‘watchful eye” on the health sector since the investment arm of the World Bank opened an office in Burma in 2015.

The representative met several “top tier” private healthcare providers on a recent visit to the country, according to a report in Health Investor Asia.

Healthcare development was strongly tied to improvements in electricity and general infrastructure, the bank representative said. Burma currently has no medical device manufacturers and few pharmaceuticals producers, she noted. Drugs are largely imported, mainly from India.

Public health facilities comprise 86 percent of total facilities in Burma but the private sector is expanding, the representative said. There are more than 200 private hospitals, most with fewer than 100 beds. Burma’s rich often travel abroad to Thailand, Singapore and India for procedures such as check-ups and cancer treatment. They spend $250 million a year on medical tourism, according to the IFC official. To capture some of this market, local investors are planning a number of greenfield hospitals.

Burma also has a severe shortage of nurses, and is the only country in Southeast Asia with more doctor graduates than nursing graduates, Jiadi Yu said. Just 400 nursing graduates are produced each year. Private hospitals make up for a shortfall of nurses by training healthcare assistants for nurses, sending new staff to the Philippines for training, or hiring foreign nurses. To improve the situation, local hospitals said they intended to create private nursing programs, the IFC representative said.

There was also a shortage of doctors, she noted, and the low penetration of health insurance meant that Burma has one of the highest out-of-pocket health spends in the region: almost 70 percent in 2015.

The official said that Burma’s health sector is full of possibilities as the government is easing restrictions on foreign and private investment and patient demand for better quality services is on the rise. National spending on healthcare will rise in line with the government’s goal to achieve universal health care by 2030, she said.

“Private investors will be a big part of the market’s development and IFC plans to be at the table,” the official added.