Private Equity Fund to Boost Myanmar Companies with up to $100M
By Nan Lwin 4 February 2019
NAYPYITAW—Singapore-based Ascent Capital Partners Pte. Ltd. launched its first Myanmar-focused private equity fund backed by sovereign wealth fund Temasek and the Asian Development Bank (ADB) in January. In December, ADB signed an agreement to provide a $10 million equity investment to the Myanmar-focused private equity fund to provide much-needed capital investment for the growth and expansion of small and medium-sized enterprises (SMEs). The fund aims to support local companies, particularly SMEs led by women or with potential to make a significant contribution to inclusive and sustainable economic growth in Myanmar.
The Irrawaddy spoke with founder and managing partner of Ascent Capital Partners Pte. Ltd., Mr. Lim Chong Chong, a man who has deep strategic and operational knowledge of Myanmar’s investment and business landscape, about the first Myanmar-focused fund, its key goals, potential for the foreign investment sector and whether the government’s Look East policy can revive the decline in foreign direct investment (FDI) in Myanmar.
Tell me about this Myanmar-focused private equity fund?
We are Ascent Capital, a Singapore-registered fund management firm that announced a Myanmar- focused private equity fund—Ascent Myanmar Growth Fund I L.P. (AMGF). The Myanmar Growth Fund is managed by us independently. We have a few investors from Temasek in Singapore, the Asian Development Bank (ADB), JG Summit Holdings from Philippines,Myanmar’s U Aung Moe Kyaw and Singapore’s Tony Chew.
But the fund is independently managed by us—our investors don’t participate in the management of the fund. The fund is supported by strategic institutional, corporate and individual investors with long, successful track records of investing and building businesses across sectors globally and in Myanmar.
In terms of sectors, we will invest in any sector as long as it can help us achieve our investment target. But AMGF will mainly focus on companies in five sectors—consumer, education, financial services, healthcare and technology. We are looking to invest at least $5 million in each Myanmar home-grown company. On average, we will invest between $5 million and $20 million in each company. We have the capital to invest more than $20 million in each company if bigger opportunities arise.
Meanwhile, we are holding discussions with a few Myanmar companies. We don’t set up the companies ourselves, we only invest in existing companies, so it takes time to talk to each other, to understanding each other. I have seen some quite interesting companies so far.
What are the key goals of Ascent Myanmar Growth Fund?
Not just myself, but our investors including ADB, are not just here to make money. We also focus on social goals that we call environmental, social and governance (ESG). We will help build the foundations of Myanmar companies which allow for sustainable growth, and we will work closely with the companies to advocate ESG objectives. One of our goals is to help [build] a sustainable economic environment that is in line with ADB’s objectives, which includes creating opportunities and support for women entrepreneurs and women-led companies.
We hope, through our investment, we can also make a positive impact on Myanmar and its people. ESG is a big part of our focus as well. We hope to create positive change in Myanmar. We also support the new Myanmar Sustainable Development Plan which is known in the private sector as the main engine for [driving] balanced and sustainable economic growth.
Based on your experiences, which sector do you think has the most potential to attract foreign investment in Myanmar?
This also is going back to our investment thesis. Our firm’s investment thesis has two factors—one is Myanmar’s growth story because Myanmar is at a very early stage of development so there is a lot of growth potential. We believe that any sector or company can rise according to the growth potential and will be able to do well.
The second factor is Myanmar’s consumption story because Myanmar has a relatively large and young population of 53 or 54 million people. Daw Aung San Suu Kyi mentioned that half [of Myanmar’s population] is below 30 year olds and also has a rising income. So it is positive for the consumption story. Anything can have leverage in Myanmar’s consumer sector—it can be retail, food and beverages, fast-moving consumer goods, healthcare or education. As income goes up, as people get older, you’d need more healthcare and more education.
Myanmar’s foreign investment has declined for two consecutive years. You already know about Western sentiment towards Myanmar due to the Rakhine crisis. Why did Ascent Capital decide to investment millions of dollars in Myanmar this year?
Our intention is quite simple. Let me first talk about your point that [investment in] Myanmar is declining for two years. I don’t think that way—Myanmar’s average growth is 6 to 7 percent, so [overall] growth has not declined. It’s just that Myanmar did not grow as fast as was expected.
Despite all the challenges Myanmar has faced in the last two years, it still managed to achieve 6.5 percent [economic] growth. Just imagine if Myanmar’s government, private sector and everybody came together and gave more effort, focus, and energy—it would be easy to achieve a lot more.
We are long-term investors. We are not here to expect short-term profits or returns. Our investment period is between 10 and 15 years. We asked ourselves where will Myanmar be by 2030. If we look at that perspective instead of thinking where Myanmar will be in 2020, I think the conclusion is quite different. If investors only think about 2020 it may not be the right time for Myanmar. If investors think about 2030, it is the right time [to invest]. It is about being early movers.
Myanmar’s government has adopted a new Look East economic strategy in an effort to revive the significant FDI decline. What do you think? Does it really have potential to revive the decline in FDI?
Let’s look at the facts. The fact is that if you look at the last eight or nine years since Myanmar opened up, look at where FDI was coming from, a lot of FDI—tangible concrete FDI—was from Asia. It is a fact. So if you ask me, the Look East strategy may have been there since 2011, not 2017 or 2018.
I am not a politician. My personal view is that we should not choose whether to look east or west. I think maybe we should welcome whoever does want to invest in Myanmar and how to contribute to Myanmar’s long-term sustainable development. I say that because I have met a lot of European and US investors who the media says don’t want to talk with Myanmar, that they want to stay away from Myanmar. It is not true—they do want to invest in Myanmar. They do want to support the long-term development of Myanmar; they do want to invest in Myanmar. As we all know, western companies and investors are more advanced in their focus on environmental and social [issues]. Their investments tend to bring higher levels of governance which can benefit Myanmar. I don’t think we should think “let’s not talk to western investors” or “let’s talk only with Asian investors.” We don’t have to draw a line in the centre.