Interview: Stephen Suen
How does Myanmar’s property development segment compare with other ASEAN members? What makes it a worthwhile investment destination?
STEPHEN SUEN: During the initial stages of the opening of their markets, some emerging economies were not ready for globalisation and modernisation. Myanmar is slightly different. There are a lot of reasons – including the fact that there is a British common-law system – that attract foreign companies here. The country is very rich in resources and can be more attractive than other ASEAN states because it is in the centre of three big markets: one is China, another is India and the last is ASEAN. Those blocs account for approximately 50% of the total population of the world. Few countries can match what this proximity offers.
Another way in which Myanmar differs from other emerging economies is that, while they typically begin economic reform first and delay political reform, Myanmar has started economic and political reforms almost simultaneously. This is very important because it allows economic growth to be sustainable. In terms of smoothness and speed in modernisation, Myanmar is one of the best examples that I have seen.
Another draw is the people. English language proficiency is high and the people here are very welcoming and enthusiastic. The intrinsic characteristics that exist in this country are very positive and together create an appealing environment for investors.
What is the current project finance environment in the country, and how do you expect the arrival of foreign banks to impact loan growth?
SUEN: Financing can be a very difficult topic as far as emerging markets are concerned. In Myanmar there are very efficient banks but there are also constraints. Currently there is not a big enough asset portfolio to support large-scale project financing. Because of this, larger projects are generally only successful if they are being funded by banks based outside of Myanmar. Additionally, in some cases, projects can also be financed by companies that have greater resources and good track records based on past projects.
I think the Myanmar government has been very clear that, based on what we have learned from other emerging markets, the opening of the banking sector cannot be done at a very fast speed, as local banks need to have time to adjust. So far, few new licences have been granted and the activities of foreign banks are limited. By opening the market, however, smaller banks could benefit from larger banks, as interbank financing arrangements could be created.
According to my past experience, the biggest constraint in most emerging markets is the shortage of money. Slowly introducing the entrance of large foreign banks will activate the money market and this will produce a multiplying effect, providing benefits to both corporations and consumers.
I think the government is clever and will monitor the speed of this process, because it needs to give local banks time to catch up in terms of the level of expertise required to be successful.
How would you assess Myanmar’s property laws in comparison to other countries in the region?
SUEN: Contrary to what we find in other emerging economies, property rights in Myanmar are quite clear. However, because new kinds of properties, such as high rises, are being built, property laws need to be defined in a more refined manner. This should also be done for condominium laws, because these types of properties did not exist 40 years ago and the current lease and ownership rights are not clear. The condominium laws are being processed, but we must wait to see how comprehensive they will be. As property laws are being refined and the financial environment is strengthened, we will see the legal structure of Myanmar’s property market match the average of ASEAN countries.
I would also like to see Myanmar allow foreign ownership, but the government must first make sure there is enough land supply to moderate price fluctuation.
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