Back in business - Issue 130 - Magazine | Monocle

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With its graceful riverfront colonnade and grand façade, Yangon’s first “ultra-luxury” hotel, the Rosewood Yangon, is also a striking reminder of the city’s past. Originally a British colonial-era law court, it was occupied by Japanese troops during the Second World War and later became party headquarters for the military regime that ruled what was then called Burma. Now, after a painstaking $150m (€135m) five-year restoration, the sprawling 205-room hotel is a conspicuous sign of confidence that Yangon – Myanmar’s economic heart – is on the up.

“I fell in love with Yangon because the city has so many heritage buildings,” says Supalak Foong, whose Bangkok-based family business, Kanok Furniture and Decoration, designs and builds luxury hotel interiors from Asia to the Middle East. It was Foong, helped by Yangon-based partner Jewellery Luck Group, who was the driving force and main investor in the restoration, and brought in Rosewood Hotel Group during the final stages. “We knew that with proper restoration this building could stand proudly alongside other grand heritage hotels around the world and, ultimately, encourage restoration of other historic buildings,” says Foong.

Indeed, in the time it took to transform the old law courts, parts of central Yangon have morphed into forests of cranes working on projects such as the restoration of the Victorian-era Ministry of Rail Transportation building that will feature a Peninsula hotel. Then there’s the overhaul of the Secretariat building, former seat of the British colonial administration, which has been transformed into an art, restaurant and commercial complex.

Many see the construction frenzy as a vote of confidence in Myanmar’s future. On a recent afternoon in downtown Yangon, that buzz was almost tangible as shiny red commuter buses roared past the towering golden Sule pagoda and the vibrant central market. In the labyrinth of surrounding streets, crowded with food vendors, heritage buildings stand alongside gleaming new malls, modern office blocks and soaring five-star hotels, including the Pan Pacific and Pullman. In recent months sleek restaurants, cafés and art galleries have also sprung up.

Dwarfing all is the ambitious multi-billion dollar New Yangon City Project, a scheme to build a mini-city across Yangon River for up to 1.2 million inhabitants, set to break ground in coming months. Led by the Yangon Region Government and Sino-Burmese tycoon Serge Pun, who is vice-chairman and chief executive of the project-management company, the new city will cover 90 sq km in its first phase. “I’m optimistic about Yangon’s future as well as the future of Myanmar,” says Pun, whose companies, Yoma Strategic and FMI, are leading the Peninsula project. “Despite the political hurdles, it is on the right track.”

The city’s energy and development surge contradicts a recent view that the world – particularly the West – had abandoned Myanmar. After the 2015 election victory of Aung San Suu Kyi, a former political prisoner, the international community hailed the country’s bright future. But that goodwill evaporated amid Suu Kyi’s silence over the military’s brutal crackdown on the country’s Rohingya Muslim community, which has driven more than 800,000 people into neighbouring Bangladesh since 2016. Amid threats of sanctions and international legal action, western tourists and some investors turned away from Myanmar. Many expected the reaction to drag down the country’s economy.

Yet Myanmar has managed to maintain growth. This is largely thanks to an eastern shift, reflected by the inflow of tourists and investment from Asia. Chinese visitors became the largest national group to visit Myanmar in 2018 – with arrivals rising by more than 40 per cent from 2017 – even as the number of western visitors nearly halved.

Sanda Win, who owns The Loft Hotel in Yangon and a resort hotel at Inle Lake in Shan State, says business has softened – although European and US guests are still her main clientele. She has just completed construction of a multimillion-dollar luxury villa resort in the ancient city of Bagan. “We’ve seen so many ups and downs over the decades but we always recover,” she says. “People realise that the violent images in the news don’t represent the whole country.”

Myanmar’s economic trajectory has been surprisingly resilient, with the Asian Development Bank forecasting 6.6 per cent annual growth in the year to 30 September, with a further increase to 6.8 per cent expected in 2020. True, foreign direct investment (fdi) plunged by nearly 40 per cent in 2017 from its lofty peak of nearly $9bn in 2015. But following the dramatic slide, FDI is climbing again and forecast to reach nearly $6bn (€5.4bn) this year, according to Thant Sin Lwin, who oversees investment procedures as director-general of Myanmar’s Directorate of Investment and Company Administration. “Western investors still seem to be watching but the past year has been much better than we expected,” he says. “Of course we worry about western sentiment but we have assigned more budget to promoting Myanmar in Asian countries, which is having some success.”

That success is reflected in the list of countries investing most heavily in Myanmar: in 2019, Singapore, China, Thailand, Hong Kong and Japan hit the top five. While western investors have slipped down the ranks, they are still represented, especially in sectors such as electricity, energy and manufacturing.

If you drive about 25km south of Yangon to the Thilawa Special Economic Zone, business is booming. The vast gate is festooned with the flags of about 19 countries that are represented inside the zone. The sprawling estate, with its compact low-rise factories and warehouses – as well as restaurants and even its own hotel – opened in 2015 as a joint venture between Myanmar and Japan, which had offered to help the country attract investment. Since then about 110 companies – most of them foreign and half of them Japanese – have signed up to establish facilities here. Among them are manufacturers of clothing, steel coils and even vehicles – including Toyota, which is building its first Myanmar vehicle-assembly factory. German retail group Metro AG and, most recently, Swiss cigar-maker Burger Söhne, which makes Dannemann cigars, are among the western firms investing in the economic zone.

Private equity and venture-capital funds, backed by financing from state-backed investment groups such as Norway’s Norfund and development-finance institutions such as the UK’s CDC Group, have been boosting the economy too. Earlier this year a dozen or so private-equity groups formed an association in Yangon. Between them they represent hundreds of millions of dollars in funds, all seeking savvy investments in promising businesses and start-ups in the country.

Among them is Delta Capital Myanmar, which has raised $120m (€108m) since 2015 and invested in technology start-ups and microfinance. With reform still urgently needed in the country’s rudimentary banking system, Delta’s managing partner Nick Powell sees such private investments as the next critical phase for Myanmar’s economy. “Increasingly, private equity and other flexible investments will be key for funding entrepreneurs and private businesses,” he says. In Powell’s view, the sectors to back in the coming years will be “anything innovative in financial services”.

Undeterred by threats of sanctions, Powell and others argue that it is the right time to be in Yangon. “The political and diplomatic challenges are well known,” says Josephine Price of Anthem Asia, an investment group that has been active in Myanmar since 2012. “Myanmar is slowly regaining its role as a significant economy in Southeast Asia and we’re optimistic that the fundamentals are so attractive that it’s worth being patient.”

Despite western criticism of the country, money is clearly talking for some big investors – and Burmese voters. Even after three years of negative headlines over the Rohingya crisis, Suu Kyi is popular among ordinary citizens. Although her National League for Democracy party is likely to lose some support in this year’s election – due to disappointment among some voters over her failure to resolve conflict between the military and ethnic armed groups – her party is still expected to win. A buoyant economy is sure to help and there are few indications that it’s slowing down.

As Thiri Thant Mon, the Myanmar country representative for CDC Group, puts it: “The clear case for investing in Myanmar is that it is at the beginning of the growth cycle – and this benefits investors taking the long view.”

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