Fly-in fly-out does not work for PE in Myanmar: Anthem Asia’s Price

Anthem Asia's Josephine Price at the DEALSTREETASIA Asia PE-VC Summit 2016 in Singapore. Photo: DEALSTREETASIA

Myanmar, seen by some as the last frontier market of Southeast Asia, has sputtered along as an investment destination for local and regional investors.

The Southeast Asian country offers an attractive consumer market with a population of about 54 million and a GDP growing at roughly 6 per cent but investor confidence has not completely recovered after a military clampdown on the country’s Rohingya Muslims.

There is about $200-300 million in uninvested capital, or dry powder, allocated for Myanmar by institutional investors, reckons Josephine Price, co-founder of Anthem Asia and chairwoman of the recently launched Myanmar PE&VC Association.

“In terms of where we are in the Myanmar investment cycle, there isn’t a lot of new money coming into the market. Historically, it’s when capital is scarce that you get the best deals done,” she said.

While Myanmar has potential, there is still a need to promote the understanding of private equity and venture capital and its role in the wider economy. That prompted the setting up of the PE-VC association.

“The associations want to raise standards. In Hong Kong, for example, most professionals realise private equity is a great career. But if you talk to people in Myanmar, they don’t know what PE is or how attractive the industry can be as a career,” said Price.

Over the years, the Burmese market has witnessed investments in a range of sectors, including consumer staples, telecom, energy, F&B, hospitality, financial services and mobile internet.

Major deals in Myanmar since 2018

Expand Table

No.CompanyInvestorsFunding sizeDate
1FrontiirCDC Group$30MJuly 2019
2FrontiirDelta Capital Management, IFU, NorfundNASeptember 2019
3Rent 2 OwnDEG, Daiwa PI Partners, agRIF$6MNovember 2018
4OwayDaiwa PI Partners, IFC, Belt Road Capital Management, Openspace Ventures, EMIA$14.7MApril 2018
5Keb Hana MicrofinanceIFC$13MNot closed yet
6Yoma Micro PowerIFC, Norfund, Yoma Strategic Holdings
$28MApril 2018
7Easy MicrofinanceDelta Capital Management$7MMarch 2018

While larger deals have typically been in infrastructure and energy, such as Yoma Micro Power and Apollo Towers, the country has also witnessed a $30 million financing for Frontiir by Commonwealth Development Corporation (CDC) and Oway’s $14.7 million fundraise from investors including the International Finance Corporation (IFC).

In Myanmar, large institutional investors have played the dual role of a direct investor and a limited partner in local funds. CDC, IFC and other international investors such as Norfund, Asian Development Bank, Denmark’s IFU and Temasek have backed the funds of Delta Capital, Anthem Asia, Myanmar Strategic Holdings and Ascent Capital.

Ascent is currently raising $100 million for its debut fund, the largest in Myanmar, while Delta Capital closed its second vehicle at $70 million in 2018.

Expand Table

No.ManagerFundTarget/Total fundraiseFirst close
1Daiwa PI PartnersVenture Fund$30MNA
2Ascent Capital PartnersAscent Myanmar Growth Fund I$100MOctober 2018
3Anthem Asia Myanmar SME Venture Fund$50MAugust 2018
4Belt Road Capital ManagementFund II$100MNA
5Delta Capital ManagementMyanmar Opportunities Fund II$70MFund closed, 2018

Myanmar, according to Price, needs a long-term, patient approach.

Edited excerpts:

How do you see the current demographics and macro situation in Myanmar as a pedal for investment in the country?

Myanmar has the elements to quickly grow into a successful economy. The country has 54 million people, a large proportion of whom are under 25 years of age. The size of the population and its age skew will mean a drive for consumer goods and services as well as health and education. This is starting to happen. As in India, Indonesia or Vietnam, a vibrant and distinct consumer sector is emerging.

Is getting investment approval lengthy and difficult?

Things are improving. For example, it is quick to register a company online. The list of areas of the economy where foreign investors are restricted or prohibited has been slashed. Approvals for smaller investments — up to $5 million — can now be done at the state and regional level. The process is getting easier though challenges remain especially getting regulations enacted and followed. But overall, the climate is more welcoming for foreign investors. And Myanmar compares well with other markets.

In a frontier market like Myanmar, does it require to be super localised when investing? Is that where Myanmar PE & VC Association comes in?

Successful deals in any market are based on solid relationships. If you are asking ‘can you only do deals in Myanmar if “you know the right people?”,’ the answer is no. There are areas of the economy, particularly in the service sector, where foreigners can invest in their own right without a local partner. In larger deals, such as in infrastructure, good joint venture partners and good relations with the government and regulators are clearly vital.

Myanmar PE&VC Association sees itself as providing a simple way for people to provide an overview and access to the who’s who among institutional players in the market.

Do you have any data showing how deal flow has been going in recent years?

No, it’s mainly anecdotal. One of the tasks Myanmar PE&VC Association has set itself is to collate data on deals and also to match deals with investors. Already we informally do referrals. For example, if my firm comes across an opportunity that is too large for our mandate or is primarily a social impact investment, we know which of our members could be interested and pass on the details.

Some investors prefer to invest based on data. Have investment activities in Myanmar been able to provide sufficient data for investment decisions? Is there a pattern for investors?

The short answer is no. Overall the number and size of transactions have been limited to date. In terms of returns, there have only been a few exits because a lot of the deals have been early-stage and growth, which typically have a holding period longer than five years. A typical early-stage investment is really small – under $1 million. Things are changing and each new deal, each new merger or acquisition adds to our collective knowledge.

This is a frontier market. The pattern for success is to be resilient; “fly-in fly-out” does not work. Have patience and commitment to the country so people and companies can see you are serious.

There is more interest in Myanmar now. Will the opportunities be enough to absorb the capital?

There are plenty of opportunities: the issue as everywhere is to find investible ones. The association estimates there is about $200-300 million in dry powder from institutional investors — funds committed to Myanmar but yet to be spent. That is a very small amount compared with the size of PE in other ASEAN and Asian economies. In terms of where we are in the Myanmar investment cycle, there isn’t a lot of new money coming into the market. Historically, it’s when capital is scarce that you get the best deals done.

Most private investors would bet on consumption themes. What are the sectors to watch in Myanmar now?

The Myanmar story is the rise of urbanisation and a middle class and so the emergence of the “Myanmar Consumer”, the same as has happened across Asia for the past three or four decades. The characteristics and speed are very different from other countries. For example, the widespread availability of affordable mobile data is propelling the Myanmar economy in ways that are completely different from, say, what happened in Vietnam in the 1990s and early 2000s. The consumer story translates into demand in such sectors as business and financial services, foods, agri-business, entertainment, healthcare and education among others. The opportunities are at B2B and at B2C.

What is the quality/competency of the entrepreneur community in the country?

It is good, but scarce. There is a strong entrepreneurial startup culture driven by young people who have seen ideas overseas and are supported by accelerators and incubators in Yangon. As to be expected, sometimes enthusiasm overreaches capabilities, but that happens everywhere. There are those returning home and keen to modernise the family business and facing resistance, again something that happens in family firms all over the world.

How about hiring investment talent for GPs?

The associations want to raise standards. In Hong Kong, for example, most professionals realise private equity is a great career. But if you talk to people in Myanmar, they don’t know what PE is or how attractive the industry can be as a career. There are some senior local investors, but they’re the minority because they haven’t spent their careers in private equity. It will change as young practitioners — many currently working with association members — gain more experience.

You had experience in Vietnam too, a market which has also witnessed PE-VC activities grow significantly over the years. Do you see Myanmar growing the same pace?

We hope so. It has similarly attractive fundamentals.

Looking forward, what will be the focus of Myanmar PE&VC Association in the near term? 

Near term, the association is focusing on training for practitioners and those interested in PE, and also communications. We see the latter as very important: educating people in Myanmar about what private equity is and can do for their businesses and for the wider economy.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.