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Dear Investors and Friends, As part of our continuing on the ground research, Ruchir Desai, Co-Manager of the AFC Asia Frontier Fund,

AFC Asia Frontier Fund - Myanmar - Unmet Potential

Dear Investors and Friends,

As part of our continuing on the ground research, Ruchir Desai, Co-Manager of the AFC Asia Frontier Fund, traveled to Myanmar recently to attend an investor tour. Photos are by Asia Frontier Capital.

There was a lot of excitement in 2011/12 when Myanmar initially opened up to the outside world after almost 50 years, which was followed by the 2015 election victory for Aung San Suu Kyi’s National League for Democracy Party. This led to a lot of investor anticipation with respect to further opening up the economy in terms of reforms and regulations. Though long-term prospects for the country are still very bright, like with many developing markets, reforms and regulations have been relatively slow to materialize.

However, things appear to be moving in the right direction, with the insurance sector having opened up to foreigners and foreign banks now allowed to lend to local businesses. Despite the slower pace of economic/market reforms and the unwanted publicity related to the refugee crisis, the country continues to attract attention due to its geographic position, natural resources, and untapped consumer base. Looking at its location on the map, Myanmar appears to be evolving into a country where a “Great Game” is being played between China, India and Japan, with the three countries seeking to leverage Myanmar’s location for logistics, resources and greater geopolitical clout. Japan in particular has taken a keen interest in the country with investment in industrial parks and ports, while Toyota recently announced that it would build its first assembly line in the country. Foreign direct investment is increasing, with the first half of 2019 witnessing a 77% increase to USD 2.3 bln.

Myanmar’s geographic position will be viewed strategically by rising Asian powers

(Source: Google)


(Source: IMF)

On the consumer front, the country remains an untapped frontier and in Yangon, one can easily realise that the consumer sector holds ample potential as there is a relatively low penetration of modern retail in terms of supermarkets, malls and food & beverage offerings. Visiting one of the few modern malls such as Junction City, one can see that the food courts are popular among the middle class who are eager to experience the latest offerings, similar to any other developing country, with well-established food & beverage brands like BreadTalk, Crystal Jade and Ippudo operating in the mall.  The mall also hosts a CGV cinema, which is a Korean chain of multiplexes that also has a large presence in Vietnam. In addition to the mall, Junction City hosts the Pan Pacific Hotel and an office tower.

At the Junction City Mall in Yangon



(Source: Boston Consulting Group)

Since I had joined a shareholder tour organised by Yoma Strategic Holdings (Yoma), we visited the company’s food & beverage offering, Kentucky Fried Chicken (KFC), for which Yoma has the exclusive Myanmar franchise. We visited the KFC store on the busy Bogyoke Road opposite the upcoming high-end Peninsula mixed-use project which is also being developed by Yoma. KFC at present has more than 30 outlets in Myanmar with plans to expand rapidly in the near future, while Yoma also has the exclusive franchise for other well-established food & beverage brands like Little Sheep and Auntie Anne’s. Furthermore, the company recently acquired the local restaurant chain YKKO which is well known for its noodle-based offerings and has 37 outlets across Myanmar.

The busy Bogyoke Road where the upcoming high-end Peninsula mixed use development is located (on the right-hand side of the picture)


Food & beverage opportunities in Myanmar appear to have a lot of growth ahead as neighboring Thailand has more than 600 KFC outlets versus just over 30 in Myanmar. With a population of 53 mln, and per capita incomes rising from a low base of USD 1,200, there could be a lot of room for consumption focused sectors like food & beverages to grow in the coming years. Fast food is not the only thing Yangon has to offer though. Thanks to Myanmar’s geographic location, it has a good mix of South Asian, Chinese and South East Asian cultures which are also reflected in the multiple cuisines that one can experience within the city. Shan cuisine is definitely worth trying, while the Rangoon Tea House serves up a good mix of local delicacies too.

Daily street scene in Yangon


In addition, financial services and more specifically mobile financial services hold huge potential in Myanmar as a large part of the country remains unbanked. Estimates suggest that there are approximately only 3 bank branches per 100,000 people. Like we have seen with Bkash in Bangladesh, Paytm in India, Easypaisa in Pakistan and Mpesa in Kenya, disruption is also taking place in the financial services industry in Myanmar through Wave Money, a mobile financial services partnership between Telenor and Yoma. Wave Money is now the number one mobile financial services player in Myanmar and, similar to regional peers, it plans to leverage its user base to foray into digital payments from generic cash in/cash out services.

At the office of Wave Money – this company could see very high growth going forward


One cannot claim that a visit to Yangon is complete without visiting the Shwedagon Pagoda, which contains the relics of Buddha. It is considered one of the most sacred Buddhist sites in Myanmar and according to some estimates is more than 2,500 years old. The gold-plated pagoda is majestic, with the top of the dome studded with a number of diamonds. 

The Shwedagon Pagoda – it was going through some restoration work during my visit


Besides this tourist attraction, Myanmar has a lot more to offer. The ancient city of Bagan, with its numerous temples and pagodas, recently received UNESCO World Heritage status and I would rate this site at the same level as Angkor Wat in Cambodia. Ngapali offers pristine beaches just an hour’s flight from Yangon. Given the tourism offerings, the tourism industry in Myanmar has still not met its potential with the country receiving only about 1.4 mln tourists based on the latest available data, a significantly lower number compared to its peers Cambodia, Laos, Thailand and Vietnam.


(Source: Asia Frontier Capital)

When I was waiting at the airport to catch my flight back to Hong Kong, I was pleasantly surprised by DFS duty free outlets selling the latest products while the overall airport is modern and has food & beverage outlets such as Coffee Bean & Tea Leaf, Gloria Jeans Coffee and Burger King. There were also outlets that offer the latest apparel brands, such as Levis, Timberland and Nike. Other markets in our universe should probably learn from the Yangon International Airport when it comes to airport retail as they are lagging in this area.

Very modern duty free shop at Yangon International Airport


Myanmar holds significant potential and though recent steps such as opening up the banking and insurance industries are positive moves, the government should look into building its capital markets. To do so, Myanmar should bring in the required regulations and also allow foreigners to invest in locally listed stocks (though there are only five listings on the Yangon Stock Exchange) as well as encourage other firms to list in order to attract more investor attention and fulfill its economic potential. The cultural diversity of Yangon is a great attraction and I look forward to visiting again to track the country’s progress.

For further viewing here are some interesting, relevant news links related to Myanmar:  

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I hope you have enjoyed reading this travel report. If you would like any further information about the AFC Asia Frontier Fund, please get in touch with me or my colleagues.

With kind regards,
Thomas Hugger
Fund Manager

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