A Belief in Myanmar’s future ( Q&A with Oliver Belfitt-nash – Myanmar Representative, ROnOc )
January , 2014

How a young man’s journey from York University in England, to Ulaanbaatar, Mongolia, brought him to Yangon to set up operations in the financial services sector.

MI: What is RONOC’s current role in Myanmar?

OBN: We focus on financial services and our major project currently is with a bank in Mongolia, where we have established relationships, invested capital and grown with the bank, and that’s the sort of situation we want to establish here. Given the current stage of the market here and the range of opportunities on offer, we are interested in looking at any investment and advisory opportunities in the country. We have no projects on the go currently [in Myanmar], but are researching the situation on the ground, but come the New Year we’ll be looking to invest some capital and get involved with projects. Financial services are an incredibly appealing sector right now and it will be interesting to see if that changes over the next few months; as to whether the doors will open completely and foreign banks can come in, set up local branches and cooperate with local companies.

MI: What is the current situation for foreign investors looking to move into the Myanmar market?

OBN: I think in terms of investment in general, most people are waiting until 2015 [when national elections will be held]. The test in 2015 is stability – whoever wins. Will there be protests in the street? If Aung San Suu Kyi’s party [The National League for Democracy] wins, maybe there won’t be protests, but there might be a backlash from the government or the military and there is a risk that there could be instability on a political level. In Myanmar, political risk is a country risk and I think a number of investors are waiting until that time to measure if it has an impact.

MI: Are those companies that are moving into Myanmar currently taking a gamble?

OBN: To a degree, yes. Anyone who comes in the next few years is certainly taking a gamble, particularly if you compare this to somewhere like the USA. The safest investment is in the USA, but you might not get much return on your investment there. People look at about 0.5 percent there, compared with about 20 to 25 percent here. Risks for investors that are already here or looking to move in quickly involve the political situation, corporate risk, communication between investors and local companies, and that risk is very high. But the job for people like myself is to look at the situation and find partners who have good investment potential.

MI: How have investor’s views of the country as a place to do business changed over the last year or so?

OBN: Well, I think things have certainly developed. One major thing that is lacking here is access to information, and the more information and the more data points that people can use will help people’s understanding of doing business here.Being on the ground has been a huge help and does give an advantage. In the nine months that I have been in the country I, of course, understand things a lot better than I did when I first arrived. But access to information is improving slowly. Let’s say, you’re sitting in a Goldman Sachs office in New York and 10 months ago you looked at information on Myanmar and the information available would have been minimal- but look now and there are certainly more data points. Look at this magazine for example [Myanmar Insider], that’s an example of more information. Our newswire is also more informed these days, and all of these things add to people’s access to information. An important thing to consider is that the nature of this country is that it’s still very much relationship-based. You cannot just call up, for example, the Central Bank and get the latest figures. You need to know the people, you need to sit down with those people and gather the information through them through building relationships. Even if there was one ministry that regularly updated all of its data, you could still only go back to 2011, maybe 2010, but most investors, they don’t want two years of data to make a decision, they need three, four, sometimes five years of data.

MI: Myanmar’s rumour mill is famously strong. Does that contribute to the problem of gaining access to information?

OBN: It does, but again, that shows the importance of building relationships with people you know really know what they’re doing. It sort of works like a pyramid: The smaller players are collecting information and, over time, a few more major players might move in, and then we’ll see examples of larger companies investing capital. Let’s look at Coca-Cola, who are operating their bottle factory here: If everything goes well and they can show transparently what they’ve been doing, then other companies will be encouraged to follow them.

MI: There has been much talk recently of Myanmar leapfrogging neighbouring countries, such as Thailand and Vietnam. Do you think that is a possibility?

OBN: There are some industries that can leapfrog other countries, but everything needs to be linked. You can bring in advanced payment systems to use, but if the staff aren’t educated and trained to use them, then they’re not going to be effective. Look at telecoms: that has huge potential. Practically the whole country can gain access to a mobile phone within the next five years – but what if the power is not consistent? What if people cannot charge their phone and people cannot remain connected all the time? For me, it’s education that is really important. If you don’t have a population that can utilise these new IT products effectively, then yes, you might be able to leapfrog here and there, but it has to be backed up. Education takes time, often an entire generation, to catch up.

MI: What do you see as being the key industries here as the country develops?

OBN: For me, financial services offer huge potential. A few years ago, Asian Development Bank published a report saying that Myanmar was the least banked country in Southeast Asia, with regards to things like the number of citizens with bank accounts and the taxes. But you look around and there are hundreds, thousands of businesses that probably aren’t registered, that probably aren’t paying tax and, from our point of view, financial services are a way that companies can improve their operations and impact their community. There might be businesses in certain industries that want to borrow money, but at this moment in time, their only option is extortionate fees from loan sharks, or banks that might not want to lend to people that they don’t know personally. So, in that sense, there’s a huge market for new lenders and new banks to come in and provide capital for these clients. There are hundreds of thousands of companies across the country who can benefit from borrowing money, expand their business and pay back the loan.