Private equity firms target $500m for Myanmar investments
Leopard Capital and Cube Capital are among the Asian private equity firms looking to raise nearly $500 million for investments in Myanmar. It is hoped that the removal of trade sanctions imposed on the Southeast Asian nation will create opportunities in natural resources and infrastructure.
Douglas Clayton, founder of Leopard Capital, plans to raise a $100 million fund dedicated to Myanmar, Reuters reported. Cube may commit up to one third of its current $200 million vehicle in Myanmar, while a $250 million joint venture fund between Dragon Capital and Frontier Investment & Development Partners is also likely to include the country in its regional portfolio.
Bagan Capital and Link Road Capital Management also plan on raising Myanmar-focused funds. In addition, several of the larger Southeast Asia private equity firms, such as Northstar Pacific Partners and Navis Capital, may well invest in the country, either directly or through companies looking to expand into the nascent economy.
Leopard Capital will target the real estate, financial services, infrastructure and utilities industries, partnering with Asian multinationals. Speaking to AVCJ in February, Clayton described Myanmar as "one of the remaining jewels of the frontier space, with a potential 10x catch-up story once the reforms are anchored."
The IMF projects GDP growth of 5.5-6% in 2012, up from 3.6% in 2008 and inflation is expected to pick up as the recent decline in food prices phases out. The parallel market exchange rate of the kyat has already appreciated by about 32% in nominal effective terms since the end of the 2010 fiscal year, primarily due to large foreign investment inflows.
Myanmar boasts a largely untapped treasure trove of natural resources, including oil and gas, minerals and timber, as well as equally impressive renewable energy, agricultural and fisheries potential. There are also opportunities in the tourism and emerging domestic consumer segments.
The downsides are a lack of foreign investment protection and incentives, plus an artificially overvalued currency. Economic sanctions may well be lifted, but there remains there is also a risk that the government will perform an about face.
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