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Asia agenda: high stakes in the next frontier market hotspots

Asia agenda: high stakes in the next frontier market hotspots

Kota Kinabalu was considered the highest mountain in Southeast Asia at 4,094m above sea level. That is until September 2013, when an American-Burmese team of climbers reached the summit of Gamlang Razi in Myanmar, recording GPS and satellite data at 5,870m.

This story is typical of frontier markets like Myanmar (sometimes referred to by its colonial name, Burma) where conventional wisdom is increasingly being overturned by new information.

The analogy holds true for the growing influence of Asia frontier markets which could be about to shake up the current world order, say experts such as Dr. Thitinan Pongsudhirak. Speaking at Citywire Asia 2013 in Bangkok, he said the development of the Cambodia-Myanmar-Laos-Thailand (CMLT) region would change the face of Asia, and become the focal point between Asian giants China and India.

World Bank data puts the CMLT region at a combined 2012 GDP of around US$412 billion (€301 billion), or roughly one-and-a-half times that of Singapore’s GDP.

At the crux of new growth

Dr. Thitinan, director of international studies at Chulalongkorn University says: ‘Myanmar and Thailand are a strategic core for Southeast Asia. But Thailand cannot survive without Myanmar’s migrant labour and resources, while Myanmar cannot develop without Thailand’s assistance.’

But both of these strategically pivotal economies face complex historical and cultural challenges.

‘Everyone wants Myanmar to succeed,’ says Thitinan, who notes Southeast Asia, Japan, America and Europe have invested in the country’s development.

‘Myanmar is critical. Until it opens and reforms, mainland Southeast Asia is missing a key country. The difficulty is governing the diverse ethnicities in Myanmar, many of which are mountainous tribes with a deep warrior culture. The government will need to come to some sort of an arrangement with minority groups, otherwise there will be no peace.’

On a societal note, Dr. Thitinan noted capitalism was a fairly new concept to Myanmar, adding that the adoption of capitalist ideas had to be paced slowly.

The notion of not being consumed by capitalism was crystalised in a remark by Myanmar’s Aung San Suu Kyi, who said at a September press conference in Singapore: ‘I want to learn a lot from the standards that Singapore has been able to achieve, but I wonder…what is the purpose of work? What is the purpose of material wealth? Is that all we want? I want to find out what we can achieve beyond that.’

South Asian gems

But while Myanmar grapples with capitalist growing pains, other Asia frontiers have thrown up a wealth of investments for frontier investors. Andrew Tan, CIO at Harvest Global Investments regularly bemoans how many confuse the countries of Sri Lanka and Bangladesh as parts of India, saying: ‘Bangladesh and Sri Lanka are not India and in fact, they have better fundamentals which are undiscovered by most investors.’

According to Tan, the currency depreciation both countries experienced in 2012 taught them lessons that positioned them well for the QE tapering concerns.

‘Current account and foreign reserves have been improving steadily over the last 18 months. The export in these markets has been stronger than expected due to increasing outsourcing orders,’ says Tan.

Beyond prudent monetary policies, business opportunities have grown in the two South Asian frontiers, serving up world class textiles and tourist experiences.

‘Bangladesh is currently the second-largest exporter of cotton apparel to the US, serving customers like Walmart, H&M and Gap. Sri Lanka is set to be the South Asian hospitality hub, serving the Greater India region with legislation to allow the development of integrated resorts. It could be the Macau of South Asia,’ notes Tan.

Among the developments in the pipeline for Sri Lanka’s tourism are projects by Hong Kong-based Shangri-La Asia, including a 375-room resort and spa in Hambantota in 2015 and a 497-room hotel in Colombo scheduled for 2017.

Australian gaming and entertainment group, Crown, was reported to be in discussions with the Sri Lankan government to develop a 450-room resort in Colombo, at a cost of around US$400 million.

So while the attention in Asia may be dominated by China’s GDP or India’s rupee, there’s more to the Asian growth story than two BRIC economies and much of the region’s most exciting investment opportunities remain unexplored.

This article originally appeared in the November 2013 issue of Citywire Global magazine

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