One of the biggest emerging market stories in 2012 was Myanmar. Sanctions were rolled back and outsiders finally had the opportunity to invest in the resource-rich nation.
Jefferies’ Sean Darby wrote that Myanmar will be the next major global trading hub.
But ethnic clashes between Buddhists and Muslims, which has now spilled over to Malaysia, has cast a specter over the country in the minds of many investors.
While tensions between the two have existed for years, riots broke out following the rape and murder of a Buddhist woman, which locals said were perpetrated by Muslim men. Hundreds have died and over 140,000 people have be displaced since last year’s riots. And the UN thinks Rohingya Muslims are one of the most persecuted minorities in the world.
Certain human rights groups argue that Western countries should be more careful about lifting sanctions too soon. But for now it appears that no one is keen to reimpose or extend them.
“It is a problem that has simmered for a long time and will probably require harsh military measures to quell,” Mark Mobius Executive Chairman at Franklin Templeton Investments wrote in an email interview. “To the extent that western nations understand the problem, there should not be any [reinstating] of sanctions.”
That being said, investors tend to be antsy about political uncertainty, especially when it concerns a country that has opened up so recently.
A report from McKinsey titled ‘Myanmar’s Moment’ argues that it’s economy could quadruple by 2030 to $200 billion, but it could also disappoint. And one of the reasons it could, is the ongoing communal tension:
“Much uncertainty remains. Investors are actively considering Myanmar, but many want reassurance that the government can resolve ethnic and communal violence, maintain its momentum towards political and economic reform, and ease constraints on doing business.
“Those political and economic choices will determine the sustainability of change and the level of interest from investors and supporters—and therefore the success of Myanmar’s economic transformation.”
Referring to the violence against Muslims in Meiktila earlier this year when 40 people were killed and thousands were displaced, Mobius says the spreading violence is cause of concern, especially because of Meiktila’s central location.
“Meiktila is in the centre of the country and is strategic. That is why it is home to Myanmar Air Force’s central command and the Meiktila Air Force Base as well as the country’s main aerospace engineering university.” But he doesn’t expect the impact to be severe unless “the situation worsens.”
Commodities guru Jim Rogers also continues to be optimistic on Myanmar.
“We in the U.S. had numerous problems as we were rising toward becoming the greatest success of the 20th century: civil war, many Depressions in the 19th century, few human rights, little rule of law, collapse of 1907, etc, etc.,” he said.
“Yet we went on to great success,” he wrote in an email interview. “…I am very optimistic on Myanmar, but expect and welcome the various corrections which will come. There will be more.”
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