New Myanmar laws open country to foreign investors, Relex Development first cryptocurrency approached by developers
“Everything is old, everything is decayed, everything is depleting. Everything is ruined. The whole system is ruined,” said Mr. Joseph Win Hlaing Oo, Founding Director, Community Agency for Rural Development in Myanmar. “We need new investment. New minds.”
With those words, a 60 year moratorium on foreign real estate ownership and foreign direct investment fell to the wayside, as Win Hlaing Oo invited Relex Development proxy developers to not only invest in the country, but also to have a hand in shaping it.
Myanmar, formerly Burma, had long suffered under one of the worst and most oppressive dictatorships until 2007, having its first free and democratic election only in recent years. Transforming from a military country to a free democracy has proven to be the catalyst the country needed.
Myanmar boasts an average of 6% GDP growth per year since its liberation, ignoring the global financial crisis that much of the outside world had suffered. Yet there is still much to be done and plenty of opportunity around.
Win Hlaing Ong told the room of investors in Ho Chi Minh City, Vietnam about the dilapidated state much of the country is still in.
“Today, we are the poorest country in Asia, the worst education system in Asia,” he said, despite boasting some of its best institutions 60 years ago.
Myanmar also has a unique relationship to finance, as it also has a severe lack of trust in banks, according to Melvyn Pun of Yoma Strategic Holdings.
“Banks are bypassed,” he said to a panel on CNBC. In order for Myanmar to grow, the country would need to “expand on non-bank services” and “leapfrog the traditional methods.”
As a private equity company, Relex Development is precisely the type of solution that Myanmar is looking for. It circumvents normal bank loans and instead provides a one-of-a-kind crowdfunding solution that fits what the country is comfortable with. And the partnership couldn’t have happened at a better time.
With natural adjacency to economic giants of India and China, Myanmar is poised to explode in growth. Its yearly GDP growth has been impressive. But even more indicative of the fortuitous timing is its recent legislation, passed just weeks prior to Win Hliang Oo’s meeting with Relex proxy developers, that has allowed for foreign investors to invest in and own real estate in Myanmar for the first time in 60 years.
“Let me get this straight — for only two weeks now roughly, for the first time in history in Myanmar, foreigners are now allowed to own real estate,” said Relex CEO Keith Hilden, pointing out to attendees that they were on the precipice of history. Win Hliang Oo shook his head in satisfied affirmation. The new law, signed in 2017, had just come into effect August 2018. It has increased the percent of real estate allowed to foreigners to 30 percent from 0 percent.
With a population of 53 million people, Myanmar’s city centers are in Yangon (the most populous), Mandalay, and Nay Pyi Taw (the new administrative headquarters). Much of the FDI in Myanmar currently has been undertaken by Japan and China, giving them major stakes in the country. Win Hliang Oo said that Myanmar wants to disrupt that trend, not wanting to give as much stake to one or two countries.
“Myanmar wants to diversify its investors from many different countries, rather than being reliant on one of two countries,” Hilden said.
And Myanmar has made great strides to achieve that end. A country’s transparency score is directly correlated to the amount of foreign capital its real estate developments will receive, and Myanmar’s has been quickly on the rise. According to the 2018 JLL Global Real Estate Transparency Report, “Myanmar has registered the biggest [transparency] improvement globally, benefitting from the government’s push to open up its economy.”
Win Hliang Oo’s Community Agency for Rural Development in Myanmar is eyeing four distinct areas for Relex Development proxy developers to invest in.
- A new private university
- A new modern hospital
- Housing, in the form of a condo apartment
- A hotel
According to Richard Emerson, chairman of the judges at the Myanmar Property Awards, “The updated Myanmar Investment Law and the new Companies Act should significantly improve the environment for business and investment in this country.”
In particular, many developers are now looking at academic institutions as their next big development projects.
Myanmar opened up its private grade schools to foreign investors in 2013, but it wasn’t until 2018 that higher education was opened to foreign investors under the Myanmar Company Act. And it hasn’t come a moment too soon — Myanmar currently has zero private universities, a major gap for students who can’t afford to leave the country to continue their educations.
The universities developed by foreign investors will later be registered under Section 100, Subsection (b) of the Myanmar Investment Law.
In addition to private universities, Myanmar is also in dire need for additional hospitals.
He described a Myanmar that has rural centuries still much in ancient times, one that lacks roads connecting its agrarian lands to the city centers. He described the four day walking journey that some townsfolk would have to undertake to get to the nearest city.
Even people with money cannot spend it on medicine because its accessibility is so limited.
He said that some women who are pregnant and need doctors in these remote villages need to be carried on people’s shoulders over the four day journey to a medical center, and many have died along the way. Win Hliang Oo was adamant about the need for a change, and he sees FDI and proxy developers’ expertise as a way to solve these issues.
Win Hliang Oo said, “We have to start from zero. We need fresh ideas, fresh technology. We need everything, new things because we were under military rule in a closed country.”
He laid out the following tentative returns for his group’s projects:
- 50 year period contract
- In the first 10 years, profits will be shared between investors and developer (land owner) 20–80 percent
- In the Second 10 years, 30–70
- In the Third 10 years, 40–60
- In the Fourth 10 years, 50–50
- In the Fifth 10 years, 50–50
- In the Sixth 10 years, 50–50
- Another 50 years’ contract again or Contract Ends
In addition to the four proposed real estate options, the Community Agency for Rural Development in Myanmar has also been crucial for its role in expanding infrastructure, such as roadways, in Myanmar to rural areas.
The group built 80 kilometers of road for only $160,000 USD, a prime example of their good cost control. These new roads not only help to connect the interior of Myanmar, but they establish better networks linking it with its powerful neighbors of China and India.
And now that roads have been built, Hilden added, Relex proxy developers have additional opportunities. Win Hliang Oo agreed that Relex Development proxy developers could also utilize B-O-T models to benefit from needed facilities on those new roads, such as gas stations.
The above announcement is the twelfth of thirty consecutive days of news brought to you by Relex Development.
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