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Why Invest In Southeast Asia

Why Invest In Cambodia

After emerging from its dark past, Cambodia has begun to solidify the remarkable progress it has achieved since adopting free-market economic policies in the 1990s. From 1998 to 2007, Cambodia’s 9.8% GDP growth ranked sixth in the world and fastest in the Far East after China. Cambodia’s continued upward trajectory is buttressed by durable fundamentals:

  • Political stability
    • Prime minister (under 60) has held power since 1985
    • Several key ministers are also long-serving and experienced
    • Ruling party’s mandate decisively renewed in 2008 election
  • Advantageous location
    • Sandwiched between two larger, more developed economies (Thailand and Vietnam) facilitating economic spillover
    • Midway between China and India – the most important growth areas of the 21st century
    • Along the Gulf of Thailand providing the country with ease-of-access to maritime trade
  • Favorable investment climate
    • 100% foreign ownership, except land (99-year land leases)
    • Attractive investment incentives
    • Open capital account; easy repatriation of profits
    • Government-Private Sector Forum helps reduce obstacles and inefficiencies
  • Largely “dollarized” economy
    • Minimal foreign exchange risks
    • Stable monetary policy and fiscal responsibility
  • Increasing trade integration
    • WTO member since 2004
    • ASEAN membership offers regional trade benefits
    • Duty free or preferential export access to most developed economies
  • Advantageous labor conditions
    • Among Asia’s lowest-cost workforces
    • Abundance of willing, trainable workers
    • Rising literacy rate has surpassed 75%
  • Improving transport connectivity
    • All key road and bridge links with neighboring countries have been or will soon be upgraded
    • Railroad system is being rehabilitated
    • Container sea port in Sihanoukville has been modernized and expanded
    • River port in Phnom Penh is being relocated and enlarged to better access Vietnam’s new deep sea ports
    • Three international airports have been opened
  • Lower costs in telecoms and internet; power next
    • Hyper-competition in mobile and internet sectors has cut user costs
    • New hydropower and coal-fired power plants underway will replace oil-based generation and cut energy costs
  • Untapped natural resources and land
    • Fertile land for production and processing of agricultural commodities
    • Aquaculture and livestock farming and processing potential
    • Abundant mineral deposits await mining
    • Off-shore oil and gas reserves
    • World-class tourism sites (beaches, islands, history, culture, nature)
  • Underpenetrated, growing domestic consumer market
    • Exceptionally youthful demographics ensures rising domestic demand (61% of Cambodians are under 25 years old; median age: 21)
    • Workforce participation, household formation, and urbanization will all show robust growth over the next decade
    • Per capita GDP and purchasing power has more than doubled over the past decade and will continue to rise
    • Emerging import substitution opportunities in various industries
  • Unleveraged financial position
    • Relatively low levels of sovereign, corporate, and consumer debt
    • Well capitalized, conservative banking system
    • No tradition of government bailouts and subsidies (capitalism’s last bastion)
  • Future stock exchange
    • Cambodia Stock Exchange launched in 2011
    • Listing criteria are not onerous

The Role of Private Equity

Cambodia’s banks require debtors to pledge land titles as loan collateral and the bank typically lends 30-50% of the land’s assessed value. While this strict approach has helped keep the banking system solvent, it has excluded many businesses from securing project finance or working capital from banks. In the absence of equities or bond markets, or leasing or factoring companies, private equity stands out as one of the only viable and flexible financing solutions. Leopard Capital has gained prominence in Cambodia as the country’s first, largest, and most experienced private equity group. Thus, it is uniquely positioned to invest in many of Cambodia’s best businesses through transactions negotiated in a comparatively non-competitive environment.

For more information on investment opportunities in Cambodia, please see our Newsletter, Media Coverage, Documents and Links sections.

 

Why Invest In Myanmar

Following recent democratization measures, including the release of hundreds of political prisoners, cease-fire agreements with ethnic rebels, and the incorporation of long-time human rights champion Aung San Suu Kyi into the political process, it is apparent that Myanmar is determined to become fully integrated into the international community. After being isolated for the better part of the last three decades, Myanmar is emerging as a potentially high growth target market for private equity investment due to its abundance of natural resources, including oil and gas, attractive tourist destinations, and young, well-educated labor force eager to work at regionally-competitive wages. These attributes, coupled with its strategic location bordering China, India, Thailand and Laos, give Myanmar the potential to emerge as one of the most dynamic economies of the twenty-first century.

  • Government Dedicated to Reforming the Economy
    • Central Bank has implemented a managed-float of the local currency (Kyat)
    • Process to register foreign companies and joint ventures has been reduced from one year to three weeks
    • President Thein Sein announced a “second wave” of economic reforms to reduce the state’s role in education, energy, forestry, healthcare, finance and telecommunications
  • Suspension of Economic Sanctions
    • High-profile visits from foreign ministers, including William Hague (UK) and Hillary Clinton (U.S.) are paving the path for improved relations
    • The US, EU, and a host of other nations have lifted and/or suspended all major economic sanctions against Myanmar as of May 2012
  • Increased International Support
    • World Bank/IMF agree to provide technical assistance on financial and economic issues after a 25 year hiatus
    • UN Secretary-General Ban Ki-moon urges countries to end all remaining sanctions against Myanmar (May 2012)
    • India has provided Myanmar with US$ 500m credit in attempt to boost trade and energy ties (May 2012)
  • Location
    • Myanmar sits at the crossroads of three of the most important economic engines of the 21st century – China, India and ASEAN
    • Construction of Dawai deep-sea port will link the Indian and Pacific Oceans while by-passing the Strait of Malacca
  • Natural Resources
    • Myanmar is endowed with off-shore oil and gas reserves
    • It also has many minerals, precious gems, and timber
    • There is fertile land for production and processing of agricultural commodities
    • It has aquaculture, livestock farming and processing potential
  • Geography
    • National treasures, such as pristine beaches along the Andaman Sea and Buddhist temples at Bagan, are destined to become prime tourist destinations
    • Myanmar holds the largest landmass in mainland Southeast Asia, including vast forests, navigable rivers, fertile deltas and a vast coastline with natural deep-sea ports
  • Increasing Trade Integration
    • WTO member since 2004
    • ASEAN membership offers regional trade benefits
  • Improving Transport Connectivity
    • Railroad system is being rehabilitated
    • An additional international airport is being built at Bago
    • Railroad, roadway and oil pipeline from southern China (Kunming) to Rhakine State are under construction
    • Deep-sea ports at Dawei are being built in the south
  • Under-penetrated, Growing Domestic Consumer Market
    • Exceptionally youthful demographics ensures rising domestic demand (61% of the population is under 25 years old)
    • Workforce participation, household formation, and urbanization will all show robust growth over the next decade
  • Future Upgrade of Stock Exchange
    • Japan’s Daiwa Securities and the Tokyo Stock Exchange signed an MOU with the Central Bank of Myanmar (CBM) to modernize Myanmar’s securities market (May 2012)

The Role of Private Equity

In spite of economic reforms to decentralize the state’s role in the economy and restructure the financial system, the development of Myanmar’s private sector is inhibited by a lack of financing options and technical expertise. Myanmar’s banking sector suffers from stifling regulation. Laws stipulate that loan terms must not exceed one year and banks cannot lend without collateral of a greater value than the loan. These provisions ensure that obtaining a loan is near impossible for the majority of citizens. And while the country hosts Myanmar securities Exchange Centre, the bourse only lists two companies and is considered the smallest, if not the most primitive exchange in the world, rendering it practically obsolete. Furthermore, after years of government control of the economy and “crony-capitalism”, Myanmar’s business class lacks technical know-how. However, partnering with private equity firms can provide businesses with critical financing capital and technical expertise that will ultimately foster a strong and sustainable business community in Myanmar.

Why Invest In Laos

Laos’ economy has maintained consistently high GDP rates over the past two decades in large part due to strong growth among its main trading partners in the region, particularly China. The government’s initiatives to decentralize control of the economy and encourage private enterprise have also been a boon to economic development in recent years. Laos can expect to experience continued growth throughout the decade and beyond if it continues to capitalize on its strategic advantages.

  • Pro-business government
    • Enhancing overall business environment
    • Strengthening public finances
    • Improving foreign investment climate
    • Revitalizing the services sector
    • Prime Minister has taken a strong stance against corruption
  • Geography/Location
    • Sits at the crossroads of the Greater Mekong Sub-region (GMS), which has a population of over 300 million people
    • Neighbored by China, Vietnam and Thailand, three of the largest and fastest growing economies in the region
    • Home to world-renowned tourist destinations
  • Favorable Investment Climate
    • 100% foreign ownership
    • Foreign land lease of up to 50 years
    • Attractive tax incentives for foreign companies
    • Open capital account; easy repatriation of profits
    • Low entry valuations
  • Increasing Trade Integration
    • Reduced quota restrictions and import tariffs
    • Lowering tariffs on a wide variety of products to below 5%
    • Signatory of a bilateral trade accord with the US
    • Joined membership to the WTO in 2013
    • ASEAN Free-Trade Area (Expected 2015)
  • Advantageous Labor Conditions
    • Among Asia’s lowest-cost workforce
    • Median age of 21 (lowest in the region), with 60% of the population of working age between 15-64
  • Low-cost of Energy
    • Region’s lowest electricity cost
    • US$ .04 - .14 kw/hr depending on business activity
  • Unleveraged Financial Position
    • Relatively low levels of sovereign, corporate, and consumer debt
    • Well capitalized, conservative banking system
  • Improving Transport Connectivity
    • North-South Corridor of Asian Highway Network will connect China, Myanmar, Laos, Vietnam, Thailand and Cambodia
    • China-Laos Railway to connect the cities of Kunming and Vientiane
    • Mekong river facilitates over 260,000 tons of cargo between China and Thailand through Laos
  • Untapped Natural Resources
    • Diverse mineral resources including copper, gypsum, tin, gold and gemstones
    • Abundant water for irrigation and hydropower
    • Excess fertile farmland for agricultural development
    • Copious amounts of timber
  • Underpenetrated, Growing Domestic Consumer Market
    • Exceptionally youthful demographics ensures rising domestic demand (median age: 21)
    • Workforce participation, household formation, and urbanization will all create robust growth over the next decade
  • Growing Securities Market
    • Lao Securities Exchange opened in 2010
    • Currently lists three companies, more expected IPOs in
    • 2012-13
    • Listed companies are given tax incentives under new proposed tax legislation

The Role of Private Equity

Over the past decade, the Laotian government has made strides toward creating an investor friendly business environment. Unfortunately, many of the projects foreign firms have invested in have not benefited the people of Laos as many of the jobs were given to foreigners and goods exported. Private equity can address this. Through investments in SMEs and entrepreneurs in Laos, private equity can help ensure that foreign investment benefits Laotians by creating local jobs, providing technical know-how and stimulating the transfer of technology from abroad, all while institutionalizing to internationally recognized business practices. Through its investments, Leopard intends to help Laos cultivate its competitive advantages as it prepares to become fully integrated into the ASEAN Economic Community by 2015.

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