「Myanmar – from 1 February, 2021」

by:Hiroyuki Isobe, ertified Real Estate Appraiser (Japan), CRE(USA), FRICE(UK) ertified Real Estate Appraiser (Japan), CRE(USA), FRICE(UK)

On the morning of February 1st, I received news from the staff in Yangon. It’s before the local dawn. Since then, all over the world have been paying strong attention on the situation in Myanmar.
As I mentioned several times before, I first visited Yangon in 2012. I had a first-hand intuition then about the future growing power of this country. Since having established a small appraisal firm in Yangon in the spring of 2016, I have been working in the field of area of asset valuation, which was not popular services within ordinary business practice. Due to COVID-19, I personally have had to stay away from Myanmar for almost a year, and my local colleagues were also under severe restrictions such as lockdown. However, I have been fortunate enough to be able to barely survive.
In 2020, the average global GDP growth rate (estimated) is -4.3%, which is the worst depression since the Great Depression in the 1930s. Nevertheless, Myanmar was reported to be +1.7% and was expected to be 2.0% in 2021 and 8.0% in 2022 (Global Economic Prospects- January 2021, World Bank). As far as foreign direct investment from October 2019 to September 2020, it achieved $ 5.7 billion, although it was just $100 million below the initial target.
In developing countries, the driving force of economic development depends largely on foreign investment. In Myanmar, the democratization that had started since 2011 definitely helped enhance the investments from a Singapore, China, Japan, and Hong Kong together with many global companies including Europe and the United States. There is no doubt that the flow and the birth of the civilian government for the first time in half a century by the National League for Democracy (NLD) in 2016 have played a significant role as a driver. In addition, the general election in November last year was successfully completed, and further economic development after Corona was expected.
However, the situation changed completely after the 1st of February. The willingness on the investments apparently seems to be diminished. As a result, the inquiries that I have received from Japanese companies and others are somehow negative, not positive, including the impact of this situation on real estate prices, impact of profitability of existing investment, and how to assess the liquidation value in case of dissolving the local joint venture.
It has to be said that economic activity has virtually been stopped and the real estate market has stopped functioning in the past month. In addition, the real estate business had been severely damaged throughout 2020 because of the pandemic. High-end residential, office, retail, hospitality, land for factory/warehouse, etc. Nevertheless, everybody was expecting V-shaped recovery after we overcome COVID-19. Current situation, however, could cause substantial reduction towards the expectation on V-shaped recovery. Big concern is that economic development as well as improvement of people’s lives in Myanmar, which had been expected from all over the world, could suddenly cool down if foreign direct investment, which has been the driving force of economic development, should decline sharply and growth should stagnate.
I was taught that the value of real estate is formed by a function that is composed with natural, social, economic, and administrative factors as explanatory variables. And we always assumed that political situation was implicitly stable. What is happening in Myanmar today, however, is that the fact that “political situation” is ranked as the highest prioritized variable to value assets.

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