Via Capitalist Exploits, some commentary on Myanmar:

Hot money (or in the case of Myanmar, hot money investors) will ruminate on how to invest, but will likely leave unsatisfied, as there are currently very few ways to gain exposure to the country.

On that note, I think this is an ideal time to roll back the clock and briefly delve into Burmese history to look at what once was and what may be again.

Mining

A mining hotspot for millennia, the Chinese know this very well, Myanmar is flush with everything from jade to oil to lead. It is a country with similar mineral potential as Mongolia, in size and scope.

Invaded by everyone from the Mongols to the British in search of trade routes and resources, Burmese mining history is “rich” to say the least.

Without writing a dissertation on the country and its prospects, as I’m not that well versed, I will focus on the history of the mining region surrounding the Bawdwin Mines in Northern Shan State.

A mineral rich region, the Bawdwin valley holds robust concentrations of lead and silver. For several millennia, the Chinese were actively involved in exploiting the area; that is until their mining operations hit the water table and they abandoned their claims.

It wasn’t until the British made inroads to Burma, beginning in 1824, when interest in the area resurfaced due to its still vast mineral potential.

Due to a lack of technical capabilities on the part of the Chinese miners, their slag heaps (the processed earth post mineral extraction) still contained high mineral concentrations. This reignited a boom in the Bawdwin mines which evolved into the largest lead, and one of the largest silver mines in the world pre-World War II.

For those history buffs among you this is how Herbert Hoover (31^st President of the United States) made the bulk of his fortune. He listed the Burma Mines Railway and Smelting Company in London during 1906.

Unfortunately, after WWII the good times ceased as Burma gained independence and eventually fell under the control of a socialist government. Becoming property of the State, under No 1 Mining Company and the Ministry of Mines, Bawdwin fell into disrepair and is still awaiting a foreign company to come and kick the mine back into gear… we shall see what happens.

On the bright side, over the past decade there have been signs of life in the Burmese mining industry. One example: in the early 2000’s a Chinese firm inked an agreement with the Junta to process 50,000 tonnes of zinc slag from the Bawdwin Mines.

As the country continues to open up politically it can only be assumed that junior and large-cap miners alike will rush into the country to stake their claim. As mining makes up a meager 2.0% of GDP, they have a long way to run.

Agriculture

Seventy percent of Myanmar’s labour force is involved with agriculture. It’s a sector that is worth watching.

From the Irrawaddy Delta to it’s vast teak forests, Myanmar is endowed with a wide array of agricultural opportunities, one in particular being rice.

In another life, Myanmar was an agricultural powerhouse known as the “world’s rice bowl.” Unfortunately, as the story goes, the Great Depression, a world war and some socialist tendencies “fixed” that. (See the below chart for how Myanmar lost out as a major rice exporter to its neighbors.)

After decades of disrepair and poor allocation of resources, a subject which Chris wrote about almost a year ago to the day, there are now signs that agriculture is starting to get the attention it so desperately needs.

In 2008 Cyclone Nargis devastated the Irrawaddy Delta, destroying rice paddies and killing over 100,000 people. In response to the crisis which ensued as rice supplies were at risk, the Junta began to liberalize the agricultural sector, encouraging foreign investment to help boost rice production.

Still in their infancy, these reforms have resulted in a drastic increase in rice production and subsequent exports. In 2011 exports of rice reached 700,000 tons, while this year’s estimate is for 1.5 million tons with estimates of 3 million tons by 2015.

At present, the government is buying rice at 10% above market, something which surely won’t last but will encourage further development and set the stage for tens of thousands of farmers to farm their way out of poverty, hopefully.

Trade

If you’ve ever played Risk, or Chess for that matter, then Myanmar should be one of your favourite countries in the world. A land bridge between two of the most populous nations in the history of the world, Myanmar has historically been a crossroads for Indian, Chinese and Siamese traders to name a few; don’t forget the Mongolian Empire.

There is a reason everyone, including the British, has attempted to dominate the place.

With the ports, railroads and roadways yet to be built, Myanmar will benefit wildly from its strategic location. Singapore may lose some of its dominance in shipping, a topic Chris delved into briefly in his recent post Myanmar- In theMix. Others, like Yunnan Province and West Bengal may flourish.

Regional integration will be positive for Myanmar, though as someone who weighs both sides, this will also mean a tug-of-war between India and China.

A wild card I am in the process of deciphering is what long-term effect ASEAN integration will have on Myanmar. Certainly projects like the development of a regional power grid will give Myanmar an avenue to import electricity, with the strong potential to even export. Trade barriers will be lowered or ended and regional FDI will likely accelerate.

I am certain that Myanmar will play an important role in the region over the coming decades, and how the country develops will be the determinate to how far its influence will reach.
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Summing up, Myanmar is a highly contentious country due to its geography. Throw in some of the world’s best investment opportunities (just ask Jim Rogers), and I believe fortunes will be made.

The government has wagered heavily on the side of liberalizing the economy to diversify its trade partners and its risk, without an attractive option to reverse its trajectory. Therefore, I am comfortable looking for ways to patiently invest my capital in the country.