Quarterly Business Magazine

Beyond Financial Returns: Impact Investment - An Integrated Approach to Realizing Myanmar’s Potential

Posted :
Wednesday, October 15, 2014

As one walks the streets of Yangon, the ever congested city of Myanmar, one cannot help but conclude that poverty does not have the capacity to destroy people’s inborn ability to challenge and outperform their own circumstances. From street vendors—that sell some of the most intricate handmade crafts—to proud women selling dishes made from their best-kept secret recipes, there is no shortage of display of people’s innate ability to find a way to provide for their families. Venture out of Yangon, and one will find this approach—of people using their innate talents to create their next best opportunity—replicated throughout the many towns and villages that make up the re-emerging country of Myanmar.

Yet poverty is not only visible throughout Myanmar, it is also a palpable social challenge for the country. Myanmar has an annual GDP per capita adjusted for Purchase Power Parity of approximately US$ 1,324—a mere 6 percent of the world’s average. Add that to an unemployment rate estimated at 40 percent within an abundant pool of unskilled labor, and one can easily understand why Myanmar is labelled the poorest country in Asia.

This fact, accompanied with poor infrastructure, an antiquated financial system, and the reality that many primary needs are largely unmet—such as indoor plumbing, a reliable and consistent supply of electricity; and access to health, technology, and education—would easily deter any major multinational company from even considering Myanmar as an investment opportunity.

Nonetheless, after 50 years of almost complete isolation, the country is reemerging as the last frontier with many investment cases highlighting the country’s move towards political and economic reform. Its abundant natural resources, youthful population, and favorable geographical position in relation to China, Thailand, Bangladesh, India, and Laos have become major considerations for investors in deciding to explore the so-called “unfulfilled potential of Myanmar.” Many are lining up to enter the Myanmar market and assess the risk of pursuing an early mover advantage.

And whilst the challenges in the still-pending reforms are relatively substantial, there is no denying that this transitioning country does indeed represent a major investment opportunity in almost every sector of its economy. The country and its people are eager to see the introduction of products, services, and practices taken as standard and basic in other countries, and this substantiates impressive forecasts for sector-specific entities. The question, however, is whether the pursuit of hefty financial returns can at all be partnered with intentionally tackling the country’s most pressing social, economic, and environmental challenges.

While most investments would create jobs and spin off growth or economic activity in differing sectors, this would not necessarily create the sustainable shared prosperity that Myanmar so desperately needs to fulfill its potential. If access and opportunities remain skewed along different social economic classes, as is the case now in Myanmar, the road to the fulfillment of that potential will not only be slow but unequivocally hampered. When new investments introduce products and services that can only be accessed, afforded, and consumed by a few, the opportunity that Myanmar truly represents will not yield sustainable results for all.

How then can the substantial social-economic challenges the country faces such as low access to education, health care, and technology and the need for enhanced opportunities to improve lives, be tackled?

One could easily argue that this sits within the domain of international NGOs and development institutions and should not be the concern of multinationals looking to enter the market based on solid business cases. On the other hand, one can argue for the inclusion of the deliberate creation of a social and environmental impact alongside the pursuit of a financial return in any investment thesis for Myanmar. The fulfillment of Myanmar’s potential requires an integrated approach that not only measures financial returns as outcomes but also seeks to define, target and measure social and environmental impact. This sits within the realm of Impact Investing.

Impact investing is an investment strategy—for investments made into countries, companies, organizations, and funds—that centers on deliberately and intentionally generating a measurable, beneficial social-economic and environmental impact alongside a financial return. The coalition between the ‘for purpose’ and ‘for profit’ world is often deemed as controversial and impossible, but it is not if the true value of factors such as ‘improved access’ and ‘enhanced opportunity’ are included as part of the obtained return. To understand how impact investment fits into the context of Myanmar, one can learn from how impact investment worked in the poorest country in the Western Hemisphere: Haiti.

When the global mobile operator Digicel entered the Haitian market, it set out to invest over US$ 1 billion to set up its network and services accessible to the masses. The immediate effects of this investment involved the creation of over 1,000 direct jobs and an estimated 60,000 indirect jobs, along the spinoff of thousands of complementary small businesses. The investment allowed for the recycling of returns into projects that further generated socio-economic impact. In 2015, Haiti will see the opening of its first 4-star hotel, a US$ 45 million 175-room Marriott Hotels & Resorts, built and funded by Digicel Haiti as part of its reinvestment into the Haitian economy and tourism sector.

Beyond setting up and funding the entities that further catalyze socio-economic development, the company has also fully funded the deployment of a US$ 16-million 200km sub-sea fiber-optic cable from Haiti. This FibraLink extension provides a secure, high-capacity sub-sea link with twenty one other countries in the Caribbean and the main internet backbone gateway in southern Florida, the United States. This brought to Haiti the high-capacity broadband connectivity that is pivotal in expanding business, public sector and social activity. All this was achieved by harnessing the power of business, and pursuing returns that were not only financial but also social-economic. More importantly, this was done not merely as part of a corporate social responsibility (CSR) program, but as part of a solid investment thesis: a success story beyond financial returns.

Whilst Haiti is highly comparable to Myanmar, the idea that the seeking of financial returns can be partnered with the pursuit of social and environmental impact is relatively new to the country. Yet, the notion of impact investing is not entirely foreign to the businesses operating in Myanmar. When global giant Coca-Cola entered the Myanmar market, the firm was explicit in aiming to create more than 22,000 jobs over 5 years across its entire value chain. Not only did Coca-Cola define this as the social-economic impact it seeked to create in Myanmar, the company also set up the internal infrastructure required to build local capability along hiring locally. And whilst the company has a portfolio of interesting CSR programs for Myanmar, it remains to be seems how it will distribute its reinvestments.

Companies that enter the Myanmar market have a massive challenge ahead. But there is also an equally massive opportunity to truly change how ‘access’ and ‘opportunity’ are distributed by taking on an integrated approach to investing in this promising country.

Suzette Dumfries

Suzette Dumfries is an Impact Investor and the chairwoman of the JP Dumfries Economic Development Corporation (www.jpdumfries.com), an organization that applies the principles of Impact Investment to define and fund large scale economic development projects that generate massive social-economic impact alongside a financial return. Her focus areas include the creation of resilient economies and the alleviation of multi-generational poverty through the increase of access and opportunity for the Bottom of the Pyramid (BoP). She is an alumnus of Oxford University’s SAID Business School where she also completed the Oxford Impact Investment Program. Through her involvement in Richard Branson’s Center for Entrepreneurship, she also mentors budding entrepreneurs in building and growing successful, sustainable businesses and in turn creating jobs and stimulating their local economies.

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