Khin Maung Win, Associated Press
YANGON, Myanmar — Alisher Ali knew on the morning of his second day in Myanmar that the long-closed country was a risk worth taking. Less than two months later he moved his wife and four children to crumbling, tree-lined Yangon and opened Myanmar's first-ever investment bank with $1 million of his own money.
This places him in sparse company. While many chatter about the economic potential of one of the world's last frontier markets, very few foreigners have actually set up shop. The first thing Ali had to do was explain to people in Myanmar, including some of his new employees, what an investment bank is.
Decades of isolation have left Myanmar with a weak education system, feeble banks, questionable courts, uneven electricity supply, entrenched corruption and an underdeveloped mobile phone network. In the last two years, sweeping political change has resulted in the release of hundreds of political prisoners, the election of Nobel Peace Prize winner Aung San Suu Kyi to Parliament, and the lifting of most U.S. and European sanctions.
Today, the Southeast Asian country's bureaucracy is scrambling to keep pace with multiple transitions, from socialism to capitalism, dictatorship to democracy, and conflict to peace. The legal environment for investors remains murky, and beneath the flurry of reforms, many feel a tug of doubt: Will this change endure? Have the country's military rulers, under the leadership of reformist president Thein Sein, really surrendered the power they grasped with such violent fervor for nearly 50 years?
These things don't bother Ali.
Looking at the early sun on Yangon's Inya Lake from a hotel balcony on his second day in Myanmar, Ali saw a country with enormous untapped potential, a bit like Mongolia — where he made his name and his money — only with 20 times more people and in a better location.
"It's an enormous bet," he said. "Over the last 20 years, you don't have any precedent where an economy of 65 million people is joining the global economy."
Ali sees his investment bank, Mandalay Capital, as a bridge between foreign investors keen to find their way into Myanmar and local companies that need capital and guidance. The business is modeled on Eurasia Capital, a boutique investment bank in Ulan Bator, Mongolia, which has attracted loyal clients and a raft of awards since Ali founded it in 2008. Ali, who was born in Uzbekistan and educated at Columbia and Oxford universities, has also raised $25 million for Myanmar's first dedicated investment fund, which closed its fundraising last month.
Many things are missing in Myanmar. There is no local equivalent of a Securities and Exchange Commission that might grant Ali a license. There is not even a provision for an investment bank in Myanmar's existing financial services law, according to Sean Turnell, an economist at Australia's Macquarie University. A much debated foreign investment law was recently sent back to Parliament for further modification.
Such deficiencies scare off some people, particularly Westerners who tend to seek safety in the letter of the law. But to others, like Ali and his investors and clients from Kazakhstan, Mongolia, Russia and Uzbekistan, they look like opportunities.
Marat Utegenov, executive director of Mongolia Development Resources, a property developer based in Ulan Bator, is one of Mandalay Capital's first clients. Utegenov wants Mandalay to help him find and structure real estate deals in Myanmar, where foreigners need a local partner, or nominee, to own property, he said.
"If we wait until the rules are in place and I can legally buy property without nominees, I will have to give up a sizeable amount of profit because prices will be different," said Utegenov, who is planning an initial investment of around $5 million.
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