Delivering a Competitive and Equitable Rate of Return
June 1, 2018
Frontier markets are high-growth, but are also among the smallest, least mature and least liquid economies. These markets are not developed enough to enter the ’emerging’ stage but are growing rapidly and attracting ambitious investors.
However, the economic and political fragility of these countries bring unequivocal risks, and the investment mantra of higher risks means higher returns would be a natural requirement for most investors. It is customary that investors in frontier markets would expect north of 20% for their return on investment.
In one of my earlier blogs, I had shared with readers on Why We Rather Not Pursue Debt Financing for the development of the New Yangon City. In Myanmar, we lack the necessary public funding to meet our basic infrastructure needs, and we do not want to build the New Yangon City with debt financing as we do not want to pass the burden of repayment on to our children and grandchildren. We have instead chosen the preferred path of building the new city through the participation of the private sector as long-term equity investors by providing them with an attractive and equitable return on their investment.
Attracting Investors to the New Yangon City
We believe that a 12% internal rate of return (IRR) on basic infrastructure investment is competitive and achievable as well as in line with global rates of return for large infrastructure projects. It is NYDC’s objective to convince investors, both locally and internationally, to accept this rate of return for their investments, negotiate successfully and ensure that these equity investments are committed in a timely manner. Over the coming months we shall be occupied with these negotiations covering various aspects of developments for the new city.
It will be appropriate to reiterate here that our overriding mission is to create jobs. The creation of jobs is the most fundamental and sustainable factor to creating a better life for our people. To achieve this goal, investment in basic infrastructure such as power, water, accessibility, connectivity etc. is the prerequisite to attract and convince the job providers – the manufacturers and industrial enterprises – to commit to joining with us.
As the first step, we are seeking investors who will invest in the infrastructure of the new city. After that is secured, we will need to attract the job providers to set up their factories and manufacturing plants. The virtuous cycle of providing a better life for our people can then materialise.