Phnom Penh, Cambodia

The modern skyline of Phnom Penh, Cambodia, illustrates the 15-year head start it has over Myanmar in economic development.

Dateline: Phnom Penh, Cambodia

At one point, Myanmar (then known as Burma) was considered one of the richest countries in Asia.

It was the largest exporter of rice in the world, was responsible for over 75 percent of global teak production and was crucial to facilitating trade between India and East Asia.

However in 1962, Burma’s government was overthrown in a military coup led by General Ne Win.

The newly appointed prime minister led his country down the road to socialism and spearheaded a campaign to nationalize all industries.

The result was almost 50 years of human rights abuses, weak economic growth and alienation from the international community.

The Burmese junta ruled with an iron fist and turned the country into one of the poorest in not only Asia, but also the world.

In 2011, Myanmar’s military dictatorship formally came to an end as the first democratic elections in generations were held.

Market opens to investment

Investors, businessmen and human-rights organizations alike rejoiced as the country’s opening up lured some to take part in what many called the rise of “Asia’s last frontier”.

In March 2012, one year after the military junta in Myanmar stepped down, a draft law seeking to enable foreign investment emerged. Later that year, Asian Development Bank engaged Myanmar to finance infrastructure and development projects.

It’s very true that unless North Korea decides to open up for business, Myanmar is the last country in Asia that has not yet welcomed foreign investment.

Protection for investors

There is a nearby country that possibly has even greater potential with much less of the hype: Cambodia.

Cambodia had somewhat of a head start, as its turning point was more than 15 years earlier. In 1995, one year before a mass defection from the Khmer Rouge, Cambodia’s first elected government began to shift from a planned economy to its current market based economy.

Herein lies Cambodia’s strength. It has had 15 years longer to develop itself and work out the kinks in its foreign investment laws.

The extra time means that its laws are now much more clear and straightforward than in Myanmar.

In Cambodia, a foreigner can own a business and a condominium, possess the right of permanent residence and have no fear about laws changing by the week.

While it can still be difficult to navigate the language and different laws, investors do not need to worry about being kicked out of Cambodia for no reason other than xenophobia and lack of a clear legal structure.

Too soon for investment?

The same cannot be said for Myanmar, which was identified as “the country offering the least legal protection for foreign companies” according to Maplecroft, a British risk analytics group.

Many laws and regulations that protect foreigners and their capital in other countries are either unenforced or not even written yet.

In addition, Myanmar remains politically unstable despite the end of military dictatorship. The current government is backed by the former military junta, which still plays a large role in politics.

Freedom of speech is not guaranteed by law and any discussions about politics are strongly controlled.

While Cambodia certainly is no bastion of democracy either, it’s a large improvement over Myanmar.

Freedom of speech is a right in Cambodia. Most elections since 1993 have gone by without major allegations of fraud, and there has not been a coup since the Khmer Rouge dissolved completely 1999 – something that even Cambodia’s far wealthier neighbor of Thailand cannot claim.

Developing economies

Both countries are certainly frontier markets and undeveloped when compared to most of their neighbors. Cambodia’s GDP per capita (PPP) is $2,776 – the second lowest in the world outside of Africa and North Korea. Myanmar’s is a bit higher at $4,344.

These countries also share a similar history with regards to their recent economic development.

For those who want to invest in either Cambodia or Myanmar, both are growing at a rapid pace and have great opportunities for investors. Cambodia’s economy grew by 7.3 percent in 2013 and Myanmar’s grew 7.5 percent during the same year.

Cambodia’s growth in the past two decades has been nothing less than stellar. Its economy not only skipped the 2008 Global Financial Crisis, but has not had a single year with negative GDP growth since Pol Pot left power in the mid 1990s.

Myanmar has had very strong economic growth as well.

Multinationals such as CocaCola, Samsung and Sony have poured into the country in recent years.

The fact that it shares land borders with both India and China also gives it a naturally strategic location, putting it right in the middle of almost 3 billion people.

With all of that said, while Myanmar may be the better country to invest in a decade from now, it is still too risky to recommend it over Cambodia today.

Myanmar’s political risk, restrictions on foreign investors, and the fact that the government must manually approve all investments simply make doing business in the country too difficult.

Nomad Capitalist is all about helping people like you “go where you’re treated best”. If you want to learn more about what exactly that means, and why I believe so strongly in it, I made this video that is worth watching:

Reid Kirchenbauer

Reid is a graduate of Thailand's top business school, speaks fluent Thai, and splits his time between Bangkok and Phnom Penh. He is the manager of a boutique fund called InvestAsian that invests in Cambodia real estate.
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