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LONDON (Reuters) - WPP (WPP.L) has become the first foreign advertising group to invest in Myanmar since Western sanctions were lifted, betting on a flood of demand from multinational companies wanting to market their goods and services.
New York-based Ogilvy & Mather, part of the global WPP group, said on Monday it had agreed to buy a stake in Myanmar's leading ad agency Today Advertising, staking out an early position in one of Asia's last frontier markets.
The United States suspended sanctions on Friday in response to political reforms in Myanmar, a poor southeastern Asian state sandwiched between China and India that had been ruled by its armed forces for 50 years.
Europe had suspended sanctions a month earlier. After years of detention and house arrest, opposition leader and Nobel laureate Aung San Suu Kyi took her seat in parliament on May 2, ushering in a new political era.
Ogilvy & Mather was also the first international ad agency to set up in Vietnam when U.S. sanctions were lifted there in 1994. Vietnam is now one of WPP's fastest-growing markets.
"It's not often that a market of this size opens up, with this history and infrastructure and capability, so it's very, very exciting," WPP Chief Executive Martin Sorrell told Reuters.
Myanmar has a population of about 60 million, who live on an average income of about $4 a day - far less than that in rural communities. It has an average age of 27 and is rich in resources but has little provision for business or banking.
Myanmar's advertising market was worth just $33 million in 2011, according to leading media buyer ZenithOptimedia (PUBP.PA), compared with $600 million for Vietnam.
John Goodman, who led the Myanmar negotiations for Ogilvy & Mather, said current advertisers were mostly Japanese or Korean companies selling electronics, and Chinese, Indian and Vietnamese firms selling consumer goods or fast food.
"Who's taking an interest now? Everyone. We've just been barraged," he told Reuters. "Initially it will be low entry goods, small pack sizes... but we think there will be a fairly rapidly developing middle class. People are well educated."
With 60 employees, Today Advertising is Myanmar's top ad agency, according to Ogilvy & Mather, which has a long-standing partnership with the company.
Singapore-based consultancy Vriens & Partners sees the first areas ready for investment in Myanmar as hotels and tourism - with just 25,000 rooms estimated to be available in the entire country - manufacturing, because of low labor costs, oil and gas, and real estate and construction.
Partner Hans Vriens, who works with multinationals preparing to enter Myanmar, said the reputational risk that had prevented many from investing in the country was fading, but substantial practical problems remained.
"The government has declared it wants to have Western investment. That doesn't mean that they really understand what it takes to rejoin the world," he said. "The regulatory system they have is so outdated."
A handful of Western firms including French oil company Total (TOTF.PA), whose investments predated the sanctions, have managed to stay in Myanmar through its decades of isolation.
Vriens said more substantial investments in agriculture, financial services, power, mining and telecommunications would take longer.
"If you're an oil and gas company it takes a bit longer to put together a deal than if you're a shampoo business and can just export your products from Thailand," he said.
Advertising in Myanmar today is almost exclusively via television and outdoor billboards, Goodman said.
Internet advertising is almost non-existent with only about 100,000 people or 0.2 percent of the population, online, while Goodman said print quality was so poor it did not lend itself to newspaper advertising.
"The ink comes off on your fingers," he said. "It's not going to win any awards at Cannes for a long time."
Additional reporting by Kate Holton in London and Jason Szep in Yangon; Editing by Giles Elgood