Sandwiched between China and India, the
world’s two most populous countries, with a wealth of natural resources, a
rising young population and a rapidly improving infrastructure, Myanmar is
expected to take off. EZRA KYRILL ERKER
After decades of economic stagnation, Myanmar
is set for a business boom despite infrastructure problems
For
decades a political pariah, Myanmar has begun to transform itself from a
military dictatorship into a multiparty democracy.
Regularly
coming last in the region in terms of gross domestic product (GDP) per capita,
this is likely to be the year that it moves ahead of Cambodia.
Sandwiched
between China and India, the world’s two most populous countries, with a wealth
of natural resources, a large, young population and a rapidly improving
infrastructure, Myanmar is expected to take off.
Hydropower
potential is considerable. Two power plants are being built for export to
China, funded by the second biggest economy in the world. Other natural
resources include timber, gems, minerals and natural gas. Three deep-sea ports
are under construction in Thilawa, Dawei and Kyaukphyu.
But the
changes may have been less due to outside political pressures, condemnations of
non-government organisations (NGO) and economic sanctions, and more due to
internal pragmatism. Having monopolised many sectors, the generals could make
more money by expanding trade and joining the international community. And
attempts at total government control, such as brutal crackdowns on the ethnic
militias and their communities, had resulted in little central consolidation.
In many
ways, the only solution to the stagnation was to bring troublesome regions and
opposition groups – even National League for Democracy leader Aung San Suu Kyi
– into the political fold.
This
hasn’t been enough to stop religious violence, though. Last week in Mandalay,
Myanmar’s second city, a Buddhist man was stabbed to death. The next morning,
apparently in retaliation, a Muslim was killed on his way to the mosque.
Hundreds
of Buddhists marched or rode through the city on motorcycles shouting death
threats to Muslims. Police responded by imposing a curfew. It is the latest
episode of religious violence since President Thein Sein’s quasi-democratic
government took office in 2011.
In
March last year, 40 Muslim youths were taken from a madrassa in Meiktila and
hacked to death, their bodies burned. Rakhine State riots in June 2012 left up
to 1,000 dead and 150,000 displaced, mostly Rohingya, a largely stateless
Muslim minority.
Muslims
form four to eight per cent of Myanmar’s population and have become a popular
scapegoat for societal ills in media forums.
Yet
away from the strife, a visit to Myanmar’s parliament in Nay Pyi Taw is
eye-opening. You are hit by the scale of the government complex, its 40-odd
buildings, a 20-lane, almost entirely empty access road, and brand new
parliament chambers that seat hundreds of representatives and visitors.
Equally
impressive is a government bureaucracy that seems determined to reduce
corruption and boost transparency, keeping long-term job creation and
environmental sustainability in mind while diversifying investment to move away
from China as a main investor.
A good
example of this was the reform of the telecommunications law last year and an
open bidding process that was highly praised for its efficiency and
transparency.
Some
energy and transport sector reforms are seeing a similar focus on long-term
utility rather than short-term gain. There also seems to be a method to the
priorities – with telecommunications and energy getting fast-tracked – since
certain sectors are essential for the growth of others.
Banking
still lags behind, though, with foreign lenders barred from conducting internal
business. Some generals with special interests have much to lose from
competition, but the investment board is aware that the law needs
liberalisation. That should happen by next year.
Deeply
entrenched economic, political and social problems remain. There are ongoing
peace processes with ethnic militias that are incomplete and tenuous. The legal
infrastructure is still inadequate for a democracy and rule of law is nascent.
Political corruption hasn’t gone away. Skilled labour is in short supply.
Yangon property prices are at Manhattan levels.
In the
Doing Business 2014 pamphlet, Myanmar ranked 182 out of 189 countries in terms
of ease of doing business, and it was 157 out of 175 in Transparency
International’s corruption perceptions index. Cambodia is even worse at 160.
By next
year these numbers will have improved, but multinationals investing in Myanmar
don’t expect quick returns.
Most
senior executives expect five years of losses, although early entry into the
market will pay later dividends. They also predict that six per cent annual GDP
growth is expected during the coming two decades.
The
launch of the ASEAN Economic Community late next year will improve cross-border
trade and make Myanmar more attractive as a manufacturing base. Considering its
wealth of cultural and historical sites, it will also become an attractive
tourism destination.
Many of
the early investors have a similar mindset going in: legally, infrastructurally
and politically the country is still evolving.
But in
the long run, after structural reforms, the consensus is that the economy –
based on location, manufacturing potential, resources, diversity and work ethic
– will grow quickly and sustainably.
It’s
better to be there as it happens than after the boom.
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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