Will Myanmar Wake Up from Sluggish Economy?
Mark ( Ramree )
July , 2017

Myanmar economy is one of the fastest growing and most promising economies in Asia after Nobel Peace Prize winner Daw Aung San Suu Kyi’s National League for Democracy (NLD) party have stormed to power in Myanmar’s first elections in November 2015. For 5 decades, Myanmar has been one of Asian’s great disappointments. After Second War World, it was one of the region’s richest nations. Myanmar’s economy crushingly slowed down because of military dictatorship that brutalized and isolated the country. While its neighbors Thailand, Malaysia, Singapore and Indonesia joined the ranks of Asian’s tiger economies, Myanmar wallowed in poverty, penalized by sanctions and impoverished by unwillingness economically.

Myanmar’s business environment, economic and demographic situation, infrastructure, communications and consumer lifestyles have been promising so far. Foreign investors around the world have been investing since Foreign Investment Law has been enacted in 2012. Myanmar’s economic development was marked by long-lasted economic stagnation in the past. However, since 2008, the country has engaged in economic liberalisation and a democratisation process that has spurred economic growth of the country. Myanmar is identified as the last economic frontier in Asia with significant growth potential. Real annual GDP growth in Myanmar stood at 6% on average over 2009-2013. The country also provides substantial growth opportunities in the future, and it is anticipated that real annual GDP growth will stand at 8% between 2013 and 2018.

Myanmar Boasts its Natural Resources for Foreign Investors

Myanmar is rich in natural resources, such as gas, oil, gems, zinc and copper with a population of 54 million. The country is also rich in timber and has huge potential for hydropower energy sector development wooing billions in foreign investment with natural resources. Lifting of international economic sanctions and liberalisation of foreign trade and investment rules will surely to boost energy, mining and oil industries in the country. Each year the government holds mining auctions that bring $1-2 billion per year, and this revenue could contribute significantly to the development of the country in a relatively short period of time.

It has one of the largest populations in Southeast Asia, estimated at more than 54 million people in 2013. The mean age of the population was 30 years, below the Asia Pacific average. It is anticipated that the number of people in Myanmar will reach 56 million by 2020. Although the majority of the population lives in rural areas, economic growth is expected to drive further urbanisation in the future.

Development and Risk

Even though the situation is improving, complicated investment rules and a difficult business environment remain among the main drawbacks in Myanmar. As a result, the country has been ranked as one of the least attractive places worldwide to do business because lack of clear trade and investment rules, corruption, high government influence on the economy and undeveloped capital markets, which are the main problems that companies faces in Myanmar. Nevertheless, the country is implementing economic reforms and liberalisation of the market. Undeveloped transport infrastructure and constraints in electricity supply are among the hurdles that companies operating in Myanmar. However, the situation is improving. The country’s authorities are creating a network of international highways to boost regional cooperation, and Myanmar could become a land bridge between Southeast Asia and mainland Asia. In addition, a new seaport, supported in part by private investment, has been built near Yangon, in order to handle growing flows of international trade. The Ministry of Electric Power has also identified 300 locations for the construction of new hydropower plants, which are anticipated to solve electricity shortage in the country. Due to high import duties, infrastructure constraints and an undeveloped supply chain, Myanmar is a supply-driven market, as consumer demand for goods outstrips supply. Modern retail in Myanmar is also in the development stage, and traditional markets account for 90% of retail sales. However, the situation is improving rapidly. Modern retailers have aggressive plans to expand in second-tier cities in Myanmar, and major players in Myanmar’s modern retail sector have plans to develop consumer goods logistics and distribution networks across the country.

The number of potential consumers is also expected to increase, and consumer expenditure is anticipated to triple over the next 10 years.

Economic Reforms

Myanmar’s economy is among the global pacemakers in terms of growth. By most other measures, it’s one of the laggards — a legacy of five decades of isolationist military rule. The optimism that greeted the Southeast Asian country’s opening up to the world has been tempered by economic realities, even after Aung San Suu Kyi’s party formed a new government last year. Poverty persists, real growth has slowed and the currency has tumbled as foreigners defer their investment plans. Foreigners pumped in a record $9.4 billion in the year though March 2016, up from less than $2 billion five years earlier, when the junta began to loosen the political reins. But the flow has stemmed, with investment down to $5.8 billion with two months of the current fiscal year uncounted. Businesses put their plans on hold in anticipation of clearer economic policies from the new government. An investment law that will make it easier for foreign companies to gain tax incentives and a companies law that will allow overseas investors to buy up to 35 per cent equity in lo