August 27, 2012
Container yards in Yangon will get busier as trade with Myanmar expands.
Rarely do you have the opportunity to observe closely, let alone participate, in the opening up to the world of a long-cloistered country. But that’s exactly what’s happening right on our doorstep with Myanmar.
In years to come, I hope that we will be able to look back at Myanmar’s previous few decades as an unfortunate blip in the history of a special country that is not only blessed with abundant natural resources but is also a key strategic location as the sole land bridge between the giant economies of India and China.
In the near term, there are undoubtedly great opportunities. Equally, there are great obstacles to overcome, as you would expect in any nation emerging from such a long period of central planning and stilted development, economically and socially.
The Asian Development Bank (ADB), in a report issued in July, introduced a cold dose of reality to those who see quick gains ahead. It noted that Myanmar has huge problems to overcome, in such key areas as:
“Infrastructure: Myanmar’s financial system is underdeveloped along with most of its physical infrastructure, including telecommunications and transport, which is in poor condition following years of under-investment and uncoordinated planning. Despite the country’s vast energy resources, Myanmar has one of the lowest domestic consumption rates of energy in Asean — in remote areas, says the ADB, electricity is provided for no more than two hours a day.
“Education: The generals stymied higher education, and let the education system in general run down. Myanmar has effectively lost two generations of educated people — those aged between 25 and 55 are woefully short of knowledge and training.
“Urban/rural income gap: The contrast between living standards in Yangon and other urban areas versus rural areas is immense. Yangon’s electrification rate of 67% is four times that of rural areas. Poverty in rural areas is double urban levels, while three-quarters of rural children don’t study beyond primary school, compared with 37% in urban areas.”
To these issues you can add outdated laws and treaties, poor corporate governance, uncertain bureaucracy, inconsistent application of regulations (where they exist), crony capitalism and sectarian social tensions.
The ADB concluded that it will take a generation before there are significant improvements, and 30 years — at best — for Myanmar to catch up to where Thailand is today.
On the positive side, the opportunities for Myanmar include:
High potential to be a “food basket” and “energy source” (especially oil and gas) for Asia.
Huge industrial potential for FDI from Asean and global supply chains.
Major developments already under way, including the Dawei industrial complex, the Northern Ayawadee dam, and the Chinese port and pipeline construction in Rakhine state.
Large foreign-exchange reserves.
There is also significant legislation in the pipeline which should make it easier for companies to do business in Myanmar. These include a new banking bill that will allow full branches of foreign banks in the next year or two, plus a new labour law. A new foreign investment law that came into effect in July will extend the period for tax holidays.
However, it’s likely that the rules will change constantly over the next few years, so good legal advice is essential.
How should Thai firms approach Myanmar? What should they be focusing on?
During his recent visit to Thailand, Myanmar President Thein Sein urged Thais to invest in agriculture, food processing, energy development, banking, tourism, and other services. He highlighted how there were opportunities not only for large investors, but also SMEs.
Thein Sein underlined the key role that Thailand will pay in the development of Myanmar with the governments of our countries signing various joint development plans.
My advice is to start slowly, explore business opportunities carefully and build up contacts. If you can find a solid local partner to work with, so much the better.
Good things take time, and I urge patience on all sides as Myanmar emerges from its lost decades.