Myanmar Steps onto the World Stage
Myanmar, also known as Burma, has been closed to the world for much of its recent history. However, the country is now going through a process of opening up and liberalization.
Since President Thein Sein was elected in 2011, Myanmar has implemented a plethora of political and economic reforms. This new political outlook has resulted in the lifting of the long-existing international sanctions regime that had been imposed upon the country.
In a further display of the international community’s growing trust in Myanmar, the country has recently taken over the chairmanship of ASEAN.
With the lifting of sanctions, international businesses are increasingly eager to invest in the country. Among its many positive attributes, Myanmar has several natural resources and lies at a geo-strategically important location between India and China.
The World Bank has predicted that the country’s economy in 2013/2014 will have a strong growth rate of 6.8 percent. President Thein Sein has predicted an even higher rate of 9.1 percent for this year. However, inflation remains a concern.
Reforms are in vogue
According to Maplecroft, a UK based risk analyst, Myanmar is the most-improved country in the global business environment for 2014. According to the firm, the country has improved in a variety of areas, including: corruption, rule of law, corporate governance, regulatory framework and respect for property rights.
Maplecroft’s analysts explained their reasoning:
“The government’s resolve to improve the business environment means a number of important steps have been taken to enhance investor protection, including the implementation of a new foreign investment law in March 2013, which provides much needed clarity around essential issues, such as foreign ownership limits and land leasing rules.”
However, Myanmar still ranks low due to high corruption levels and lack of rule of law. Thus, the country still presents significant risks to the unwary investors.
In its annual “Doing Business” report, the World Bank ranked Myanmar 182 out of 189 for ease of opening or conducting business ventures.
The Economist has noted that “Mr Thein Sein’s government is ready to admit its shortcomings and has vowed to improve. Its ministries are crawling with foreign consultants, lawyers and accountants, dispensing advice on how Myanmar might move up the rankings.”
Additionally, Myanmar has signed onto a number of international agreements, thus furthering its reform process and increasing transparency and accountability. These agreements include the New York Arbitration Convention and the Extractive Industries Transparency Initiative.
On the employment front, the UN Economic and Social Commission for Asia and the Pacific is collaborating with Infosys and the governments of Myanmar and India to help create jobs and investment opportunities in Myanmar’s IT sector through education and infrastructure building.
On January 23 of this year, Myanmar’s government passed the Special Economic Zone (SEZ) law. The law will provide a diverse array of income and tax incentives to those investing in the country’s SEZs, such as Kyaukphyu, Dawei or Thilawa. Maung Aung, advisor to Myanmar’s Trade Minister, called the SEZs the “driving force” for economic development in the country.
And the money begins to flow…
The World Bank has pledged US$2 billion in development aid to the country. This aid will go to a variety of projects including healthcare and energy supplies.
Jim Yong Kim, World Bank president, explained that “Expanding access to electricity in a country like Myanmar can help transform a society. Children will be able to study at night, shops will stay open, and health clinics will have lights and energy to power life-saving technology. Electricity helps brings an end to poverty.”
US$200 million of the aid money will also go to helping Myanmar achieve universal health coverage by 2030. A further portion of the money will go to a Telecom Sector Reform project that is aimed at getting affordable cell phones into the hands of the country’s citizens.
The World Bank had stopped leading money to the Myanmar government in 1987 due to the fact that the country had stopped making payments on its outstanding loans. However, in 2013, the country used a Japanese bridge loan to pay off the World Bank, as well as the Asian Development Bank. This allowed both banks to begin providing assistance to the country again.
The Japanese are also providing a start-up cash “float” of US$32 million to Rangoon’s stock exchange. This amount represents half of the start-up capital. The exchange is scheduled to start trading in 2015.
Myanmar’s National Planning and Economic Development Minister, Kan Zaw, has highlighted the fast growing level of investment flowing from China and Thailand. Additionally, due to low wages and cheap production costs, the garment cutting, manufacturing and packing sectors were seeing strong improvement and growth.
FDI into the country has also been seeing strong growth now that sanctions have been dropped. During the first six months of the 2013-14 fiscal year, the government approved over US$1.8 billion worth of projects. The 2012-13 fiscal year saw only US$1.4 billion of FDI.
Many investors and businesses are still awaiting the outcome of the 2015 elections before they jump too deeply into the country. How the country handles the outcome of the election, and whether it is seen as legitimate, will have a strong effect on how the international community views the state. In particular, many wonder if opposition leader Aung San Suu Kyi will be allowed to run for president.
While there are signs that caution is still the rule of the day, it seems clear that Myanmar is slowly turning the corner and moving towards fully joining the international community.
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