Myanmar: Asia’s Next
Tiger?
A Wave of Change and The Way Forward
Snapshot
After 50 years of military rule, the nominally civilian government of 2010 has lent a
positive outlook to the political and economic scenario in Myanmar. A rapid series
of reforms and forecasts for further economic and social development have made it
an attractive destination for investment.
▪
Wave of Change: Held its first general elections in 20 years in November 2010 ending
an oppressive military regime bringing an end to 50 yrs of economic & political isolation
▪
Reforms: A process of reform has been under way since November 2010
– Financial Sector reforms: Floating of the currency exchange rate and plans to set up
a stock exchange have been at the forefront
– Investment climate: Changing FDI and taxation laws have displayed pronounced
results by creating a flurry of investments into the country
– Social reforms: release of political prisoners, deregulation of media, focus on citizen
rights, have generated a favorable response from the international community
▪
New Investment Hotspot: As one of the most exciting liberalizations in recent times,
Myanmar, coupled with its vast reserve of natural resources is expected to see huge
foreign investment in the coming few years. With an expected Economic Growth of 8%,
effects of this are already visible. Myanmar has been appointed to chair ASEAN in
2014. Multilateral financial institutions and foreign governments are increasing aid and
loosening sanctions against Myanmar
1
Myanmar: Asia’s Next Tiger?
Content
Brief History
Economic Development
Reforms and impact on the industry
Key challenges
Appendix
2
Myanmar: Asia’s Next Tiger?
Content
Brief History
– Economic Development
– Reforms and impact on industry
– Key challenges
– Appendix
3
Through the difficult period of internal conflicts and isolation, towards
peace, harmony and prosperity
…Now
Then…
SOURCE: Images courtesy British Broadcasting Corporation (BBC) and Deutsche Welle
After years of martial law, periods of political unrest and attempts at
democracy the new government promises a head start towards liberalization
1962 -1988
Oppressive Martial Law
▪ Myanmar ruled under martial law
till 2010
1988-2010
Attempts at democracy and rise
of Aung San Suu Kyi
▪ In the 1990, general multiparty elections were held
but results were nullified
▪ Continued human rights violations ▪ Military refused to hand
▪ United States and European
over power, resulting in an
Union imposed and intensified
sanctions against Myanmar
▪ Business climate opaque and
highly inefficient
international outcry
▪ Aung San Suu Kyi placed
under house arrest for 15
years; won Nobel Peace
Prize for non-violent
struggle for democracy
▪ Anti-government protests
in 2007; constant
discontent building up
▪ Through 2009,
international pressure for
release of Suu Kyi
SOURCE: Web, Press Search
2010-Present
Establishment of Democracy
▪ National elections held for
the first time in 2010
▪ Though, elections were
condemned as fraudulent, a
wave of reformation is seen
▪ Release of Aung San Suu
Kyi and hundreds of
political prisoners
▪ Reforms like deregulation of
the media etc
▪ By elections in 2012 won by
opposition party National
League for Democracy
▪ Countries recognized this
development by lifting or
loosening sanctions
Focus
areas
Next rising star of Asia?
Geographic advantage of being located between
India & China with good harbors and developing
road networks
Emerging from 5 decades of isolation, both
economically & politically
Young and large labor force
Rich natural resources in form of Oil, Gas &
Minerals
SOURCE: Myanmar in Transition
6
Myanmar is one of the largest countries in Southeast Asia strategically
placed between two economic powerhouses
GDP: $7,318bn
GDP/capita: $5,445
Pop: 1.3 bn
China
India
GDP: $1,847bn
GDP/capita: $1,489
Pop: 1.2 bn
Myanmar
GDP: $52 bn
GDP/capita: $857
Pop: 49-55 mn
l
1 GDP numbers at current USD, 2011
SOURCE: World bank, UNPD
7
It presents economic opportunities with large population, significant
natural resources and a geo-strategic location
Key facts
GDP/capita (2010, PPP)
7,846
Uzbekistan
3,836 2,846
Kyrgyzstan
Turkmenistan
1,967 1,311
Tajikistan
Japan
China
Afghanistan
Nepal Bhutan
Pakistan
South Korea
Myanmar
Vietnam
India
North Korea
Sri Lanka
Cambodia
VN CAM MYR
240
89
70
Hong Kong
Lao
RI
Population, million people
Taiwan
Bangladesh
Thailand
TL
60
14
Philippines
Brunei
Malaysia
Singapore
TL
RI
Size, million ha
1.9
Indonesia
0.7
0.5
Strategic location between China, India. The worlds 40th largest country and
second largest in SEA after Indonesia (RI)
With 60 million people it is the 24th most populous country
Largest exported item: Natural Gas
VN CAM MYR
TL
0.3
RI
0.2
VN CAM MYR
SOURCE: International Monetary Fund; Asian Development Bank; Burma Economic Review 2005-06 by Sein Htay, Burma
Fund; The Conference Board Total Economy Database
Leaving behind times of isolation, fragility and conflict
1824 - 1886
Anglo-Burmese
Wars; British control
1960-90’s
Uprising of socialism;
civil unrest; Burma
changed to Myanmar
Source: Press search
1940-1959
Independence from
British rule; Economic
turmoil
1990 onwards
Fight for democracy
continues; Joins ASEAN;
NLD wins elections
9
Making steady progress towards brighter future
st
1
general elections
conducted in 20 years;
however 25% of MP’s
appointed by Military
In 2011
Hillary Clinton
became the most senior US politician to visit
Myanmar in 50 years
80%-100%
ownership in restricted sectors, 5 year
tax break, easy land lease
policy
Foreign investment law passed -
First SEZ
was approved. The total project
value is estimated to be more than
100% of the current GDP
Source: Press search
10
Share of working population aged between 30-59 has increased over the
last ten years and projected to grow further
Population by age, in %. Total in millions
100% =
60 +
45
8
45-59
11
30-44
48
9
50
52
54
10
12
14
15
17
18
19
21
23
15-29
24
24
29
27
0-14
24
26
24
22
30
25
23
22
21
2000
2010
2015F
2020F
2025F
SOURCE: United Nations Population Division
11
Myanmar: Asia’s Next Tiger?
Content
Economic Development
– Reforms and impact on industry
– Key challenges
– Appendix
12
Its economy has grown at fastest pace among ASEAN nations, however its
per capita income is still the lowest
GDP growth rate (CAGR) between 2000-12;
(at Current Prices)
14.7
14.2
Per Capita; 2012
Singapore
13.7
Brunei
12.1
9.5
9.1
8.8
Indonesia
8.6
Vietnam Cambodia Malaysia Philippines Thailand Singapore
Source: International Monetary Fund
10,304
Thailand
8.2
5,678
Indonesia
Philippines
Laos
41,703
Malaysia
11
Myanmar
51,162
3,592
2,614
Vietnam
1,528
Laos
1,446
Cambodia
934
Myanmar
835
Brunei
13
This growth has been primarily driven by Industry and Services
Growth in percentage
4.4%
4.4%
6.3%
6.5%
5.8%
6.1%
6.3%
2009
2010
2011
4.7%
Agriculture,
livestock,
fishery and
forestry
3.4%
Industry
3.0%
Services
4.2%
2008
SOURCE: Myanmar in Transition
5.0%
14
In the short-to-medium term the fundamentals are expected to go through
corrections and stabilize which will make growth sustainable
Inflation - stabilizing
Currency - stabilizing
Percentage YoY
60
Kyat per USD
Unstable period
35
-3% p.a.
30
Expected stable period
with open market and
floating currency
25
+3% p.a.
+26% p.a.
1,110
1,004
1,027
861
857
810
772
20
819
874
965
998
904
5
319
0
-5
2000
02
04
06
SOURCE: Global Insight (WMM)
08
10
12E 14E 16E 18E 2020E 2000 02
04
06
08
10 12E 14E 16E 18E 20E
15
The fast urbanization in Myanmar continues to fuel the demand for more
products and better services
The Mass affluent segment has the fastest growth
Number of Households
CAGR 12-17
Thousands
+2% p.a.
3,620
3,236
2,729
Mass affluent
452
Upper mass
837
1,068
1,609
1,133
1,243
Lower mass
Urbanization
SOURCE: MGI Citiscope
2%
Affluent people typically
have more needs and
require more
sophisticated products,
678
647
Unbankable
9%
By 2017, the proportion
of upper mass and
mass affluent
household segments
~80% the total number
of household in urban
areas in Myanmar
762
-5%
512
388
256
2005
2012
2017
29%
33%
36%
-8%
16
Myanmar: Asia’s Next Tiger?
Content
Reforms and impact on industry
– Key challenges
– Appendix
17
Since 2011, policy reforms in various sectors have been recognized and
supported by foreign countries and institutions alike
Reforms
Recognition
▪ Major reforms in the financial sector
– Private banks allowed to engage in the
▪ Recognition of reforms at a global level
– ASEAN approved Myanmar's bid for the
foreign exchange market
– Currency exchange rate floated by the
Central Bank of Myanmar
– New Taxation Laws led to a 389% y-o-y
rise in revenue1
▪ Changing Foreign Investment Laws
– New FDI Law enacted in November 2012
to allow foreign-owned investment up to
100%
– Foreign investors to get five-year tax
holiday and 50-year land leases
– Relaxed import restrictions and abolished
export taxes.
▪ Social reforms, too, been a key focus
– Establishment of the National Human
Rights Commission and amnesties of
political prisoners
– New labor laws allowing unions and
strikes
– Relaxation of press and media censorship
SOURCE: ADB Report
chairmanship in 2014
– Foreign Investment increased from
US$300 million in 2009-10 to a US$20
billion in 2010-11, (about 667%)1
▪ Multilateral Financial institutions and foreign
governments to increase aid
– World Bank to resume aid of US$85 mn
– Asian Development Bank (ADB) to resume
financial aid after a 24 years
– United States, European Union, etc.
suspend sanctions
▪ Multinational firms expressing increasing
interest in the country
– Japanese companies, financial firms and
US energy giants interested
– Coca- Cola Co. and MasterCard Inc. etc
increasing their presence
– OAO Gazprom in discussions with the
government to participate in energy
projects
1 Independent Media Source
18
Several sectors of the economy show promise
Agri/fishery/
forestry
Sectors
Description
▪ Fisheries
▪ Substantial opportunities to develop both riverine and marine fisheries
▪ Forestry
▪
▪ Agriculture
▪ Energy
▪
▪ Has proven reserves of 7.8 trillion cubic ft of natural gas. Natural gas is the
▪
country’s most important source of export revenue
Has proven oil reserves of 2.1 billion barrels, more than Thailand and Brunei
Darussalam
Hydro-power potential by harnessing 4 river basins is pegged at 100,000 MW
Like its neighbors (Vietnam & Thailand) , Myanmar could build on apparel exports
(it already does some), particularly with abundant labor available at low cost
Is rich in mineral resources & minerals of potential importance are copper, gold,
lead, zinc, silver, tin and tungsten, antimony, chromium and nickel
▪ Apparel
▪
▪
▪ Mining
▪
▪ Tourism
▪ Natural attractions (forests, beaches) and rich heritage provide a good
▪ Telecom
▪ Retail
▪
▪
Industry
Services
resources, one million metrics tons of fishery resources could be exploited
annually on a sustainable basis
Has 33 million hectares of forest reserves and forestry exports were USD 644
million in 2011/12
Lot of potential due to availability of arable land (~19.39 million hectares) and
labour. Key crops include –Rice, beans, sesame seeds
SOURCE: ADB, Interconsulting
potential of growth
Has potential, however very underdeveloped as of now
Good growth with a CAGR of 15% over 2000-2011 and expected to increase
upto CAGR 17% over 2011-2017
Did you know?
Tourist arrivals to Myanmar in
the whole of 2011 were equivalent
to arrivals to Thailand
in a single week
20
Tourism and increased trade ties look to further strengthen Myanmar’s
global position
Flow of tourists into the country is
anticipated to rise
▪
▪
Tourism declared as national priority
sector
25 million visitors forecasted in 20132015
Increased trade ties and bilateral relations
with international countries
▪
▪
Indian and Chinese ministers visiting
Myanmar for talks
Leader Aung San Suu Kyi visited several
nations to strengthen ties
Myanmar President, Thein Sein, seeks
flexibility for foreign investors in their joint
ventures in Myanmar
SOURCE: Factiva, WebSearch, WMM
21
Myanmar: Asia’s Next Tiger?
Content
Key Challenges
– Appendix
22
Many risk and challenges lie ahead of a young and promising nation
Economic challenges:
▪ Weak macroeconomic management and lack of experience with
market mechanisms
▪ Business is restricted by poor infrastructure and logistics , particularly
in transport, electricity access, and telecom
▪ Limited economic diversification; production structure dependent on
natural resources (gas & wood and farm & fish)
Political challenges:
▪ Ongoing influence of Military rule; 25% of MP’s appointed by Military
▪ Low score on government effectiveness & regulatory quality
▪ Scores very low on human development reflective of the low
government investment on key necessities
External/Internal Risks:
▪ Social tension within Myanmar remains a potentially destabilizing
factor; over 130 recognized ethnic group
▪ Abolition of sanctions still languishing
SOURCE: Facts sourced from reports published by World Bank; Asian Development Bank
23
Myanmar: Asia’s Next Tiger?
Content
Appendix
24
Myanmar scores very low on human development reflective of
the low government investment on key necessities
Global best country
Global worst country
Human development index, 2011
Public health expenditure, 2011
Public education expenditure, 2011
High to low; (x)=global rank
% of GDP
% of GDP
Norway
0.9 (1)
Denmark
9.7
Denmark
Australia
0.9 (2)
USA
9.5
Sweden
9.4
Finland
6.2
8.2
7.0
Japan
0.9 (12)
Netherlands
Hong Kong
0.9 (13)
Japan
7.8
Malaysia
6.0
Korea
0.9 (15)
Costa Rica
7.4
France
5.7
Singapore
0.9 (26)
Finland
6.7
United States
5.5
6.6
Bhutan
5.4
China
0.7 (101)
Czech R
Thailand
0.7 (103)
Bhutan
4.5
Brazil
4.6
Philippines
0.6 (112)
S. Korea
4.1
Korea, Rep.
4.4
Indonesia
0.6 (124)
Thailand
2.9
Thailand
4.3
Viet Nam
0.6 (128)
China
2.7
Japan
3.6
India
0.5 (134)
Vietnam
2.6
India
3.4
Bhutan
0.5 (141)
Cambodia
Singapore
3.2
Bangladesh
0.5 (146)
Indonesia
1.3
Philippines
Myanmar
0.5 (149)
India
1.2
Bangladesh
2.4
Nepal
0.5 (157)
Bangladesh
1.2
Sri Lanka
2.1
Pakistan
0.8
Myanmar
0.9
Guinea
0.6
Zimbabwe
Congo
0.4 (173)
0.3 (187)
Myanmar
SOURCE: Human Development Report 2011; World Bank
2.1
0.2
2.8
Business is restricted by poor infrastructure and logistics
Quality of infrastructure
(0 = bad, 5 = good) 2011
Logistics performance index
(0 = bad, 5 = good) 2011
Score
Score
Rank
Rank
Singapore
4.2
3
Singapore
4.1
1
Hong Kong
4.1
8
Hong Kong
4.1
2
22
South Korea
25
China
3.5
26
26
Malaysia
3.5
29
3.7
South Korea
3.6
China
3.4
Malaysia
3.7
21
Thailand
3.1
43
Thailand
3.2
38
Brazil
3.1
44
Brazil
3.1
45
India
2.9
54
India
3.1
46
Philippines
2.8
61
Philippines
3.0
52
Pakistan
2.7
69
Vietnam
3.0
53
Vietnam
2.7
72
Indonesia
2.9
59
Indonesia
2.5
83
Pakistan
2.8
71
Sri Lanka
2.5
88
Sri Lanka
2.8
81
Russia
2.5
96
Russia
2.6
95
116
Cambodia
2.6
101
125
Bhutan
2.5
107
132
Myanmar
147
Nepal
2.3
Bhutan
Cambodia
Myanmar
Nepal
SOURCE: World Bank 2012
2.2
2.1
1.9
2.4
2.0
129
151
Myanmar scores low on government effectiveness and regulatory quality
Government effectiveness score
(100 = best, 0 = worst) 2011
Rank
Score
Singapore
Hong Kong
S. Korea
Malaysia
Brunei
99.05
94.31
86.26
81.04
77.25
70.62
60.66
59.72
55.92
55.45
54.50
52.61
46.92
45.02
42.18
Bhutan
China
Thailand
Philippines
Brazil
India
Sri Lanka
Indonesia
Vietnam
Russia
Cambodia
Nepal
Pakistan
Bangladesh
Myanmar
25.59
22.75
22.27
19.91
2.37
Regulatory quality score
(100 = best, 0 = worst) 2011
3
13
30
41
49
63
84
86
94
95
97
101
113
117
123
158
164
165
170
207
SOURCE: World Bank, World Governance Indicators 2012
Score
Hong Kong
Singapore
Brunei
S. Korea
Malaysia
Thailand
Brazil
Sri Lanka
China
Philippines
Indonesia
India
Russia
Cambodia
Pakistan
Vietnam
Nepal
Bangladesh
Bhutan
Myanmar
99.05
97.16
84.83
79.15
74.41
56.40
55.92
50.71
45.50
43.60
41.71
40.28
38.86
35.07
29.86
29.38
25.59
22.27
10.90
1.42
Rank
3
7
33
45
55
93
94
105
116
120
124
127
130
138
149
150
158
165
189
209