ASIA’S UNCUT GEM

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FOREWORD

IN ‘MYANMAR: ASIA’S UNCUT GEM’ WE OUTLINE THE ABUNDANT PROMISES OF MYANMAR AND CONSIDER SOME OF THE KEY RISKS TO ACHIEVING THAT PROMISE. THE MONIKER ‘FRONTIER’ SEEMS TRULY WELL-DESERVED ON MANY LEVELS AT THIS TIME, AND IMPORTANT STEPS WILL NEED TO BE TAKEN IN INSTITUTIONAL, POLICY, CORPORATE AND REGULATORY DESIGN.

Our thesis is simple: if Myanmar is able to set up transparent institutions and an FDI-friendly environment, then inward FDI should enable the skills and technology transfer needed to rapidly transform Myanmar's economy from agrarian and resource to manufacturing.

KEY TAKEAWAYS

After five decades of economic isolation, Myanmar will experience a rapid economic catch-up in the coming ten years. This economic catch-up will make itself apparent in one of the fastest industrialisation and manufacturing sector build-outs the Asian region has ever seen.

Geographically, Myanmar is the Asian economy most strategically positioned to benefit from the dual economic ascension of China and India.
Myanmar is on the cusp of an industrialisation process that should see it rapidly build out its domestic manufacturing capacity and (given its abundant and youthful population) become a magnet for foreign direct investment.
Economic reforms and the lifting of sanctions are seeing Myanmar rapidly re-engage with the rest of the world, and the speed of that re-engagement is not without risk.
Economic and political isolation has resulted in poorly capitalised financial institutions, untested regulatory structures that may have too heavy or too light a hand, and a workforce with a skillset unsuitable to the production platforms the rest of the region is now attracting.

Rapid economic transformation of Myanmar is a ‘promise’, not a foregone conclusion. Institution building is in its infancy, rule of law and corporate governance are largely untested, and the moniker ‘frontier’ truly seems well deserved on many levels.

Glenn Maguire
Chief Economist, South Asia, ASEAN and Pacific, ANZ

Glenn and his team strive to support ANZ’s brand across Asia by providing commercial and market-relevant economic research. Glenn has extensive Asian economics and banking experience, most recently at Société Générale, as Head of Asian Economic and Cross Asset Research based in Hong Kong. Prior roles included Australian Chief Economist and Japan Chief Economist. He was also an Economist in the Fiscal Policy Division of the Department of Prime Minister and Cabinet in Canberra.

FIGURE 1
The Cost of Economic Isolation — Myanmar’s Economic Underperformance From 1950 Onwards

FIGURE 3
Myanmar – GDP By Sector (2000 vs 2011)

Opportunities and Challenges

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A large part of Myanmar’s economic promise is due to the fact that the economy has emerged from almost complete economic isolation with the rest of the world. These episodes of isolation and subsequent re-engagement are extremely rare. As such they present a myriad of opportunities for trade and foreign investment as well as access to untapped markets.

Challenges

Enormous cost of ‘connectivity’.
Labour exodus.
Over-reliance on and foreign exploitation of Myanmar’s resources wealth.
Striking the right balance between resource extraction and development.
Rent extraction from land and slowing pace of urbanisation.
The resources curse.
Leveraging China if it succumbs to the middle income trap.
Funding urbanisation and avoiding slums.
Imported technology and intellectual safety.
Very poor telecommunications and electricity infrastructure.

Opportunities

Strategic location between India, China and the ASEAN.
Untapped human capital.
Large hydrocarbon resources.
Endowment of precious and semi-precious stones.
Significant arable land and generous water supply could see Myanmar return as the ‘rice bowl’ of Asia.
Harnessing resource revenue for growth.
A ‘greenfield’ opportunity to design and build an economy set to harness its unique geographic and resource opportunities
Accelerating urbanisation.
No legacy infrastructure could accelerate the move to a digital economy.
Becoming a destination for FDI platforms.