Opportunities and challenges await in Myanmar

Myanmar offers promising prospects for businesses and investors – a newly emerging economy with many advantages, in the heart of the world’s fastest-growing region. Home to 60 million inhabitants (46 million of working age), our neighbour has abundant natural resources – natural gas and forests, to name only two – and is a member of a market of over half a billion people called Asean.  

Currently Myanmar contributes only 0.2 per cent of Asia’s gross domestic product, but it has the potential to quadruple its economy by 2030. This means its economic size will expand from US$45 billion in 2010 to over $200 billion in 2030, and its per capita GDP (purchasing power parity) could rise from $1,300 to $5,100 by 2030.  

Moreover, the country’s early stage of economic development gives it a “greenfield” advantage: an opportunity to build a “fit for purpose” economy to suit the modern world. With rapidly changing technology, Myanmar can leapfrog over the intermediate stages of economic development and create sufficient jobs to improve the livelihood of its people.   

If Myanmar is managed well, the country can achieve what Thailand has done; we quadrupled our income to the current GDP per capita level in just 13 years. In the process, Myanmar can create upward of 10 million non-agricultural jobs, concentrating on high-productivity manufacturing and the service sectors. 

Most economists think that Myanmar has the potential to sustain a growth rate of 8 per cent a year, similar to that of China. However, in the process, the country must substantially accelerate its labour-productivity growth. Only a diversified economy can double its labour productivity; 

Relying exclusively on energy and mining will not suffice. Most importantly, all the fundamentals – political and macro-economic stability, the rule of law, and enablers such as skills and infrastructure – must be in place. 

There are four areas in Myanmar’s development that could underpin growth and productivity. First, Myanmar’s economic policy should support a structural shift toward manufacturing. While other emerging economies have experienced a structural shift away from agriculture toward manufacturing, Myanmar’s reliance on agriculture has increased. Today, the country’s manufacturing sector is small in absolute terms – less than half the size of Vietnam’s – but it has the potential to be Myanmar’s largest by 2030. 

Second, it must try to harness digital technology. Myanmar is beginning its economic development journey in the digital age, when mobile and Internet technology are increasingly affordable. Harnessing these tools to the fullest could help the country leapfrog to a more advanced stage of development, but that would call for an aggressive telecommunications-infrastructure plan from the government. 

Third, the country should prepare for urbanisation. The vast majority of Myanmar’s citizens still live in rural areas, but this is likely to change rapidly. The share of the population in large cities could double, from just 13 per cent today to around 25 per cent in 2030 – an additional 10 million people, or two cities the size of Yangon. Myanmar would benefit from preparing for this change through investment, planning and a shift to local governance. 

Finally, Myanmar must maintain its course in connecting to the world. Myanmar must consider the best way of reconnecting to the global economy through investment, trade and flows of people. It is estimated that the nation potentially needs more than $170 billion of foreign capital to meet its overall investment requirement of $650 billion, and thus should develop a targeted strategy to attract it. Trade volumes are not only low but also undiversified, and Myanmar could expand these and increase population mobility to encourage knowledge transfers, the building of skills and expanded tourism. 

These are challenging agendas for Myanmar’s policy-makers and its people. Myanmar’s government is likely to require more capacity to implement these changes. The nation’s businesses need to consider their opportunities in different markets, quickly reach international quality standards and explore foreign partnerships. International companies have to move fast, be prepared to commit to Myanmar for the long term, and consider partnerships with local firms in order to achieve success in this emerging country with great potential.   

 

Chodechai Suwanaporn is executive vice president, corporate strategy, PTT Plc. [email protected].