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Building for a better tomorrow

Sandwiched between China and India, the world’s two most populous countries, with a wealth of natural resources, a rising young population and a rapidly improving infrastructure, Myanmar is expected to take off
Sandwiched between China and India, the world’s two most populous countries, with a wealth of natural resources, a rising young population and a rapidly improving infrastructure, Myanmar is expected to take off. EZRA KYRILL ERKER

Building for a better tomorrow

After decades of economic stagnation, Myanmar is set for a business boom despite infrastructure problems

For decades a political pariah, Myanmar has begun to transform itself from a military dictatorship into a multiparty democracy.

Regularly coming last in the region in terms of gross domestic product (GDP) per capita, this is likely to be the year that it moves ahead of Cambodia.

Sandwiched between China and India, the world’s two most populous countries, with a wealth of natural resources, a large, young population and a rapidly improving infrastructure, Myanmar is expected to take off.

Hydropower potential is considerable. Two power plants are being built for export to China, funded by the second biggest economy in the world. Other natural resources include timber, gems, minerals and natural gas. Three deep-sea ports are under construction in Thilawa, Dawei and Kyaukphyu.

But the changes may have been less due to outside political pressures, condemnations of non-government organisations (NGO) and economic sanctions, and more due to internal pragmatism. Having monopolised many sectors, the generals could make more money by expanding trade and joining the international community. And attempts at total government control, such as brutal crackdowns on the ethnic militias and their communities, had resulted in little central consolidation.

In many ways, the only solution to the stagnation was to bring troublesome regions and opposition groups – even National League for Democracy leader Aung San Suu Kyi – into the political fold.

This hasn’t been enough to stop religious violence, though. Last week in Mandalay, Myanmar’s second city, a Buddhist man was stabbed to death. The next morning, apparently in retaliation, a Muslim was killed on his way to the mosque.

Hundreds of Buddhists marched or rode through the city on motorcycles shouting death threats to Muslims. Police responded by imposing a curfew. It is the latest episode of religious violence since President Thein Sein’s quasi-democratic government took office in 2011.

In March last year, 40 Muslim youths were taken from a madrassa in Meiktila and hacked to death, their bodies burned. Rakhine State riots in June 2012 left up to 1,000 dead and 150,000 displaced, mostly Rohingya, a largely stateless Muslim minority.

Muslims form four to eight per cent of Myanmar’s population and have become a popular scapegoat for societal ills in media forums.

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Yet away from the strife, a visit to Myanmar’s parliament in Nay Pyi Taw is eye-opening. You are hit by the scale of the government complex, its 40-odd buildings, a 20-lane, almost entirely empty access road, and brand new parliament chambers that seat hundreds of representatives and visitors.

Equally impressive is a government bureaucracy that seems determined to reduce corruption and boost transparency, keeping long-term job creation and environmental sustainability in mind while diversifying investment to move away from China as a main investor.

A good example of this was the reform of the telecommunications law last year and an open bidding process that was highly praised for its efficiency and transparency.

Some energy and transport sector reforms are seeing a similar focus on long-term utility rather than short-term gain. There also seems to be a method to the priorities – with telecommunications and energy getting fast-tracked – since certain sectors are essential for the growth of others.

Banking still lags behind, though, with foreign lenders barred from conducting internal business. Some generals with special interests have much to lose from competition, but the investment board is aware that the law needs liberalisation. That should happen by next year.

Deeply entrenched economic, political and social problems remain. There are ongoing peace processes with ethnic militias that are incomplete and tenuous. The legal infrastructure is still inadequate for a democracy and rule of law is nascent. Political corruption hasn’t gone away. Skilled labour is in short supply. Yangon property prices are at Manhattan levels.

In the Doing Business 2014 pamphlet, Myanmar ranked 182 out of 189 countries in terms of ease of doing business, and it was 157 out of 175 in Transparency International’s corruption perceptions index. Cambodia is even worse at 160.

By next year these numbers will have improved, but multinationals investing in Myanmar don’t expect quick returns.

Most senior executives expect five years of losses, although early entry into the market will pay later dividends. They also predict that six per cent annual GDP growth is expected during the coming two decades.

The launch of the ASEAN Economic Community late next year will improve cross-border trade and make Myanmar more attractive as a manufacturing base. Considering its wealth of cultural and historical sites, it will also become an attractive tourism destination.

Many of the early investors have a similar mindset going in: legally, infrastructurally and politically the country is still evolving.

But in the long run, after structural reforms, the consensus is that the economy – based on location, manufacturing potential, resources, diversity and work ethic – will grow quickly and sustainably.

It’s better to be there as it happens than after the boom.


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