Catalyzing Economic Growth in Myanmar: Investors, Officials, and Civil Society Find Common Cause in Reform
Rush-hour traffic moves near the Sule Pagoda in Yangon, Myanmar. (Paula Bronstein /Getty Images)
In the competitive landscape of global business, it is rare for a new market of nearly 60 million people to open. This alone has ensured high investor interest in Myanmar — and, since reforms began nearly three years ago, countless firms have visited the country in search of new opportunities.
Yet, what was near universal excitement about this vast new market has recently been tempered by wider recognition of the barriers to investment. And, because economic growth is expected to drive public support for political reforms, there is worry that limited foreign investment could hinder the pace of political transformation.
The World Bank recently ranked Myanmar at number 182 out of 189 countries on its Ease of Doing Business Index. The barriers to investment are significant, and the state of Myanmar's economy is wanting. Today, Myanmar's per capita GDP is approximately U.S. $1,400 — making it the least developed country in Southeast Asia. Other countries at that level of per capita GDP include Burkina Faso, Uganda, and Nepal. Extreme poverty is extensive, though decreasing — 25 percent of Myanmar’s citizens now live on less than $1.25 a day, whereas 32 percent did in 2005. One-third of children under five suffer from malnutrition.
To be sure, this recent analysis by the World Bank looks back, not forward. Indeed, the work being done by the government, business, and civil society today in Myanmar demonstrates a widely shared commitment across sectors to realize new economic opportunities. Looking forward, the ingredients for rapid growth seem more apparent in Myanmar than other countries at the bottom of the World Bank's rankings.
The McKinsey Global Institute assesses that, if priority reforms are implemented, Myanmar's $50 billion economy could become a $200 billion economy by 2030. Investors are acting on this possibility — one-sixth of GDP went toward fixed capital investments in 2012, an encouraging sign about confidence in the future. Governments and philanthropists from around the world are contributing aid, and major companies are already active in Myanmar, selling their products, with some undertaking social responsibility and community development projects.
Against this backdrop, Asia Society has convened a series of engagements with leaders from government, business, and civil society to better understand how these sectors can work together, with their respective strengths, to accelerate equitable and inclusive growth in Myanmar. Drawing from Asia Society's seminal report Sustaining Myanmar's Transition: Ten Critical Challenges, these discussions have revealed three broad conclusions.
First, although there has been notable progress in Myanmar's economic reforms, many foreign firms are adopting a “wait and see” approach. There still exist today compelling cases for and against investment. The size of the largely untapped Myanmar market, its proximity to other Asian markets, and the new opportunities of the digital age all make Myanmar an attractive destination for new investments. Low worker productivity, education gaps, uncertain regulatory and policy frameworks, and undeveloped infrastructure drive investor hesitation.
Second, reforms are sparking both new commercial and new development opportunities. There is a strong commitment by the Myanmar government to new ways of doing business, as indicated by last year's passage of a foreign-investment law and this year's decision to join the Extractive Industries Transparency Initiative (EITI), the global standard in that field. Yet, there is work to be done, as experts across sectors identify human rights challenges and ethnic and sectarian conflicts as potentially the most significant obstacles to economic development and foreign investment in Myanmar, and call for unyielding attention to improving human rights practices.
Third, significant challenges still block the full realization of Myanmar's aspirations. Asia Society has identified five issues as particularly significant impediments to Myanmar's ability to attract responsible investment:
- Capacity. The capacity of the government to develop and implement policies and laws that foster investment is limited — and, as the world seeks new opportunity in Myanmar, the demand for their attention is great.
- Donor coordination. The large volume of offered assistance, which is often uncoordinated among foreign donors, creates a challenge as Myanmar struggles to absorb and deploy the help.
- Infrastructure. Myanmar's basic infrastructure remains inadequate.
- Catalyzing sectors. Land and banking reform require particular attention.
- Equity. As changes and assistance slowly take root, the economic benefits of reform and resulting investments are not yet shared broadly across Myanmar's population.
After decades of economic isolation, there are many tough questions and few easy answers. Still, initial progress and the demonstrated commitment of Myanmar and its supporters should give potential investors some reassurance that while the road ahead is long, it is increasingly well-marked.