Is Myanmar the Economic Paradise We Thought?

It was not long ago that expectations shot up as foreign investors were gearing up for what was expected to be a bonanza in Myanmar (formerly known as Burma). Thein Sein, a member of the former ruling military junta, took over as a civilian president. Opposition leader Aung San Suu Kyi was persuaded to join in the democratic process in parliament and was released from house arrest. Myanmar seemed to have turned the political corner, and it looked like economic opportunity beckoned.

Much of the excitement about the economic prospects in Myanmar stemmed from its geographic location, its natural resource abundance, and the underdeveloped state of most of its economy. With a population of over 50 million there is a sizable domestic market and plenty of exportable prospects. Many longtime residents of Asia shunned visits to the heavy-handed military-run country in the past despite its rich history and beautiful landscapes. Positive changes could provide a jolt to the tourism industry.

A sorted political environment could set reasonable economic policies that would point to expanding opportunities in one of Asia’s last closed markets. The political changes seemed to herald a new era where Myanmar would become a more normal member of the Association of Southeast Asian Nations (ASEAN) and would have prospects closer to neighbors like Indonesia, Thailand, and the Philippines. Where do things stand now?

Recently, even Miss Suu Kyi admitted that the reforms have “stalled.” There is a lot of discussion about a constitutional clause that precludes people with a foreign spouse or foreign children from becoming president. This clause seems ready-made for Miss Suu Kyi, whose sons are British and due to her popularity would be a shoe in for the presidency. The constitution also reserves 25% of the seats in parliament for the military. So there are plenty of impediments to progress.

The international hopes and hype about change has not helped either. The progress was widely cheered by many outside players. U.S. government officials used the progress to tout long-standing sanctions. ASEAN jumped in with chortling about how their “constructive engagement” was the key to positive forward movement. Whichever approach was the key driver of change, all players overstated the progress and set expectations extremely high.

So now we are back to reality. Progress on reform will come in fits and starts but we can all hope for steady, positive progress. There are still plenty of positive signs. Two wireless telecom licenses have been issued and there is movement in building out those networks. There are plenty of infrastructure needs and foreign investments may have slowed a bit but certainly have not stopped. Better clarity in government policy would help but as we have seen in other developing markets this process is more a marathon than a sprint.

Agriculture dominates the overall economy and is generally private with the exception of government monopolies on rice exports. Energy is an interesting area as there are oil and gas opportunities to be assessed and developed. Most all heavy industry has been government owned and operated, but there is a view that reforms could bring privatization.

While it is early days on the policy front there is little doubt about the potential. It was not that long ago that Burma (Myanmar’s earlier incarnation) was one of the wealthiest nations in Asia and the largest exporter of rice. Myanmar’s strategic location between China and India position it to benefit from growth in both of these huge and growing economies. There is a lot to like about Myanmar. Let’s hope that politics and policy don’t get in the way.

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