Myanmar to see rapid economic development and businesses growth

Myanmar is projected to enjoy robust economic growth, as both local and international companies eye a host of opportunities in the country's opening economy. A new report finds that a stable policy environment as well as infrastructure investment are key drivers for the opportunities to be realised.

Myanmar, following decades of economic isolation, has – since the handover of military power in 2011 and the 2016 democratic elections – opened its economy to other economies. The opening of the country has seen economic growth accelerate, up from 5.9% in 2011, to hit a forecasted growth of 8.4% in 2017.

A new Roland Berger report, titled ‘Myanmar: A wave of optimism – will it last?’ investigates how local and international business view growth prospects in the country, as well as key factors limiting growth., offers local and global business opportunities. The report, is based on a survey of more than 200 business executives, both local and international, across major sectors.

According to the firm’s analysis, the country is set to enjoy some of the world’s fastest economic growth, hitting 8.4% - well above Lao PDR and Cambodia, on 7% and 6.9% respective. Growth remains on a relatively low base however, the country is one of Asia’s least developed nations with a nominal GDP of around $1,500.

Technology trends, as well as the large amount of relatively free moving capital now means that, even from a low base, the pace of development of Myanmar is expected to well outpace historic trends seen in the UK and US – which took 200 years and 90 years respectively to grow $1,500 to $5,000. Much like the Asian Tigers, which saw growth rates that allowed them to make the leap in 20 years, the current conditions are likely to allow the country to leapfrog to around $5,000 nominal GDP.

The research found that executives are generally upbeat about the prospects of most key sectors in the Myanmar economy, with 65% saying conditions are set to improve while 8% say that they will improve rapidly. Hotel and tourism executives were the most generally positive about the prospects for improvement, with 86% saying that there would be at least improvement. Utilities, oil & gas, chemicals respondents too are generally positive about outcomes for the country, so too are financial services respondents.

The firm cites a number of reasons why companies are upbeat, the market is seen by 80% of respondents as a frontier market in which two thirds believe government reforms are like to succeed and which has a fast growing, young, population. The further lifting of sanctions is likely to make the country even more attractive.

Some sectors are a little more cautions, construction & real estate executives, for instance, are relatively pessimistic, at 27% believing conditions will remain the same and 8% remarking that conditions are set to deteriorate slowly. Retail & distribution highlights a mixed bag of expectations, 31% are expecting rapid improvement, while the highest number, 13%, expect conditions to deteriorate.

The research notes that both local positive about the future growth of their companies. 57% of respondents say that they are expecting to growth their businesses organically, while 55% plan to leverage partnerships with more global companies, 27% say that they will enter into partnerships with local firms – 12% say that they will tur to mergers & acquisitions (M&A) to drive growth.

International firms are predominantly focused on growing organically in the country, as cited by 67% of respondents, while 16% say that they will partner with other international firms to drive growth. Around 34% are keen to combine with local firms, while 8% say that they are planning to use M&A.

The research notes too however, that, while businesses are generally positive, challenges remain. 41% say that a lack of staff with required skills needs very significant improvement, while 44% say it needs improvement. Furthermore, no clear government economic policy and unpredictable legislative environment are cited by 76% and 75% respectively as at least an area that needs significant improvement. Infrastructure too is cited as an area in which considerable development would provide a significant boost to the economy, with 97% indicating stable electricity supply and 94% broadband development.

The research notes that discrimination against foreign companies and administrative issues are the least concerning respectively, with 32% and 46% respectively suggesting that that area needs significant change.

The firm concludes, “Finally, companies that want to invest in Myanmar need to be prepared for volatility. The country is rapidly developing and changing, but still has a long way to go to catch up. The prospects for Myanmar are bright and those who are prepared to ride out the volatility are likely to be rewarded with new opportunities. Our conversations with Government officials indicate that there is awareness of the need and urgency to clarify and detail economic policies, and determination to move from planning and deliberation to action and quick wins. If this indeed happens, we will continue to see one of the fastest and most impactful transformations of a nation ever.”