Myanmar: Asia’s Next Tiger?
A Wave of Change and The Way Forward
1
Snapshot
After 50 years of military rule, the nominally civilian government of 2010 has lent a positive outlook to the political and economic scenario in Myanmar. A rapid series of reforms and forecasts for further economic and social development have made it an attractive destination for investment.
▪ Wave of Change: Held its first general elections in 20 years in November 2010 ending an oppressive military regime bringing an end to 50 yrs of economic & political isolation
▪ Reforms: A process of reform has been under way since November 2010
– Financial Sector reforms: Floating of the currency exchange rate and plans to set up a stock exchange have been at the forefront
– Investment climate: Changing FDI and taxation laws have displayed pronounced results by creating a flurry of investments into the country
– Social reforms: release of political prisoners, deregulation of media, focus on citizen rights, have generated a favorable response from the international community
▪ New Investment Hotspot: As one of the most exciting liberalizations in recent times, Myanmar, coupled with its vast reserve of natural resources is expected to see huge foreign investment in the coming few years. With an expected Economic Growth of 8%, effects of this are already visible. Myanmar has been appointed to chair ASEAN in 2014. Multilateral financial institutions and foreign governments are increasing aid and loosening sanctions against Myanmar
2
Myanmar: Asia’s Next Tiger?
Brief History
Economic Development
Reforms and impact on the industry
Key challenges
Content
Appendix
3
Myanmar: Asia’s Next Tiger?
Brief History
– Economic Development
– Reforms and impact on industry
– Key challenges
– Appendix
Content
Through the difficult period of internal conflicts and isolation, towards peace, harmony and prosperity
SOURCE: Images courtesy British Broadcasting Corporation (BBC) and Deutsche Welle
Then…Then…Then…Then…
…Now…Now…Now…Now
After years of martial law, periods of political unrest and attempts at democracy the new government promises a head start towards liberalization
SOURCE: Web, Press Search
▪ Myanmar ruled under martial law till 2010
▪ Continued human rights violations
▪ United States and European Union imposed and intensified sanctions against Myanmar
▪ Business climate opaque and highly inefficient
▪ In the 1990, general multi-party elections were held but results were nullified
▪ Military refused to hand over power, resulting in an international outcry
▪ Aung San Suu Kyi placed under house arrest for 15 years; won Nobel Peace Prize for non-violent struggle for democracy
▪ Anti-government protests in 2007; constant discontent building up
▪ Through 2009, international pressure for release of Suu Kyi
▪ National elections held for the first time in 2010
▪ Though, elections were condemned as fraudulent, a wave of reformation is seen
▪ Release of Aung San SuuKyi and hundreds of political prisoners
▪ Reforms like deregulation of the media etc
▪ By elections in 2012 won by opposition party National League for Democracy
▪ Countries recognized this development by lifting or loosening sanctions
Oppressive Martial Law
Attempts at democracy and rise of Aung San Suu Kyi
Establishment of Democracy 1962 -1988
1988-20102010-Present
6
Next rising star of Asia?
SOURCE: Myanmar in Transition
Emerging from 5 decades of isolation, both economically & politically
Rich natural resources in form of Oil, Gas & Minerals
Young and large labor force
Geographic advantage of being located between India & China with good harbors and developing road networks
Focus areas
7
Myanmar is one of the largest countries in Southeast Asia strategically placed between two economic powerhouses
SOURCE: World bank, UNPD
1 GDP numbers at current USD, 2011l
GDP: $1,847bnGDP/capita: $1,489
Pop: 1.2 bn
GDP: $7,318bnGDP/capita: $5,445
Pop: 1.3 bn
GDP: $52 bnGDP/capita: $857
Pop: 49-55 mn
India
Myanmar
China
It presents economic opportunities with large population, significant natural resources and a geo-strategic location
Key facts
Bhutan
Thailand
Sri Lanka
Nepal
Pakistan
Afghanistan
Tajikistan
KyrgyzstanUzbekistan
Turkmenistan
North Korea
Japan
South Korea
China
Bangladesh
Taiwan
PhilippinesLao
Myanmar
Cambodia
Vietnam
Singapore
Malaysia
Brunei
Indonesia
IndiaHong Kong
GDP/capita (2010, PPP)
MYR
1,311
CAM
1,967
VN
2,846
RI
3,836
TL
7,846
� Strategic location between China, India. The worlds 40th largest country and second largest in SEA after Indonesia (RI)
� With 60 million people it is the 24th most populous country� Largest exported item: Natural Gas
Population, million people
60
14
8970
MYRCAMVNRI
240
TL
Size, million ha
0.7
0.20.3
0.5
MYRCAMVNRI
1.9
TL
SOURCE: International Monetary Fund; Asian Development Bank; Burma Economic Review 2005-06 by Sein Htay, Burma Fund; The Conference Board Total Economy Database
9
Leaving behind times of isolation, fragility and conflict
1824 - 1886
Anglo-Burmese Wars; British control
Source: Press search
1940-1959
Independence from British rule; Economic
turmoil 1960-90’s
Uprising of socialism; civil unrest; Burma changed to Myanmar
1990 onwards
Fight for democracy continues; Joins ASEAN;
NLD wins elections
10
Making steady progress towards brighter future
Source: Press search
general elections conducted in 20 years;
however 25% of MP’s appointed by Military
1st In 2011 Hillary Clinton became the most senior US politician to visit Myanmar in 50 years
Foreign investment law passed - 80%-100% ownership in restricted sectors, 5 year tax break, easy land lease policy
First SEZwas approved. The total projectvalue is estimated to be more than100% of the current GDP
11
Share of working population aged between 30-59 has increased over the last ten years and projected to grow further
SOURCE: United Nations Population Division
8 9 10 12 14
52
22
24
24
18
2015F
50
23
26
24
17
2010
48
25
27
23
15
2000
45
30
2915-29
11
19
45-59
2025F
60 +
100% =
21
0-14
2020F
54
24
21
22
30-44
Population by age, in %. Total in millions
12
Myanmar: Asia’s Next Tiger?
Economic Development
– Reforms and impact on industry
– Key challenges
– Appendix
Content
13
Its economy has grown at fastest pace among ASEAN nations, however its per capita income is still the lowest
Source: International Monetary Fund
Myanmar
14.7
Philippines
9.1
Malaysia
9.5
Cambodia
11
Vietnam
12.1
Indonesia
13.7
Laos
14.2
BruneiSingapore
8.6
Thailand
8.8
GDP growth rate (CAGR) between 2000-12; (at Current Prices)
835
Cambodia 934
Laos 1,446
Vietnam 1,528
Philippines 2,614
Indonesia 3,592
Thailand
Myanmar
5,678
Malaysia 10,304
Brunei 41,703
Singapore 51,162
Per Capita; 2012
8.2
14
This growth has been primarily driven by Industry and Services
SOURCE: Myanmar in Transition
Growth in percentage
3.0%
5.0%6.3% 6.5%
3.4%
4.7%
4.4% 4.4%
4.2%
2008
5.8%
2009
Industry
Services6.1%
2010
6.3%
2011
Agriculture,livestock,fishery andforestry
15
In the short-to-medium term the fundamentals are expected to go through corrections and stabilize which will make growth sustainable
SOURCE: Global Insight (WMM)
60
35
30
25
20
5
0
-5
2020E18E16E14E12E10080604022000
Percentage YoY
Expected stable period with open market and floating currency
Unstable period
998965
904874
819810861
1,0041,110
1,027
857772
319
+3% p.a.-3% p.a.
+26% p.a.
080604022000 20E18E16E14E12E10
Kyat per USD
Inflation - stabilizing Currency - stabilizing
16
The fast urbanization in Myanmar continues to fuel the demand for more products and better services
� By 2017, the proportion of upper mass and mass affluent household segments ~80% the total number of household in urban areas in Myanmar
� Affluent people typically have more needs and require more sophisticated products,
SOURCE: MGI Citiscope
The Mass affluent segment has the fastest growth
1,0682,729
678
2005
837
452
1,133
762388
2012
1,243
Unbankable512
Lower mass
Upper mass
647
Mass affluent
2017
3,236
3,620
256
1,609
+2% p.a.
29% 33% 36%Urbanization
9%
2%
-5%
-8%
CAGR 12-17Number of HouseholdsThousands
17
Myanmar: Asia’s Next Tiger?
Reforms and impact on industry
– Key challenges
– Appendix
Content
Since 2011, policy reforms in various sectors have been recognized and supported by foreign countries and institutions alike
18SOURCE: ADB Report
▪ Major reforms in the financial sector
– Private banks allowed to engage in the foreign exchange market
– Currency exchange rate floated by the Central Bank of Myanmar
– New Taxation Laws led to a 389% y-o-y rise in revenue1
▪ Changing Foreign Investment Laws
– New FDI Law enacted in November 2012 to allow foreign-owned investment up to 100%
– Foreign investors to get five-year tax holiday and 50-year land leases
– Relaxed import restrictions and abolished export taxes.
▪ Social reforms, too, been a key focus
– Establishment of the National Human Rights Commission and amnesties of political prisoners
– New labor laws allowing unions and strikes
– Relaxation of press and media censorship
▪ Recognition of reforms at a global level
– ASEAN approved Myanmar's bid for the chairmanship in 2014
– Foreign Investment increased from US$300 million in 2009-10 to a US$20 billion in 2010-11, (about 667%)1
▪ Multilateral Financial institutions and foreign governments to increase aid
– World Bank to resume aid of US$85 mn
– Asian Development Bank (ADB) to resume financial aid after a 24 years
– United States, European Union, etc. suspend sanctions
▪ Multinational firms expressing increasing interest in the country
– Japanese companies, financial firms and US energy giants interested
– Coca- Cola Co. and MasterCard Inc. etcincreasing their presence
– OAO Gazprom in discussions with the government to participate in energy projects
1 Independent Media Source
Reforms Recognition
Several sectors of the economy show promise
SOURCE: ADB, Interconsulting
Sectors Description
Agri/fishery/forestry
▪ Fisheries
▪ Forestry
▪ Agriculture
▪ Has 33 million hectares of forest reserves and forestry exports were USD 644 million in 2011/12
▪ Substantial opportunities to develop both riverine and marine fisheries resources, one million metrics tons of fishery resources could be exploited annually on a sustainable basis
▪ Lot of potential due to availability of arable land (~19.39 million hectares) and labour. Key crops include –Rice, beans, sesame seeds
Industry
▪ Energy
▪ Apparel
▪ Has proven reserves of 7.8 trillion cubic ft of natural gas. Natural gas is the country’s most important source of export revenue▪ Has proven oil reserves of 2.1 billion barrels, more than Thailand and Brunei
Darussalam▪ Hydro-power potential by harnessing 4 river basins is pegged at 100,000 MW
▪ Like its neighbors (Vietnam & Thailand) , Myanmar could build on apparel exports (it already does some), particularly with abundant labor available at low cost
Services
▪ Mining
▪ Tourism
▪ Telecom
▪ Retail
▪ Is rich in mineral resources & minerals of potential importance are copper, gold, lead, zinc, silver, tin and tungsten, antimony, chromium and nickel
▪ Natural attractions (forests, beaches) and rich heritage provide a good potential of growth
▪ Has potential, however very underdeveloped as of now
▪ Good growth with a CAGR of 15% over 2000-2011 and expected to increase upto CAGR 17% over 2011-2017
20
Tourist arrivals to Myanmar in the whole of 2011 were equivalent
to arrivals to Thailand in a single week
Did you know?
Tourism and increased trade ties look to further strengthen Myanmar’s global position
21SOURCE: Factiva, WebSearch, WMM
▪ Indian and Chinese ministers visiting Myanmar for talks
▪ Leader Aung San Suu Kyi visited several nations to strengthen ties
▪ Tourism declared as national priority sector
▪ 25 million visitors forecasted in 2013-2015
Flow of tourists into the country is anticipated to rise
Increased trade ties and bilateral relations with international countries
Myanmar President, Thein Sein, seeks flexibility for foreign investors in their joint ventures in Myanmar
22
Myanmar: Asia’s Next Tiger?
Key Challenges
– Appendix
Content
23
Many risk and challenges lie ahead of a young and promising nation
External/Internal Risks:▪ Social tension within Myanmar remains a potentially destabilizing
factor; over 130 recognized ethnic group▪ Abolition of sanctions still languishing
Political challenges:▪ Ongoing influence of Military rule; 25% of MP’s appointed by Military▪ Low score on government effectiveness & regulatory quality▪ Scores very low on human development reflective of the low
government investment on key necessities
Economic challenges:▪ Weak macroeconomic management and lack of experience with
market mechanisms▪ Business is restricted by poor infrastructure and logistics , particularly
in transport, electricity access, and telecom▪ Limited economic diversification; production structure dependent on
natural resources (gas & wood and farm & fish)
SOURCE: Facts sourced from reports published by World Bank; Asian Development Bank
24
Myanmar: Asia’s Next Tiger?
Appendix
Content
Myanmar scores very low on human development reflective of the low government investment on key necessities
Congo 0.3 (187)
Zimbabwe 0.4 (173)
Nepal 0.5 (157)
Myanmar 0.5 (149)
Bangladesh 0.5 (146)
Bhutan 0.5 (141)
India 0.5 (134)
Viet Nam 0.6 (128)
Indonesia 0.6 (124)
Philippines 0.6 (112)
Thailand 0.7 (103)
China 0.7 (101)
Singapore 0.9 (26)
Korea 0.9 (15)
Hong Kong 0.9 (13)
Japan 0.9 (12)
Australia 0.9 (2)
Norway 0.9 (1)
Human development index, 2011
Myanmar 0.2
Pakistan 0.8
Bangladesh 1.2
India 1.2
Indonesia 1.3
Cambodia 2.1
Vietnam 2.6
China 2.7
Thailand 2.9
S. Korea 4.1
Bhutan 4.5
Czech R 6.6
Finland 6.7
Costa Rica 7.4
Japan 7.8
Netherlands 9.4
USA 9.5
Denmark 9.7
Public health expenditure, 2011
Global best country
Global worst country
0.6
Myanmar 0.9
Sri Lanka 2.1
Bangladesh 2.4
Philippines 2.8
Singapore 3.2
India 3.4
Japan 3.6
Thailand 4.3
Guinea
Korea, Rep. 4.4
Brazil 4.6
Bhutan 5.4
United States 5.5
France 5.7
Malaysia 6.0
Finland 6.2
Sweden 7.0
Denmark 8.2
Public education expenditure, 2011
SOURCE: Human Development Report 2011; World Bank
High to low; (x)=global rank % of GDP % of GDP
Quality of infrastructure (0 = bad, 5 = good) 2011
Logistics performance index (0 = bad, 5 = good) 2011
Rank
1.9
2.1
2.2
2.3
2.5
2.5
2.5
2.7
2.7
2.8
2.9
3.1
3.1
3.4
3.6
3.7
4.1
4.2
Nepal
Myanmar
Cambodia
Bhutan
Russia
Sri Lanka
Indonesia
Vietnam
Pakistan
Philippines
India
Brazil
Thailand
Malaysia
China
South Korea
Hong Kong
Singapore
Rank
3
8
22
25
26
43
44
54
61
69
72
83
88
96
116
125
132
147
1
2
21
26
29
38
45
46
52
53
59
71
81
95
101
107
129
1512.0
2.4
2.5
2.6
2.6
2.8
2.8
2.9
3.0
3.0
3.1
3.1
3.2
3.5
3.5
3.7
4.1
4.1
India
Philippines
Indonesia
Vietnam
Malaysia
China
South Korea
Hong Kong
Singapore
Brazil
Thailand
Bhutan
Myanmar
Nepal
Cambodia
Russia
Sri Lanka
Pakistan
SOURCE: World Bank 2012
Business is restricted by poor infrastructure and logistics
ScoreScore
Government effectiveness score (100 = best, 0 = worst) 2011
Regulatory quality score (100 = best, 0 = worst) 2011
Myanmar scores low on government effectiveness and regulatory quality
2.37
Vietnam
Indonesia
Sri Lanka
India
Brazil
Philippines
Thailand
China
Bhutan
Brunei
Malaysia
94.31
99.05
19.91
22.27
22.75
25.59
42.18
45.02
46.92
52.61
54.50
55.45
55.92
59.72
Myanmar
60.66
Bangladesh
86.26
Pakistan
81.04
Nepal
77.25
Cambodia
70.62
Russia
S. Korea
Hong Kong
Singapore
1.42
Nepal
Bangladesh
Bhutan 10.90
Myanmar
Russia 38.86
India 40.28
Indonesia 41.71
Philippines 43.60
China 45.50
Sri Lanka 50.71
Brazil
22.27
Thailand 56.40
Malaysia 74.41
S. Korea 79.15
Brunei 84.83
Singapore 97.16
Hong Kong 99.05
35.07
29.38
Cambodia
Pakistan
25.59
29.86
Vietnam
55.92
SOURCE: World Bank, World Governance Indicators 2012
3
13
30
41
49
63
84
86
94
95
97
101
113
117
123
158
164
165
170
207
3
7
33
45
55
93
94
105
116
120
124
127
130
138
149
150
158
165
189
209
Score RankScore Rank
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