As Myanmar emerges from the wilderness and opens up to the rest of the world, a new Economist Intelligence Unit (EIU) report, “Myanmar: White elephant or new tiger economy?” assesses possible growth scenarios for Myanmar. The report also identifies various sectoral and investment opportunities that may emerge as the reform process takes root in Myanmar.
In the report, the Economist Intelligence Unit (EIU) presents three possible scenarios for Myanmar’s growth trajectory until 2020, and the accompanying assumptions and risks under which each would unfold. The three scenarios are:
Core scenario (60%): Ongoing reforms but with limited real structural change
Golden era (25%): Rapid political and economic reforms
Dark forces (15%): Reforms are rolled back, as the military reasserts itself
Under the core scenario (60%), which assumes that the military-backed Union Solidarity and Development Party (USDP) maintains its grip on political and economic power while orchestrating superficial reforms to win international legitimacy, GDP growth for the period 2016-2020 will rise to an average of 7.7% per year (up from 4.4% in 2011).
Under the golden-era scenario (25%), which assumes that Myanmar takes meaningful steps towards genuine democratisation and structural economic reforms are carried out in consultation with multilateral financial institutions, GDP growth could rapidly accelerate and average as much as 8.5% per year during 2016-2020. If Myanmar were able to maintain that growth rate for eight years, the size of its economy would simply double.
However, there is still a chance that dark forces (15%) will prevail, in which case Myanmar’s economic growth could actually slow in the coming years, averaging only 4.4% during 2016-2020. Under this scenario, the military reverts to type and economic growth remains narrowly based.
Manoj Vohra, Director of Custom Research, Asia Pacific, Economist Intelligence Unit, said:
“The whole world is watching Myanmar at the moment, with the central question being whether meaningful political reform will follow the liberalising gestures we have already witnessed.
As ties with Western governments thaw, there is now a high probability that sanctions and other restrictions on trade and investment will be lifted over the coming months. Foreign investors are anxious to capitalise on the opportunities presented by an emerging country with 60m people and vast untapped resources.
The potential is clear but this should not be a goldrush. Myanmar has a long way to go and it remains a volatile and high-risk market.”
The report also details the specific investment opportunities that will emerge if Myanmar stays on the path of reform. In addition to established opportunities in the resources sector, extensive opportunities would emerge in under-developed sectors such as agri-business, tourism, construction, telecommunications, retail, low-cost manufacturing, healthcare and regional transport infrastructure. Some of the specific investment themes, as identified in the report, include:
· Consumer market opportunity: A relatively large percentage of income will continue to be spent on food, beverages and tobacco, and the market for consumer goods is met largely by low-cost Chinese goods. Nevertheless, the market for items such as motorcycles, televisions, refrigerators and airconditioners is by no means mature, and sales could expand rapidly if economic growth spurred a sharp jump in incomes. In the face of competition from low-cost manufacturers in China, the production of consumer goods in Myanmar is limited. Manufacturing is currently largely based on processing agricultural crops, timber and other commodities. There has been some diversification in recent years, and there is great potential for further growth.
· Low-cost manufacturing: Similarly, the abundance of low-skilled labour means that Myanmar has great potential to expand labour-intensive export-oriented manufacturing, particularly given the fact that the current lack of modern technology in use means that there is scope for rapid productivity gains without major investment.
· Regional transport hub: Myanmar’s strategic location as an alternative shipping route to Asia, bypassing the Straits of Malacca, as well as its land borders with China, India and Thailand, gives it the potential to emerge as a regional trade and transport hub. To reach its potential in this area, there will be increasing opportunities for foreign companies to help develop Myanmar’s transport infrastructure.
A summary of the full report is available at http://www.eiu.com/public/topical_report.aspx?campaignid=Myanmar12
Jennifer Cole, Grayling. Tel: +44 (0) 207 592 7933. Mobile: +44 (0) 795 742 5935
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.