Myanmar: Asia s Next Tiger? A Wave of Change and The Way Forward
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 1
Myanmar: Asia s Next Tiger? Content Brief History Economic Development Reforms and impact on the industry Key challenges Appendix 2
Myanmar: Asia s Next Tiger? Content Brief History Economic Development Reforms and impact on industry Key challenges Appendix 3
Through the difficult period of internal conflicts and isolation, towards peace, harmony and prosperity Then Now SOURCE: Images courtesy British Broadcasting Corporation (BBC) and Deutsche Welle
After years of martial law, periods of political unrest and attempts at democracy the new government promises a head start towards liberalization 1962-1988 Oppressive Martial Law 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 1988-2010 Attempts at democracy and rise of Aung San Suu Kyi In the 1990, general multiparty 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 2010-Present Establishment of Democracy 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 Suu Kyi 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 SOURCE: Web, Press Search
Next rising star of Asia? Focus areas Geographic advantage of being located between India & China with good harbors and developing road networks Emerging from 5 decades of isolation, both economically & politically Young and large labor force Rich natural resources in form of Oil, Gas & Minerals SOURCE: Myanmar in Transition 6
Myanmar is one of the largest countries in Southeast Asia strategically placed between two economic powerhouses GDP: $7,318bn GDP/capita: $5,445 Pop: 1.3 bn China India GDP: $1,847bn GDP/capita: $1,489 Pop: 1.2 bn Myanmar GDP: $52 bn GDP/capita: $857 Pop: 49-55 mn 1 GDP numbers at current USD, 2011 SOURCE: World bank, UNPD 7 l
It presents economic opportunities with large population, significant natural resources and a geo-strategic location Key facts GDP/capita (2010, PPP) 7,846 Uzbekistan Kyrgyzstan Turkmenistan Tajikistan Afghanistan Nepal Bhutan Pakistan India Bangladesh China Myanmar Vietnam Hong Kong Thailand Lao Japan South Korea North Korea Taiwan Philippines 3,836 2,846 1,967 1,311 TL RI VN CAM MYR Population, million people 240 89 70 60 14 Sri Lanka Cambodia Brunei TL RI VN CAM MYR Singapore Indonesia Malaysia Strategic location between China, India. The worlds 40 th 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 Size, million ha 1.9 0.5 0.3 TL RI VN 0.2 CAM 0.7 MYR SOURCE: International Monetary Fund; Asian Development Bank; Burma Economic Review 2005-06 by Sein Htay, Burma Fund; The Conference Board Total Economy Database
Leaving behind times of isolation, fragility and conflict 1824-1886 Anglo-Burmese Wars; British control 1960-90 s Uprising of socialism; civil unrest; Burma changed to Myanmar 1940-1959 Independence from British rule; Economic turmoil 1990 onwards Fight for democracy continues; Joins ASEAN; NLD wins elections Source: Press search 9
Making steady progress towards brighter future 1 st Hillary Clinton general elections In 2011 conducted in 20 years; became the most senior US politician to visit Myanmar in 50 years however 25% of MP s appointed by Military First SEZ was approved. The total project value is estimated to be more than 100% of the current GDP Foreign investment law passed - 80%-100% ownership in restricted sectors, 5 year tax break, easy land lease policy Source: Press search 10
Share of working population aged between 30-59 has increased over the last ten years and projected to grow further Population by age, in %. Total in millions 100% = 60 + 45-59 30-44 15-29 45 48 50 52 54 8 9 10 12 14 11 15 17 18 19 21 23 24 24 24 29 27 26 24 22 0-14 30 25 23 22 21 2000 2010 2015F 2020F 2025F SOURCE: United Nations Population Division 11
Myanmar: Asia s Next Tiger? Content Economic Development Reforms and impact on industry Key challenges Appendix 12
Its economy has grown at fastest pace among ASEAN nations, however its per capita income is still the lowest GDP growth rate (CAGR) between 2000-12; (at Current Prices) Per Capita; 2012 14.7 14.2 13.7 12.1 11 Singapore 51,162 Brunei 41,703 Malaysia 10,304 9.5 9.1 8.8 8.6 8.2 Thailand 5,678 Indonesia 3,592 Philippines 2,614 Vietnam 1,528 Laos 1,446 Cambodia 934 Myanmar 835 Myanmar Laos Indonesia Vietnam Cambodia Malaysia Philippines Thailand Singapore Brunei Source: International Monetary Fund 13
This growth has been primarily driven by Industry and Services Growth in percentage 4.4% 4.4% 4.7% Agriculture, livestock, fishery and forestry 3.4% 5.0% 6.3% 6.5% Industry 3.0% Services 4.2% 5.8% 6.1% 6.3% 2008 2009 2010 2011 SOURCE: Myanmar in Transition 14
In the short-to-medium term the fundamentals are expected to go through corrections and stabilize which will make growth sustainable Inflation - stabilizing Percentage YoY 60 Unstable period Currency - stabilizing Kyat per USD 35-3% p.a. +3% p.a. 30 25 20 Expected stable period with open market and floating currency +26% p.a. 1,027 857 772 1,110 1,004 861 810 819 965 904 874 998 5 0 319-5 2000 02 04 06 08 10 12E 14E 16E 18E 2020E 2000 02 04 06 08 10 12E 14E 16E 18E 20E SOURCE: Global Insight (WMM) 15
The fast urbanization in Myanmar continues to fuel the demand for more products and better services The Mass affluent segment has the fastest growth Number of Households Thousands Mass affluent Upper mass Lower mass 2,729 452 837 678 +2% p.a. 3,236 1,068 1,133 3,620 1,609 1,243 CAGR 12-17 9% 2% 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, Unbankable 762 647 388 512 256-5% -8% 2005 2012 2017 Urbanization 29% 33% 36% SOURCE: MGI Citiscope 16
Myanmar: Asia s Next Tiger? Content Reforms and impact on industry Key challenges Appendix 17
Since 2011, policy reforms in various sectors have been recognized and supported by foreign countries and institutions alike Reforms 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 revenue 1 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 SOURCE: ADB Report Recognition 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. etc increasing their presence OAO Gazprom in discussions with the government to participate in energy projects 1 Independent Media Source 18
Several sectors of the economy show promise Agri/fishery/ forestry Industry Sectors Fisheries Forestry Agriculture Energy Apparel Mining Description 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 Has 33 million hectares of forest reserves and forestry exports were USD 644 million in 2011/12 Lot of potential due to availability of arable land (~19.39 million hectares) and labour. Key crops include Rice, beans, sesame seeds 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 Is rich in mineral resources & minerals of potential importance are copper, gold, lead, zinc, silver, tin and tungsten, antimony, chromium and nickel Services Tourism Telecom Retail 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 SOURCE: ADB, Interconsulting
Did you know? Tourist arrivals to Myanmar in the whole of 2011 were equivalent to arrivals to Thailand in a single week 20
Tourism and increased trade ties look to further strengthen Myanmar s global position Flow of tourists into the country is anticipated to rise Tourism declared as national priority sector 25 million visitors forecasted in 2013-2015 Increased trade ties and bilateral relations with international countries Indian and Chinese ministers visiting Myanmar for talks Leader Aung San Suu Kyi visited several nations to strengthen ties Myanmar President, Thein Sein, seeks flexibility for foreign investors in their joint ventures in Myanmar SOURCE: Factiva, WebSearch, WMM 21
Myanmar: Asia s Next Tiger? Content Key Challenges Appendix 22
Many risk and challenges lie ahead of a young and promising nation 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) 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 External/Internal Risks: Social tension within Myanmar remains a potentially destabilizing factor; over 130 recognized ethnic group Abolition of sanctions still languishing SOURCE: Facts sourced from reports published by World Bank; Asian Development Bank 23
Myanmar: Asia s Next Tiger? Content Appendix 24
Myanmar scores very low on human development reflective of the low government investment on key necessities Global best country Global worst country Human development index, 2011 Public health expenditure, 2011 Public education expenditure, 2011 High to low; (x)=global rank % of GDP % of GDP Norway 0.9 (1) Australia 0.9 (2) Japan 0.9 (12) Hong Kong 0.9 (13) Korea 0.9 (15) Singapore 0.9 (26) China 0.7 (101) Thailand 0.7 (103) Philippines 0.6 (112) Indonesia 0.6 (124) Viet Nam 0.6 (128) India 0.5 (134) Bhutan 0.5 (141) Bangladesh 0.5 (146) Myanmar 0.5 (149) Nepal 0.5 (157) Zimbabwe 0.4 (173) Congo 0.3 (187) Denmark 9.7 USA 9.5 Netherlands 9.4 Japan 7.8 Costa Rica 7.4 Finland 6.7 Czech R 6.6 Bhutan 4.5 S. Korea 4.1 Thailand 2.9 China 2.7 Vietnam 2.6 Cambodia 2.1 Indonesia 1.3 India 1.2 Bangladesh 1.2 Pakistan 0.8 Myanmar 0.2 Denmark 8.2 Sweden 7.0 Finland 6.2 Malaysia 6.0 France 5.7 United States 5.5 Bhutan 5.4 Brazil 4.6 Korea, Rep. 4.4 Thailand 4.3 Japan 3.6 India 3.4 Singapore 3.2 Philippines 2.8 Bangladesh 2.4 Sri Lanka 2.1 Myanmar 0.9 Guinea 0.6 SOURCE: Human Development Report 2011; World Bank
Business is restricted by poor infrastructure and logistics Quality of infrastructure (0 = bad, 5 = good) 2011 Logistics performance index (0 = bad, 5 = good) 2011 Score Rank Score Rank Singapore Hong Kong South Korea 4.2 4.1 3.7 3 8 22 Singapore Hong Kong South Korea 4.1 4.1 3.7 1 2 21 China Malaysia Thailand Brazil India Philippines Pakistan Vietnam Indonesia Sri Lanka Russia Bhutan Cambodia Myanmar Nepal 3.6 3.4 3.1 3.1 2.9 2.8 2.7 2.7 2.5 2.5 2.5 2.3 2.2 2.1 1.9 25 26 43 44 54 61 69 72 83 88 96 116 125 132 147 China Malaysia Thailand Brazil India Philippines Vietnam Indonesia Pakistan Sri Lanka Russia Cambodia Bhutan Myanmar Nepal 3.5 3.5 3.2 3.1 3.1 3.0 3.0 2.9 2.8 2.8 2.6 2.6 2.5 2.4 2.0 26 29 38 45 46 52 53 59 71 81 95 101 107 129 151 SOURCE: World Bank 2012
Myanmar scores low on government effectiveness and regulatory quality Government effectiveness score (100 = best, 0 = worst) 2011 Regulatory quality score (100 = best, 0 = worst) 2011 Score Rank Score Rank Singapore Hong Kong S. Korea Malaysia Brunei Bhutan China Thailand Philippines Brazil India Sri Lanka Indonesia Vietnam Russia Cambodia Nepal Pakistan Bangladesh Myanmar 99.05 94.31 86.26 81.04 77.25 70.62 60.66 59.72 55.92 55.45 54.50 52.61 46.92 45.02 42.18 25.59 22.75 22.27 19.91 2.37 3 13 30 41 49 63 84 86 94 95 97 101 113 117 123 158 164 165 170 207 Hong Kong 99.05 Singapore 97.16 Brunei 84.83 S. Korea 79.15 Malaysia 74.41 Thailand 56.40 Brazil Sri Lanka 50.71 China 45.50 Philippines 43.60 Indonesia 41.71 India 40.28 Russia 38.86 Cambodia Pakistan Vietnam Nepal Bangladesh 22.27 Bhutan 10.90 Myanmar 1.42 35.07 29.86 29.38 25.59 55.92 3 7 33 45 55 93 94 105 116 120 124 127 130 138 149 150 158 165 189 209 SOURCE: World Bank, World Governance Indicators 2012