Myanmar could experience five decades of economic catch-up over the next five years, as the country opens to foreign direct investment in its infrastructure and a significant regional manufacturing base is established, according to a new report by ANZ.
The report titled ‘Myanmar – Asia’s Uncut Gem’ predicts annual GDP growth as high as 10 per cent, if the country harnesses the potential of its unique strategic location between China and India, a large youthful population and relatively cheap labour costs.
The report also highlights significant challenges as the nation re-emerges from 50 years of economic isolation, including poorly capitalised financial institutions, untested regulatory structures and a largely unskilled workforce.
“We believe the Greater Mekong and Myanmar will emerge as Asia’s manufacturing hub, as production migrates from the comparatively expensive economies of the north. The challenge for southeast Asia is to manage that process smoothly via increased interconnectivity, freer capital flows and skills development,” said Andrew G?czy, ANZ CEO of International and Institutional Banking.
From over 30 applicants, ANZ is one of 9 foreign banks awarded the restricted banking licenses last year. The bank established a representative office in March 2013 and will open a branch this September, providing corporate banking services to foreign companies, joint ventures and local financial institutions.
All the nine licensed banks are expected to start the local operations later this year.
Since opening its doors in 2012, Myanmar has drawn over US$10 billion in new foreign direct investment, including over $5 billion last year.
Foreign companies, mostly from Asia, have witnessed great business opportunities in the country. Yet, many, mostly from the western hemisphere, appear reluctant as Myanmar still needs to address several challenges – from legal framework to infrastructure. The nation-wide ceasefire agreement has been delayed. Importantly, the country is holding a crucial election later this year, which would pave way for constitutional amendments.
“Despite the enormous opportunity, the economic transformation of Myanmar is not a foregone conclusion,” Czczy said.
“Transparent institutions and an FDI-friendly environment are essential for a skills and technology transfer. These are pre-conditions that will enable the economy to grow beyond its reliance on basic agriculture and resources into supply chain manufacturing. The pace at which that transformation occurs could be the fastest industrialisation episode Asia has ever witnessed,” he continued.
Among 10 Asean nations, Myanmar is considered the poorest with the per-capita income of only $1,126 in 2012. The amount jumped from $799.5 in 2010.
Glenn Maguire, ANZ Chief Economist for South Asia, Asean and Pacific, said Myanmar would benefit from December’s launch of the Asean Economic Community and a common market of over 600 million people – along with the emergence of a new consuming class in Asia.
“By 2030, we estimate that half of the world’s consuming class will be located within a four hour flight from Myanmar. It therefore makes logical sense for the country to develop into the key production and distribution hub at the very heart of Asia,” Maguire said.
Source: The Nation