Getting Back on the Map
Myanmar, officially the Republic of the Union of Myanmar, is going through an epochal phase in its history. The land of the Golden Pagoda is on the move as it undergoes political and economic reforms following the formation of a semi-civilian government in 2011. From being a ‘pariah state’ on the fringe under the rule of a military junta, Myanmar is now a fledgling democracy tackling the challenges of economic development and nation building as it looks to forge a new position for itself in the international community as a centre of growth and prosperity for its people and partners.
(Featured Image: Myanmar Tourism Federation)
The second largest country in Southeast Asia by land area, Myanmar sits in a strategic location between regional giants China and India to its north and west respectively, and the rest of Southeast Asia to the east. The opening of Myanmar’s economy presents opportunities arising from its low economic base, wealth of natural resources, and potentially large market for consumption. Populated by 56 million people from more than 100 ethnic groups, Myanmar is a diverse and young population with a median age of 28.6.
Singapore and Myanmar enjoy good bilateral relations, having marked 50 years of diplomatic relations in 2016, and have long-running experience working together in multilateral fora such as ASEAN. Singapore was Myanmar’s third largest trading partner in 2015 with bilateral trade coming in at SGD$3.5 billion, a 9.6% increase from the previous year, indicative of the many economic opportunities Myanmar offers for Singaporean investors.
(Photo: Mary Scully Report)
A Brief History Lesson
Among the region’s most developed countries under British colonial rule till 1948, Myanmar’s progress was derailed under the rule of an oppressive military junta from 1962 to 2011. The junta which ran the country suppressed almost all dissent – best symbolised by the house arrest of democracy icon and now State Councillor Aung San Suu Kyi (ASSK) – and was accused of grave human rights abuses which led to international condemnation and sanctions. Beset by poor policymaking under an ill-conceived blueprint of ‘The Burmese Way to Socialism’, Myanmar’s internationally isolated economy was riddled with massive debt and its people lived in widespread poverty.
The numbers do not lie. According to the McKinsey Global Institute, between 1900 and 1990, the global economy achieved average GDP growth of 3% a year, but Myanmar’s growth was much lower at only 1.6% annually. In the same period, while global GDP per capita quadrupled, Myanmar’s was nearly stagnant.
The junta’s political repression also derailed Myanmar’s path to democracy. In multiparty legislative elections held in 1990, the opposition National League for Democracy (NLD) won by a landslide only to see the junta ignore the result and place NLD leader ASSK under house arrest in various spells from 1989 to 2010.
A New Hope Part 1: Gradual Political Reform
With the military junta under increasing domestic and international pressure for human rights abuses and economic mismanagement, a long process of reforms began as the junta handed over power to a nominally civilian government led by the military-backed Union Solidarity and Development Party (USDP) in controversial elections in 2010. Opposition parties including the NLD rejected the election as a sham due to its tightly-controlled nature. Nevertheless, former general Thein Sein was appointed president and spearheaded reforms including repairing diplomatic relations with the US, beginning peace talks with armed rebel groups, and loosening oppressive media laws. International pressure started to ease as the US eased sanctions and European Union suspended most sanctions on Myanmar in 2012. The Asian Development Bank (ADB) resumed loans to Myanmar in 2013 for the first time in 30 years to help social and economic development.
There was greater progress in a landmark 2015 election that was widely accepted as free and fair which saw the NLD sweep to victory and form the current government of Myanmar. To be sure, Myanmar is not a fully-elected and civilian democracy as the military-drafted constitution guarantees that unelected military representatives occupy 25% of seats in the Hluttaw (legislature) and have a veto over constitutional change. The military retains important powers in key ministries such as defence, home affairs and border affairs in what it calls a “disciplined democracy”.
A New Hope Part 2: Economic Reform and Growth Potential
More than five decades after being in the wilderness, Myanmar’s economy is in transition from a closed command economy to an open one based on free market principles. Since the end of military rule, GDP has grown from 5.6% in 2011 to 8.4% in 2014, with estimates of 8.3% growth in 2017.
Foreign Direct Investment (FDI) plays a key role in economic development, which Myanmar is seeing a lot more of in recent years. Based on International Monetary Fund (IMF) annual data, FDI in Myanmar was only US$40 billion between 1989 and 2012, an average of $1.67 billion a year, with the bulk of it coming from neighbouring China. In stark contrast, the reform period has seen a significant rise in investments – 2014/15 FDI of $8.1 billion was a staggering 25 times the $329 million received in 2009/10, the year before military rule ended. Continuing the uptrend, FDI in 2015/16 was $9.4 billion with oil and gas, transport, communications, and manufacturing the biggest beneficiaries.
(Photo: Myanmar Business Today)
In recognition of Myanmar’s potential, Singapore has been among the top foreign investors in the country – in 2015/16, Singapore was Myanmar’s largest foreign investor to the tune of $4.3 billion followed by China which is Naypyidaw’s biggest trading partner and invested $3.3 billion. Despite strong interest in one of Asia’s last remaining untapped markets, investors remain cautious. Myanmar has yet to hit its FDI target for 2016/17 amidst global economic uncertainties and a wait for clearer policy directions from the NLD government in areas such as the new Myanmar Investment Law of 2016 that is supposed to make investing easier.
Economic liberalisation has seen an ambitious agenda of reform in the fiscal, monetary, banking, currency, and international trade and finance domains. For instance, Myanmar’s currency, the kyat, was placed on a managed floating system in 2012 to eliminate informal currency rates in the black market in favour of a unified exchange rate regime. Banking sector reforms since 2014 have led to 13 foreign banks being granted operating licences in Myanmar, which also houses four state-owned and 24 private local banks.
A McKinsey Global Institute report identified agriculture, manufacturing, energy and mining, and infrastructure as major potential drivers of growth as they account for 85% of total economic opportunity. Reinforcing this positive outlook is Myanmar’s increasing openness to the global economy as measured by its ratio of total trade to GDP which notably improved from 37% to 47% between 2012 and 2015.
Singapore companies are well-poised to take advantage of opportunities in Myanmar given the familiarity between both countries on governmental and people-to-people levels; there is a sizeable Myanmar diaspora in Singapore and even a ‘Little Myanmar’. The Singapore government encourages local companies to offer their management and technological expertise in partnership with Myanmar’s companies that can help navigate local regulations and culture. Well-known Singaporean firms already in Myanmar include property firm Keppel Land, banks UOB and OCBC, and food and beverage players Pastamania and Ya Kun Kaya Toast.
(Photo: Thừa Thiên HuếOnline)
Staying on Track: Challenges Along the Way
As the Myanmar government and international community work to realise its economic potential, the road ahead poses several challenges in the areas of political balance of power, ethnic relations and administrative effectiveness.
Although the NLD government led by ASSK is civilian, the military has drafted the constitution to retain substantial powers for itself in key ministries and the legislature. While striking a political balance between both power bases is a complex and delicate matter, it is imperative that the ruling party and military maintain a cooperative relationship and calmly resolve any differences for the larger national interest.
Myanmar is an ethnically and religiously diverse nation that has had to deal with armed rebellions from various ethnic and ideological groups since independence. The government’s efforts to broker peace agreements with more than 20 of these armed groups, based mainly in frontier states such as Kachin and Shan, will be vital for the peace and stability that national development needs. The plight of the persecuted Muslim Rohingya people in Rakhine state in the country’s west near Bangladesh, the subject of much international scrutiny, is another delicate challenge that will test the government and military.
According to companies and investors, uncertainties about the rule of law are one of the most important barriers to doing business in Myanmar. An international index on perceptions of the rule of law in Myanmar before reforms began ranked it a lowly 172nd out of 176 countries. The government has its work cut out in convincing companies that the law is stable, clear and consistently enforced. An Anti-Corruption Law was passed in 2013 to address issues such as bribery and abuse of power, although implementation of the law is a work in progress.
Implementation of laws and policies requires institutions and human resources with the capabilities and capacities to carry out a complex reform agenda. The NLD government faces an uphill task in reinvigorating and strengthening Myanmar’s key institutions and talent pool which for decades had been deprived of capacity-building and innovation. To address this challenge, the NLD government needs to build on Initiatives such as the Singapore-Myanmar Technical Cooperation Programme that provides Singapore-style training for Myanmar officials in economic development, human resources and public administration.
The current state of Myanmar’s infrastructure is insufficient to support the higher growth rate and future demand driven by its growing industries and urbanising population. Between 2010 and 2030, analysis suggests that Myanmar will need to invest a massive $320 billion in infrastructure if its economy is to achieve 8% growth a year.
By 2030, Myanmar’s economy could be more than four times its current size with a GDP of over $200 billion. But realising such possibilities depends on effective progress being made in the long journey of political and economic reform the country’s major stakeholders – government, military, ethnic groups, citizens, and others – have to make together with the support of the international community.