Country Overview

With a population of over 53 million people, countless untapped energy resources and an advantageous geographical location between India, China and Southeast Asia, Myanmar has the potential to be the next great economic growth story. Rapprochement with the Western world has led to a complete lifting of economic sanctions. Moves toward democratic governance and peace agreements with ethnic armies along its border areas continue to improve the prospects of a lasting peace and the creation of a national identity. Dubbed “The Final Frontier” by the media, Myanmar is emerging from decades of economic isolation and has its sights set on once again becoming a major economic player in the region.

 

Myanmar is the fifth most populated country in Southeast Asia and 26th most populated in the world. The population is relatively young with 13 million people between the ages of 15 and 28. Today, 76% of the population is of working age. The adult literacy ratio at 92% (2011) is among the highest in the region and continues to improve over time. Currently, the consuming class is limited to only 4% of the population compared to the worldwide average of 35%. This gap is expected to close as Myanmar re-emerges from economic isolation. Only about 30% of the population lives in urban areas; however, urbanisation is expected to continue at roughly 2.9% per annum, which is consistent with the historical rate of growth experienced over the last five years.
Myanmar’s geographic location at the intersection of the two most populated countries on the planet, India and China, has more advantages than just trade. Both countries, as well as others in the region, have a vested interest in Myanmar’s development as they hope its economic resurgence will provide access to resources and connectivity.
China is currently the largest investor and trading partner of Myanmar. China’s “Go West” campaign is aimed at bridging the economic gap between China’s coastal cities and western provinces. The new oil link connecting Kunming (capital of Yunnan province) and Sittwe (deep water port in Myanmar on the Bay of Bengal) helps accomplish this by providing vast energy resources to China while cutting transportation time by 30% and bypassing the Straits of Malacca. The completion of this pipeline demonstrates China’s commitment to Myanmar as it is a 2,400km project through some of the most rugged areas on the planet and traverses two of Southeast Asia’s political hotspots in Rakhine and Shan states. Moreover, Myanmar is increasingly playing a strategic role in China’s largest project to date; “Belt and Road Initiative” through its western coastline. China is also the major developer and stakeholder of Myanmar’s one of three largest Special Economic Zones (“SEZ”); Kyauk Phyu SEZ in the west coast of Myanmar with access to the Indian Ocean. China’s objective to gain clear access to the Indian Ocean was encapsulated by the Gwadar Port / Pakistan – China economic corridor. Geo-political issues involving Kashmir and India and India’s resistance to this corridor were examples of why China is eyeing Myanmar as a viable long-term partner.

India’s “Act East” policy represents its efforts to cultivate economic and strategic relationships with Southeast Asian nations, of which Myanmar is the only country it shares a border. Also of interest to India is connecting Northeast India to the rest of the country as it is isolated by the Siliguri Corridor, also known as the “Chicken’s Neck”. To accomplish this, India is working with Myanmar to bypass Bangladesh and improve the infrastructure between the port in Sittwe, the Northeast Indian states and the highways leading to Thailand. It is supporting the construction of the Mekong-India Economic Corridor to connect Myanmar, Thailand, Cambodia and Vietnam and, at the same time, projecting its influence to areas surrounding the South China Sea to expand its strategic space from the Indian Ocean to the West Pacific.

In 2012, the United States relaxed economic sanctions against Myanmar by easing the ban on the export of financial services to the country and authorising the importation of goods from Myanmar to the United States. In 2016, as one of his last acts in office, President Obama issued an executive order lifting all remaining trade sanctions against Myanmar. President Obama has visited Myanmar twice, marking the first trip to the country by a sitting U.S. President. The trips also demonstrated the significance the United States places on improving relations with Myanmar, as it is one of only a few countries to be visited multiple times by President Obama during his presidency.

In 1997, Myanmar joined the Association of South-East Asian Nations (ASEAN). This group of ten nations is estimated to have a population of 620 million people and nominal GDP of US$2.4 trillion. The Human Development Index ranked Myanmar the lowest amongst ASEAN countries providing it with the largest opportunity to improve living standards. “ASEAN Integration 2015” removed additional trade barriers and further integrated the association.

Myanmar is home to fertile lands, significant untapped agricultural potential and a rich endowment of natural resources:

  • Gas: Proven reserves of 10.0 trillion cubic feet and one of Southeast Asia’s five major exporters
  • Oil: Proven reserves of 2.1 billion barrels and one of the largest reserves in Southeast Asia
  • Water: Substantial renewable resources. Hydropower accounts for 75% of the total installed capacity for electricity
  • Fisheries: Over 3,000 kilometers of coastline with substantial mangrove areas. Already a major exporter of fish and shrimp
  • Rice: Previously the top exporter of rice in the world, but today its market share is negligible
The economic outlook appears positive as the GDP, at US$71.2 billion in 2019, is forecasted to grow at the rate of 6.8% in 2020, which according to Asian  Development Bank, is the highest compared to other ASEAN countries. In the Doing Business 2020 report by World Bank, Myanmar has been mentioned as the top 20 reformers for the year and has climbed up by 6 positions compared to previous year at 165th place in ease of doing business.

With the recent decisions to open the financial sector to greater foreign competition, ease trade restrictions and begin mega infrastructure projects note a decisive and anticipated uptick in reform momentum, according to Myanmar Economic Monitor report by the World Bank Group. External factors that drive the downside risks to the economic outlook include possible revocation of preferential trade access under the European Union Generalized System of Preferences. Furthermore , the flow of inbound foreign investments and exports could decelerate due to slow  down in the global and regional growth, especially in China, along with renewed escalation of global trade tensions.

The cost of labour in Myanmar is substantially lower than in neighbouring countries such as China and Thailand. Myanmar ranks second among low-cost economies in the world with average monthly wages below US$100. This compares to US$450 per month in China.

Despite the low wage costs, manufacturing output remains low at 57% and 47% compared to Bangladesh and Vietnam’s respective outputs.

Some of the most recent series of reforms initiated by the government in order to remove economic distortions include;

  • Efforts to modernise the legal and regulatory framework
  • New Myanmar Companies Law
  • New online registry; Myanmar Companies Online (MyCO)
  • Tax administration law
  • Trademark law
  • Industrial Design law