Investing in Myanmar - Case Study Example

Investing in Myanmar

Myanmar is one of the third world countries, hotel chains are looking more into investing particularly with ASEAN community formation. Myanmar is currently at a critical juncture (Asian Development Ban, 2012). The country is undertaking a major shift in its all sphere of operations. The country after decades of authoritarian military rule is slowly embracing major governance reforms. These reforms have not only transcended the political sphere but have also been adopted across board, from the social structure to economic policies. The government has embarked on a peace process that seeks to end decades of inter communal violence at the same time it has engaged the international community ending decades of isolation.

In addition, Myanmar is at heart of one of the fastest growing regions globally. The ASEAN community has for the last decade experience faster economic growth, which despite periods of global economic recession has been able to sustain this good run. Myanmar is however highly underdeveloped with an economy that has stagnated over large couple of years. A large number of her populations is very poor and lacks critical basic amenities. The infrastructure is also lacking particular so in the rural areas where the infrastructure is hardly functioning. Moreover, due to constant communal wars and war between the various rebels and the country’s military the literacy level is very low.

Nevertheless, these challenges can be deemed more of opportunities rather than obstacles. With the current international goodwill, investors have an opportunity to partner with the government and the emerging entrepreneurs in establishing a success story by leapfrogging some intermediate sages of economic development (Brown, 20111).

In this report, I shall critically analyze the economic, legal, political, social framework and future prospects of Myanmar as an emerging investment hub.

Economic

For a long time Myanmar, economic prospects have been bleak. Her economy has been stagnant for the past decades averaging a 3% average GDP growth for the years 1900 to 1990 whereas the global capital grew four-fold (Booth, 2003). Such has been the tragedy.

However in the 1990s Myanmar has experienced a faster economic growth yet it was still lower than the regional states. Her GDP grew by an average of 4.7% as compared 6% growth experienced by her neighbors. This has largely been attributed to her labor policy, which has promoted low productivity. In comparison to her neighbor levels of productivity, Myanmar has performed very poorly.

Additionally, Myanmar has had a high population growth rate which has not necessarily led to high levels of productivity as many her population are engaged in agriculture as an economic venture. Myanmar continued reliance on agriculture as the country’s main economic activity has contributed to its low capita growth (Commission on Growth and Development, 2008). Agriculture has in many countries been proven a low –productivity activity a lesson her neighbors seem to have learnt as they have invested more on their manufacturing and service sectors.

Despite these challenges the economic prospects of Myanmar are promising. Myanmar has abundance arable of land. A key factor of production. Her arable land and water catchment capital ratio are bigger than some of the largest economies. In addition she is blessed with natural resources. Myanmar has large deposits of natural gas, precious stones as well as oil, the liquid gold (Edel, 2012). These resources remain largely untapped and with the experiences of other countries if well utilized it can bring large volumes of foreign investments.

Myanmar also has a large work-age population who can provide cheap labor. She also has access to the largest market by virtue of her geological position. Together with her neighbors they account for 40% of the global population presenting a huge prospective market.

Legal

For decades Myanmar has been under authoritarian military rule. The legal framework has been dependent on the military rulers who have largely used decrees to govern (Rieffel, 2012). As is the case in many dictatorships the country military rulers have cracked down on any form of dissent, by limiting freedom of expression and other fundamental freedoms. Thousands of her population languish in prisons accused of various crimes against the state, others have been killed while others have simply disappeared in mysterious circumstances.

For a long time, Myanmar has ranked poorly on the global human right index. Issues of transparency and accountability particularly among the military leaders and their families are largely ignored. This has created an unconducive business environment with many foreign investors preferring other destinations for investment. Investors tend to invest in a place where they have faith in that the system that is predictable and fair.

Additionally has insolated itself by applying protectionist measures. By law foreigners were not allowed to invest in the banking sector, as well as owning any property (Kachin Independence Organisation, 2013). This coupled with the poorly drafted business legislations has kept investors at bay.

There is however currently a shift in the business framework. Many of these laws are been reviewed and the government seems to be embracing democracy. Many of the political prisoners have been released including the popular opposition leader Suu kyi. It is hoped as the government embraces more legal reforms issues of accountability will be taken more seriously and the rule of law will prevail.

Political

As already established in this report Myanmar has been under decades of military rule. The military since 1962 exercised its control on the country’s affairs either directly or through its party. The military has established a strong grip of the state where any form of dissent is not tolerated. Thousands of Myanmar citizen have been imprisoned for political reasons with some paying the ultimate price, death (Myint, 2009).

Though the country has a constitution, it is tailored to serve the military. For instance despite the people having the right to choose their parliamentarians the military is reserved 25% of the seats which is by law. The military also controls all the key ministries from national defense, border affairs and home affairs. The latter is structured in such a manner that the military has control on levels of state up to the village level (Sean Turnell, 2009). The military also controls the National Defense and Security Council, which amongst other powers has the power to dissolve parliament and impose martial law.

Nevertheless the country is adopting some form of democracy. For the first time the military has allowed an election to take place, which was considered largely free and fair, and predictably, it lost. Surprisingly the military accepted the defeat to the opposition party led by long time freedom activist Suu Kyi who has been banned by the country’s constitution from vying for the highest office as she was married to a foreigner.

Though the military seemed to have accepted these changes, the citizens remain suspicious, as past experiences have shown the military will not let go of the state machinery more so to a civilian easily.

Social

Myanmar is a multicultural and multi-religious society. She gained her independence from Britain in 1948 but shortly entered into civil war pitting communities against each other. In 1962 the country’s military ruler seized power establishing a military state. Following a series of unpopular decisions in the military in 1988 changed the name of the country to union of Myanmar from the Socialist Republic of the Union of Burma (Thant Myint-U, 2011).

Though the name has been promoted by the military through displays of nationalism, it is largely disliked. Socially, the military has failed to maintain a relation with her citizen. Many have viewed it as illegitimate and this has been promoted by the human right abuses conducted by military personnel. It is this discontent with the military that has sustained the rebellion movements in parts of Myanmar, which in many cases have resulted in civilian deaths. Moreover, a large number of the Myanmar has sought refuge in the neighboring countries (Program, 2011).

Efforts to build a national identity have also been inhibited by the poor inter-community relations who have from time to time engaged in armed conflict, in addition to the poor infrastructure and low literacy levels.

It is however not all gloomy, the military has been able to pacify some areas by signing peace agreements with the rebel groups and with the new reforms and drive to achieve national peace and reconciliation it is hoped that the country will be able to achieve lasting peace.

This however would not be an easy task. There is a huge gap between the rich and the poor. Approximately one- third of the country’s population lives in abject poverty more so in the rural areas with the only a few elites connected to the military leaders benefiting from the country’s resources. Needless to say, this division has brewed discontent among the people especially the poor class. This disparity has been exploited by various parties to start an armed conflict with each group claiming to be fighting for the rights of the people.

Additionally, the country faces a drug problem of major proportions. The country is one of the largest producers and suppliers of opium related products such as heroine. Despite efforts by the military to stop the trade, its efforts are futile. The narcotic business thrives so much that the money gained from this illegal activities has become a crucial stake in the national economy. This illegal business largely thrives in the rebel held territories like Shan state where some rebels have entered into agreements with the military to share the income.

Future prospects

Despite the obvious problems, Myanmar offers a unique opportunity (McKinsey Global Institute, 2015). The country is at a critical juncture, where after decades of socialist authoritarian military rule it is embracing major reforms. This coupled with the fact that it is in the early stages of development in a digital era, presents an opportunity to embark on an economic transformation journey.

The country has many advantages both internally and external these include:

• Myanmar has abundance arable of land. A key factor of production. Her arable land and water catchment capital ratio is bigger than some of the largest economies. With such favorable conditions, Myanmar could be one of the world largest food producers. She is already one of the biggest rice producers in the world and with the current agricultural reforms supported by the various global partners her agricultural potential is immense. In addition the abundance of water resources can be used in hydro-power production
• Myanmar is blessed with natural resources. She has large deposits of natural gas, precious stones as well as oil.it has been proven that she has a natural gas reserve of 7.8 trillion cubic feet, making one of the prospective energy producers, the country is also one of the largest producers of precious stones specifically gem. She already produces 90% of the global jade production by value.
• Myanmar also has a large work-age population who can provide cheap labor. She also has a large population of migrant labor force who are generally skilled in the various sectors. These two factors will play a critical role in turning the economic potential to reality.
• Myanmar geological positioning (Ravallon, 2012). She has access to the largest market by virtue of her geological position. Together with her neighbors they account for 40% of the global population presenting a huge prospective market. This is in addition to membership of the ASEAN community, which is currently experiencing one of the fastest integration processes. The ASEAN community presents immense opportunities for Myanmar. She could benefit from increase in trade investments, credit facilities as well as financial cooperation.
• International good will. Myanmar has ended decades of international isolation. It has now embarked on critical reforms with the support of international partners such as the International Monetary fund and the ASEAN community. This has been further supplemented by the easing of sanctions by both the United State and the European Union.
• Government Reforms. The government has embarked on a large-scale reform process. The military rule has embarked on a democracy process where political prisoners have been released including longtime political prisoner Suu Kyi. The country has also reformed the business legal framework by getting rid of the protectionist measures and opening some of the sectors like banking to foreign investors. The economic prospects of Myanmar are certainly brighter filled with numerous business opportunities provided the reform process continues (Rieffel, 2012).

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