Burma - Market Challenges Burma - Market Challenges
As a frontier economy, Myanmar faces market challenges and obstacles. Obtaining accurate and relevant market and financial data can be onerous. Demand for well-educated and trained workers outstrips supply. Government staff can be overwhelmed due to the spike in interest from foreign governments, NGOs, and multinational businesses. Weak infrastructure remains a barrier to growth. Only 40 percent of the road network is paved and 20 million people, half of the rural population, do not have access to all-weather roads.
According to the Asian Development Bank, $120 billion will be needed by 2030 to improve infrastructure and add needed roads, rail, bridges and airports. About 77 percent of the population has no access to financial services, according to consultancy Roland Berger. A large part of Myanmar’s foreign investment is concentrated in the oil, gas, power, and telecom sectors, according to an analysis by the World Bank, with manufacturing accounting for less than 10 percent of GDP.Reputational Risk
Since late 2017, the Myanmar market has been subject to growing “reputational risk” in the wake of the Rakhine situation. In August 2017, a small militant group representing a Muslim minority - the Rohingya - with a long history of discrimination by Myanmar's Buddhist majority, launched a violent attack in Rakhine State, a western region of Myanmar bordering Bangladesh. The response by the Myanmar military to this attack was swift and disproportionate. Ultimately, the protracted military response – amid widespread international condemnation – forced 700,000 Rohingya out of the country. This unresolved situation continues to be a setback for Myanmar’s political and economic progress and has had significant impact on the market outlook - particularly for some U.S. companies. Some Western firms may still be hesitant to enter the market due to Myanmar’s current “reputation.” U.S. companies should be mindful of this situation while considering the Myanmar market.
In this context, some of Myanmar’s Asian partners have seized the opportunity to pressure Myanmar into an exclusive “Look East” stance. Despite this attempt to suggest that U.S. and Western firms have “given up” on Myanmar, U.S. firms are still interested in Myanmar and continue to carefully explore the market for trade and investment opportunities.
Market challenges that Myanmar has begun to address, include:
- Poor infrastructure including communications and transportation network
- A weak educational system and unskilled work force
- A legal and regulatory system that relies on practices and government discretion rather than written laws
- A small and inexperienced financial sector and shallow domestic capital market
- An evolving economic policy
- Limited supply of electricity, outside major urban areas
- No standard law on public-private partnerships (PPP)
- Weak intellectual property laws with limited implementation
- Weak rule of law and property rights; the judiciary is not independent and lacks experience with commercial litigation and arbitration