The region’s latest gold rush is on, and all the roads, it appears, are leading to Myanmar.
As the government opens up the previously tightly-controlled economy and accelerates reforms, and as some Western-imposed sanctions get lifted, businessmen from the United States, Germany and Japan, among others, have been flocking to the country in search of the next big thing.
For weeks now, business hotels in Rangoon have been running at full occupancy, while real estate prices have shot up and so have rentals, the result of the influx of foreigners. Investors are scouting for opportunities in a country with much untapped potential across the board, from mining and energy to tourism and telecommunications.
“Things are beginning to fall into place in Myanmar,” observed Singapore-based Manu Bhaskaran, chief executive of Centennial Asia Advisors. “Obviously there is risk, but clearly there is momentum.”
That momentum is evident in the growing number of visits by businessmen from around the world.
This month, an American delegation is due to visit. Last month, billionaire George Soros went, and said he would set up an office to facilitate philanthropic work. In December last year, a group of executives from Germany’s biggest bank and its government investment arm visited, as did a Japanese team of corporate from Hitachi, Toshiba, Mitsui, Itochu, JX Nippon Oil & Energy, and Marubeni.
Investors from as far away as Norway, Brazil and Russia have expressed interest in Myanmar’s energy sector, while neighbors China, India, Thailand and Vietnam have held trade shows in Rangoon or dropped by to explore infrastructure projects.
The keen interest follows the rapid political and economic reforms that Myanmar’s government has been carrying out, at a pace that has surprised even critics. On Monday, in an exclusive interview with The Straits Times, President Thein Sein pledged his commitment to the reforms, saying they will go on until Myanmar achieves a “flourishing democracy”.
International Monetary Fund (IMF) executive Meral Karasulu, after a mission to Myanmar early last month, told reporters: “Myanmar has a high growth potential and could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world into its advantage.”
Indeed, there is vast opportunity in the country of 62 million, ASEAN’s biggest after Indonesia. It boasts natural resources such as gas deposits, has a large, young workforce, and offers many opportunities in tourism and infrastructure development.
But, as Bhaskaran pointed out, numerous risks remain in doing business in a country that has just emerged from decades of military dictatorship.
Among the problems, it has a poorly developed financial sector, a very small stock market, an unsettling dual foreign exchange rate, and frequent power shortages. There is no statutory minimum wage, and health care and educational systems have been eroded. Young people in Myanmar today speak less English than those in their 60s.
“There is certainly a gold rush, but at the same time, a lot of money is still off the table,” noted professor Sean Turnell, head of the Burma Economic Watch unit at Australia’s Macquarie University. “People are visiting and recognizing that there is good potential, but they are still cautious.”
One of the key barriers is the massive gap between the official and black market rate for the kyat – 6.5 kyat to US$1 versus about 800 kyat to US$1 on the latter – which complicates business.
Another key issue is labor law reform, needed to protect both employers and workers. A new law allowing trade unions to be formed has not yet taken effect because the rules have not been finalized, although they could be ready in weeks. A new law covering labor disputes is also in the works.
The country could also find a shortage of skilled workers, which could see many locals returning from abroad – including Singapore – to take up the new jobs when investments take root. Skeptics also warn of “potential volatility” in the reforms.
But analysts noted that the government is making moves in the right direction, such as making plans to empower its central bank to fix the exchange rate issue, and working to set up market structures for trade.
“At the top level they are genuinely trying and would like to do it as soon as possible,” observed Turnell.
Thein Sein, who is now in Singapore on a state visit, this week also signed an agreement for Singapore to train Myanmar officials in a wide range of sectors, from legal, banking and financial to trade and tourism.
Bhaskaran pointed out that such constraints were not unlike those found in China and Vietnam when those countries began opening up.
“These are problems but they are not insurmountable,” he said. “With some economic sanctions being reduced, and economic and political reform, the momentum will soon become unstoppable.” (mtq)