Economic View


On opportunities for investment in construction and the oil and gas sectors

Given Myanmar’s current stage of economic development, which sectors do you consider to be ripe for foreign investment?

TRANG THANH: Economic and political reform has quickly triggered the attention of foreign investors. With a young population, one of the largest landmasses in South-east Asia, vast natural resources and a GDP of about $66bn, the country has grown into an exciting and dynamic frontier market with a diverse range of business opportunities. 

From our perspective, Honeywell identified some of the best opportunities in areas such as oil and gas, city planning, household products and the aviation industry. In keeping with its reformist spirit the government has announced expansion and upgrade plans for the country’s three international airports, as well as for another 30 domestic airports. In April 2017 the authorities also outlined 10 priority sectors for investment that will certainly open up opportunities in the construction sector, which, despite the current slowdown, will remain one of the engines of economic growth.

Without losing sight of the available opportunities, investors are also well aware of the challenges posed by Myanmar’s business environment. To attract more investment, the government should develop a clear policy roadmap to boost the confidence of investors, as well as strengthen the rule of law and enforceability of contracts. Banking and financial services are another area that presents challenges, but in the end the situation in Myanmar is not very different from that of previous frontier markets in the region. On top of this, the country also has to deal with the challenges posed by an increasingly globalised, technologically developed world economy. Despite these challenges, we remain confident that the country has the right conditions to keep growing in the years to come.               

Considering that Myanmar is a net producer of natural gas but lacks the necessary infrastructure to consume its output, what opportunities do you see for investment in the local hydrocarbons industry? 

TRANG THANH: Current investment in Myanmar’s oil and gas sector is focused on the upstream side. As a net producer of natural gas the commodity plays a significant role in the primary energy market by supporting the country’s trade balance and foreign exchange reserves. What we are witnessing today is that some international oil and gas players are starting to consider new investments to develop Myanmar’s mid and downstream sectors. This new focus is being propelled by the rapid growth of energy demand from the residential, industrial and transport sectors. 

Myanmar is heavily reliant on fuel imports from overseas, and the key actors in the oil and gas sector see investment opportunities in the refining side of the business, especially after the temporary shutdown of some local refineries. 

From a broader perspective, hydrocarbons players are also seeking to leverage the country’s need to upgrade its energy infrastructure, including its pipeline network, warehousing and exploration technology. Together with improvements to internet infrastructure, Myanmar can deploy advanced connected solutions to improve all aspects of industrial operations, from supply chain efficiency to asset optimisation.

Taking into account the infrastructure and housing needs in Myanmar and the current limitations faced by the domestic construction industry, what changes can we expect to see in the sector during the next five years? 

TRANG THANH: Though economic growth slowed in the course of 2016 and early 2017, and the contribution of the construction industry in the Yangon region to GDP contracted to 5%, we still believe that the sector presents good opportunities for investors. According to experts, the industry was valued at $4.9bn in 2015 and is projected to grow at a compound annual growth rate of 11% until 2020, despite regulatory uncertainty and a lack of clarity surrounding certain policies. 

We see plenty of underpenetrated areas that could see rapid development with the adoption of adequate policies. When we speak about better regulation, we are addressing the need of the country to bridge some of the gaps the sector has compared to more developed and sophisticated markets. In the years to come, we can expect improvements in local infrastructure and building construction, which will improve energy efficiency and safety. On this front, local companies, investors and stakeholders will have to improve the efficiency of their operations and be on top of the latest technologies that will enhance the experience of local consumers and property buyers.