Despite seeing solid growth, 2019 posed some challenges for Myanmar, as the country continued with plans to liberalise its economy.
In a review released in December, the IMF estimated that the economy grew by 6.5% in FY 2018/19, which ended on September 30. The figure largely aligns with the previous financial year’s growth of 6.4%.
Despite some global headwinds, growth was driven by the continued strong performance of exports, particularly of garments and gas, while modest fiscal stimulus also bolstered expansion.
However, domestic demand was mostly weaker over the course of the year, which also saw a correction in real estate prices and lower levels of investment.
See also: The Report – Myanmar 2019
Forging ahead with economic liberalisation
Another feature of 2019 was the continuation of broader government plans to liberalise selected sectors of the economy.
In January the Ministry of Planning and Finance (now called the Ministry of Planning, Finance and Industry) announced that foreign insurance companies would be allowed to enter the market to sell life and non-life products. Prior to this, foreign insurers were permitted to open representative offices but were largely restricted from operating in the domestic market.
Then, in April, the ministry awarded five foreign insurance providers the provisional right to launch wholly owned life insurance businesses in the country. The companies were Prudential Hong Kong, a subsidiary of the UK’s Prudential; the US’ Chubb Tempest Re; Canada’s Manufacturers Life Insurance Company; Japan’s Dai-ichi Life Insurance Company; and Hong Kong’s AIA Company, which operates as a subsidiary of the pan-Asian firm AIA Group.
Having received their licences to operate in November 2019, these companies have moved quickly to establish themselves in the market. It is hoped the reforms will improve the product offering in the sector and help boost penetration.
The focus on insurance in 2019 followed similar liberalisation efforts in retail and wholesale. Looking ahead, the government has also identified the financial sector as one that stands to benefit from liberalisation in 2020.
Reforms encourage private sector-led growth
The plans form part of a broader government strategy designed to give the private sector a greater role in the economy and incentivise foreign investment in selected industries.
In a positive development, Myanmar was named as one of the top-20 most-improved countries in the World Bank’s 2020 ease of doing business index.
A series of reforms, including a new Companies Law that strengthens minority investor protections and boosts transparency by mandating fuller disclosure of transactions, and the launch of an online company registration platform, were cited as key factors in the country’s rise to 165th out of 190 economies in the index, up six spots from the previous year.
International perception continues to impact investment flows
While there is general positivity within the business community about the government’s policy direction, concerns remain over the ability to implement planned reforms.
Furthermore, with ongoing concerns over the security and humanitarian situation in Rakhine State, and national elections due in 2020, international investors remain cautious.
Government-approved foreign direct investment (FDI) for FY 2018/19 totalled $4.2bn, according to the Directorate of Investment and Company Administration, down 27.3% on the previous year’s total of $5.7bn, and well below the high of $9.5bn recorded in FY 2015/16.
With a notable drop in Western cooperation in recent years, the majority of investment came from neighbours Singapore, which accounted for 57.9% of FDI (although this figure does not distinguish money from further afield which comes through holding companies); China (15.2%); Hong Kong (10.9%); and Thailand (5.3%). The country also receives significant overseas development assistance from Japan.
The fall in international investment comes despite the creation of a dedicated ministry tasked with boosting inflows.
In November 2018 the government established the Ministry of Investment and Foreign Economic Relations, whose roles include streamlining FDI approval processes, promoting Myanmar as an investment destination, and working with other government agencies to improve the regulatory and operational landscape.