The Report: Myanmar 2015

Over the past few years Myanmar has experienced a number of dramatic transitions that have restructured its economy, rapidly changing its unique landscape and gradually enriching the social welfare of its people. These changes have placed modern-day Myanmar back on the international investment radar and have seen the nation coined “the Last Frontier”.

Country Profile

The second-most-populous country in South-east Asia, and the 24th biggest in the world, Myanmar has a total of 135 different officially recognised ethnic groups. Approximately 70% of the population lives in rural areas, and urbanisation is increasing at a rate of around 2.9% per year. The chairing of the ASEAN summit in 2014 is a testament to how far “the Golden Land” has come in a relatively short time. However, significant hurdles remain; political, ethnic and religious tensions hinder national objectives that overstretch its outdated infrastructure and understaffed public sector. These bottlenecks, which stem from decades of economic sanctions, are now being addressed by an ambitious government, which, under the leadership of President U Thein Sein, has taken critical steps that have reintegrated Myanmar back into the international community.

This chapter contains interviews with President U Thein Sein and Lim Hng Kiang, Minister of Trade and Industry for Singapore, as well as viewpoints from Daw Aung San Suu Kyi, Chairperson, National League for Democracy; and US President Barack Obama.

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Trade & Investment

Myanmar has seen an extraordinary surge in trade and investment in the few years since emerging from isolation. Out of the $9.5bn in FDI permissions granted from April 2012 to October 2014, $2.9bn went to projects in manufacturing; $2.2bn to those in real estate, hotels and tourism; and $2.5bn to transport and communications. Foreign investment in many sectors, however, still remains banned and the list of restricted sectors is set out in regulations that can be revised by the government without parliamentary approval. In this light, the government under President U Thein Sein has been gradually liberalising Myanmar’s trade regime. Largely due to a reform passed in April 2013 that eliminated export and import licensing requirements, the country’s ranking for international trade jumped from 135th to 103rd in the World Bank’s “Doing Business 2015” survey.

This chapter contains interviews with Gregory So, Secretary for Commerce and Economic Development, Hong Kong; U Win Myint, Minister of Commerce; and Serge Pun, Chairman, Serge Pun & Associates Myanmar.

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A series of political and economic reforms have led to the lifting of most international sanctions since 2012. While it may take many years of intensive foreign investment and rapid growth to catch up to other south-east Asian countries, Myanmar has exceptional potential for a country in its income range. Agriculture, fishing and forestry is the country’s largest sector, contributing 30.5% to Myanmar’s GDP in FY2012/13. Manufacturing is the second-largest sector, accounting for 19.9% of GDP in FY2012/12, followed by retail and wholesale trade with 19%, transport and communication with 13.3%, and mining with 6.1%. Since a historic reform process began in 2010, foreign investment has been pouring in, driving annual growth to more than 8%, according to IMF estimates. There are good reasons to believe the economy will continue to enjoy exceptionally strong growth in the years ahead. In the short term, much will depend on the outcome of the national elections, which are due in autumn 2015. This chapter contains interviews with U Soe Thane, Minister of the President’s Office; Hidetoshi Nishimura, Executive Director, Economic Research Institute for ASEAN and East Asia (ERIA); and U Set Aung, Chairman, Thilawa Special Economic Zone (SEZ). It also includes a viewpoint from John Kerry, US Secretary of State.

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Financial Services

While Myanmar’s banking sector has much to do in order to catch up to its neighbours, it should remain on track to expand rapidly as the economy grows and penetration deepens. Regulatory reforms will be key to expansion and foreign access. Elsewhere in the financial services sector, Yangon Stock Exchange (YSX) is Myanmar’s fourth try at launching a securities market, but it is by far the most serious project to date. Its formal launch date is set for late 2015, when it will be inaugurated along with a new securities exchange commission. There is extensive support for a local bourse in Myanmar, however it will likely take time to properly ensure that stock is able to trade freely and securely and to solve questions regarding the extent of foreigners’ participation. Meanwhile, the insurance sector, with private insurers just beginning to develop since 2013, is in its early stages after a long period in which the sector was fully nationalised.

This chapter contains interviews with U Win Shein, Minister of Finance; and Lim Cheng Teck, CEO for ASEAN, Standard Chartered; as well as a roundtable with Andrew Geczy, CEO of International and Institutional Banking, ANZ Bank; Chartsiri Sophonpanich, President, Bangkok Bank; and Abdul Farid Alias, Group President and CEO, Maybank.

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Myanmar has already hit its investment target of $4bn-5bn for the 2014/15 fiscal year six months ahead of schedule, thanks in part to the energy sector, which attracted $800m of investment in the first half of the fiscal year. As of December 2014 revenue from foreign investments in the oil and gas sector came to more than $15.1bn, second only to the power sector, which stood at $19.3bn. This represents about 30% of the country’s total foreign investments. As Myanmar works to promote renewable energy to complement its insufficient electricity supply, new opportunities within the sector have opened up for foreign investors who can help to boost the country’s power generation. In the long term a fully developed electrification system, along with offshore gas exploration, look set to accelerate Myanmar’s growth in all aspects of the energy sector. To achieve this growth, the government must keep up the pace of its reform programme, in turn speeding up the country’s integration into the world economy.

This chapter contains interviews with U Zay Aung, Minister of Energy; Ken Tun, CEO of Parami Energy Group; and U Zeya Thura Mon, CEO, Zeya & Associates.

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Telecoms & IT

Myanmar is at the beginning of a telecoms boom, and consumers will soon have access to a plethora of new services that can fully alter the way business, social activities, education, and every aspect of society is run. Myanma SIM cards at one time retailed for $3000 each, severely limiting access, but as of 2014 citizens can connect their phones for just $1.50. The entrance of new players to the sector is expected to create demand for a number of ICT services companies, drawing upon the skills of web designers, network professionals and programmers. However, education and human resources are a major challenge and local talent is hard to find. As the sector develops, access to information will enable the country’s citizens to thrive in areas that have been blocked for decades.

This chapter contains a roundtable with Takashi Nagashima, Managing Director, KSGM; Ross Cormack, CEO, Ooredoo Myanmar; Peter Furberg, CEO, Telenor Myanmar; and U Shane Thu Aung, CEO, Yatanarpon Teleport/Royal Yatanarpon; and an interview with U Thein Oo, Chairman, Myanmar ICT Development Corporation (MIDC).

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Construction & Real Estate

The opening of Myanmar’s economy has led to a proliferation of mega-projects in the past four years, including the upgrade of infrastructure and the expansion of utilities. The government has embarked on projects to upgrade, broaden and build a long list of facilities, ranging from roads to bridges, seaports to airports, hotels to malls, high rises to apartments and hydroelectric dams to electric plants. Evidence of the construction boom is visible throughout Myanmar, especially in Yangon, an old capital that is on an express track to becoming a modern city. The influx of foreign firms has caused a shortage of office and commercial space. With rental rates rapidly rising, a number of new projects are being launched that will market to international customers. Despite the rapid growth of the economy overall, the construction sector may see a slight slowdown as investors adopt a wait-and-see approach pending general elections in November 2015, after which Myanmar is likely to see a catch up period of intense investment in a wide range of projects.

This chapter contains interviews with Dr Khin Shwe, Chairman, Zaykabar; and Stephen Suen, Marga Group.

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Agriculture & Forestry

An estimated 45% of Myanmar’s GDP is provided by the agricultural sector, which also employs 70% of the domestic labour force. Myanmar is well known for its rice and teak production, and is also a leading provider of rubber, oil seed, cotton, corn, chillies and pulses. A number of structural obstacles, including land rights, outdated techniques, inadequate infrastructure and low financing, have served to frustrate Myanmar’s agricultural sector in recent years. Despite these challenges, the sector holds great promise and potential for growth. Foreign trade and investment are seen as key to helping develop Myanmar’s rice production and milling industries, and several new agreements with regional neighbours should help the country move forward in coming years.

This chapter contains interviews with U Win Tun, Minister of Environmental Conservation and Forestry; and U Chit Khine, Chairman, Myanmar Rice Federation.

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With a wealth of untapped geological resources, including the world’s richest jade and ruby mines, Myanmar is set to attract a flood of foreign investment into its high-potential mining sector. In the decades to come, mining is expected to be one of the top drivers of Myanmar’s economic development. Current growth is being driven by a number of smaller projects in metals and by a boom in tin ore output from existing mines. Coal output is growing rapidly, thanks mainly to rising output from the Kalewa basin, in the Sagaing region west of Mandalay. The scale of opportunities in the sector is such that there are already dozens of international mining firms visiting Myanmar, studying its geology and applying or preparing to apply for exploration licenses. A reform that may clear away obstacles to international exploration was adopted in August 2014, allowing foreign investors to own up to 100% of mining licenses. While the wave of exploration expected to be released by reforms will take many years to convert into production, the mining industry appears to be in the early stages of a long-lasting expansion.

This chapter contains interviews with Dr Myint Aung, Minister of Mines; and U Maung Ko, Chairman, Myanmar Federation of Mining Association (CEC).

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Industry & Retail

While much ground remains to be covered in Myanmar’s industry and retail sectors, its progress to date is remarkable, given the country’s history and the challenges it faces in a highly competitive neighbourhood. Figures from the end of November 2014 show manufacturing coming in third, behind the oil and gas and power sectors, in terms of total investments received. Strong international support and investment, together with the efforts of a hard-working, young, highly literate and motivated population, are paying increasing dividends, as Myanmar opens up to the world and progresses towards joining the ASEAN Economic Community (AEC). With robust economic growth expected to continue, paralleling continued investor interest, industry and retail are likely to see further expansion in 2015 and beyond. While almost all manufacturing areas offer major upsides, an awareness of changing local conditions and the ability to adapt to political dynamics will be key for sustained growth.

This chapter contains interviews with Stuart Dean, CEO, General Electric ASEAN; and Rehan Khan, Managing Director, Coca-Cola Myanmar.

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Health & Education

Following years of poor governance, limited resources and international sanctions, much work needs to be done in order to bridge the gap between Myanmar’s ill-equipped public health system and internationally recognised norms. The government and foreign donors are ramping up efforts in the fight against HIV, malaria, tuberculosis (TB) and maternal and child mortality as well as the increasing prevalence of non-communicable disease (NCDs). After decades of isolation, the sector is now open to foreign investment, allowing 70% ownership in clinics and hospitals. Both private and public sector players are taking significant steps to adjust to the evolving landscape of the country in an effort to improve the provision of medical care. The education system is also undergoing revitalisation. With many of the country’s development goals relying on the improvement of education and the expansion of vocational training, the transformation is well under way. Although the Ministry of Education has numerous hurdles to overcome, an increased budget, growing support from the global community, and the reopening of Yangon University are all positive signs for the future of Myanmar’s education system.

This chapter contains an interview with Dr Ye Moe Myint, Hospital Administrator, Pun Hlaing Hospital; and an education viewpoint from Julie Bishop, Foreign Minister of Australia.

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Building a modern transport network will be necessary if the government is to accomplish its ambitious development plans, with a host of air, rail and shipping upgrades planned for the coming years. Major projects include the proposed $1.1bn Hanthawaddy International Airport project, which will be able to accommodate 12m passengers with a plan to increase numbers to 30m per year, over 10 times the country’s current capacity. The existing network threatens to limit growth if air, rail and port facilities are not successfully upgraded in the coming years. The capital needed for improvements is significant, but Myanmar has great incentive to push for economic reforms and to further engage private parties and international development agencies. The state aims to be a major logistics player in the region, and given Myanmar’s strategic geographic position within the region, many believe this vision can be realised with sufficient injection of capital and international cooperation.

This chapter contains interviews with U Nyan Tun Aung, Minister of Transport; and U Si Thu, Managing Director, Myanmar Airways International (MAI).

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According to the Ministry of Hotels and Tourism the number of international entrants to Myanmar in 2013 doubled to 2m from the previous year, with data showing that during the first half of 2014 a 40% year-on-year increase in arrivals was also recorded. The government is hoping to channel the industry’s short-term growth into long-term benefits for the country. In June 2013 the ministry unveiled its Tourism Master Plan, which focuses on six main areas including building human resource development, developing quality products and services, and building Myanmar’s brand as a tourist destination. Together with a Tourism Law it was developed to encourage the establishment of sustainable eco-tourism projects countrywide. Myanmar’s rich natural assets and cultural lure have the potential to make the country one of the top tourism destinations in the region. Major upgrades to transport infrastructure as well as hospitality and public services will be necessary to withstand the pressure of the tourism industry on the country’s infrastructure.

This chapter contains interviews with U Htay Aung, Minister of Hotels and Tourism; and Chali Sophonpanich, President, City Realty Company.

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This chapter offers an overview of Myanmar’s tax system, examining how new laws and amendments are affecting the country’s business environment. It also features a tax viewpoint from U Win Thin, Chairman, Win Consulting.

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Legal Framework

This chapter contains an overview of the rules and regulations surrounding business and investment in Myanmar. It also features a legal viewpoint from Cheah Swee Gim, Director, Kelvin Chia Yangon.

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The Guide

This chapter contains useful information for visitors to Myanmar, including proper etiquette, language, transport and how to obtain a visa. It also offers important contact information for foreign embassies, hospitals, UN agencies, airlines and hotels.

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