Burma the Next Tiger Cub?

Will political reforms in Burma lead to a flood of investment from Western companies? No, Burma isn’t Vietnam.

With the upgrading of American diplomatic relations with Burma, and a wave of political reform in the country over the past year, many businesses have begun eying the Southeast Asian nation, which has a population of over 50 million people and has been essentially isolated from Western companies by U.S., Japanese, and EU sanctions.

A delegation of Japanese business leaders recently visited the country, as did an American delegation. Business magnate and philanthropist George Soros also visited recently (of course, the United States would have to drop sanctions for investment to happen, but that’s looking more likely).  Asia Sentinel has provided an update on all the corporate interest in Burma.

I’ve personally heard from a number of Western businesspeople who see great potential in Burma – they see the sizable population, the history of British law, and the significant natural resources including offshore petroleum, and compare Burma today with Vietnam in the early 1990s, when that country began to seriously open up to Western investment.

But, at least right now, that comparison is seriously flawed. Burma is a large consumer market, but its development indicators overall are more on the level of some of the poorest countries in sub-Saharan Africa. Large areas of the country have virtually no infrastructure, having been dominated by ethnic insurgencies for decades. Although the country has a history of quality education and use of English, for decades the regime essentially shut down the best universities, fearful that they would be breeding grounds for anti-government protests as they have been many times in Burma’s history.

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This was perhaps the most destructive blow to the country’s economic future – despite some government talk of IT and computer science in recent years, in reality Burma is one of the least technologically advanced nations in Asia, outside North Korea. It would be very hard for a multinational to build an office of any size in Burma doing medium-value or high-value added work, without recruiting many Burmese exiles to come back to the country, which probably isn’t going to happen at this point.

Of course, in certain industries such as natural resources, all these flaws may not matter; oil companies have prospered in other climates inhospitable to business. But then there’s another problem, which didn’t exist as much in Vietnam: even in the resources industry, any Western companies coming in will start with at least a ten-year disadvantage against Chinese firms already established in Burma, and with shorter supply chains, more diplomatic support, and large pools of cash.

Joshua Kurlantzick is a fellow for Southeast Asia at the Council on Foreign Relations. He blogs at Asia Unbound, where this piece originally appeared.