Back in 2013, there was a rush of excitement in Myanmar as investors and businesses poured in — wanting to take advantage of one of Asia’s last frontier markets. As the country opened-up in 2013, the economy grew at a breakneck 8.5 percent. This has now slipped to 6.5 percent in 2016 with projections of around 7 percent for this year.
There are still many reasons to be cheerful. The World Bank predicts that Myanmar will see higher economic growth rates over the next few years. The 1914 Companies Act is in the process of being redrafted to bring it up to international standards, encouraging the growth of capital markets and will likely soon be passed; the Investment Law has granted licenses for many banks, with still many more waiting for the next round of licenses to be granted and the insurance industry expected to be soon liberalized; Myanmar now even has a fledgling stock exchange; foreign ownership laws are being redrafted to give more flexibility for investment in local Myanmar firms and a law requiring foreign companies to hold separate permits to trade is to be scrapped. All this, of course, is on top of the most important reform of all: that sanctions on Myanmar by the United States and EU have largely been lifted, giving foreign multinationals the ability to do business in the country and Myanmar access to the international financial system and capital – after decades of isolation. There are still multiple opportunities in Myanmar.
For Jodi Weedon, CEO of the Australia-Myanmar Chamber of Commerce, these reforms are demonstrative of the optimism that remains.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
“While challenges do remain when investing in Myanmar, huge inroads have been made in the last 12 months with the implementation of several elements of a new regulatory regime and investors can now have more confidence in the financial sector – making doing business easier and more transparent than previous years.”
However, the initial excitement and optimism of foreign investors have faded to some extent with a marked slowdown in growth and investment. The pace of reform has been too slow, argue many who bemoan the still huge amounts of red tape and antiquated legislation that remains in place. Some new regulations are also said to be overly vague and unclear. Furthermore, there are concerns that Aung San Suu Kyi’s National League for Democracy (NLD) government is too personality focused – with almost all major decisions and committees reporting to Suu Kyi herself, leading critics to accuse her of a micromanagement leadership style.
A new public opinion poll by IRI (PDF) also echoes this decline in optimism, showing a fall in the confidence of public opinion regarding Myanmar’s economy – a fall since the National League for Democracy (NLD) government and Aung San Suu Kyi took power. It is worth noting from the survey, however, that confidence overall remains high.
Although Myanmar has moved forward, the military junta that governed Myanmar for half a century has not gone away. Many of the companies in Myanmar are still directly or indirectly linked or owned by the military or military cronies. This deep-seated cronyism has made it difficult for other rivals to compete and foreign investors particularly cautious of who with and how they invest their capital. It is not just the public who have tapered expectations.
For those businesses that have taken the plunge, there is a message of continued optimism marked by an appreciation of the challenges faced. Chris Hughes, Partner at law firm Berwin Leighton Paisner, outlines the challenges that many businesses have faced.
“After an initial rush a couple of years ago many are finding the realities of implementing projects here challenging. Regulatory uncertainty and capacity challenges on the government side are a key part of this, and it could be argued that the new government hasn’t always given sufficient priority to these areas. Fortunately, there are signs that attention is being given to this from the top, and with new investment and corporate law reforms taking effect the climate is improving, but good advice and effective support from trade commissions, business chambers, and others are still fundamental to the success of foreign business here.”
Jo Daniels, Managing Partner at law firm Baker & McKenzie, echoes the optimism that the regulatory climate for business is improving commenting that the “the pace of regulatory change is beginning to speed up” providing continued hope to the optimists and renewed hope to Myanmar’s doubters.
“The growth in the economy is likely to be driven by investments in infrastructure, particularly power, ports, and railways,” says Daniels. “However, a parallel development is the growth of innovation and the fact that Myanmar will leap-frog many old technologies to adopt the latest innovative products. This will be particularly apparent in financial services but applies across a full range of goods and services. It is expected that the sharing economy will take off, with early adopters, such as Grab Taxi, having already entered the market.”
“With all these opportunities comes challenges, such as companies are finding it difficult to keep compliance programs up to date with all the changes in law and policies, most of the laws are not drafted to take into account new developments, such as the digital economy, and there is a need for administration and enforcement policies of the ministries to catch up with legal reform.”
Furthermore, other lessons to be drawn from investing in Myanmar demonstrate that choosing the right investment and – especially important in Myanmar – the right partner is crucial. Natural resources and the added challenge that many resource rich areas are in conflict zones makes such investments particularly difficult. However, catering to growing and future needs often pays-off – telecommunications being a prime example – alongside service based industries – including fried chicken – that cater to Myanmar’s growing middle class. Myanmar’s huge infrastructure needs also provide ample opportunities, with any area of infrastructure development likely to be in demand but land ownership and land conflict must be navigated equally carefully.
For business, early excitement and optimism have been dampened by the realization of how great the challenge is in a country and economy that was neglected for so long. However, optimism remains that Myanmar is modernizing fast, and for those willing to work through the challenges – the rewards have proved to be rich indeed. In Myanmar, patience may well prove to be a virtue.
Edward Parker is a contributor to The Diplomat, based in Southeast Asia.