Monday, 5 November 2012

Encouraging signs as Myanmar opens to the world

Perhaps best known for the brave democracy activist Aung San Suu Kyi, winner of the Nobel Peace Prize, Myanmar is slowly preparing to change the direction of their once rigidly entrenched political and economic future.

2012 has been a resurrection year for the strategically located Myanmar. Formerly known as Burma, the large South-East Asian country of 50 million people has made a concerted effort to re-enter the global system. As it does so, many investors are looking to get a head-start in a newly emerging economy, so to speak.

Nestled around the warm waters of the Bay of Bengal, Myanmar is something of a prize, a jewel locked away for decades behind strict authoritarian dictatorships.

The country boasts significant reserves of oil, copper, timber, natural gas, coal, zinc and some uranium. Their re-emergence is set to deeply affect Asian geopolitics – probably for the best.

The country offers investors the chance to create a continental manufacturing base near key consumer markets with easy access to waters connecting to the larger Asia-Pacific region.

Having historically jostled between Chinese domination and Indian influence, the country is deftly reaching out to connect to Western trading partners.

Because of low labour costs Myanmar has the potential to become an important energy and trading hub, connecting the entire Indian subcontinent with China and South East Asia as rail and road creation intensify.
During the next few years high-speed rail will snake through Myanmar facilitating even more access to the Bay of Bengal for China and the region.

Beijing is already moving ahead of other interested countries, helping create pipelines to carry energy through Myanmar towards the city of Kunming.

As a result, China’s Kunming city will likely become the pulsing economic heart of South East Asia sitting as it does where transport routes from Myanmar, Vietnam, and Laos neatly congregate.

Across the Bay in the subcontinent as Myanmar opens, India finally sees an opportunity to loosen the geographic constraints from around land-locked West Bengal.

Currently India must absorb refugees from poorer Bangladesh into this region making it difficult to project influence deeper into Asia. An opening Myanmar is a timely geopolitical, and economic, gift for Delhi.   

However, Myanmar still wrestles with significant obstacles to foreign investment. Political reforms are high on the list of preconditions for Western nations if they are to reconsider economic sanctions on the state.
Yet there are encouraging democratic signs finally emanating from the country since the elections in April 2012, leading the European Commission to hint at removing their sanctions.

To further reassure foreign investors, Myanmar is initiating several essential economic reforms. These include relaxing the terms for foreign investment, regulating currency exchange rates, restructuring state-owned enterprises, permitting foreign banks to open in Myanmar, and privatising those economic sectors which indicate hefty potential for growth, such as telecommunications.

The proposed changes are desperately needed as little of Myanmar’s infrastructure could be called anything close to modern. From the road and rail system to the dilapidated legal environment, Myanmar still has a long way to go.

It is hard to do business if the lights will not turn on. Myanmar’s electricity grid drags the country into blackouts regularly and many companies use their own power generation. Myanmar is gradually making use of their significant hydropower resources, but overhaul is years away.

Land prices are coming down significantly, although slowly, as the government revamps its investment laws. In some regions prices hover near upmarket London rates, even if one can find a plot inside the growing manufacturing sector.

But Myanmar is a lucky country geographically, and it is joining the international community at an ideal time. The rest of the decade heralds bounty for the nation if significant foreign investment can be coaxed in with intelligent political reforms.

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