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Risks and opportunities in the Myanmar market
Publication Date : 19-02-2014
Myanmar has the advantage of a favourable geographical position, low wages and a large potential consumer market.
Its recent political and economic reforms have inspired optimism among foreign investors.
However, despite the positive outlook, investors need to be cognisant of the risks and challenges of transacting with a market that has only recently emerged from decades of isolation.
As a frontier market in Asia, Myanmar holds tremendous economic potential. It has vast reserves of untapped resources and a large population of 60 million.
Located at the crossroadsof China, India and South-east Asia,Myanmar provides strategic access to a huge potential consumer market of three billion people.
To triple the size of the economy and raise annual gross domestic product per capita to US$2,400 by 2015, the Thein Sein administration has introduced a slew of political and economic reforms that reflects the government's resolve to create a pro-business environment.
With the influx of foreign investments into the country, competition will intensify. Companiesneedtoact fast andofferimmediatesolutions tosecure business opportunities in Yangon and beyond.
Opportunities exist across different sectors for Singapore companies, including in manufacturing, logistics, urban solutions, hospitality, energy and consumer goods.
Still, challenges remain. Myanmar is in the process of developing its legal system and one would need to prepare for changes as legislation is introduced.
In addition, investors should note that implementation is not a proven process and that it will take time for regulations to come into effect.
Singapore companies involved in sizeable projects should be prepared to finance their own investments as there are limited project financing options in the country.
Foreign banks are not allowed to operate in Myanmar at the moment. The regulatory framework does not always provide international banks with the option to secure collateral.
With the exponential increase in demand for residential and office space due to the entry of foreign investments, rents in Yangon have skyrocketed. Between early 2012 and April 2013, Yangon's average office occupancy rate rose from 23 per cent to 98 per cent and rents jumped by more than 80 per cent.
Other challenges include poor infrastructure, a shortage of skilled workers and a lack of transparency.