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Major obstacles remain even as Myanmar beckons
Publication Date : 22-08-2012
Investors rushing into Myanmar are bumping into the realities of a country just out of decades of military rule and economic isolation.
With its natural resources and strategic location between India and China, it is clear that explosive growth is possible.
Tourism is also booming, with Myanmar's beaches, mountains, pagodas and varied cultures set to net around one million visitors this year, compared with Thailand, which this year has already surpassed 10 million arrivals.
The Asian Development Bank (ADB), in a report released this week, said Myanmar could triple its per capita income by 2030 if it stays the reform course.
But there remain significant barriers to growth - among them are a banking system in its infancy, depleted human resources and inadequate infrastructure.
That has not stopped investors from flocking to Myanmar. Planes and hotels are full and hotel and rental rates have skyrocketed.
These investors may be overly optimistic, said Dr Sean Turnell, an associate professor of economics at Australia's Macquarie University who specialises in Myanmar.
"The opening up of the political situation, the desperate desire of investors and lots of other people to build in a positive narrative to that, I think, says a bit more about the current excitement than economic reform per se," he told the Foreign Correspondents' Club of Thailand on Monday.
A critical new foreign investment law is currently being debated in Parliament. The original version gave a five- to 10-year tax holiday to foreign investors, something local businesses oppose.
Turnell is among many who believe that there is no need for the law to be so generous. "This is a country that's been walled away for 50 years; there are incredible opportunities," he said.
That may be so for foreign investors but sections of local industry are struggling, said Khin Maung Nyo, a senior research fellow at the Centre for Economic and Social Development in Yangon, speaking at the same event in Bangkok.
Wages and social security costs have edged up, and workers have formed unions. Locals struggle with low technology and sparse managerial skills as the best managers are mopped up by foreign companies and non-governmental organisations.
The ADB warned that Myanmar must build infrastructure in transport, power and telecommunications and modernise its financial sector. And in order to ensure long-term stability, more investment is needed in education, health and social services.
Stephen Groff, an ADB vice president, also noted vast differences in development across Myanmar. The average poverty rate is 26 per cent, but in the remote state of Chin, for instance, it is 70 per cent.
Myanmar has executed extraordinary reforms, Turnell said - including the change from a dual exchange rate to a single official rate and a managed float of the kyat in April. But it still had a budget deficit and not much of a banking system, he said.
Singapore-based Luc de Waegh, a managing partner at West Indochina, who has done business in Myanmar for some 30 years, agrees the euphoria over Myanmar should be dampened.
"There will be no economic miracle," de Waegh said.
"It takes time to rebuild an economy, to create a middle class."