Always good to be back in Yangon. So many developments and changes in such a short span of time. I always enjoy coming to Myanmar. I am always treated to the very best of Burmese hospitality and the resilience and entrepreneurial qualities of the Myanmarese continue leaving a deep impression on me.
A few observations from Myanmar on the economic front:
- Hotels – When I first used to come to Myanmar – I was paying about US$70 for a good room at well-known hotels like the Traders, Chatrium or Park Royal. Room rates now start at US$200 for any of these hotels! And they are all running at above 95% occupancy rates!
- Traffic – The cost of car ownership has gone down dramatically. In the past, to purchase a car required a permit which cost an exorbitant amount (for instance, it used to cost about US$350,000 to buy a Toyota Land Cruiser). However the permit system has changed and now you can purchase any cars manufactured from 2007 onwards. The cost of a Toyota Land Cruiser is now about US$25,000. This has led to newer cars on the roads, but more pertinently, the number of the cars have increased dramatically with no corresponding increase in the roads and traffic infrastructure, leading to snarling traffic jams which were previously unheard of before.
- Capital market development – It is expected that Myanmar will have a stock exchange by 2015. This development is being supported by the Tokyo Stock Exchange and Daiwa Securities Group. This will lead to significant demand for qualified professionals in the finance sector to support the stock exchange and capital market development. Myanmar previously set up a Myanmar Securities Exchange – back in 1996 but trading volumes were extremely low and there was little or no technical or IT infrastructure available for an efficient and effective functioning capital market. However this new development will be significant given the resource and technical assistance provided by the Japanese. With development and effective governance, we can expect the Myanmar Stock Exchange to rival Malaysia’s BURSA, Indonesia’s IDX and Singapore’s exchange by 2030.
- Currency exchange rate – Up until last year, the Myanmar Central Bank had fixed the exchange rate at 6 kyats to the US Dollar. However, the black market rate at the time was about 700 to 800 kyats to the dollar. The Myanmar Central Bank has now implemented a managed floating system – where the official rate is around 850 kyats to the dollar. This has been a signficant development in helping with the modernisation of the Burmese economy and one that will support further investment into the country.
- Adoption of International Financial Reporting Standards – Myanmar has now formally adopted IFRS and have converted them in their entirety to the Myanmar Financial Reporting Standards. This has been instrumental in providing greater clarity and transparency to financial statements being prepared in the country. This will drive further investment into the country as investors have a better view of the financial positions and performance of the firms they are investing in or keen on acquiring.
- Passing of the Investment Law – Myanmar also passed the Foreign Investment Law in November 2012. Some provisions in the law allow for overseas firms to fully own ventures and offers tax breaks and lengthy land leases, amongst other things. However, the bye-laws and regulations to support the Foreign Investment Law have not yet been passed and are still being deliberated by the Myanmar Parliament. However, under the law, details of bye-laws and regulations should come out within 3 months of the law being passed in Parliament so we should expect further developments by March 2013.
- Tax reforms – The government has also announced a slew of tax law and regulatory changes. There is a plan to widen the tax base but also to make it easier for local residents to calculate the tax. The tax-exempt status will also change for citizens at the lower end of the income spectrum. A progressive tax system is in place and is likely to continue.
- Increased foreign investment and donor funding – Myanmar has also benefited from the increased inward investment into the country from multinational firms. Of the accounting firms, PwC, EY and KPMG all have presence now in Myanmar. Coca-Cola has entered into a JV agreement with a local partner. Other MNCs are also increasing their branding and presence in the country. The Asian Development Bank (ADB) and the World Bank (WB) have also approved loans and grants to support Myanmar’s continued economic and social development.
- ASEAN Economic Community (AEC) – There is also a strong support by the Myanmar government and businesses to support the AEC 2015 vision of greater economic integration by all of the members of ASEAN. This requires further development in terms of capacity and capability – and one that will benefit a broad section of the Myanmarese.
Exciting times for Myanmar. However, the key thing to address will be to ensure that the economic progress is one that benefits a broad base of the Myanmar population and not one that only serves to widen the income gap between the top earners and the rest of the country. Ignoring the potential consequences of this will only set back Myanmar’s development down the road. It will also be important to ensure that there is continued focus on education and social development. Environmental sustainability also remains crucial. It is easy to ignore the impact of industrial and economic development on the natural environemnt but doing so will again lead to severe consequences for Myanmar in the long run.
However, that said, I am confident that in the years to come, Myanmar will again take leadership within South East Asia both economically and politically like they did back in the day up to the 1960s!