Since its opening a year and a half ago, foreign investors increasingly see Myanmar as a good place for business. But experts know, the country still has a long way to go in terms of infrastructure.
Myanmar, the country formerly known as Burma, was a comparatively rich British colony that won its independence in the year 1948. It was once considered the breadbasket of Southeast Asia and was an exporter of copper and gemstones. But in the years following its independence, it was gripped tightly by wide-spread ethnic violence. The economy continued to decline until it hit rock bottom after the military took power in 1962.
Today, Myanmar is one of the world's poorest countries. Inflation has almost completely destroyed the value of the currency, the kyat. Bureaucracy suffocates private initiatives; corruption is rampant. Myanmar came in at 180 out of 183 countries on the NGO Transparency International's corruption index.
But recently, the country has been experiencing a political transformation. At the beginning of this year, a number of Western nations suspended sanctions against the country in response to its democratic reforms. Investors from abroad are now hoping for new business opportunities in the Southeast Asian country.
Last week, Vijay Nambiar, UN Secretary General Ban Ki-moon's advisor on Myanmar, said the country had the potential to become the next Asian tiger. Meral Karasulu of the International Monetary Fund (IMF) said in January that Myanmar, with its vast resources, young population and advantageous geographical location, could become one of the most dynamic economies.
Land of many possibilities
Myanmar is located between India and China on the Bay of Bengal. For China, it is a strategic corridor to the Bay of Bengal for the export and import of goods and natural resources to and from Europe and Africa. The country is also rich in resources. Its most important exports are natural gas, hydroelectricity, gemstones, wood and rice.
Investors now see Myanmar as a good investment opportunity: "The country has a very large market with a population of 60 million people. Their level of income is, however, still very low," says Michael Jungnitsch, director general of TÜV Rheinland's Asia-Pacific branch and member of the business delegation that recently accompanied German Foreign Minister Guido Westerwelle on his trip to Myanmar.
The global information company International Handling Services (IHS) forecasts an annual growth of the country at six percent and a doubling of its GDP to 93 billion euros by the year 2020.
Floating the currency
A first step in attracting foreign investment was to float the exchange rate of the kyat. Until not long ago, the government in Naypyidaw had an artificially fixed rate of 6.4 kyat to the US dollar. But the actual value of the currency was around 800 kyat to the dollar. The floating of the exchange rate this week has made it closer to its actual value. Fluctuations in future are expected to be at a maximum of two percent. Myanmar is also receiving support from the IMF, the World Bank, Asian Development Bank and the United Nations Development Program.
A long journey
Myanmar is one of the poorest countries in the world
The revaluation of the currency only just marks the beginning of a long journey. The country's run-down infrastructure is a further draw back for Western companies.
"The infrastructure will be one of the greatest challenges when it comes to setting up industries to produce exports," Jungnitsch explains.
The rail network, which encompasses around 5,000 kilometers, was only kept at a minimum level in the past few years. Most of the country, which is almost twice the size of Germany, still has dirt roads. And the few tarred ones melt in the summer or are flooded in the rainy season so that most of them are only partially accessible anyway.
Investors will also have trouble with bureaucracy and corruption. Jungnitsch explains that the interior ministry has started cleaning up its bureaucracy; there are three central points the government wants to confront first: a new investment law, the abolishment of import licenses, and a revision of the tariff system. The will to "confront corruption is also visible," Jungnitsch adds.
Klaus Fritzsche, head of the German Asia Foundation, believes that in principle, more foreign investment in Myanmar would be positive for the country. But he also says that it should carefully thought out to which areas the investments should go.
"If you listen to the announcements from the EU, it is mainly about wood and resources, especially minerals. But there is the threat that the country's resources will be blindly exploited. That will happen if the West starts doing what Chinese, Thai and Indian companies already are."
Author: Rodion Ebbighausen / sb
Editor: Shamil Shams