myanmar: asia’s next tiger?

Myanmar: Asia’s Next Tiger?

A Wave of Change and The Way Forward

1

Snapshot

After 50 years of military rule, the nominally civilian government of 2010 has lent a positive outlook to the political and economic scenario in Myanmar. A rapid series of reforms and forecasts for further economic and social development have made it an attractive destination for investment.

▪ Wave of Change: Held its first general elections in 20 years in November 2010 ending an oppressive military regime bringing an end to 50 yrs of economic & political isolation

▪ Reforms: A process of reform has been under way since November 2010

– Financial Sector reforms: Floating of the currency exchange rate and plans to set up a stock exchange have been at the forefront

– Investment climate: Changing FDI and taxation laws have displayed pronounced results by creating a flurry of investments into the country

– Social reforms: release of political prisoners, deregulation of media, focus on citizen rights, have generated a favorable response from the international community

▪ New Investment Hotspot: As one of the most exciting liberalizations in recent times, Myanmar, coupled with its vast reserve of natural resources is expected to see huge foreign investment in the coming few years. With an expected Economic Growth of 8%, effects of this are already visible. Myanmar has been appointed to chair ASEAN in 2014. Multilateral financial institutions and foreign governments are increasing aid and loosening sanctions against Myanmar

2


Brief History

Economic Development

Reforms and impact on the industry

Key challenges

Content

Appendix

3


Brief History

– Economic Development

– Reforms and impact on industry

– Key challenges

– Appendix

Content

Through the difficult period of internal conflicts and isolation, towards peace, harmony and prosperity

SOURCE: Images courtesy British Broadcasting Corporation (BBC) and Deutsche Welle

Then…Then…Then…Then…

…Now…Now…Now…Now

After years of martial law, periods of political unrest and attempts at democracy the new government promises a head start towards liberalization

SOURCE: Web, Press Search

▪ Myanmar ruled under martial law till 2010

▪ Continued human rights violations

▪ United States and European Union imposed and intensified sanctions against Myanmar

▪ Business climate opaque and highly inefficient

▪ In the 1990, general multi-party elections were held but results were nullified

▪ Military refused to hand over power, resulting in an international outcry

▪ Aung San Suu Kyi placed under house arrest for 15 years; won Nobel Peace Prize for non-violent struggle for democracy

▪ Anti-government protests in 2007; constant discontent building up

▪ Through 2009, international pressure for release of Suu Kyi

▪ National elections held for the first time in 2010

▪ Though, elections were condemned as fraudulent, a wave of reformation is seen

▪ Release of Aung San SuuKyi and hundreds of political prisoners

▪ Reforms like deregulation of the media etc

▪ By elections in 2012 won by opposition party National League for Democracy

▪ Countries recognized this development by lifting or loosening sanctions

Oppressive Martial Law

Attempts at democracy and rise of Aung San Suu Kyi

Establishment of Democracy 1962 -1988

1988-20102010-Present

6

Next rising star of Asia?

SOURCE: Myanmar in Transition

Emerging from 5 decades of isolation, both economically & politically

Rich natural resources in form of Oil, Gas & Minerals

Young and large labor force

Geographic advantage of being located between India & China with good harbors and developing road networks

Focus areas

7

Myanmar is one of the largest countries in Southeast Asia strategically placed between two economic powerhouses

SOURCE: World bank, UNPD

1 GDP numbers at current USD, 2011l

GDP: $1,847bnGDP/capita: $1,489

Pop: 1.2 bn

GDP: $7,318bnGDP/capita: $5,445

Pop: 1.3 bn

GDP: $52 bnGDP/capita: $857

Pop: 49-55 mn

India

Myanmar

China

It presents economic opportunities with large population, significant natural resources and a geo-strategic location

Key facts

Bhutan

Thailand

Sri Lanka

Nepal

Pakistan

Afghanistan

Tajikistan

KyrgyzstanUzbekistan

Turkmenistan

North Korea

Japan

South Korea

China

Bangladesh

Taiwan

PhilippinesLao

Myanmar

Cambodia

Vietnam

Singapore

Malaysia

Brunei

Indonesia

IndiaHong Kong

GDP/capita (2010, PPP)

MYR

1,311

CAM

1,967

VN

2,846

RI

3,836

TL

7,846

� Strategic location between China, India. The worlds 40th largest country and second largest in SEA after Indonesia (RI)

� With 60 million people it is the 24th most populous country� Largest exported item: Natural Gas

Population, million people

60

14

8970

MYRCAMVNRI

240

TL

Size, million ha

0.7

0.20.3

0.5

MYRCAMVNRI

1.9

TL

SOURCE: International Monetary Fund; Asian Development Bank; Burma Economic Review 2005-06 by Sein Htay, Burma Fund; The Conference Board Total Economy Database

9

Leaving behind times of isolation, fragility and conflict

1824 - 1886

Anglo-Burmese Wars; British control

Source: Press search

1940-1959

Independence from British rule; Economic

turmoil 1960-90’s

Uprising of socialism; civil unrest; Burma changed to Myanmar

1990 onwards

Fight for democracy continues; Joins ASEAN;

NLD wins elections

10

Making steady progress towards brighter future

Source: Press search

general elections conducted in 20 years;

however 25% of MP’s appointed by Military

1st In 2011 Hillary Clinton became the most senior US politician to visit Myanmar in 50 years

Foreign investment law passed - 80%-100% ownership in restricted sectors, 5 year tax break, easy land lease policy

First SEZwas approved. The total projectvalue is estimated to be more than100% of the current GDP

11

Share of working population aged between 30-59 has increased over the last ten years and projected to grow further

SOURCE: United Nations Population Division

8 9 10 12 14

52

22

24

24

18

2015F

50

23

26

24

17

2010

48

25

27

23

15

2000

45

30

2915-29

11

19

45-59

2025F

60 +

100% =

21

0-14

2020F

54

24

21

22

30-44

Population by age, in %. Total in millions

12


Economic Development

– Reforms and impact on industry

– Key challenges

– Appendix

Content

13

Its economy has grown at fastest pace among ASEAN nations, however its per capita income is still the lowest

Source: International Monetary Fund

Myanmar

14.7

Philippines

9.1

Malaysia

9.5

Cambodia

11

Vietnam

12.1

Indonesia

13.7

Laos

14.2

BruneiSingapore

8.6

Thailand

8.8

GDP growth rate (CAGR) between 2000-12; (at Current Prices)

835

Cambodia 934

Laos 1,446

Vietnam 1,528

Philippines 2,614

Indonesia 3,592

Thailand

Myanmar

5,678

Malaysia 10,304

Brunei 41,703

Singapore 51,162

Per Capita; 2012

8.2

14

This growth has been primarily driven by Industry and Services

SOURCE: Myanmar in Transition

Growth in percentage

3.0%

5.0%6.3% 6.5%

3.4%

4.7%

4.4% 4.4%

4.2%

2008

5.8%

2009

Industry

Services6.1%

2010

6.3%

2011

Agriculture,livestock,fishery andforestry

15

In the short-to-medium term the fundamentals are expected to go through corrections and stabilize which will make growth sustainable

SOURCE: Global Insight (WMM)

60

35

30

25

20

5

0

-5

2020E18E16E14E12E10080604022000

Percentage YoY

Expected stable period with open market and floating currency

Unstable period

998965

904874

819810861

1,0041,110

1,027

857772

319

+3% p.a.-3% p.a.

+26% p.a.

080604022000 20E18E16E14E12E10

Kyat per USD

Inflation - stabilizing Currency - stabilizing

16

The fast urbanization in Myanmar continues to fuel the demand for more products and better services

� By 2017, the proportion of upper mass and mass affluent household segments ~80% the total number of household in urban areas in Myanmar

� Affluent people typically have more needs and require more sophisticated products,

SOURCE: MGI Citiscope

The Mass affluent segment has the fastest growth

1,0682,729

678

2005

837

452

1,133

762388

2012

1,243

Unbankable512

Lower mass

Upper mass

647

Mass affluent

2017

3,236

3,620

256

1,609

+2% p.a.

29% 33% 36%Urbanization

9%

2%

-5%

-8%

CAGR 12-17Number of HouseholdsThousands

17


Reforms and impact on industry

– Key challenges

– Appendix

Content

Since 2011, policy reforms in various sectors have been recognized and supported by foreign countries and institutions alike

18SOURCE: ADB Report

▪ Major reforms in the financial sector

– Private banks allowed to engage in the foreign exchange market

– Currency exchange rate floated by the Central Bank of Myanmar

– New Taxation Laws led to a 389% y-o-y rise in revenue1

▪ Changing Foreign Investment Laws

– New FDI Law enacted in November 2012 to allow foreign-owned investment up to 100%

– Foreign investors to get five-year tax holiday and 50-year land leases

– Relaxed import restrictions and abolished export taxes.

▪ Social reforms, too, been a key focus

– Establishment of the National Human Rights Commission and amnesties of political prisoners

– New labor laws allowing unions and strikes

– Relaxation of press and media censorship

▪ Recognition of reforms at a global level

– ASEAN approved Myanmar's bid for the chairmanship in 2014

– Foreign Investment increased from US$300 million in 2009-10 to a US$20 billion in 2010-11, (about 667%)1

▪ Multilateral Financial institutions and foreign governments to increase aid

– World Bank to resume aid of US$85 mn

– Asian Development Bank (ADB) to resume financial aid after a 24 years

– United States, European Union, etc. suspend sanctions

▪ Multinational firms expressing increasing interest in the country

– Japanese companies, financial firms and US energy giants interested

– Coca- Cola Co. and MasterCard Inc. etcincreasing their presence

– OAO Gazprom in discussions with the government to participate in energy projects

1 Independent Media Source

Reforms Recognition

Several sectors of the economy show promise

SOURCE: ADB, Interconsulting

Sectors Description

Agri/fishery/forestry

▪ Fisheries

▪ Forestry

▪ Agriculture

▪ Has 33 million hectares of forest reserves and forestry exports were USD 644 million in 2011/12

▪ Substantial opportunities to develop both riverine and marine fisheries resources, one million metrics tons of fishery resources could be exploited annually on a sustainable basis

▪ Lot of potential due to availability of arable land (~19.39 million hectares) and labour. Key crops include –Rice, beans, sesame seeds

Industry

▪ Energy

▪ Apparel

▪ Has proven reserves of 7.8 trillion cubic ft of natural gas. Natural gas is the country’s most important source of export revenue▪ Has proven oil reserves of 2.1 billion barrels, more than Thailand and Brunei

Darussalam▪ Hydro-power potential by harnessing 4 river basins is pegged at 100,000 MW

▪ Like its neighbors (Vietnam & Thailand) , Myanmar could build on apparel exports (it already does some), particularly with abundant labor available at low cost

Services

▪ Mining

▪ Tourism

▪ Telecom

▪ Retail

▪ Is rich in mineral resources & minerals of potential importance are copper, gold, lead, zinc, silver, tin and tungsten, antimony, chromium and nickel

▪ Natural attractions (forests, beaches) and rich heritage provide a good potential of growth

▪ Has potential, however very underdeveloped as of now

▪ Good growth with a CAGR of 15% over 2000-2011 and expected to increase upto CAGR 17% over 2011-2017

20

Tourist arrivals to Myanmar in the whole of 2011 were equivalent

to arrivals to Thailand in a single week

Did you know?

Tourism and increased trade ties look to further strengthen Myanmar’s global position

21SOURCE: Factiva, WebSearch, WMM

▪ Indian and Chinese ministers visiting Myanmar for talks

▪ Leader Aung San Suu Kyi visited several nations to strengthen ties

▪ Tourism declared as national priority sector

▪ 25 million visitors forecasted in 2013-2015

Flow of tourists into the country is anticipated to rise

Increased trade ties and bilateral relations with international countries

Myanmar President, Thein Sein, seeks flexibility for foreign investors in their joint ventures in Myanmar

22


Key Challenges

– Appendix

Content

23

Many risk and challenges lie ahead of a young and promising nation

External/Internal Risks:▪ Social tension within Myanmar remains a potentially destabilizing

factor; over 130 recognized ethnic group▪ Abolition of sanctions still languishing

Political challenges:▪ Ongoing influence of Military rule; 25% of MP’s appointed by Military▪ Low score on government effectiveness & regulatory quality▪ Scores very low on human development reflective of the low

government investment on key necessities

Economic challenges:▪ Weak macroeconomic management and lack of experience with

market mechanisms▪ Business is restricted by poor infrastructure and logistics , particularly

in transport, electricity access, and telecom▪ Limited economic diversification; production structure dependent on

natural resources (gas & wood and farm & fish)

SOURCE: Facts sourced from reports published by World Bank; Asian Development Bank

24


Appendix

Content

Myanmar scores very low on human development reflective of the low government investment on key necessities

Congo 0.3 (187)

Zimbabwe 0.4 (173)

Nepal 0.5 (157)

Myanmar 0.5 (149)

Bangladesh 0.5 (146)

Bhutan 0.5 (141)

India 0.5 (134)

Viet Nam 0.6 (128)

Indonesia 0.6 (124)

Philippines 0.6 (112)

Thailand 0.7 (103)

China 0.7 (101)

Singapore 0.9 (26)

Korea 0.9 (15)

Hong Kong 0.9 (13)

Japan 0.9 (12)

Australia 0.9 (2)

Norway 0.9 (1)

Human development index, 2011

Myanmar 0.2

Pakistan 0.8

Bangladesh 1.2

India 1.2

Indonesia 1.3

Cambodia 2.1

Vietnam 2.6

China 2.7

Thailand 2.9

S. Korea 4.1

Bhutan 4.5

Czech R 6.6

Finland 6.7

Costa Rica 7.4

Japan 7.8

Netherlands 9.4

USA 9.5

Denmark 9.7

Public health expenditure, 2011

Global best country

Global worst country

0.6

Myanmar 0.9

Sri Lanka 2.1

Bangladesh 2.4

Philippines 2.8

Singapore 3.2

India 3.4

Japan 3.6

Thailand 4.3

Guinea

Korea, Rep. 4.4

Brazil 4.6

Bhutan 5.4

United States 5.5

France 5.7

Malaysia 6.0

Finland 6.2

Sweden 7.0

Denmark 8.2

Public education expenditure, 2011

SOURCE: Human Development Report 2011; World Bank

High to low; (x)=global rank % of GDP % of GDP

Quality of infrastructure (0 = bad, 5 = good) 2011

Logistics performance index (0 = bad, 5 = good) 2011

Rank

1.9

2.1

2.2

2.3

2.5

2.5

2.5

2.7

2.7

2.8

2.9

3.1

3.1

3.4

3.6

3.7

4.1

4.2

Nepal

Myanmar

Cambodia

Bhutan

Russia

Sri Lanka

Indonesia

Vietnam

Pakistan

Philippines

India

Brazil

Thailand

Malaysia

China

South Korea

Hong Kong

Singapore

Rank

3

8

22

25

26

43

44

54

61

69

72

83

88

96

116

125

132

147

1

2

21

26

29

38

45

46

52

53

59

71

81

95

101

107

129

1512.0

2.4

2.5

2.6

2.6

2.8

2.8

2.9

3.0

3.0

3.1

3.1

3.2

3.5

3.5

3.7

4.1

4.1

India

Philippines

Indonesia

Vietnam

Malaysia

China

South Korea

Hong Kong

Singapore

Brazil

Thailand

Bhutan

Myanmar

Nepal

Cambodia

Russia

Sri Lanka

Pakistan

SOURCE: World Bank 2012

Business is restricted by poor infrastructure and logistics

ScoreScore

Government effectiveness score (100 = best, 0 = worst) 2011

Regulatory quality score (100 = best, 0 = worst) 2011

Myanmar scores low on government effectiveness and regulatory quality

2.37

Vietnam

Indonesia

Sri Lanka

India

Brazil

Philippines

Thailand

China

Bhutan

Brunei

Malaysia

94.31

99.05

19.91

22.27

22.75

25.59

42.18

45.02

46.92

52.61

54.50

55.45

55.92

59.72

Myanmar

60.66

Bangladesh

86.26

Pakistan

81.04

Nepal

77.25

Cambodia

70.62

Russia

S. Korea

Hong Kong

Singapore

1.42

Nepal

Bangladesh

Bhutan 10.90

Myanmar

Russia 38.86

India 40.28

Indonesia 41.71

Philippines 43.60

China 45.50

Sri Lanka 50.71

Brazil

22.27

Thailand 56.40

Malaysia 74.41

S. Korea 79.15

Brunei 84.83

Singapore 97.16

Hong Kong 99.05

35.07

29.38

Cambodia

Pakistan

25.59

29.86

Vietnam

55.92

SOURCE: World Bank, World Governance Indicators 2012

3

13

30

41

49

63

84

86

94

95

97

101

113

117

123

158

164

165

170

207

3

7

33

45

55

93

94

105

116

120

124

127

130

138

149

150

158

165

189

209

Score RankScore Rank

myanmar: asia’s next tiger?

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