Almost two decades ago, Burma was classified by the United Nations as one of the least developed countries in the world. Nowadays, it has reformed itself and arisen as a golden bowl for those eyeing on new economy development territory.
Rise of the Golden Bowl
The Government of Burma’s reform in eight areas of agriculture, infrastructure, export, investment has achieved outstanding results and was proven to have speeded up development of the national economy.
Ever since Burma officially joining the Association of Southeast Asian Nations ("ASEAN") in 1997, , trade development has been steady grew. With the successful launch of the ASEAN Expo and China - ASEAN Free Trade Area in 2010, Burma also drew the attention of neighboring countries. Trade figures of recent years indicated the progressive growth of trade in Burma. China and Burma bilateral trade amounted to US$4.4 billion in 2010, a year-on-year growth of 53.2% in 2011 to $50 billion, making China the largest trading partner of Burma. Thailand and Singapore came next with records of $4.5 billion and $3 billion respectively. Foreign investment in Burma till May this year received a total of $32 billion from 31 countries and regions involving 440 projects in 12 areas.
Return of World Bank to Burma in August this year after a 25-year of black-out period was remarkable both to the country and investor. This not only indicated improved environment but also brought $85 million funding to support Burma reforms.
Bright side of the Golden Bowl
Burma is rich natural resources such as oil, gas, gold and gems and gets abundant supply of cheap labor.
Natural resources brought up Burma’s economy in an intense way. According to data provided by the Ministry of National Planning and Economic Development of Burma, as of May this year, oil and gas exploration projects amounted for $13 billion and accounted for 44 percent of all approved projects; power industry and mining industry accounted for 42 and 7 percent respectively. All three industries in total took up over 90 percent of this nation’s investment income.
Take one Burma's electric power project as example. Water resource is highly accessible along Irrawaddy River and Salween River for hydroelectric power generation. Upon green light by Burma government, co-operations between local and foreign enterprises in building power plants, grids and networks complemented the lack of technology and expertise of domestic stakeholders.
Burma's low price labor costs but high production quality makes the nation lucrative and irresistible to foreign investment. When it comes to wages, take the textile industry as an example, local textile workers’ monthly wage is about $85, much lower than that of $400 to $500 in China. The highly competitive labor pool was a major factor that kept the unemployment rate as low as 1.7 percent only in 2011.
The Asian Development Bank announced in an earlier report this year that Burma might hit an annual growth rate of 7 percent and a three-fold increase in per capita income by 2030 if the reform and development are on the right track.
The dark side …
While a considerate amount of foreign investment was attracted to this nation, development projects in Burma might meet some hindrance that might not be tackled easily.
Poor transportation, communication and power infrastructure is one major obstacle. Despite dedicated works of the Burma government on these aspects, transport networks and facilities are still of low standard and unable to cope with rising cargos and passages demand. Penetration of modern communications equipment remains low and power supply continues to be unstable and insufficient.
Burma is not logistic-friendly as well. The nation gets no deep-water port and relies on transshipment from Singapore. Civil flights are limited and thus no short-term delivery of small quantity is guaranteed.
Domestic political unrest gradually improved, but the establishment of a new political system does not totally ease political tension. Those long-standing fundamental problems in Burma like lack of bureaucratic transparency, incomprehensive law and financial system are dragging down market performance.
One noteworthy issue is that Burma has long established foreign exchange controls, prohibiting free currency exchange and resulting big disparity between the official exchange rate and the free market exchange rate. Foreign investment should take this into consideration seriously.
Burma government has recently announced tax exemption to foreign investors on a wide array of aspects for as many as eight years. Will you be the one to get a spoon of rice from this Golden Bowl?