The original four – South Korea, Taiwan, Hong Kong and Singapore – have all but graduated, joining the ranks of the world’s richest nations. Many now see Indonesia, Vietnam, Thailand, Philippines and Malaysia as the new tigers.
But what about Myanmar?
I think it pays to ask this question – and not just because I’m the CEO for Asia Pacific at DHL Global Forwarding or the fact that we recently opened a wholly owned office in the country. Any future-oriented company doing business in the region should be asking it.
And the question is especially fitting considering what has happened in the Myanmar in the past three years. In case you missed it, the country’s decades-long military rule came to an end and democratic reforms have begun. But if you think this has created a watershed moment for business – think again. It’s still a very challenging environment.
A tiger at the end of its slumber
Yet the potential is there, and here’s why I think so: With a population of 60 million, Myanmar is the world’s 24th most populous country. It is the second largest nation in Southeast Asia and 40th largest in the world. Add to that a tremendous mineral wealth and one of the world’s newest democracies has the potential to be one of the region’s biggest economies.
Politically isolated for many years as a result of international sanctions, however, Myanmar suffered both socially and economically. The country stood still in many respects while its neighbors – China, India, Thailand, Bangladesh and Laos – powered ahead. The way I see it, a slumbering Asian tiger was just waiting to be awakened.
International sanctions were lifted two years ago in response to Myanmar’s steps toward liberalization and the long-dormant economy is now coming to life. With the help of the International Monetary Fund (IMF) and other agencies, the country is undergoing a major transformation to create a modern economy and establish the tools, systems and institutions required to make that transition. For example, Myanmar recently enacted a new law to give its central bank autonomy.
First strides driven by booming oil, energy and infrastructure
Although this tiger is still rubbing the sleep out of its eyes, it has already begun to take strides. GDP grew by 6.5% in 2012/13 , driven primarily by gas production, construction and services. This puts Myanmar firmly in the fast-developing nation category.
Since the sanctions were lifted, many companies are interested in investing in Myanmar. They’re approaching us and asking for advice. It’s no surprise that many are from the currently booming industrial sectors, oil and energy, construction and infrastructure. But more and more companies in the FMCG industry – like fashion and apparel businesses – are exploring the market. The relatively higher labor costs and recent problems with the garment sector in neighboring countries make Myanmar an attractive place to open a factory or source from. However, while apparel companies seem ready to go, particularly those from the European Union which enjoy duty free access, factors such as a lack of skilled labor, strict import/export license requirements and poor infrastructure still give them pause.
The pace of Intra-ASEAN trade is also accelerating, and Myanmar is certainly a piece in that puzzle. The recent ASEAN-China free trade agreement is providing further stimulus. Chinese companies are investing in Myanmar and I’ve watched strong growth in trade between the two economies.
Investment in the consumer sector is also gaining traction. Coca-Cola is already in production through a joint venture, while Korea-based Lotte Chilsung Beverage Co has formed a joint venture with Myanmar Golden Star (MGS) Beverage Co to bottle and distribute soft drink products – including Pepsi – in Myanmar. Nestle and Unilever have also set up offices in the country.
And keep your eye on the telecommunications sector, too. There is huge market potential there, in my opinion. A number of major telecommunications companies have already set up operations.
All of these changes are why we’re on the ground in Myanmar. And we’re tapping our expertise in emerging markets to really help others make the leap as well. We want to be there first in order to deliver the kind of logistics services and support customers expect, for example, when setting up a manufacturing operation.
Is the tiger ready to awaken?
Myanmar has woken up from its slumber and is preparing to move. But I don’t think it’s going to be easy – but no emerging market is. One reason is the fact that road and port infrastructure outside the big cities can be described as in its infancy at best, which presents challenges for domestic shipping.
But there are clear signs of development. Myanmar is investing in infrastructure, expanding its port and releasing concrete plans for a new airport at Yangon. New economic zones have been established and Mandalay has been earmarked as a logistics hub. Many more business-friendly policies are being introduced. Foreign investment rules are set to ease further, which should attract more foreign direct investment. The upcoming elections in 2015 will be an important milestone for the further development of the country.
All of this boosts confidence and attracts more investment. Corporate investment from China, Japan, Korea and Thailand is already outpacing that from Europe. And the IMF recently raised its economic forecast for this year to 6.8%. The sentiment is certainly positive.
Ten years ago it would have been impossible to even imagine the growth we are seeing today. I am certain it will be even faster in the next 10 years. Myanmar is a large awakening tiger in Asia and we plan to be a part of what will surely be an amazing success story.