Burma is an untapped new frontier, says US think tank 0

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Leading American think tank Frost & Sullivan says it is optimistic on the future growth for Burma because the country is an untapped new frontier at the crossroads of India, China and Southeast Asia offering abundant opportunities.

The market research firm’s vice-president Vivek Vaidya said that the fact that Burma was among the first few countries US President Barack Obama chose to visit after his second term election victory last month indicates the improving status of the country and its image among the global community.

“Myanmar, the only neighbor for both China and India, is likely to assume great geopolitical-business importance in years to come,” he added.

Vaidya said that Burma’s GDP in terms of purchasing power parity has been growing at a very solid rate and is expected to continue to do so over the next few years in the range of 5-6 percent. He noted that Burma’s GDP has increased by 20 percent since 2007.

Burma has a very young population spread that will help to drive it economically, Vaidya said. He added that the low unemployment rate of about 5 percent was due to the growth of the agriculture sector, which remains the key driving force of the Burmese economy both in terms of GDP and employment.

“There is a large labor force to be tapped into in Myanmar but two-thirds of this is involved in agriculture, representing about 43 percent of GDP,” he added.

Frost & Sullivan’s vice-president said that most imports into Burma are basic commodities not yet manufactured on a wide scale across the country.

He added that the top 10 import industries/items for Burma in 2011 were petroleum and related products, machinery/spares, steel construction materials, plastic raw materials, palm oil, vehicles and spare parts, pharmaceutical products, ships & boats, cement and fertilizers.

Vaidya also said that while China has been the leading investor in Burma in the last few years, this is likely to change. “With the market opening up, Southeast Asian companies are rushing to invest in the country. US and international companies are also doing so, but on a more selective and wait-and-see nature to get clarity on [the direction] and laws of the country,” he added.

Mr. Vaidya said that all industry sectors and sub-sectors are of interest, but for the economy to take off and to benefit from the country’s geographical location, large infrastructure projects covering power, water, ports and roads are needed.

“Oil, gas, power, infrastructure, telecommunications and consumer businesses could top the list in terms of being the most attractive and easier to do investments in the country. Property prices are already very high,” he said.

He also said that special economic zones will be required to continue to stimulate both imports and exports, along with ports and roads. He noted that around 300,000 TEUs [20-foot equivalent container units] and 16.7 million tonnes—accounting for close to 100 percent of Burma’s cargo—pass through the ports of Rangoon and Thilawa.

Vaidya added that Burma will act as a “Southern Economic Corridor” and “Gateway to India”, and noted that the three special economic zones being developed to facilitate this are Kyaukphyu, Thilawa and Dawei.

But Vaidya said that Burma needs to address its chronic shortage of electricity to ensure continued economic growth. He added that the country’s power generation is currently made up of 70 percent hydro, 24 percent gas, 4 percent coal and 2 percent diesel.

He said that current production levels are at 1,350 MW which can drop in summer due to less hydro production against a demand of 1,850 MW. He forecasts demand of about 3,000 MW in 2016.

Vaidya said that the oil and gas sector offers major opportunities but most likely under Production Sharing Contracts. He added that state-run MOGE is active in the oil & gas sector, and noted that Burma has large reserves of oil and gas both onshore and offshore.

“Other than companies coming in to work with current block license holders, Myanmar is looking at offering up as many as 10 offshore and 10 onshore blocks,” he said, adding that altogether 62 of the country’s 101 exploration blocks remain open for bidding, including 34 onshore, eight in shallow water, and 20 in deep water.

Vaidya said that Burma’s telecommunications sector shows huge potential with only 3 million mobile subscribers out of 60 million people. He added that wireless penetration stands at 4 percent, a massive upside for growth, but noted that hurdles still exist.

“Fifty percent wireless penetration is targeted by 2015 but handset prices are high and registering SIM cards is expensive at about US $150-200,” he added.

The Frost & Sullivan executive concluded that there are abundant opportunities within a wide range of industries in Burma, but one will need to be patient and get timing and model of entry right in order to be successful in the country.

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