Myanmar To Become The Next Low Cost Labor Producer?

Myanmar To Become The Next Low Cost Labor Producer?

After political reforms, following Myanmar’s democratic elections this past April, the United States government has decided to lift an export ban on the backwards S.E. Asian nation. Despite being among the most resource rich countries in the region, Myanmar lags far behind its emerging competitors, with a nominal GDP per capita of only USD 707 in 2010. With this export ban being raised, will Burma become the next investment hot zone in the region, or will it continue to struggle to develop?

Myanmar To Become The Next Low Cost Labor Producer?

Costs for labor are rising rapidly in neighboring countries, such as Malaysia and Thailand. Even China is seeing labor costs rise, making the “world’s factory” less and less attractive to manufacturers of low-value added goods. These long dominant manufacturing powerhouses are now beginning to shift into higher-value production and research, as low-cost competition from Laos, Cambodia, and others is putting pressure on the bottom line. This is creating opportunities for Asian nations that can offer low labor costs and good infrastructure.

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Competing in the manufacturing sector will be difficult, especially with Laos and Cambodia already enjoying a large head start, while offering labor prices that are competitive with Myanmar. Still, with its rich stock of natural resources, including petroleum reserves and mineral deposits, Myanmar could develop a strong infrastructure and provide support to nascent industries.

One source of strength will be Myanmar’s textile and garments industry. Even without trade with the U.S., the industry accounted for some USD 770 million in exports in 2011. With labor costs rapidly rising in China, and labor shortages in low-end manufacturing sectors, garment manufacturing could develop into a strong sector for Myanmar.

The repeal of import bans is the latest in a line of actions to normalize relations between Myanmar and the United States. In May, 2012, the U.S. government announced that investment and financial services bans were lifted on Myanmar. It is too early to know the results of these repeals, but business tourists have been visiting the country in record numbers.

With over 60 million citizens, Myanmar is seen as a large market for goods and services, and an excellent source for natural resources. With resources being rapidly depleted around the world, new sources are being welcomed by the business community. Sitting between India, China, and Indonesia, which collectively accoount for some 2.5 billion people, Mynamar is well positioned in the cross hairs of global trade.

On the other hand, education rates and infrastructure remain underdeveloped, and Myanmar will have to compete with several well-positioned neighbors. Myanmar is also trying to institute major economic and political reforms, while the world is in the middle of an economic slowdown. Conditions are poor in numerous economies around the world, and international trade is beginning to slow down. These conditions could hamper Myanmar’s emergence.

Ultimately, Myanmar’s success will depend largely on the skill of its leaders. Myanmar has plenty of natural resources, which can be exploited to build up industries and provide revenue for national development projects. The question will be whether these resources are used wisely and invested, or spent on useless projects and funneled away through corruption. With the right investments, Myanmar could attract serious attention from international investors, who are looking for the next low-cost manufacturing base.

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