Numerous companies around the world are considering expanding their operations in Myanmar. The resource rich country offers one of the last frontier economies in Asia and numerous unique investment opportunities. Now, McKinsey has found that the Burmese economy could quadruple by 2030.
However, they also find that the country is fraught with risk. It would appear that Myanmar is a go big or go home investment, and investors will either reap huge rewards or suffer substantial losses.
So far most investors have been reading McKinsey’s report and cherry picking the information they want to hear. The country is blessed with natural resources, has a young population, and is well-positioned in the cross roads of booming Asia. With India to the west, China to the north, and S.E. Asia to the South and East, Myanmar is smack dab in the middle of booming Asia.
Myanmar Could Quadruple Its Economy Within The Next Two Decades
McKinsey argues that Myanmar could quadruple its economy within the next two decades, however, achieving such stunning growth is going to require a lot of reform and massive amounts of investment. McKinsey believes that the nation will need at least $650 billion worth of investment, a huge sum for a country with a GDP of only $53 billion (nominal) as of 2012. $320 billion will need to be directed towards infrastructure alone, a huge sum that points to the massive lack of advanced infrastructure in the country.
Currently, most people in Myanmar are living at near sustenance levels, having little discretionary income to spend on manufactured goods and modern services. McKinsey estimates that there are only about 2.5 million people in the “consumer class” at the moment, however this number could grow to 19 million by 2030. While this could represent tremendous growth, such numbers still pale in comparison to regional neighbors. China alone is projected to be home to $1.4 billion by 2030. You’d have to excuse companies for not finding 19 million people all too enticing with so many regional neighbors also vying for attention.
As the famed consulting company rightly points out, Myanmar has largely missed out on the massive wave of economy growth that has swept through Asia in the last 20 years. This has left the country with an under educated population, with only 4.5 years worth of education on average. Further, many people are still employed in the agriculture sector, which accounts for some 44 percent of the economy, far higher than most of its regional neighbors.
Myanmar’s Natural Resources Give The Nation Hope:
Still, the nation is rich in natural resources, including oil, natural gas, and jade. In fact, Myanmar accounts for 90 percent of the world’s jade production and could increase its stranglehold on the market with increased mineral extraction investments. The country also has a large amount of arable land, which could prove vital if the country is able to develop a modern agricultural industry. Asia has a huge population, but limited amount of land. Myanmar could become an Asian rice basket, producing food for populations across the region.
Still, in order to quadruple its economy by 2030, the country would need to average growth rates of 8 percent or more. Few countries have been able to manage such sustained growth, but Myanmar’s natural resources give the nation hope. Either way, McKinsey argues that the country will have to double its labor productivity, a difficult task given how long the nation’s population has been isolated from the modern global economy and low levels of education.
The current low costs of labor may attract investments in manufacturing, however investors should be aware that Laos and Cambodia have similar low wages.