Myanmar’s efforts to catch up with the world around it after half a
century of military rule is being put to the test this week as a summit
of government and business leaders fills hotels and stretches phone
networks.
Myanmar hosts the three-day World Economic Forum on East Asia starting tomorrow, with heads of state and executives from companies including General Electric Co. (GE), Coca-Cola Co. (KO) and WPP Plc (WPP)
attending. Delegates may struggle to communicate over phone networks
that have yet to be expanded and will have difficulty finding businesses
that accept credit cards. Many hotels are still cash-only, with some
only recently accepting Visa and MasterCard payments, including the
Parkroyal Yangon.
President Thein Sein has allowed more political freedom and loosened
economic controls since coming to power two years ago, prompting nations
including the U.S. to ease sanctions and attracting companies such as Ford Motor Co. (F), MasterCard Inc. (MA) and Unilever NV. (UNA)
The country needs to spend $320 billion by 2030 to achieve economic
growth of 8 percent a year, according to a report by McKinsey Global
Institute released last week.
“There is a gold rush” into Myanmar, said Maung Zarni, a visiting fellow at the Department of International Development at the London School
of Economics. “This is one of the last few remaining places that has
not has been penetrated, but the infrastructure is just not there.”
Thein Sein
signed a foreign investment bill in November to woo overseas companies
into spending more. Companies scouting opportunities or striking
development agreements include Visa Inc. (V),
the biggest payments network, Unilever, the second-biggest
consumer-goods company, and closely held hotel chain Best Western
International Inc.
Growth Potential
Modernization plans
include upgrading Myanmar’s financial system, building roads and
airports, as well as giving the country’s 64 million people greater
access to mobile phones.
The economy may grow 6.75 percent this fiscal year, led by natural gas sales and investment, the International Monetary Fund said in a report last month.
Myanmar’s
gross domestic product could more than quadruple to $200 billion with
an 8 percent annual growth rate, according to McKinsey, almost double
the pace from 1990 to 2010. That may help lure $170 billion in capital
inflows, with foreign direct investment accounting for $100 billion,
more than twice as much as it attracted in the previous two decades, it
said.
Of the $320 billion McKinsey estimates is needed to spur
the economy, about 60 percent will be for residential and commercial
real estate. The agriculture-dependent economy also needs power plants, roads and railways, it said.
Airport Bids
Myanmar’s
Department of Civil Aviation has invited bids to build and operate
international airports in Yangon and Mandalay. Four companies or groups
were selected last week to make final bids for the new Yangon airport,
which will be about 50 miles (80 kilometers) northeast of the city,
according to the authority’s website. Seven groups have also qualified for the next round of bidding for the Mandalay International Airport expansion project.
Hotel
chains are also planning to expand in the nation. Best Western will
open its first Myanmar property in 2013 to take advantage of a shortage
of rooms. The Phoenix-based group is considering locations including
Yangon and Mandalay, the nation’s two largest cities, Glenn de Souza,
Bangkok-based vice president of international operations for Asia and
the Middle East, said in January.
Mobile Reach
Mobile phones
have been out of reach for most Myanmar consumers since limited
services were first introduced in 2001. The cost of activating a phone
using the global system for mobile communications standard, or GSM, was
initially about 4.5 million kyat ($4,790).
The government has
invited bids for two telecom licenses, for which it shortlisted 12
groups in April. The country plans to boost telecommunications coverage
to as much as 80 percent by 2016 and to make services affordable, the
government said in January. There were 5.44 million mobile-phone
subscribers as of December, or 9 percent of the population.
Final winners of the licenses will be announced June 27, according to the Ministry of Communications and Information Technology. Singapore Telecommunications Ltd. (ST), which is bidding together with KBZ Group and Myanmar Telephone Co., said yesterday it submitted its final bid for a license.
“Our
in-country partners, KBZ and MTel, have insights and extensive presence
in various sectors of the Myanmar economy,” Mark Chong, head of
SingTel’s international consumer division, said in an e-mailed statement
yesterday.
4G Network
A group led by Kingston, Jamaica-based Digicel Group Ltd., billionaire George Soros
and Myanmar property developer YSH Finance Ltd. pledged to invest $9
billion in Myanmar’s mobile-phone network if it’s granted a license. The
group will roll out a fourth-generation mobile network across the
country by Dec. 1, and its wireless service will reach 96 percent of
Myanmar’s population by 2016, it said yesterday.
The Myanmar
government said in April it would lower the price of SIM cards to 1,500
kyat from 200,000 kyat and sell about 350,000 of them each month.
The
telecom and financial services industries may each grow at a compound
annual rate of 23 percent from 2010 to 2030, McKinsey said. That
compares with 17 percent for tourism, 10 percent for manufacturing and 8
percent for infrastructure.
Visa and MasterCard are seeking to
expand their presence in Myanmar, where most transactions are done in
cash. MasterCard became the first payments network to issue a license to
a local bank last September when it signed an accord with Co-Operative Bank Ltd.
Only
a handful of hotels in Yangon, the commercial capital, accept credit
cards. Adding to the difficulty of paying for goods and services in
Myanmar, business owners typically won’t accept worn U.S. dollar bills,
the preferred currency.
“Even as tourists if you want to buy local products, a lot of businesses
don’t have credit card facilities,” Zarni said. “If you pull out your
wallet and give them cash they will say ‘I’m sorry I can’t take your
cash because it’s creased.’”
source: Bloomberg
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