Leading trade credit insurer, Atradius (www.atradius.co.uk), has
identified Myanmar as the latest in a list of frontier markets offering
foreign investors promising opportunities for future long-term growth in
South East Asia.
The second largest country in the sub region,
Myanmar has been experiencing drastic economic and political reforms
since the country’s military relinquished power over the government in
March 2011. Its economy grew 6.3% in the fiscal year that ended in March
2013, compared with 5% the previous year, and is forecasted to grow
6.7% in the coming year.
In the period from April to December
2012, the government granted investment approvals to 62 foreign
projects, which is more than the total number granted during the
previous three years.
Myanmar is an attractive prospect for
foreign investors because of its abundance of natural resources, which
include oil, natural gas, minerals and precious stones, its cheap labour
costs and location. After the completion of the Dawei Seaport Project
Myanmar is expected to be at the hub of trade connecting Southeast Asia
and the South China Sea, via the Andaman Sea, to the Indian Ocean,
receiving goods from countries in the Middle East, Europe and Africa.
Bart
Poublon, Head of Risk Asia Pacific said: “In the last couple of years
Myanmar has embarked upon major reforms in areas including opening of
trade, ease of foreign investment laws, anti-corruption, currency
exchange rate and taxation. The United States and European Union also
eased their sanctions against Myanmar in 2013 which was a significant
milestone. As a result of these factors we have seen a number of foreign
multinational companies entering the market quickly, keen to maximise
on the opportunities presented by its favourable economic outlook.”
Atradius has recently conducted an extensive market visit in Myanmar and met with various parties there.
Petr
Racek, Head of Underwriting for South East Asia & Japan, commented:
“There is certainly a lot of long-term potential and opportunities for
British companies to do business in Myanmar. Currently just 5% of
country’s population is considered middle to higher class, which
represents only 10% of total trade in Myanmar, and as this continues to
grow so will opportunities for trade.
“In addition, the country
has potential to become a major tourist destination in South East Asia
given its rich history and natural beauty but there is a big need for
infrastructure, construction and other sectors to develop which will
require foreign investments.
“On the other hand, foreign
companies will be confronted with a very challenging operating
environment and many hurdles such as widespread corruption, an
underdeveloped banking system, poor infrastructure including frequent
blackouts, and lack of transparency to name a few. Our view is that many
investors are still hesitating to invest and will likely be waiting for
the outcome of the 2015 elections before making a decision.
There
are also changes afoot in other key countries in Asia. Although China’s
situation is relatively stable Atradius believes the West should no
longer expect double growth figures in Chinese GDP, as the country’s
government looks to promote a move from an investment and export model
to a domestic consumption model. Growth has slowed as both industrial
output and retail sales decline and China’s sovereign credit rating has
dropped from AA minus to A plus with concern about high level debts at
corporate and local government level.
After more than a decade
of deflation Japan has re-entered the game thanks to Prime Minister
Shinzo Abe, who came to office in 2012. Abe hopes to create 2% inflation
through a combination of monetary easing policy, increased government
spending and a structural reform of the Japanese economy. With the Bank
of Japan previously unable to achieve 1% inflation over a sustainable
period of time, critics say there is doubt about whether this goal is
achievable on a long-term basis.
Meanwhile the largest country
in South East Asia, Indonesia, continues to grow as the number of people
that can be labelled as middle class is predicted to double by 2020.
Domestic consumption currently accounts for about 65% of the country’s
economic growth, and this will rise as more and more people can afford
high end products and become more selective in their choices.
Bart
Poublon, Head of Risk Asia Pacific continued: “South East Asia
regularly presents new opportunities for British investors, with
existing markets developing further and emerging markets stepping up. It
is an area that we will continue to monitor closely over the next few
years.”
source: CreditMan
http://www.creditman.biz/uk/members/news-view.asp?newsviewID=18818
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