Bank of America Merrill Lynch (BoAML) has warned of
over-enthusiasm and great uncertainty in the opening up of
Myanmar research report
published today, the
bank’s Global Research Head of Emerging Asia
Economics, and report author, Chua Kah Bin said
Myanmar’s potential was significant. But
cautioned political reforms were still at an early stage.
"The opening of Myanmar is a game-changer," he said.
"Myanmar sits at the crossroads of some of the largest and
fastest growing Asian economies. The 62 million population
base is relatively young. The British also left behind a
legal system which is better developed than the rest of
Indochina," he said.
But he said, as with any gold rush, there was probably some
over-enthusiasm. "There is great uncertainty over how the
military will manage the challenge and erosion to its
influence and control," he said.
Other potential foreign investors have said this ambiguity
poses a considerable challenge to increased involvement in
Dragon Capital’s Dominic Scriven told IFLR it
would be very constructive if the Myanmar authorities were to
make public its reform agenda.
The Myanmar government is now being assailed from all sides
with foreign interest groups requesting tax codes, employment
and trade liberalisation, Scriven said. "It is unfair to
expect any government to address all of those concerns at
But if a reform agenda were to be made public, outlining the
calendar of change anticipated to the rest of the world it
would help to better manage expectations, he said. "It would
go some way to stopping every exporter out there believing
that Myanmar is immediately going to open up to be a viable
market for them," he said.
A realistic, well-researched and patient approach to
investment in the country was vital, he said.
"There is a lot of good will on both sides and a lot of
enthusiasm on the Myanmar side to engage with would-be
investors," he said. "But the principle law should be caveat
until the feasibility of investment becomes
There remains a great deal of uncertainty as to foreign
investors’ ability to deploy capital, as well as
their ability to put investments to work in a way that has
sufficient scale and a level of predictably, he said.
BoAML’s Chua Hak Bin said that the central bank
will have to keep inflation contained and the local kyat
currency stable, amid a surge in capital inflows. "An
overvalued kyat - driven by a commodity boom - may also risk
jeopardising prospects for both the manufacturing and
agriculture sector, which generate the bulk of employment,"
Scriven likened the situation in Myanmar to that in Vietnam
two decades ago. "This is a country that has been isolated
for decades and that means business practices are also
decades removed from the rest of world, he said. "Pitfalls
must be expected."
One Yangon-based market participant said it was impossible to
know where you stood.
"You simply don't know what directive will come next or
when," he said. "The government is in such a state of
disarray that even the civil servants often do not understand
what it is that they are supposed to be doing."
"Forget the pretty pictures you've seen of the new capital
and structured appearance, the truth is somewhat different,"
he said. "Just today I was submitting an application for a
permit at one of the ministries and the guy behind the desk
told me to call back on Monday as government policy in the
mornings was different to that in the afternoon.
"He laughed, I laughed, but it was understood he wasn't
joking. There has to be clarity, and right now there isn't."
Myanmar has announced a series of reforms across the
country’s political and economic landscape in
recent weeks, in a bid to open the country to foreign
investment after years of harsh economic sanctions.
These include a
new communications law
, an updated foreign investment law
and the introduction of
, unifying up to seven different rates
used by business, government and consumers on April 1.