Our Opinion: 2016
Myanmar’s stock market : open for business
In December, I wrote about Myanmar’s economic potential. The first few months of this year have already seen significant developments to help it realize its true potential.
On February 1st, the new legislators belonging to the National League for Democracy (NLD), the party led by Myanmar’s Nobel peace-prize winning campaigner for democracy, Aung San Suu Kyi walked into the country’s new Parliament. For the first time, an elected government controls the country.
The new political landscape is clear – more than 100 of the NLD’s MPs have served time in prison for the crime of belonging to the party.
With its promise to transform impoverished Myanmar after more than 50 years of control by the army, the NLD won 80% of contested seats in November. That has created high expectations—unrealistic ones, some fear. One MP said, “people expect that the NLD will solve all their problems, but it will take at least ten years before we see real change.”
Miss Suu Kyi’s power is restrained. Despite the NLD’s landslide, the army is still powerful. It controls the home, defence and border-affairs ministries, as well as the country’s security forces and civil service. It can thus frustrate the NLD’s attempts at reform. Revising the constitution may prove even more difficult. That would require a parliamentary majority exceeding 75%. In a national crisis, as defined by the generals, the army can still legally seize control again.
Against the background of political transition, the country’s economy is transforming. Myanmar has been thinking about opening a stock market since the early 1990s. The Asian crisis and a wary military junta delayed the plans.
But as the dictatorship began to loosen its grip from 2010, gradually opening up the economy, setting up an exchange became more realistic. Two weeks ago, it finally opened, with one company being traded: First Myanmar Investment Co., a local conglomerate.
The military junta isolated the economy from the global system for decades, but it has allowed political and economic liberalisation that looks irreversible. The Asian Development Bank reckons that the country will need $80bn of investment in power, transport and technology projects by 2030 to modernise its economy.
Bolstered by a flood of foreign direct investment – thought to have jumped from zero to $8.1bn in the past six years – the economy grew by 8.5% last year. It has plenty of potential. Natural resources range from oil and gold to jade and copper. With only 3.1 million visitors in 2014, there is vast scope for tourism to expand: Thailand received 24.8 million in 2014. Its 51-million-strong, young population constitutes a huge labour pool and a big domestic consumer market. “Given its location, young population and low wages, Myanmar is perfectly positioned to develop a low-cost export industry,” says Bloomberg.
There is a long way to go. The state dominates the economy, ethnic tensions remain, and infrastructure is basic. But the government is working on allowing foreign investors access to the exchange.
In the meantime, those looking at gaining exposure to the country can do so through Asian companies who are increasing their local presence.
Alexander Wade
11th April 2016
