A series of key economic and political reforms launched by President Thein Sein and optimistic IMF growth forecasts of 6 percent or more this year give the impression of a reforming Myanmar joining the league of highgrowth markets. US investment guru Jim Rogers hails "an astonishing opportunity," saying, "If I could put all my money into Myanmar, I would."
Rogers may have to wait a bit longer. The United States has eased sanctions, but the move was limited to the lifting of some travel bans, asset freezes, and restrictions on financial transactions. American officials have said it could take over a year to ease substantive curbs, which still ban direct investment by US companies. At the same time, the rush to examine opportunities in the resources sector, telecoms, tourism, construction, and medical equipment has already prompted critics to warn of "over-investment" in a country still struggling to introduce basic investor protection and regulatory frameworks.
Vikram Nehru, a former World Bank chief economist, warns that rushed development could be counterproductive. "A big risk is that you can have macroeconomic instability and the desire, for example, to liberalize too rapidly."
Moody's has said debt forgiveness, the removal of sanctions, and continued reform were "credit positives." Myanmar, however, remains unrated. Moody's also warned of "negatives," including inadequate infrastructure, a fragile banking sector, weak rule of law, and a history of high inflation.
Nehru, also, warned of deep-rooted problems including excessive licensing and controls that "suffocate private initiative and breed corruption," as well as tariff and non-tariff barriers that inhibit trade. The question is who to believe. Can Myanmar live up to the hype?
Crucial advice comes from U Than Lwin, vice chairman of KBZ Bank. With laws covering banking, insurance, and foreign exchange all being amended, he suggests foreign investors exercise restraint until they are complete.
This spring, vital laws on land use, labor, and pensions were passed. In the fine-tuning stage are a foreign investment law with big incentives, including eight-year tax exemptions; more liberal provisions on land leases; and a green light for foreign companies to set up on their own. Other ongoing reforms include new banking regulations, steps to develop capital markets, and a new law on special economic zones.
But the most critical reform has been the managed float of the currency, the kyat, and a push to unify its many exchange rates. The central bank sets a daily reference rate which has hovered around the starting rate of Kt818 to the dollar - far from the previous official rate of Kt6.4. The official rate was widely blamed for gross distortions in the economy and government accounts.
Foreign and local companies are already vying to overhaul Myanmar's telephone network, and other fields will open rapidly to investment. The first beneficiary is the Yangon property market, which saw prices surge on an influx of money. In Yangon's elite Golden Valleyarea, houses are selling for US$2 million or more. Elsewhere, the costs of hotel rooms and office space have soared. But the most important reform, say many analysts, is the most daunting: to overhaul the entire legal system and institute a full rule of law. A commission reviewing the country's legal framework says at least 400 bills are required. In the "new Myanmar," that may take some time.
