Myanmar is entering a phase of rapid development, despite what the western media portray, the Myanmar Government is smart and sophisticated and Aung San Suu Kyi has been a strong element in shaping the new Myanmar.

Myanmar is not a politically isolated state, they are an active member of ASEAN and enjoy close ties with China.

Myanmar is set to see an economic boom period and the Military relax investment rules, free the political process and attract foriegn investors with investment and tax incentives.

The International Monetary Fund predicts the economy will grow at a rate of some 5.5 percent for 2012. Such projections — in line with neighboring Indo-Chinese economies — are significant given the weak global outlook. But there is potential for greater, sustained growth.

Consider the country’s ample natural resources of oil and gas, as well as forestry products and minerals. Factor in a strategic location that can link China, India and Southeast Asia. Add also that Myanmar has sizeable population of some 54 million, many of whom are of working age, and eager for jobs. The economy, among the region’s poorest at present, has the potential to grow.

There are of course concerns, many of which are typical of frontier economies — like the need for infrastructure and concerns about corruption and power shifts during this political change. But Myanmar also faces special challenges.

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As Aung San Suu Kyi has started her political campaign for a parliamentary seat, Myanmar’s President Thein Sein has begun an Asia tour starting with a state visit to Singapore.

Accompanied by a high-level delegation of Myanmar business and political leaders, Thein Sein’s visit finalized an agreement for technical assistance and training in a number of key areas including finance, investment law and trade facilitation.

The current developments demonstrate the pace of change and growing confidence in Myanmar. Reaching out to Singapore also brings into the spotlight an economic dimension to the ongoing political reform.

Investors are eager to explore investments in Myanmar. Considered the last, large and untapped market in Asia, many sectors of the economy have been underdeveloped or else dominated by Chinese firms.

ASEAN — the regional group to which Myanmar belongs — wants to be supportive and so does Singapore. This goes beyond the politics of having Myanmar assume the group’s chairmanship in 2014. ASEAN’s plan for a more integrated economic community in 2015 can also gain.

Much however depends on whether sanctions put in place by the West for more than two decades are lifted. The European Union has already begun to unwind its sanctions. In Washington DC, a complex legal process is gaining bipartisan support.

There is cause for optimism, but is Myanmar ready for business and investment? Can the country follow up its current political reform with parallel reforms to the economy and boost the country’s development?

One key issue are exchange controls and currency stability. Officially, US$1 is exchanged for just 6 Myanmar kyats. But in the widespread black market, the rate currently hovers around 750 kyats and has been as high in recent years as 1250 kyats. Only with astute financial management can the country hope to liberalize its currency while maintaining macroeconomic stability.

Another issue important for businesses coming in is that investment protection laws need improvement, with stable policies to be put in place. Recall that in the mid 1990s, some companies invested in the country, anticipating its membership in ASEAN. Many investors of that period were however left stranded by circumstances and policy changes.

Another issue to watch will be the central government’s effort to settle decades of fighting with different ethnic groups. The recent cease-fire deal with the Karen is a prime example. The Karen have been active in the Dawei industrial zone in the south of the country and this is now undergoing a major overhaul worth $50 billion as a cornerstone of the government’s revitalization plan.

As economic opening moves ahead, it will be essential that gains go beyond the circle of those in power. If development is to be sustained in tandem with political reform, the government must give attention to educating and training its people, and meeting their basic needs, such as housing.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com

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Posted by Shayne Heffernan on Feb 7th, 2012and filed underAnalysis, ASEAN News, Asia, Emerging Markets, Heffernan Capital Management, Latest News, Research, Shayne Heffernan.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.