A well-managed Myanmar could grow its economy to $200 billion by 2030 while creating over 10,000 jobs outside of the agricultural sector. Such expansion would rely on a sustained GDP growth rate of 8%; only achievable by increasing labor production growth from its current 2.7% to 7% annually. These figures were released in a recent report by the McKinsey Global Institute, a research arm of McKinsey and Co.
Several factors potentially fuel Myanmar’s productive capacity: a work force of 46 million, an untapped economy with potential for massive growth, a market of nearly a half a billion consumers, a vast pool of natural resources, its membership in ASEAN, and its well positioned location in the Southeast Asia region.
The McKinsey report identified several possible impediments to these ambitious forecasts; notably a lack of diversification and a stagnation or slow-down of labor productivity. The projected growth rate of 8% per annum is based on 2010 levels of productivity; if 1990-2010 levels are maintained, growth would be limited to 2.5% or less.
The McKinsey report also identified four specific areas previously neglected that, if developed, could bolster growth projections. Such strategies would include: Friendly foreign investment policies to encourage direct and indirect capital inflows; encouragement of private equity foreign capital inflows in addition to more traditional FDI; a concentrated focus on growing the manufacturing sector; planning for and investing in urbanization; new policies to support small business development and create venture capital opportunities; and a better dialogue with the rest of the world.
“We have made an initial ASEAN venture capital investment in Myanmar with a company called Fumo Engineering, the sole distributor for Spyrax Sarco steam technology products for the Country. This is a growth play on factory construction and upgrades as well as scaled hotel and resort projects, all which use steam technology extensively in their infrastructure,” says Tom Kim, Co-Founder and Partner at Inspire Ventures, a Southeast Asia venture capital firm. Tom adds “Yangon is a quickly evolving city and when we visit every quarter, we notice the all the familiar signs of rapid infrastructure development. It is growing at a more rapid clip, albeit from a lower base, and this is driving investment opportunities in surprising abundance even for venture capital in Thailand and venture capital in Vietnam.”
Both the private sector and government will need to revisit current attitudes and strategies in order to hold the interest of investors. A delivery plan designed to drive implementation may be something the government would be wise to consider. The private sector would do well to develop strong ties with their foreign counterparts in order to rise to international trade quality and price standards, and to avail themselves of the foreign capital they will need to compete in the international marketplace.