What has been the best-performing Asian economy of 2011? Is it China? Or maybe Singapore? Incredibly, on some measures, Burma tops the list. This once destitute and still desperately poor country attracted $20 billion (€14.7 billion) worth of foreign investment pledges in the year to March. Its currency has been 2011’s best global performer, strengthening by one-third against the dollar.
The political reforms that have been gathering pace in Burma since 2010 partly account for this sudden upswing in foreign interest, while the newfound wealth of China ploughing investments into Burma accounts for much of the rest.
In business terms, the true extent of Burma’s isolation has long been overstated. Western sanctions never kept out multinationals like Chevron and Total, while China, India, Thailand and Singapore have always done business there. But clearly many Western companies put off until now by the country’s dreadful reputation will be re-examining the Burmese business case. Indeed, for plenty of companies, Burma, with a population approaching 60 million, will be the biggest market where they have no presence. From that perspective, the pariah is starting to look very much like the prize.
Unfortunately, if it looks too good to be true, then it probably is. Look more closely at that $20 billion of foreign investment and you find that virtually all of it is earmarked for just two sectors; resource extraction and power generation. These are seller’s markets. Burma has the natural resources to attract foreign buyers. But other sectors such as tourism, agriculture and manufacturing, despite growth potential, remain no-go areas for foreign firms as uncertainty lingers over the country’s political direction and its financial stability.
To really turn their country around, the Burmese government must figure out how to pull foreign cash and expertise into these languishing sectors of their economy. Further political reform will help. Burma is like a serial offender that only yesterday promised to go straight. So the international community needs to see genuine, lasting progress if it is to regard Burma as a credible partner. The government has also begun reforming its business policies to encourage foreign investors, enabling them to own land, for example. But much more sweeping liberalisation of an economy still dominated by cronies of the old military regime still needs to occur.
So, for the time being, the bottom line is that if you want to develop one of Burma’s gas fields or build a hydroelectric dam across the Irrawaddy river, someone has already beaten you to it. And if you want to build a factory or set up a plantation, Burma won’t be anywhere near the top of your list.