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Derek Tonkin: Nikkei Asian Review - 18 November 2015

The writer takes a hard look at investment prospects in Myanmar in the wake of the elections and concludes:

"In the coming months, the U.S. administration will be paying very close attention to Myanmar's transition. It might be hoped that, by way of encouragement and even before the end of 2015, the administration could give an earnest indication of its intention to soften restrictions.

"In the past, the U.S. faithfully heeded the tough line that Aung San Suu Kyi took on sanctions, but this has already long ceased to be NLD policy. If her new administration is to succeed, the U.S. will need to provide practical support over business finance and investment flows. President Barack Obama has the power to issue executive orders waiving congressional legislation, but whether he is willing to use it with U.S. elections next November remains to be seen.

"The U.S. would surely not wish to be seen to be primarily responsible for any stagnation in business and investment in the nascent democracy that Myanmar now represents."

Global Witness - October 2015

This 12-month investigation reveals an industry far bigger than previously thought, worth up to US$31 billion in 2014 alone. That is equivalent to nearly half the GDP for the whole of Myanmar, but hardly any of the money is reaching ordinary people or state coffers.

Instead, the sector is secretly controlled by networks of military elites, drug lords and crony companies associated with the darkest days of junta rule. 

Derek Tonkin writes: If only half of what Global Witness says is true, that would confirm the futility of the economic sanctions imposed by the West against Myanmar, or any threat of reimposition.

Press Release IMF - No. 15/428 - 18 September 2015
Myanmar’s economic growth remains strong, but macroeconomic imbalances have increased significantly over the past year. Real GDP growth for fiscal year (FY) 2014/15 (April-March) is estimated to have reached 8.5 percent, while inflation rose to 8 percent (y/y) in May, up from 4 percent in October 2014, reflecting mainly strong domestic demand. The fiscal deficit increased to 3 percent of GDP in FY 2014/15, while credit to the private sector continued to grow strongly at 35 percent (y/y) in March, albeit lower than in FY 2013/14. The current account deficit widened to over 6 percent of GDP, largely reflecting a rapidly rising trade deficit. The official reference exchange rate came under strong downward pressure and depreciated by about 20 percent from Sept 2014 to July 2015. At end-March 2015, the Central Bank of Myanmar’s (CBM) foreign reserves covered around 3 months of imports.
The Myanmar economy is set for strong growth this year amid signs of overheating. The economy is expected to grow by 8.5 percent, reflecting strong growth momentum and expansionary macroeconomic policies. The projected increase in the fiscal deficit in the FY 2015/16 budget will provide an expansionary stimulus and contribute to strong credit growth and a rising current account deficit. With higher deficit anticipated, CBM financing of the deficit is likely to remain significant while credit growth is expected to accelerate. As a result, inflation is expected to rise further in FY 2015/16 and the current account deficit to widen.
IMF Press Release - 1 July 2015
Extracts: Economic growth is expected to remain strong in FY 2015/16, at 8.5 percent, led by strong domestic demand. The increased fiscal deficit in the FY 2015/16 budget and continued monetization of the deficit will contribute to strong demand and credit growth. Together with continuous release of pent-up demand, inflation may rise further in FY 2015/16 and the external current account deficit is expected to widen further.....

A tightening of monetary and fiscal policies will be required to contain inflationary pressure and anchor exchange rate expectations. This policy move should be supported by prompt introduction and vigorous enforcement of prudential standards in the banking sector to slow credit expansion and reduce financial sector risks.
Oxford Business Group - 27 April 2015
A new budget signalled major funding boosts in Myanmar for the power and education sectors, both of which have been identified as structural weaknesses in the economy.

The Ministry of Electrical Power was a key recipient under the MMK20trn ($18.5bn) budget for 2015/16, which came into effect on April 1. According to local media, the ministry plans to spend MMK2.5trn ($2.3bn), including foreign loans, to improve electricity supply and distribution, making it the fourth-largest spender behind the finance, energy and defence portfolios. Since 2011, the ministry's budget has increased from MMK40.9bn ($37m) to MMK87.7bn ($81.3m), during which time capacity has risen from 1591 MW to 2300 MW.

Spending on education rose to just under MMK1.4trn ($1.3bn), up from MMK1.1trn ($1bn) last year, with some of the funds to be set aside for hiring an additional 50,000 teachers. In a separate move, the country's free schooling system will be extended to include higher education this year, in a bid to boost the number of graduates entering the workplace. The budget also approved resources for university stipends and scholarships as well as financial support for students attending technical institutions, as part of a push to boost take-up of vocational courses.

While Myanmar's economy is expected to perform strongly in the fiscal year 2015/16, with the ADB projecting GDP growth of 8.3%, advances will be offset by higher inflation. Consumer prices are forecast to reach as high as 8.1%, according to government data, compared to an ADB estimate of 8.4%, up from 6.5% in the last fiscal year.

The World Bank -24 March 2015 

Access to finance is the top constraint for private enterprises as Myanmar’s economy undergoes market-oriented reforms after emerging from decades of isolation, and addressing this and other challenges will help create a strong private sector to drive the country’s future growth and create much-needed jobs, the World Bank Group’s first Investment Climate Assessment report in Myanmar finds.

Among more than 1,000 foreign and domestic non-agricultural businesses interviewed in the report, merely 1 percent of fixed-asset investment costs are financed by bank borrowing, while 92 percent of firms rely on their own funds – a percentage higher than that of any other comparable country. Difficulties in getting land-use rights, power outages, and inadequate workforce skills are other main barriers to business operation and growth in Myanmar.

AFP - 24 March 2015

The Asian Development Bank Tuesday predicted economic growth in Myanmar will surge by over eight percent for the next two years as it urged the nation to press on with reforms before landmark elections.

Myanmar, which has implemented broad economic and political changes since a half-century of military rule ended in 2011, is expected to see output grow from 7.7 percent in the 12 months to March to 8.3 percent in the 2015 fiscal year, the ADB said. It estimated that gross domestic product (GDP) growth in the fiscal year 2016 would "remain close to this pace".

Statement at the end of the IMF Staff Visit to Myanmar
IMF Press Release - 11 February 2015
The IMF team reports that real GDP growth is expected to decelerate slightly to 7.8 percent in fiscal year (FY) 2014/15 (year ending March) from 8.3 percent in FY2013/14 due to slower growth in the agricultural sector. Inflation is expected to pick up to around 6 percent year on year (y/y) in FY2014/15 from 5.8 percent in FY2013/14. 

The recent kyat depreciation is primary driven by the global strengthening of the U.S. dollar and a widening external current account deficit. The trade deficit increased to 5.5 percent of GDP in December 2014 as imports grew by 25 percent y/y for the period April-December 2014 while exports growth remained flat. Against this background, the CBM’s net international reserves fell to US$4.5 billion at end-December. Credit to the private sector continued to grow rapidly at 36 percent y/y in November.

“The growth outlook of the Myanmar economy remains favorable over the medium term, but downside risks for the near term have increased. Read on....

Gearing up for Burma's new Stock Exchange
Democratic Voice of Burma - 12 January 2015
Applications for licenses to practice on the Yangon [Rangoon] Stock Exchange (YEX), set to open in October 2015, have been given the go-ahead by the Burmese Securities and Exchange Commission (SECM) by Maung Maung Thein, Deputy Minister for Finance and Revenue and SECM Chairman. “We are ready to start it on October,” Maung Maung Thein said. “The Securities Exchange Commission will issue licences to the stock companies. It will be happen two or three months later.”

Underwriting, dealing, brokerage and consultancy businesses will be able to apply for the licenses, with certification costs ranging from 7 billion kyat (US$ 7 million) to 30 billion kyat, depending on the type of business. Licenses will be on sale from 19 January, with submission of applications closing on 27 February.These service providers will be able to undergo joint ventures with foreign companies in the drive to successfully establish the fledgling stock market.

Financial and Economic News from Mizzima

IMF Press Briefing on Asia-Pacific
IMF Press Release - 10 October 2014

Extract: "Myanmar is the one country that at this moment our Asian Pacific Department is very heavily engaged and with very close collaboration. So we actually are working very closely with the government. Regarding your question about foreign bank cooperation we are advising them that before the enactment of the foreign bank operation law and before the system is built, we are recommending them to review and allow them to start their operations. So even though the many, you know, the nine foreign banks got their license, probably it will take a little more time for Myanmar to prepare their system and then start operations."

On September 24, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Myanmar.

Growth is accelerating and the external balance remains stable. Output growth is estimated to have risen to 8¼ percent in fiscal year (FY) 2013/14 (April-March). Inflation has broadly stabilized, and stood at 6 percent (year-on-year) in April 2014. 

International reserves held by the Central Bank of Myanmar (CBM) increased to US$4.5 billion by end-March, covering 2¾ months of prospective imports. While the base remains low, broad money and private sector credit continue to grow rapidly, at 32¼ and 58½ percent (y/y), respectively in February. The headline fiscal deficit in 2013/14 is estimated at 1½ percent of GDP. A debt sustainability analysis indicates that Myanmar is now at a low risk of debt distress.

The economic outlook is favorable. Growth is expected to average 8¼ percent in the next few years, led by rising gas production and investment. Inflation is expected to remain under control at around 6 percent over the medium term. The current account deficit is projected to remain broadly stable, while the CBM’s international reserves are forecast to continue to increase rapidly as foreign inflows intensify. 

Medium and long-term prospects remain strong, but require sustained policy and institutional reforms even as the authorities’ capacity is being strained. 

ADB predicts GDP to grow to 9.5% by 2030
Global Post/Xin Hua - 12 September 2014
The Asian Development Bank (ADB) has predicted that Myanmar will see annual average gross domestic growth (GDP) as high as 9.5 percent by 2030, according to a new report of the regional institution available here Friday.

The country will reach a per capita income of nearly 5,000 U.S. dollars by 2030 from about 900 U.S. dollars now.

However, the forecast growth calls for full realization of the country's economic potential and the need to ensure infrastructural development and investment in human capital and education, stressed Cyn-Young Park, ADB assistant chief economist, in the bank's launch of its new report on Myanmar's growth prospects.

"Myanmar must upgrade its infrastructure and improve the quality of human capital to achieve sustainable economic growth and reap the full benefit from its ambitious reform agenda," the report said.