This document provides an overview of the political and economic developments in Myanmar. Politically, Myanmar has transitioned to a civilian government in 2011 after decades of military rule. Key political milestones include Aung San Suu Kyi's landslide victory in the 2012 by-elections and the suspension of most sanctions by the EU and US. Economically, Myanmar remains one of the last frontier markets in Asia, but it is rich in natural resources and undergoing reforms. Geopolitically, Myanmar is strategically located between China and India, and its political opening could shift regional trade routes and make it a hub for energy and trade.

1. 1
Myanmar Basic Country Study
Prepared by Finpro Malaysia
March 2014

2. 2
TABLE OF CONTENTS
P3 INTRODUCTION
P4 POLITICAL DEVELOPMENT
P4 GENERAL OVERVIEW
P5 THE GEOSTRATEGIC FACET
P6 THE REFORM PROCESS
P6 POLITICAL RECONCILIATION
P7 THE BY-ELECTIONS
P7 THE LEGISLATION
P8 BUREAUCRACY
P9 FREEDOM OF EXPRESSION
P10 ECONOMIC DEVELOPMENT
P10 GENERAL OVERVIEW
P13 ECONOMIC REFORMS
P15 POPULATION
P17 EXCHANGE RATE
P17 FOREIGN DIRECT INVESTMENTS
P21 MYANMAR BUSINESS OVERVIEW
P21 NATURAL RESOURCES
P21 MAIN INDUSTRIES
P23 TRADING PARTNERS
P24 INVESTMENT PROGRAMS
P25 MATURITY/DEVELOPMENT PHASE
P26 INTELLECTUAL PROPERTY
P27 SUB-AREAS/CITIES & LEADING ECONOMIES
P30 DOING BUSINESS IN MYANMAR
P30 INFRASTRUCTURE
P32 PEOPLE & SOCIETY
P33 LOGISTICS & TARIFFS
P34 CORRUPTION
P35 FACTORS FOR DOING BUSINESS
P36 COUNTRY RISK ANALYSIS
P36 COUNTRY RANKINGS
P39 OUTLOOK
P41 APPENDICES
P41 SOURCES
P44 LIST OF ABBREVIATIONS
P45 MAP OF MYANMAR

3. 3
INTRODUCTION
Recent political developments have pushed Myanmar on the path of the 21st century
with governments and businesses in Asia and the West closely monitoring the reform
process. The most recent milestone of the reform process has been the by-elections
on 1 April 2012, which were considered a great success and a major step towards
progressive developments in Myanmar. The election result did not just give a window
of opportunities to Myanmar's opposition leader Aung San Suu Kyi. It also provided a
chance for the international business community to participate in the newly
developing market after more than a decade of sanctions.
Myanmar1
is arguably the last economic frontier in Asia. For decades, the country's
economy was outperformed by its neighbours. Every private, semi-government and
government sector is decades behind in development when compared to Myanmar’s
peers in ASEAN. What sets Myanmar apart from other underdeveloped nations in
Asia is the fact that the country is rich in resources such as vast oil and gas reserves,
hydropower, minerals and timber, located mainly in the ethnic minority regions.
Myanmar also has a large, relatively young population representing potential
domestic demand and competitive labour. Due to the “remarkable progress”
culminating in the by-elections, the EU and the US did suspend most sanctions,
keeping the arms embargo in place.
With the suspension of the sanctions, the country's growing attractiveness has led to
a noticeable hype by foreign investors and in media coverage that can be found in
many investment reports and press releases. While Myanmar offers considerable
investment opportunities, significant challenges will remain in the short and medium
term. On the other hand, long-term investors might find attractive rewards.
This Basic Market Study examines the significant political and economical
transformation processes now taking place in Myanmar, providing perspectives on
the recent developments, the current reforms and the opportunities and challenges
resulting for foreign companies and investors. Topics covered are the Political
Development, Economic Development, Myanmar Business Overview, and Doing
Business in Myanmar.
1
In 1989, the government of Burma changed the official name of the country from the Union of Burma
to the Union of Myanmar. In 2010, the name was officially changed to the Republic of the Union of
Myanmar. In 2005 the government was relocated from Yangon to the new capital Naypyidaw.

4. 4
POLITICAL DEVELOPMENT
GENERAL OVERVIEW
Myanmar gained its independence from Great Britain in 1948. The country is home to
more than 135 ethnic groups, some of which are situated in areas known to hold
most of Myanmar's valuable natural resources. Post-colonization and the issue of
ethnic minorities' separatist aspirations were the main reason for a coup d’état by
General Ne Win in 1962, which brought the Revolutionary Council to power,
centralised control and nationalised the economy. Ne Win, failing to bring prosperity
to Myanmar, turned the country from Southeast Asia’s richest nation into its poorest.
The military became the most powerful institution in the country with strong influence
in the economy and on society.2
By 1988, the "military-crony economy" was removed
following nationwide demonstrations, known as the 8888 Uprising that brought down
Ne Win's regime and replaced it with a liberalised economy. The new economic
system was still dominated by military entrepreneurs with a lack of clear demarcation
between government-owned businesses and private enterprises.
The EU and the US had imposed sanctions on Myanmar since 1989 in response to
serious human rights violations. This stands in sharp contrast to China and other
neighbouring countries that have maintained close trade relations. The sanctions
have led to international isolation as the regime failed to achieve objectives of
restoring democracy.
The multiparty elections in 1990 saw a decisive victory for the National League for
Democracy (NLD), the opposition party led by Aung San Suu Kyi that won 80% of the
seats. The military-backed party, the Union Solidarity and Development Party
(USDP) had, in contrast, a mere 2% of the vote. The State Law and Order
Restoration Council (SLORC) imposed martial law, refusing to validate the election
result and to relinquish power. The monk-led protests in September 2007 were the
largest against the regime since 1988, but they did not lead to change. A new
constitution was revealed in April 2008, outlining the "road to democracy" that
ensured the military's retention of power in a nominally democratic system after
parliamentary elections were held in 2010; reserving for the military a quarter of seats
in the parliament and a further 58% held by the military-backed USDP.3
The military
regime, renamed in 1997 to the State Peace and Development Council (SPDC), was
formally dissolved on 30 March 2011. The former head of state, General Than Shwe,
was replaced by Thein Sein, the first civilian president of a new, nominal civilian
government in nearly 50 years.4
This political change was possible mainly due to the 'retirement' of General Than
Shwe and his deputy Maung Aye, leading the path for former General Thein Sein to
become president. To somehow keep a power balance between the parliament and
the military, Than Shwe has chosen as his successor General Aung Hlaing, who
does not enjoy the implicit support from the military, which prevents him from gaining
absolute power.
2
Bünte 2011: 5.
3
The USDP won 884 out of 1,154 seats.
4
Twenty-eight of 35 high level cabinet ministers are former military officers, holding key positions in
the new government.

5. 5
Sources: CIA World Factbook
Cambodia Philippines Malaysia Vietnam Thailand Myanmar
The visit of Hilary Clinton in December 2011 marked the turning point in international
relations for Myanmar and was considered an acknowledgement of the reform
process. This culminated in the highly anticipated parliamentary by-elections on 1
April 2012 in which the opposition leader and Nobel Peace Prize winner Aung San
Suu Kyi had a land slide victory. The country has ever since found itself in a
transitional phase, often referred to as the "Myanmar spring".
THE GEOSTRATEGIC FACET
Myanmar, one of the largest countries in Southeast Asia (SEA) at 676,578 km2
(See
Figure 1) sits strategically at the intersection of the two major emerging economic
players: China and India. Its opening is politically and economically significant due to
its geostrategic location, which has shifted the region’s trade routes. With direct
access to the Andaman Sea and the Bay of Bengal where the major shipping lanes
pass through the Indian Ocean, Myanmar lies at a crossroads and might well develop
into a crossroads itself. As soon as Myanmar's infrastructure sector has been
sufficiently developed, the country will unroll trade routes in all directions and turn
into an energy and natural resource hub, connecting the Indian subcontinent, China
and Southeast Asia. As Myanmar's border states are mostly inaccessible, the country
remained isolated and thus has one of the world’s largest remaining virgin
rainforests. Myanmar's political opening and economic development will probably
change this geopolitical fact.
Figure 1: Country Size (area in sq km)
Influence of the near economies
Myanmar's relation to its neighbouring countries has been mainly peaceful, despite
tensions with Thailand due to border conflicts caused by drug trafficking, refugee
movements and ethnic conflicts in the Karen state.
Profiting from sanctions imposed by the West, China has the strongest influence in
the country and some even consider Myanmar a "Chinese province". But the
economic overreliance on China has led to growing concerns over Beijing’s resource
extracting strategy in Myanmar. For his inaugural visit, the new Myanmar
Commander in Chief, Min Aung Hlain, has, interestingly enough, chosen Vietnam, a
country bearing historically similar reservations about China. Despite these tensions,
China will most likely remain a very important ally, having close political and
economic links. Indeed, Kunming, in the Chinese province Yunnan, could turn into
another transit hub for Southeast Asia, as rivers and rail routes from Myanmar, Laos
and Vietnam converge. China sees Myanmar as having an increasingly important
role in its energy security, not just as a direct resource exporter, but also as a transit
country for planned gas and oil pipelines that will connect the Chinese province

6. 6
Yunnan with the Golf of Bengal: a much desired alternative route to the US-patrolled
Malacca Strait, through which 80% of China's crude oil imports are being transported.
Other players other than China are quickly positioning themselves, trying to increase
their influence in Myanmar. India, too, has already signed several agreements on
strengthening economic ties, focusing on direct highway, rail and shipping links as
well as resource extraction.5
India is already constructing an energy hub in Sittwe on
Myanmar's coast that will provide India with offshore natural gas sent northwest
through Bangladesh. During a previous visit, the Indian Prime Minister Manmohan
Singh offered a USD 500 million credit to further develop Myanmar’s infrastructure
sector.
The Association of Southeast Asian Nations (ASEAN) community, which Myanmar
joined in 1997, has long considered Myanmar as tainting the organisation’s
reputation. With Myanmar being confirmed as the chair of ASEAN in 2014, the
country is on the verge of a new approach within the SEA region and will need to
continue to open up politically. ASEAN itself has had a strong influence in the
country's political opening and has a unique opportunity to play an important role in
shaping the transition by providing technical assistance to the government.
THE REFORM PROCESS
In his address to the Union assembly on 1 March 2012, President Thein Sein
outlined both the government’s achievements and its commitment to achieving
"genuine democracy". The extent of the president's ambitions to further pursue
fundamental political change and his commitments towards social reforms and the
rebuilding of the economy were striking and not only to the Western community. The
speech was very well received across the whole political spectrum, and it covered all
essential issues from the political process, economic change and ethnic minorities to
day-to-day matters on the ground.
The government's overall ambition to reform the country has put Myanmar on a new
path towards democracy, greater prosperity and peace, but the speed and the extent
of the reforms have also raised questions about the sustainability of the transition
process, as some laws have been rushed through without sufficient knowledge and
advice. Considering Myanmar’s current lack of institutions, Western institutions and
international companies remain a valuable source of advice on global best practices.
POLITICAL RECONCILIATION
President Thein Sein met with the opposition leader of the NLD, Aung San Suu Kyi in
August 2011 to agree on a common path towards positive change. This was probably
the most visible example of political reconciliation: the head of state beside the most
prominent opposition voice, debating further democratisation, economic reforms and
social justice.
Amendments to the electoral legislation laid the groundwork for the NLD to become a
legally registered political party and for Aung San Suu Kyi to return to the formal
political landscape. The majority of political prisoners were granted amnesty,
including prominent figures like Min Ko Naing, who took part in the 1988
5
Gottipati 2012.

7. 7
demonstrations, as well as Ashin Gambira, the leading figure of the 2007 monk-led
demonstrations. This was an essential step, as numerous NLD members and other
opposition parties had been serving prison sentences. On 5 January 2012, the NLD
became a legally registered party for the first time in over twenty years with Aung
San Suu Kyi as its chairperson, The president also extended an invitation to political
activists living abroad to return home from exile. Prominent figures like Harn
Yawnghwe, head of the Euro-Burma Office and son of Myanmar's first president
accepted this offer and returned.
After over six decades of civil war, remarkable progress was made in reaching
preliminary ceasefire agreements with nearly all of Myanmar's armed ethnic groups.
THE BY-ELECTIONS
On 1 April 2012, by-elections were held for 45 vacant seats: 37 in the lower house,
six in the upper house, and two in regional legislatures. Union Solidarity and
Democratic Party (USDP) legislators had vacated these seats after being appointed
to executive positions, such as ministers and deputy ministers, as stipulated by the
constitution.
Of the 17 political parties competing in the by-elections, the NLD, which had
boycotted the 2010 elections, emerged with 43 out of 45 seats, including one for
Aung San Suu Kyi, who made her first formal entrance into government. This makes
NLD the second largest opposition party in the national legislature behind the Shan
Nationalities Democratic Party, which holds 22 seats in the Union Assembly. The
USDP secured only one seat, for which there was no NLD candidate. The landslide
victory of the NLD can be interpreted as a demonstration of the popular support for
Aung San Suu Kyi and gives her a clear mandate as "the voice of the people" in the
legislature.
Even though the by-elections did not have the potential to shift the power balance in
the legislatures, which is still dominated by the USDP, they were considered a
milestone in the path to political reconciliation and a more peaceful and democratic
transformation.6
International response was invariably positive and resulted in many
Western governments lifting sanctions.
Although opposition parties won nearly all available seats, only a relatively small
percentage of seats were at stake. The real test of the willingness for deviation from
the political establishment will be the next general elections, scheduled for 2015.
THE LEGISLATION
The new constitution that came into force in 2011 implemented a bicameral national
legislature system with an upper house ("Amyotha Hluttaw") and a lower house
("Pyithu Hluttaw"), which can act in joint sessions in the Union Assembly
("Pyidaungsu Hluttaw"). In the upper house, a total of 224 seats are available, 168 of
which are directly elected and 56 of which are appointed by the military. In the lower
house 330 out of 440 seats are directly elected and 110 are reserved for the military.
6
The 37 vacant seats in the lower house represent 11% of the elected seats in that chamber. The six
seats in the upper house represent less than 4% of the elected seats.

8. 8
There are 14 regional assemblies, and all parliamentary members serve a five-year
term. The judicial branch, based on the British legal system, is not entirely
independent from the executive power and represents a mix of both English common
law and customary law.
Apart from the president, regarded as the key architect of the reforms, legislators
have emerged as strong supporters of the reforms. Shwe Mann has become a
leading reformer, having taken advantage of his influence as Speaker of the lower
house. Looking at the history of Myanmar's military rule, however, many strong
personal rivalries linger within the government. The most significant one can be seen
between Thein Sein and Shwe Mann. Both are among the strongest supporters of
the reforms, but Shwe Mann is one of the strongest contenders for the presidency.7
Despite this internal power struggle, Shwe Mann would probably not challenge the
broader reform process. Debates of legislators on making of laws are said to be
remarkably dynamic and there seems to be a consensus among the military that is
supportive.8
The continued momentum of the reforms seems irreversible given its
significant progress.
Currently a whole set of new laws and regulations are in the pipeline. The priorities
under the new government are to legislate democratic rights and to rebuild the
economy.
Key pieces of legislation that have been adopted are:
 Foreign Investment Law Amendment Bill
 Virgin Land Management Amendment Bill
 Union Budget Bill
 Condominium Law
 The Law Relating to Peaceful Gathering and Peaceful Processions
 The Labour Organisation Law
BUREAUCRACY
Reversing the political direction of Myanmar while simultaneously reforming the
economy and pursuing a peace process with over a dozen separate armed groups is
an enormous challenge. Initially, the public administration has very few people with
the skills and vision to lead the process, with the result that a small number of
individuals are faced with an enormous work-load.
Inevitably, in the beginning of the reform period, ad hoc and inadequately informed
decision making was the order of the day. However, with the Framework for
Economic and Social Reform (FESR) put in place, which sets out policy priorities
until 2016 and also the guiding principles for longer-term development plans, there is
a pathway of development to be followed by the bureaucracy. The priorities of the
FESR have effectively become the reference point for decision making process in the
bureaucracy, as also the implementation of the reforms.
7
Given the poor health condition of Thein Sein, the president might not run for a second term. The
opposition leader Aung San Suu Kyi will not be able to run for president, as her children are British.
The constitution would have to be changed for her to be able to run, which would require the support
of 75% of the legislature followed by a referendum.
8
International Crisis Group 2012: 3.

9. 9
There are several visible structural changes in transforming the Myanmar
bureaucracy into a development agent. The reorganizing and restructuring of
Myanmar’s Ministries in 2012 was a first right step in this direction.
FREEDOM OF EXPRESSION
In addition to the introduction of new laws on economics and legislation, the
government took a number of steps to strengthen freedom of expression. The
Myanmar National Human Rights Commission was established, aiming to meet the
Paris Principles for national human rights institutions.9
Another important step was
allowing Internet users unrestricted access to most websites with political content. In
September 2011, the government lifted restrictions on 30,000 blocked Internet sites,
such as international and banned media as well as on sites such as FaceBook,
Twitter, YouTube and others.10
As part of a new media law that was drafted, censorship of the print media was
likewise relaxed. In December 2011, around 50 publications, mainly business
magazines were permitted to publish without submitting their articles beforehand to
the censorship board. About 200 entertainment publications received similar
permission.
9
The Commission received more than 1,000 complaints in 2011 within the first three months of its
operation. Certain issues, including the independence of the commission itself and the handling with
cases that involve military officials, are yet to be confirmed.
10
Sites with pornographic content remain blocked.

10. 10
ECONOMIC DEVELOPMENT
GENERAL OVERVIEW
Myanmar is steadily reducing its rigid trade policies to attract foreign funds with the
hope of shaping its economy and competing with its much more developed
neighbouring countries. Despite the existence of valuable resources, Myanmar ranks
among the least developed countries in the world with a GDP per capita of USD
1,600 (2012) (See Figure 2). But Myanmar does not lack money. The government
receives about USD 3 billion from its gas reserves, allowing its foreign currency
reserves to be valued at over USD 7 billion.11
The development of the planned gas
and oil pipelines will further increase these revenues.
Figure 2: GDP per capita (PPP) (in USD)
Despite recent growth in tax revenues in 2010, there was also an increase on the
government's debt stock, leading to a rapidly increasing budget deficit. In recent
years, the government has financed part of its fiscal deficit through treasury bond
issues, rather than relying on money creation alone to finance the fiscal gap. As a
result, the inflation rate fell significantly from over 30% in 2007 to 1.5% in 2012 (See
Figure 3). Myanmar’s GDP growth rate significantly increased from 5.3% in 2010 to
6.8% in 2013 (See Figure 4).
11
Biron 2012b.
(Note: data are in 2012 US dollars)
Sources: CIA World Factbook

11. 11
Figure 3: Inflation rate (consumer prices) (%)
Figure 4: GDP - real growth rate (%)
The economy relies mainly on the agriculture sector, which accounts for the majority
of the labour force, but contributes only 44% to the GDP in 2010 (See Figure 5). In
contrast, other countries have shifted towards industry and services during the last
four decennia.
Sources: CIA World Factbook
(Notes: e = estimate; f = forecast; GDP measured in
constant 2010 US dollars)
Sources: Worldbank

12. 12
Figure 5: Sector share of GDP (%)
The main export goods in 2010 were gases (38.5%), precious stones (24.4%),
vegetables (11.7%), and wood (7.3%) (See Figure 6).
Figure 6: Top 10 export commodities (2010) (%)
a. Petroleum gases and other gaseous hydrocarbons
b. Precious stones (other than diamonds) and semi-
precious stones
c. Dried leguminous vegetables, shelled, whether or
not skinned or split
d. Wood in the rough, whether or not stripped of bark
or sapwood
e. Fish, fresh or chilled, excluding fish fillets
f. Natural rubber, balata, gutta-percha, guayule, chicle
g. Rice
h. Men's or boys' suits, ensembles, jackets, blazers,
trousers
i. Crustaceans, whether in shell or not
j. Men's or boys' shirts
k. Others
Myanmar Indonesia Thailand Malaysia Philippines China South Korea
Sources: World Development Indicators, World Bank; Myanmar in 2010, Central Statistical Organisation,
Myanmar; McKinsey Global Institute analysis
Sources: UN Comtrade

13. 13
The main import goods in 2010 were Petroleum oils (21.9%), heavy equipment
(4.7%), Marine equipment (4.1%) and palm oils (4.0%) (See Figure 7).
Figure 7: Top 10 import commodities (2010) (%)
a. Petroleum oils, other than crude
b. Self-propelled bulldozers, angledozers, graders,
levellers, scrapers
c. Light-vessels, fire-floats, dredgers, floating cranes
and other vessels
d. Palm oil and its fractions
e. Medicaments
f. Woven fabrics of synthetic staple fibres
g. Polymers of propylene or of other olefins, in primary
forms
h. Tubes, pipes and hollow profiles, seamless, of iron
(other than cast iron)
i. Portland cement, aluminous cement, slag cement
j. Structures (excluding prefabricated buildings)
k. Others
ECONOMIC REFORMS
Pace of economic reform
Transforming the economy is probably the biggest task at hand. The economic
reform process has proceeded at a much slower pace than political reforms. This is
partially due to the absence of reliable economic data, a lack of transparency, weak
institutions and limited technical capacity. Key reforms include a series of tax
reforms, an increase in state pensions, regulatory framework for foreign investment
and a currency reform to manage the kyat exchange rate to a realistic level. To
encourage trade, the government cut the export tax from 10% to 2% in 2011 and
privatized several state assets in 2010, including an airline, gasoline stations, public
buildings and rice distribution operations in order to liberalise the economy.
Sources: UN Comtrade

14. 14
Constraints to economic reform
Four immediate constraints need to be addressed as priorities for economic reform
and to help sustain growth:
1. The inadequate infrastructure and frequent power shortages are the primary
reason for an increase in production costs, making Myanmar uncompetitive
even where it has a comparative advantage.
2. Secondly, the excessive licensing and controls, which limit private initiatives,
are a breeding ground for corruption and nepotism.
3. The tariff and non-tariff barriers also increase the cost of trade and restrain
trade of goods and services.
4. And last, but not least, the inadequate kyat exchange rate distorts any
accurate macroeconomic data and has led to the establishment of a black
money market.
Myanmar's black market economy
Little information as to the extent of Myanmar's black market economy is available.
What is certain is that it has existed for decades and has established its own
networks between the legal and illegal economies, entrenching it in Myanmar's
society. It has been estimated that the black market economy is three to five times
larger than Myanmar's legal economy.12
Role of international financing institutions
Asian Development Bank (ADB)
Myanmar joined the Asian Development Bank (ADB) in 1973. ADB’s last loan
projects for Myanmar were approved in 1986. Since the general elections in 2010,
Myanmar has undertaken significant political and economic reforms. As a result, the
international community has resumed reengagement with the country. In 2012, ADB
developed a road map toward resumption of normal operations. The activities
included initial assessments of the economy and of key sectors, provision of
technical assistance projects, and development of an interim country partnership
strategy for 2012–2014.
ADB’s interim country partnership strategy for 2012–2014 seeks to support the
government in achieving sustainable and inclusive growth. It focuses on (i) building
human resources and capacities (capacity building in ministries in core areas of ADB
involvement, and education); (ii) promoting an enabling economic environment
(macroeconomic and fiscal management; and trade, investment, financial sector
reform); and (iii) creating access and connectivity (rural livelihoods and infrastructure
development, especially energy and transport).
In January 2013, the Asian Development Bank announced a new USD 512 million
loan for Myanmar.
The World Bank
After a nearly 25 year absence, the groundwork for re-engagement in Myanmar was
laid when the Bank’s Board of Executive Directors endorsed an Interim Strategy for
Myanmar in November 2012, reaffirming support for Myanmar government reforms to
improve the lives of the people of Myanmar.
12
Shwe Gas Bulletin: 2005: 6. Other figures estimate the volume of the black market as 70-80% of the
total output (2010).

15. 15
In January 2013 the World Bank’s Board approved the Myanmar Reengagement and
Reform Support credit in the amount of USD 440 million. This credit facilitated the
clearance of arrears to the World Bank, thereby paving the way for resumption of a
full partnership to pursue Myanmar’s development objectives. In addition to helping
Myanmar clear its debts to creditors, this credit is supporting critical reforms needed
to strengthen macroeconomic stability, improve public financial management and
improve the investment climate.
POPULATION
Myanmar’s population size was a bit more than 52 million people in 2012, of which
the largest part is living in rural areas. In 2012 33.2% of Myanmar’s population lived
in cities. By comparison, only Cambodia, Vietnam and India had lower urbanisation
rates in 2012 (See Figure 8).
Figure 8: Urban population (% of population)
Aside from the two large cities Yangon and Mandalay, only eight cities in Myanmar
have reached population levels exceeding 200,000, compared with 32 such cities in
Thailand and 16 in Vietnam. Figure 9 gives an overview of Myanmar’s cities, which
are mostly concentrated in the Delta and the Dry Zone, and cities close to Yangon
and Mandalay are growing fastest.
Sources: United Nations Escap

16. 16
Figure 9: Myanmar cities with 50,000 inhabitants or more,
by population and population growth
Sources: McKinsey Global Institute analysis

17. 17
EXCHANGE RATE
Regulation of the exchange rate of the kyat, Myanmar's national currency, was a
long-overdue concern. For more than three decades, government officials have kept
a multiple exchange rate system in place, pegging the kyat to an official exchange
rate of 6.4 kyat to the USD. While the official rate was tremendously overvalued, it
left the country's black market rates floating at approximately 800 kyat to the USD.13
Such a discrepancy between the two rates created a huge obstacle to doing
business and was a source of widespread governmental corruption. Several different
exchange rates were in use for different purposes, such as the calculation of import
duties and the conversion of foreign exchange revenues. In April 2012, the beginning
of the Myanmar fiscal year, the authorities began a managed float of the Kyat. To
ensure a smooth transition toward developing a formal interbank market, the
currency is not completely exposed to the free market, but set at a reference rate of
818 kyat to the USD, plus or minus 2%.14
Interestingly enough, the new official
benchmark reflects the former black-market rate. The budget for the 2012-2013 fiscal
year aimed to calculate foreign exchange revenues and expenditures at the 800-kyat
rate. This meant that, for the first time ever, Myanmar's huge foreign currency
income, resulting from the sale of natural gas and other resources, would be
accurately reflected in the national accounts.15
Within the next few years, the aim will be to allow the Kyat to float freely. The current
exchange rate auction is part of a managed float that requires the central bank to
intervene to keep the exchange rate within certain limits. Eleven domestic banks are
currently authorised to conduct foreign exchange operations. An interbank exchange
market is in the planning stage, allowing the central bank to influence the exchange
rate and to intervene. To ensure that the foreign exchange auction becomes a
permanent feature of the economy, and to keep the real exchange rate at a level that
encourages domestic production and international trade, the government has to
institutionalise the process by developing an independent central bank. For 2012, the
International Monetary Fund noted that the kyat had been already overvalued by
around 40%. Thus the Central Bank of Myanmar was likely to weaken the newly
floated currency to prevent a further rise that could hurt the economy.
As of 28th
February 2014 the Reference Foreign Exchange Rate published by the
Central Bank of Myanmar was 984 kyat to the USD.16
FOREIGN DIRECT INVESTMENTS
Myanmar's Foreign Investment Commission had been updating the original Foreign
Investment Law of Myanmar, which dated back to 1988. Foreign investment has
since been encouraged but sanctions coupled with high corruption ratings resulted in
little actual investment. Only two major investors remained during that time: China,
and, to a much lesser extent, India.
13
Rates on the black market varied between 700 - 1,400 kyat to the USD. ICG 2012: 6.
14
(ICG 2012:33).
15
Previously state-owned enterprises had access to imports calculated at the six-kyat rate, which led
to huge inefficiencies in the public finance sector as well as to corruption and a lack of transparency
over losses. Only state-owned companies had the advantage to use the official rate - making it 125
times stronger than the black- market rate of around 800 kyat per USD for most transactions.
16
Central Bank of Myanmar

18. 18
This already changed, as Myanmar's very ambitious draft of the new Foreign
Investment Law would permit fully foreign-owned businesses, allow foreigners to
lease land for business purposes, create a five-year tax holiday at the start of
commercial operations, and protect investments against nationalisation.
The Foreign Investment Law Amendment Bill was approved by parliament and
endorsed by the president in 2012.17
The economic activities allowed under the new Foreign Investment Law cover almost
all economic sectors. Foreigners can either set up a 100% foreign-owned company
or a joint venture with any partner: an individual, a private company, a cooperative
society or a state-owned enterprise. Such joint ventures must provide 35% foreign
ownership of the total equity capital.18
Tax breaks differ from five to eight years for
investing in the newly established SEZs. Businesses can now use the prevailing
exchange rate to book any transactions.
Foreign companies can also lease land from the state or private citizens, who have
permissions to use it for up to 30 years with the option for two extensions of up to 15
years each. The law requires that all unskilled workers must be from Myanmar, as
well as a minimum of skilled workers, increasing over time from 25% after five years
to 75% after fifteen.19
If products and services are exported, further exemptions from
taxes and tariffs can be granted. The requirement from the previous legislation that
products manufactured in Myanmar by foreign companies must be entirely exported
was dropped, and those products can now be sold on the domestic market.
Myanmar’s Foreign Direct Investment (FDI) more than doubled between 2011 and
2012, from respectively USD 1 billion to USD 2.2 billion (increase of 124%) (See
Figure 10). Despite the economic reforms and the easing of sanctions, the majority of
the country's FDI still comes from China, Thailand, Hong Kong and South Korea (See
Figure 11). The sectors receiving the highest share of FDI in Myanmar in 2012 were:
Power (46.5%), Oil & Gas (34.6%), Mining (6.9%) and Manufacturing (4.3%) (See
Figure 12).
17
Robinson 2012.
18
Tun 2012.
19
(ICG 2012: 39) Given the size of the country, Myanmar is relatively thinly populated and a labour
shortage is already developing, as workers are required to move to neighbouring countries where
there are better wages.

19. 19
Figure 10: Myanmar Foreign Direct Investment (FDI) (in million USD)
Figure 11: Myanmar FDI by country of origin (2012) (%)
Sources: Worldbank
124%
Sources: Ministry of National Planning and Economic Development (Myanmar,
2012); United Nations Escap

20. 20
Figure 12: Myanmar FDI by sector (2012) (%)
Sources: Ministry of National Planning and Economic Development
(Myanmar, 2012); United Nations Escap

21. 21
MYANMAR BUSINESS OVERVIEW
NATURAL RESOURCES
Myanmar’s major natural resources are: Petroleum, timber, tin, antimony, zinc,
copper, tungsten, lead, coal, marble, limestone, precious stones, natural gas, and
water (hydropower).
Highlights20
Natural Gas
Gas is the country’s most important source of export revenue. BP estimates that
proven natural gas reserves in Myanmar total 7.8 trillion cubic feet, giving Myanmar a
worldwide rank of 46th
.
Precious and Semiprecious Stones
While its value is less significant, Myanmar’s endowment of precious and
semiprecious stones is remarkable. Myanmar accounts for 90 percent of the global
value of jade production and ranks among the top producers in the world of gems
including rubies and sapphires.
Water
Water is becoming an increasingly critical resource for many countries around the
world, and Myanmar is well placed on this front. It has an estimated 24,164 cubic
metres per person per year, more than ten times the per capita endowment of China
and India, around four times that of Thailand and the Philippines, and more than
double the per capita endowment of Vietnam, Indonesia, or Bangladesh. Myanmar’s
water resources also mean that it has considerable potential to use hydropower more
extensively — hydropower already accounts for three-quarters of electricity-
generating capacity — although there are social and environmental challenges in
developing this power source.
MAIN INDUSTRIES
Myanmar’s main industries are: agricultural processing (of rice, pulses, beans,
sesame, groundnuts, sugarcane; fish and fish products); wood and wood products;
copper, tin, tungsten, iron; cement, construction materials; pharmaceuticals; fertilizer;
oil and natural gas; garments, jade and gems.
Myanmar’s major drivers of growth during next two decennia21
Agriculture
Myanmar has a total of 12.25 million hectares of arable land and permanent crops,
the 25th
-largest endowment in the world. Although the country’s endowment of water
and fertile land is abundant, productivity in Myanmar’s agriculture sector is low with
output per worker of only around USD 1,300 a year, compared with around USD
2,500 per worker in Thailand and Indonesia.
20
McKinsey Global Institute analysis / CIA World Factbook
21
McKinsey Global Institute analysis / CIA World Factbook

22. 22
The sector’s low productivity and the low level of inputs such as seeds, fertilisers,
water, and machinery suggest that there is significant room to grow. There is also
large scope to increase the share of fruits, vegetables, coffee, oil palm, rubber, and
other high-value crops as well as the production of fisheries.
Given that agriculture currently accounts for 52 percent of workforce employment,
capturing the full growth potential of agriculture is critical to ensuring that the
economy’s growth is shared widely.
Energy and mining
Myanmar has large endowments of oil, gas — its most important export — and
precious minerals such as rubies, sapphires, and jade. For example, Myanmar
currently ranks 46th in the world in terms of proven gas reserves, and estimates of
undiscovered gas reserves indicate that the amount of reserves is likely to be much
higher. Myanmar produces 90 percent of the world’s jade, which is valued highly in
Asia.
Many of these natural resource reserves are largely unexplored today — with new
technologies, the potential could be much higher than current estimates.
Manufacturing
Myanmar’s labour costs today are comparatively low, giving the country an
opportunity to boost output in labour-intensive manufacturing sectors such as textiles,
apparel, leather, furniture, and toys at a time when some of this manufacturing is
leaving China.
However, labour productivity in the sector is also weak. Output per worker is only 70
percent of that in Vietnam in 2010, 20 percent of that in China and Thailand, and less
than 15 percent of that in Malaysia.
To compete in the region, Myanmar will need to improve labour productivity.
On the back of that higher productivity, there is scope over time to make the
transition to more value-added sectors, following the example of Thailand, Malaysia,
and other Asian economies.
Infrastructure
Myanmar’s infrastructure is not sufficient today to support the higher growth and
future demand driven by developing industrial sectors and an urbanising population.
Between 2010 and 2030, Myanmar will need to invest USD 320 billion in its
infrastructure if the economy is to achieve growth of 8 percent a year. The majority of
infrastructure investment — 60 percent — will need to be in residential and
commercial real estate, but there is also a huge need for power plants, water-
treatment plants, and road and rail networks.

23. 23
Sources: CIA World Factbook (2012) Sources: CIA World Factbook (2012)
TRADING PARTNERS
Major markets for exports in 2012 were Thailand, India, China, and Japan (See
Figure 13). Imports are mostly coming from China, Thailand, Singapore and South
Korea (See Figure 14).
Figure 13: Export Partners Figure 14: Import Partners
Myanmar is mostly exporting to Asian countries. This is in strong contrast with other
SEA countries that have stronger ties with Western countries. To diversify trade,
Myanmar would need to build trade ties with the West and strengthen existing ones
in Asia (See Figure 15).
Figure 15: Exports by top 10 countries of destination (2011) (%)
Sources: Comtrade data; McKinsey Global Institute analysis

24. 24
Myanmar’s strategic location at the heart of Asia22
Myanmar’s export potential
Myanmar has long been cut off from political, economic, and trading relationships
and has not been able to participate in regional integration and capitalise on its ideal
position in the world’s fastest-growing regional economy.
Now that Myanmar’s economy is opening up, there is potential to become a major
exporter, especially of agriculture and food products, to many of its regional
neighbours that are experiencing strong demand and rapid growth.
Considering the fact that Myanmar borders Bangladesh, China, India, Laos, and
Thailand — home to 40 percent of the world’s population. Bangladesh alone has a
population of 150 million, and Thailand and Laos have a combined population of 75
million people. China’s Yunnan province to the north-east of Myanmar is home to an
additional 46 million people. The Indian provinces bordering Myanmar as well as
those across the Andaman Sea have 240 million more people.
Taking all of this together, Myanmar is close to a market of more than half a billion
people and, by 2025, will be within a five-hour plane ride of 2.5 billion members of the
consuming class.
Myanmar as a trade hub on the crossroads of Asia
In addition to this export potential, observers have often suggested that Myanmar
could become a trade hub on the crossroads of Asia.
However, it remains questionable whether the land routes across Myanmar can
attract a substantial share of regional trade transit, given that China’s demand
centres tend to be by the coast and that sea freight is substantially cheaper. For
instance, transporting a ton of freight by ship from Chennai to Shanghai is ten times
cheaper than shipping it to Myanmar and then trucking it overland to China’s eastern
seaboard.
INVESTMENT PROGRAMS23
European Commission (Europeaid)
Following the suspension of most EU restrictive measures in May 2012, the EU is
now fully engaging with the Myanmar government. EU development cooperation is
assisting the civilian government's goals of inclusive, sustainable growth and
development for all of the population of Myanmar. Directly backing the transition
process, EU development cooperation has more than doubled in value and its scope
has expanded. In February 2012, Commissioner Piebalgs visited Myanmar and
announced a package of €150 million for the country's democratic reform and
inclusive development initiatives. An EU Office was opened in Yangon in April 2012.
The first EU-Myanmar Task Force took place on 13-15th
November 2013 in Yangon
and Nay Pyi Taw. It comprised of several high-level events, including a Development
Forum where EU support and the countries development challenges were discussed.
22
McKinsey Global Institute analysis
23
European Commission; The World Bank; Finpro Research

25. 25
The European Commission has proposed the following main sectors for development
cooperation with Myanmar for 2014–2020: Rural Development, Education,
Governance and Support to Peace Building. Funding levels for the upcoming
programming period are likely to be substantially increased, up to €90 million
annually.
World Bank Group
World Bank Group to invest USD 2 billion in Myanmar to support reforms, reduce
poverty, increase energy and health access (January 2014): On his first visit to
Myanmar, President Jim Yong Kim announced World Bank Group plans for a USD 2
billion multi-year development program. It will include projects that dramatically
improve access to energy and health care for poor people and support other key
government development priorities.
United Kingdom
In April 2012, following the lifting of EU sanctions, the British Government announced
that it was also lifting its policy of discouraging trade and investment with Myanmar.
UK Trade and Investment (UKTI) opened its first office in the country in July 2012.
In 2011, the UK committed £187 million in aid to Myanmar until 2014, making it the
largest bilateral donor to the country. On 4 March 2013 the UK agreed to provide
£600,000 to establish a Responsible Investment Resource Centre in Yangon
intended to strengthen responsible business practices for Burmese companies and
those investing in the country.
US (Usaid)
The US has also reopened a USAID mission in Myanmar and will provide a projected
USD 51.2 million in aid in 2014, a boost from the 2012 figure of USD 35 million. In
November 2013 the US government pledged an additional USD 25 million for
humanitarian assistance for displaced communities in Rakhine State, Kachin State,
and Burma’s Southeast region. The US is one of the largest bilateral donors for
Myanmar and its extended reengagement has been described as an opportunity to
focus on longer-term development and deepen participation in political and economic
reforms. In November 2012 three new projects were unveiled, including a project to
boost access to the Internet, strengthen transparent government and expand digital
literacy; a project aimed at reducing preventable child deaths; and a project
supporting free and fair elections.
MATURITY/DEVELOPMENT PHASE
According to The Global Competitiveness Report 2013-2014 (published by the World
Economic Forum (WEF)), Myanmar’s stage of development can be classified as “a
factor driven economy”. This classification is based on analysis of 12 indicators,
which are presented in Figure 16.

26. 26
Sources: World Economic Forum: The Global Competitiveness Report 2013-2014
(Note: Global Competitiveness Index scores; Score 1-7, with 7 being most competitive)
Figure 16: Myanmar’s Stage of development: a factor driven economy
INTELLECTUAL PROPERTY (KNOW-HOW)24
Overview
Myanmar joined WTO in 1994, became a member of ASEAN in 1997 and of WIPO in
2001, it has become responsible to observe and be in compliance with the provisions
of relevant treaties of such organizations, particularly, TRIPS Agreement and the
ASEAN Framework Agreement on Intellectual Property. Myanmar obtained special
exemption of time preparation to apply the TRIPS Agreement till July 2013.
Meanwhile, the Attorney-General Office, with the close cooperation of Ministry of
Science and Technology that is designated as the focal point ministry to handle the
Intellectual Property matters, is drafting the IP laws to have wide and efficient
protection and promotion, being demanded by the regional and global IP regimes.
Recent News
Intellectual Property Group to Be Formed Ahead of Expected Law (December
2013): The Union of Myanmar Federation of Chambers of Commerce and Industry
(UMFCCI) will launch a Myanmar Intellectual Property Association ahead of the
expected passage of an Intellectual Property Law by Burma’s Parliament, according
to a UMFCCI official. “There will be four components to the law, with provisions
24
ASEAN Intellectual Property Association; The Irrawaddy

27. 27
relating to trademarks, patents, intellectual design and copyright. The law will be in
line with ASEAN and WTO standards.”
Strengthening Intellectual Property Rights in Burma (June 2013): “Strengthening
the protection of intellectual property rights in Burma has the potential to act as a
catalyst for economic growth, spurring foreign direct investment and in the long run
helping the country reap rewards in terms of greater domestic innovation and
increased technology diffusion.” “For multinational companies, any lack of legal
certainty, including the inability to safeguard intellectual property — the mainstay
asset of modern technology-intensive enterprises — serves as a deterrent to
investment, excepting those firms hoping to reap quick profits in capital-intensive and
labour-light extractive industries, such as mining.” “And yet, attracting foreign
investment with the potential to transfer technology to domestic firms is a key factor.
Thus, the future pace of investment will depend to a large extent on how quickly the
government takes steps to upgrade its IPR legislation.”
SUB-AREAS/CITIES & LEADING ECONOMIES
Meaningful sub-areas, cities & their leading economies to be highlighted are:
Yangon, Mandalay, Mon, Shan, and Bago.25
Yangon
Yangon is the country’s main centre for trade, industry, real estate, media,
entertainment and tourism. The city alone represents about one fifth of the national
economy. According to official statistics for FY 2010–2011, the size of the economy
of Yangon Region was USD 9 billion, or 23% of the national GDP.
The city is Lower Myanmar’s main trading hub for all kinds of merchandise – from
basic food stuffs to used cars. Bayinnaung Market is the largest wholesale centre in
the country for rice, beans and pulses, and other agricultural commodities. Much of
the country’s legal imports and exports go through Thilawa Port, the largest and
busiest port in Myanmar.
Manufacturing accounts for a sizable share of employment. At least 14 light industrial
zones ring Yangon, directly employing over 150,000 workers in 4,300 factories in
early 2010.
Tourism represents a major source of foreign currency for the city although by
Southeast Asian standards the actual number of foreign visitors to Yangon has
always been quite low.
Mandalay
Mandalay is the second-largest city and the last royal capital of Myanmar. Located
445 miles (716 km) north of Yangon on the east bank of the Irrawaddy River, the city
has a population of one and half million, and is the capital of Mandalay Region.
Mandalay is the economic hub of Upper Myanmar and considered the centre of
Burmese culture. A continuing influx of Chinese immigrants, mostly from Yunnan, in
the past twenty years, has reshaped the city's ethnic makeup and increased
commerce with China. Despite Naypyidaw's recent rise, Mandalay remains Upper
Myanmar's main commercial, educational and health centre.
Mandalay is the major trading and communications centre for northern and central
Myanmar. Much of Burmese external trade to China and India goes through
25
Finpro Research

28. 28
Mandalay. Among the leading traditional industries are silk weaving, tapestry, jade
cutting and polishing, stone and wood carving, making marble and bronze Buddha
images, temple ornaments and paraphernalia, the working of gold leaves and of
silver, the manufacture of matches, brewing and distilling.
Mon
Mon State is an administrative division of Myanmar. It is sandwiched between Kayin
State on the east, the Andaman Sea on the west, Bago Region on the north and
Tanintharyi Region on the south, and has a short border with Thailand's
Kanchanaburi Province at its south-eastern tip. The state's capital is Mawlamyaing.
Mon State has a cultivated area of nearly 4.5 million acres (18,000 km²), mostly
under rice. The major secondary crop is rubber. Orchards and rubber plantations are
found in the mountainous areas while Coastal fishing and related industries such as
production of dried fish, fish sauce and agar-agar are in southern part, Ye district.
Production of Betel nut is also a sustaining business of Mon state, as the Mon
peasants preserved their heredity land onwards along with the government
regulations, however, there are some many parts of uncultivated crude land in the
area closed to neighbour Karen state. Moreover, modern business development
includes growing of cashew trees, from which they collect the cashew nut for market
elsewhere.
The Mon are an ethnic group from Myanmar, living mostly in Mon State. One of the
earliest peoples to reside in Southeast Asia, the Mon were responsible for the spread
of Theravada Buddhism in Burma and Thailand. The Mon culture is credited as a
major source of influence on the dominant Burmese culture.
Shan
Shan State is a state of Myanmar, which borders China to the north, Laos to the east,
and Thailand to the south, and five administrative divisions of Myanmar in the west.
Largest of the 14 administrative divisions by land area, Shan State covers 155,800
km², almost a quarter of the total area of Myanmar. The state gets its name from the
Shan people, one of several ethnic groups that inhabit the area. Shan State is largely
rural, with only three cities of significant size: Lashio, Kengtung, and the capital,
Taunggyi.
Shan State is famous for its garden produce of all sorts of fresh fruit and vegetables
thanks to its temperate but sunny climate. It is also part of the Golden Triangle, an
area in which much of the world's opium and heroin are illegally produced. Drug
trafficking is controlled by local warlords, some of whom have private armies
amounting to thousands of soldiers. Much of the meth-amphetamine (yaba) that ends
up in Thailand is produced in this region as well.
There are some border trading centres along the Shan State border and neighbour
countries. Muse, the biggest border trading centre along the Myanmar China border
and Tachileik, another important trading centre between Myanmar and Thailand are
in Shan State.
The construction project of Sino-Burma pipelines of oil and gas that passes through
northern part of Shan State started in September 2010.
Bago
Bago Region is an administrative region of Myanmar, located in the southern central
part of the country.
The division's economy is strongly dependent on the timber trade. Taungoo, in the
northern end of the Bago Region, is bordered by mountain ranges, home to teak and

29. 29
other hardwoods. Another natural resource is petroleum. The major crop is rice,
which occupies over two-thirds of the available agricultural land. Other major crops
include betel nut, sugarcane, maize, groundnut, sesamum, sunflower, beans and
pulses, cotton, jute, rubber, tobacco, tapioca, banana, Nipa palm and toddy. Industry
includes fisheries, salt, ceramics, sugar, paper, plywood, distilleries, and
monosodium glutamate.
The division has a small livestock breeding and fisheries sector, and a small
industrial sector.

30. 30
DOING BUSINESS IN MYANMAR
INFRASTRUCTURE26
Roads
Presently, Myanmar's transport sector is considerably under-developed for a country
of its size, population, and potential. In 2011, Myanmar’s number of vehicles per
1000 people was about 38. In comparison, Thailand’s ratio was 432 and Lao PDR’s
was 171. The number of vehicles in Myanmar has more than doubled from 960,000
in 2004 to 2,354,000 in 2011, and the strong growth trajectory is expected to be
maintained as the economy continues to expand.
The institutional structure for Myanmar’s transport sector is complex as there is no
single agency with clear oversight of the sector. Currently, responsibilities are shared
between six ministries, various city development committees and state-owned
transport enterprises, where relevant. There is no formal coordinating platform to
develop an overall strategy for the sector and no clear lines of responsibility within
the fragmented institutional structure.
Ports
Myanmar currently has 9 ports along the western and south-eastern coast of the
country, namely: Yangon, Sittwe, Kyaukphyu, Thandwe, Pathein, Mawlamyine,
Dawei, Myeik, and Kawthaung. In addition, Myanmar International Terminals Thilawa
(MITT) is a private multi-purpose container terminal owned and operated by
Hutchinson Port Holdings. However, with the exception of the country’s principal port
in Yangon, the rest are reportedly small coastal ports with limited port handling
capabilities. According to official statistics from the Myanma Port Authority,
Myanmar’s ports handled 24 million tons of import and export freight in 2011, with the
Port of Yangon handling 90% of the cargo throughput.
Railways
The railway sector in Myanmar is currently a monopoly operated by state-owned
Myanmar Railways. The rail network has expanded considerably over the last twenty
years, expanding by almost 78% between 1988 and 2010, although the focus had
been on providing transport services and connectivity to remote areas of the country.
According to the Asian Development Bank (ADB)’s initial assessment of the railway
sector, the rail network is in poor condition and investment in basic infrastructure,
such as track renewal, replacement of sleepers, and upgrading of signalling and
communications systems, has been inadequate.
Airports
Myanmar currently has a total of 69 airports, of which only 32 are operational. There
are 3 international airports - in Yangon, Mandalay and Nay Pyi Taw, with 19
international airlines and 4 domestic airlines operating regular flight services between
Myanmar and 17 regional destinations. In 2011, there were 1.5 million international
passengers and 1.4 million domestic passengers.
26
KPMG International (2013)

31. 31
The Myanmar Department of Civil Aviation (DCA) wishes to double the capacity at
Yangon International Airport from 2.7 million passengers a year to 5.5 million. The
government also has plans to transform some of the existing domestic airports into
international airports to serve the growing number of foreign investors and tourists.
The DCA has already announced plans to re-develop airports in Yangon and
Mandalay and to also build a new airport at Hanthawaddy, about 80km from Yangon.
Energy & Power
Myanmar has abundant energy resources, including renewable alternatives such as
hydro, biomass, wind and solar. The country’s primary energy supply includes coal,
oil, gas, hydropower and biomass. Hydropower is the main source of fuel in the
country and electricity from hydropower plants contribute nearly 70% of the total
electricity generated in the country, followed by 22% produced from natural gas and
8% from coal.
Between 2000 and 2010, electricity consumption in Myanmar has almost doubled
from respectively 3,303 GWh to 6,093 GWh. However, Myanmar’s per capita
electricity consumption still remains the lowest among the ASEAN-10 countries, at
100 KWh in 2010, compared to a consumption of around 600 KWh in Indonesia and
over 2,000 KWh in Thailand. It is estimated that only a quarter of Myanmar's
population currently has access to a regular supply of electricity and even Yangon is
plagued by frequent outages, limiting economic growth and development. The low
national average per capita electricity consumption is due to the low electrification
rate, low industrial development and lack of investment.
The Myanmar government has indicated under the Framework for Economic and
Social Reform (FESR) that the sector will be further liberalised through the
deregulation of prices, the adoption of appropriate taxes and elimination of across-
the-board subsidies in the energy sector. Myanmar is also developing a master plan
for the electricity sector that will project future electricity consumption, develop a plan
to meet those consumption requirements and identify necessary regulatory reforms.
Tele-communications
Myanmar’s telecommunications sector is significantly underserved, with exceptionally
low penetration rates given the size and potential of the market. Although the mobile
subscriber base has grown fivefold in the last couple of years, official statistics report
that there are 5.4 million subscribers as at December 2012, or a penetration rate of
just 9% of population.
Fixed-line subscriber numbers have been growing erratically, with an overall
penetration of around 1% of the population or 0.6 million subscribers. Internet user
penetration is even lower, at less than 1% of the population or 0.5 million
subscribers. Yangon and Mandalay account for majority of the mobile and fixed-line
subscribers.
The government has identified the key barrier to telecommunication access to be
high costs and limited infrastructure. To achieve the target of increasing mobile
phone density to 75-80% and internet penetration by over 50% by FY2015/16, the
government has committed to undertaking several reforms.

32. 32
Special Economic Zones / Industrial Zones
There are a total of 18 private-operated industrial zones across the country,
contributing about 20% of the country’s gross domestic product (GDP). The
government has been actively promoting greater public and private sector
investments into the industrial zones to generate jobs and technological
development. Myanmar expects to overcome infrastructure bottlenecks and promote
foreign direct investment through Special Economic Zones (SEZs), which will
emphasise Myanmar as a strategic location and a low-cost production base for
exports to the region.
Social Infrastructure
One of the key policy priorities of the Myanmar government under the FESR is to
focus on people-centric development, particularly in the areas of improving
education, health and living standards. In the fiscal year 2012/2013 budget, the
government increased expenditures on education and health.
Education is a top government priority in view of the low levels of provision and the
importance of investment in education for inclusive growth. Net enrolment in
education for Myanmar is low compared to other ASEAN countries and the quality of
education at all levels is generally poor. The ratio of government expenditure on
education to overall GDP is also the lowest in the region.
Health indicators in Myanmar currently compare poorly to those of neighbouring
countries and the government has doubled its commitment to improving health care
services and public financing in the healthcare sector.
PEOPLE & SOCIETY27
Language
There are approximately one hundred languages spoken in Myanmar. Burmese,
spoken by approximately 65% of the population, is the official language. However, a
wide variety of languages are spoken, especially by ethnic minorities, representing
four major language families: Sino-Tibetan, Austro-Asiatic, Tai–Kadai, and Indo-
European.
English is the secondary language taught. English was the primary language of
instruction in higher education from late 19th century to 1964, when Gen. Ne Win
mandated educational reforms to "Burmanize". English continues to be used by
educated urbanites and the national government.
Religion
Myanmar is a multi-religious country. There is no official state religion, but the
government shows preference for Theravada Buddhism, the majority religion. It is
practiced by 89% of the population, especially among the Bamar, Rakhine, Shan,
Mon, and Chinese. Christians represent 4% (Baptist 3%, Roman Catholic 1%),
Muslims 4%, Animists 1%, and others 2% of the population.
27
CIA World Factbook; Myanmar Times

33. 33
Cost of Living
According to an article published by the Myanmar Times the cost of living for expats
are on the rise in Yangon (December 2013): “Yangon has climbed to become the
sixth most expensive city in the ASEAN bloc for expatriates to live and work, a
new survey by global consulting firm, ECA International, found last week. Singapore
was the most expensive Southeast Asian city and the 30th
most expensive city
worldwide for international assignees to live.”
“The ranking was judged on the cost of living and looked at indicators like the
average price of weekly groceries, basic goods like drink and general services like
motoring and hospitality that reflect an “international lifestyle”, ECA said in a press
release.”
“Behind Singapore were Bangkok, Jakarta, Vientiane and Kuala Lumpur. Yangon
pipped expat-populous Chiang Mai to take the spot of the sixth most expensive.”
LOGISTICS & TARIFFS
The Logistics Performance Index and Its Indicators
Based on a worldwide survey of global freight forwarders and express carriers, the
Logistics Performance Index is a benchmarking tool developed by the World Bank
that measures performance along the logistics supply chain within a country. The
index ranges from 1 to 5, with a higher score representing better performance.
Allowing for comparisons across 155 countries, the index can help countries identify
challenges and opportunities and improve their logistics performance. The World
Bank conducts the survey every two years. Analysis of the six logistics indicators in
2012 shows that Myanmar scores lowest for all the indicators, with Malaysia and
China showing the best performances in SEA (See Figure 17).
Figure 17: The Logistics Performance Index and Its Indicators (2012)
Sources: Worldbank

34. 34
Customs Tariff System in Myanmar28
In Myanmar, the customs procedures are provided in the Sea Customs Act and Land
Customs Act. The tariff law was enacted on March 12, 1992 with a view to assisting
the market economic system in order to facilitate external trade. In accordance with
the Law, a notification was issued to regulate the classification of imported goods and
assessment of duties. For modernization and standardization, in line with
international practice, the Harmonized Commodity Description and Coding
System (HS) was introduced in April 1992. After incorporating necessary changes
in the Myanmar Customs Tariff, the 1996 Version of the Harmonized System was
applied on 1st January 1996.
The maximum Customs tariff rate is 40% and the minimum is 0%; Customs tariff
rates on imports of machinery, spare parts and inputs generally range from 0.5% to
3%; Customs duty is zero rate for all the goods to be exported from the Union of
Myanmar.
CORRUPTION29
According to an article published by the The Irrawaddy, reforming Myanmar moves
up in the Global Corruption Rankings (December 2013): “The Burma government’s
reforms since a quasi-civilian government took charge in 2011 appear to be
improving its poor reputation for corruption, with global watchdog Transparency
International boosting the country’s ranking in its annual survey.”
“The Berlin-based organization put Myanmar 157 out of 177 countries surveyed for
its Corruption Perceptions Index 2013.The ranking represents a significant
improvement from Transparency International’s survey a year ago, in which the
country was ranked 172 out of 176 nations, above only Sudan, Afghanistan, North
Korea and Somalia.”
“The index gives countries scores between 0 (highly corrupt) and 100 (very clean).
Despite the improvement, Myanmar’s score of 21 in 2013’s index—compared with 15
in 2012—put it only level with troubled African states Zimbabwe and Burundi, and
made it the worst performer in Southeast Asia, except for Cambodia (20).”
“Myanmar remained below neighbours Laos (26) and Bangladesh (27), while
Thailand scored 35 and ranked 102 in the index.”
“Transparency International said its rankings were based on “experts’ opinions of
public sector corruption,” and took into account the level of access to information on
corruption, the accountability of public bodies and the rules that a country has in
place to govern the behaviour of public officials.”
“The improved ranking for Burma comes amid a program of economic reforms since
President Thein Sein’s administration came to power and began to shed the
country’s image as a highly corrupt military dictatorship that allowed government
cronies to win contracts and receive favourable treatment.”
28
ASEAN; Myanmar Customs Department
29
The Irrawaddy; Transparency International

35. 35
“Parliament in July 2013 approved a new Anticorruption Law, which established an
anticorruption commission and requires officials in the executive, judicial and
legislative arms of government to declare their assets.”
FACTORS FOR DOING BUSINESS
The Global Competitiveness Report 2013-2014 (published by the World Economic
Forum (WEF)) presents the most problematic factors for doing business in Myanmar.
From a list of factors, respondents were asked to select the five most problematic
factors for doing business in Myanmar and to rank these between 1 (most
problematic) and 5. The results are presented in Figure 18. The bars in the figure
show the responses weighted according to their rankings. Most problematic factors
were seen to be: policy instability, access to financing, corruption, and inadequately
educated workforce.
Figure 18: The most problematic factors for doing business in Myanmar
Sources: World Economic Forum: The Global Competitiveness Report 2013-2014

36. 36
COUNTRY RISK ANALYSIS30
Based on analysis of strengths and weaknesses of Myanmar, several rating
agencies, such as Coface, place Myanmar in the category with the highest country
risk. It is expected that this rating will improve along with the ongoing transformation
process in the coming years.
Strengths
 Strong reform dynamic with increased support from international organizations
 Moderate external debt
 Increasing hard-currency earnings potential
 Substantial potential in natural resources, agriculture and tourism
 A relatively large and young population
 A strategic geographic location in a dynamic region
Weaknesses
 An inexperienced political system in the beginning of the transition from a
military dictatorship and with a risk of setbacks.
 The economy is in the beginning of a transformation into an open market
economy and there are large deficiencies in macro-political governance and in
institutional capacity in the state apparatuses.
 A narrow economic base centred around gas extraction and low-productive
agriculture.
 A very difficult business climate: corruption, weak judicial system, difficult
conditions for lending due to restricted provision of guarantees.
 High risk of ethnic and religious tensions: Burmese-Buddhist extremism and
ethnic-religious violence are one of the biggest threats to the reform process
and stability.
 Underdeveloped financial sector: the financial sector is rudimentary and
fragile. Traditional banking in the form of borrowing and lending has been very
limited for a long time.
 Inflation risk: caused by sustained domestic demand, rising public sector
wages, soaring property prices, etc.
COUNTRY RANKINGS
Rankings by: ease of doing business
The Worldbank publishes a ranking on the ease of doing business in countries.
Economies are ranked on their ease of doing business from 1 – 189. A high score on
the ease of doing business index means the regulatory environment is more
conducive to the starting and operation of a local firm. This index averages the
country's percentile scores on 10 topics, made up of a variety of indicators, giving
equal weight to each topic. The rankings for all economies are benchmarked to June
2013. The 10 covered topics are: Starting a Business, Dealing with Construction
Permits, Getting Electricity, Registering Property, Getting Credit, Protecting
Investors, Paying Taxes, Trading Across Borders, Enforcing Contracts, and
Resolving Insolvency. Country ranking number 1 is the country perceived to be
easiest to do business in. Myanmar ranks at the bottom with a ranking of 182 (most
difficult to do business in) (See Figure 19).
30
The Swedish Export Credits Guarantee Board (2013); Coface (2013)

37. 37
Figure 19: Rankings by ease of doing business
Rankings by: corruption
The Corruption Perceptions Index (published by Transparency International) ranks
countries and territories based on how corrupt their public sector is perceived to be.
A country or territory’s score indicates the perceived level of public sector corruption
on a scale of 0 - 100, where 0 means that a country is perceived as highly corrupt
and 100 means it is perceived as very clean. A country's rank indicates its position
relative to the other countries and territories included in the index. Country ranking
number 1 is the country perceived to be least corrupt. 2013’s index includes 177
countries and territories. Myanmar, with a ranking of 157, is perceived to be the most
corrupt country in SEA, except Cambodia (See Figure 20).
Figure 20: Rankings by corruption
Sources: Worldbank
Sources: Transparency International

38. 38
Rankings by: country risk
The Coface country risk assessment is based on macroeconomic, financial and
political data. For 2013 a total of 158 countries have been evaluated. The analyses
use a seven-level ranking. In ascending order of risk, these are: A1, A2, A3, A4, B, C
and D (See Figure 21). The country rankings for Asia are:
Cambodia D Philippines A4
Myanmar D Thailand A3
Vietnam C China A3
India A4 Malaysia A2
Indonesia A4
Figure 21: Rankings by country risk
Sources: Coface (2013)

39. 39
OUTLOOK
Myanmar's economy is currently in a pre-stage of transition. Neither insiders nor
outsiders know for certain where the development will lead.31
What is certain is that
the country is on the verge of considerable change. Despite the general enthusiasm
about Myanmar's largely untapped market, investors need to be aware of significant
risks and should maintain "healthy scepticism".32
Widespread corruption, a weak
legal system, human rights abuses and a lack of protection for investors will remain
serious obstacles.
The successful by-elections were an important milestone in the reform process, but
there is still a long way to go to democratization. The willingness for reform is a
reaction to both internal and external factors. Internally, the military felt secure
enough to reform the political system and to secure their assets. Externally, Western
sanctions might have played a role, but also relevant are the growing economic
overreliance on China and the political desire to gain legitimacy within ASEAN.
Overall, political reforms are being initiated from "above" and many critical topics,
such as corruption, civil war, military dominance and government mismanagement
have yet to be addressed. The military has veto power over the entire reform process
and sees itself as the guardian of national integrity. The state's weak institutional
capacity and the lack of civilian control over the military was demonstrated in
December 2011, when President Thein Sein unsuccessfully ordered the military to
stop its offensive in the state of Kachin.33
Another challenge is the delicate issue of
national reconciliation following decades of civil war and human rights violations that
have created a deep mistrust between ethnic groups and the military. Additionally,
there are hidden tensions between various ethnic and religious groups, which were
not visible during the military control. These tensions erupt in times of political
change, as we have recently seen in northwest Myanmar.34
The key to the future of Myanmar's economic transformation will be how the country
integrates into the world economy: whether rapidly, under the free trade principles of
the Washington Consensus or with a more gradual approach that initially provides
trade protection and subsidises the domestic industries until they are competitive in
overseas markets. Rather than follow the IMF and World Bank’s advice for rapid
global integration, Myanmar should do what other ASEAN countries have done and
develop its domestic industries before committing to reduce tariff rates. Despite the
poor condition of its economy, Myanmar has already agreed to join the ASEAN Free
Trade Area (AFTA) in 2015 and thus will have to compete with countries like
Thailand and Malaysia.
Myanmar's strategic location and its wealth of natural resources offers advantages
few countries have, but Myanmar's comparative advantage in the primary resource
industries and the exploration industry has to be adequately used in two ways: to
develop the country from resource revenues that must be transparent and equally
shared and to serve the domestic rather than international electricity demand. If the
31
Hellmann-Rajayanagam 2012.
32
Quote by opposition leader Aung San Suu Kye at the World Economic Forum in Bangkok in June
2012.
33
Bünte 2012: 3.
34
The Irrawaddy 2012.

40. 40
government fails to generate its large revenues to foster economic growth and to
reduce poverty, this "resource curse" will continue to cause conflict and poverty.
Myanmar's challenge will be implementing an industrial policy, which attracts certain
types of FDIs that will benefit its manufacturing and services sectors rather than all
kinds of FDIs focused in the energy sector. Small and medium enterprises face great
difficulties in attracting investments and are less likely to arise in the special
economic zones, where most FDI is being channelled.
Foreign investors should invest in individual privately owned companies or joint
ventures, rather than to participate in large-scale resource or energy projects, which
are dominated by the global players. Insufficient understanding of ground conditions,
especially in the resource-rich minority areas, could jeopardize any sort of investment
and lead to conflict and frustration.
Corporations and investors need to monitor the market very carefully and need a
reliable source of information on investment policies, in order to take advantage of
the unique opportunities that the transformation process permits. While setbacks will
inevitably occur, foreign investors should think long-term and not expect a secure
profit. Only investors who know the market and its challenges will succeed.
The decision as to how democratic the country will be has yet to be proven; the next
general elections take place in 2015. Until then it seems most likely that the liberal
climate will continue, as numerous important events will challenge the government to
further integrate. Myanmar's hosting of the Southeast Asia (SEA) Games in 2013, the
hosting of the World Economic Forum (WEF) on East Asia in the same year, its
chairmanship of the ASEAN Summit in 2014, and the movement toward a region-
wide ASEAN Economic Community (AEC) in 2015, will all play important roles in
contributing to the further political stability over the coming years. The challenge will
be to keep up the reform momentum without causing macroeconomic or political
instability.

41. 41
APPENDICES
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stakes. The Nation. Bangkok, 25.May 2012.
Arakan Oil Watch (AOW) 2012: Burma's Resource Curse. March 2012.
Asian Development Bank & Myanmar, country fact sheet, April 2013
Asian Development Outlook 2012: Confronting Rising Inequality in Asia. Manila.
Aung Ye Naing 2012: Business visitors to get "one-minute" visas. Irrawaddy, May 29
2012.
Baldor, Lolita C. 2012: Panetta open to military relations with Myanmar. Associated
Press. Singapore. 2. June 2012.
http://abcnews.go.com/International/wireStory/panetta-open-military-relations-
myanmar-16480226
Bangkok Post 2012: Pace of reform should be steady and sure. 04.05.2012:
http://m.bangkokpost.com/opinion/291699
Biron, Carey L 2012a: Myanmar rush risk undermining progress. Asia TImes Online,
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Violations, Applicable Law, and Revenue Secrecy. Situation Briefer No.1. March
2011. Washington.

42. 42
Economic Research Institute for ASEAN and East Asia: Effective Bureaucracy can
Facilitate Economic Reforms in Myanmar, June 2013
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fiber.html
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http://www.property-report.com/myanmars-hotel-land-prices-on-the-rise-20057

43. 43
Reuters 2012: “Myanmar Still Not Open on Oil, Gas Wealth”. Bangkok, 22. March
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idUSL3E8EL5LL20120322
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The Logistics Performance Index and Its Indicators
World Economic Forum: The Global Competitiveness Report 2013–2014

44. 44
LIST OF ABBREVIATIONS
ADB - Asian Development Bank
AFTA - ASEAN Free Trade Area
ASEAN - Association of Southeast Asian Nations
ATM - Automated teller machine
CIA - Central Intelligence Unit
CNPC - China National Petroleum Corporation
CSO - Central Statistical Organization (Myanmar)
DDC - Dawei Development Company Limited
DSEZ - Dawei Special Economic Zone
EIA - Energy Information Administration
EU - European Union
FDI - Foreign Direct Investment
FESR - Framework for Economic and Social Reform
GDP - Gross Domestic Product
GSM - Global System for Mobile Communication
IMF - International Monetary Fund
ITD - Italian Thai Development Plc.
km2 - square metre
KWh - kilowatt hour
MOGE - Myanmar Oil and Gas Enterprise
MPT - Myanmar Posts and Telecommunications
MW - Megawatt
NLD - National League for Democracy
PV - Photovoltaic
SEA - Southeast Asia
SEZ - Special Economic Zone
SLORC - State Law and Order Restoration Council
SPDC - State Peace and Development Council
UMFCCI - Union of Myanmar Federation of Chambers of Commerce and Industry
US - United States
USDP - Union Solidarity and Development Party
USD - United States Dollar
WB - World Bank
WEF - World Economic Forum

45. 45
MAP OF MYANMAR
Sources: United Nations