By Joshua Brown and Martin Jancik
Canadian businesses are among the best suited to capitalize on the opening of Myanmar’s emerging market. The country’s geological potential, infrastructure, needed investment in education and growing consumer class has helped the country land on the Canadian government’s “Priority Market list.” However, Canadian reticence to tackle challenging markets further afield leaves them at risk of missing out as public and private interests pour into the country on the heels of landmark elections.
Myanmar’s greenfield economy is set to grow at a rate in excess of 8 percent by most forecasters’ estimates. The growth will drive surging imports in many of the export categories where Canada performs best. Growth in the imports of motor vehicles and parts, industrial machinery, aircraft and parts, chemicals and fertilizers – all among Canada’s largest sources of export revenue – are set to grow by 91 percent as a group by 2019, nearly doubling in every single product category.
As per capita incomes grow, more consumers will purchase vehicles and imports of motor vehicles and parts are expected to increase by 95 percent between 2014 and 2019 to as much as US$4.6 billion. Imports of industrial machinery will jump too and are expected to climb more modestly by 76 percent to US$4.8 billion by 2019. As air travel becomes more accessible locally, and rapid growth in the tourism sector boosts the number of commercial airline passengers, imports of aircraft and the parts needed to service them could grow as much as 134 percent by 2019 from 2014 figures reaching an estimated US$268.7 million.
Expansion of modern farming techniques and usage of modern production inputs will help to boost imports of fertilizer by up to 93% reaching US$245.6 million by 2019. Imports of chemicals will grow from a larger base, albeit more slowly, topping US$414.9 million by 2019, a 55 percent change from 2014 figures.
The opportunity has been much hyped throughout the historic events of the last five years that have seen Myanmar’s regime shed its military garb and make way for a nominally civilian government. The opportunity has not been lost on the Canadian government. Since 2010, Canada has opened a fully credentialed embassy, appointed an ambassador, trade and development staff, denoted Myanmar as a priority market and sent ministers of trade and foreign affairs on official visits. Alongside dozens – if not hundreds – of international business delegations, the Canada Asean Business Council led a group of its own members into the country and Canadian chambers of commerce in the region have done the same.
However, the Canadian response has not been relative to the scale of opportunity. Canadian exports to Myanmar stand at a paltry US$19.5 million, less than one percent of Canada’s exports to the Asean region and investment in the country has not been significant enough to make Myanmar Investment Commission records.
Canada’s economy is expertly well-suited to address Myanmar’s fast-growing thirst for both commodity and finished goods imports. However, reticence among Canadian companies and an aversion to perceived risk must be overcome. Canadian companies seeking to benefit from Myanmar greenfield growth story must be prepared to commit resources to establishing an incumbent market position. Success in this frontier market will not come overnight but those prepared to commit head-on, stand to reap tremendous benefit.
Thoughts on Myanmar Election
November 2015 saw Myanmar’s historic election come and go. More than 80 percent of Myanmar’s 33 million eligible voters turned out at the polls to vote in what has been seen as Myanmar’s first free and fair election since a 1990 poll saw the opposition National League for Democracy (NLD) sweep in a landslide victory that was quickly annulled by the ruling military junta.
Since then, the sitting Myanmar government and powerful military, which holds 25 percent of parliamentary seats by constitutional dictate and appoints many of cabinet’s top positions, have made all the right signs to signal a forthcoming peaceful transition of power.
While parliament will not vote to appoint a president until March, progress has been much lauded by the international community and results sent stocks with Myanmar exposure, such as Singapore-listed Yoma Strategic Holdings, soaring by as much as 34% days after the election results were announced.
Much hard work remains ahead with the newly empowered NLD facing a basket case of economic, political and social issues and its first attempt at managing a majority and quite possibly the civilian administration. Despite the road ahead however, Myanmar’s prospects appear strongly positive.
This article was published in Canada-ASEAN Business Council’s Q4 2015 Newsletter.