Myanmar may be in for a tough patch with foreign direct investments declining, inflation rising and global uncertainty adding pressure to the kyat. Yet, recovery may be on the cards as opportunities emerge on the back of policy reforms and the execution of projects related to China’s Belt and Road Initiative (BRI), analysts from Singapore’s OCBC Bank said in a new year’s eve report to its clients.
“Myanmar is still struggling to resolve fundamental concerns relating to basic human rights as well as the repatriation and recovery of refugees who fled to Bangladesh. Global economic prospects are increasingly gloomy as uncertainty over trade rises. However, not all hope is lost. With the recent policy changes and investments in infrastructure from BRI, Myanmar is forecast to enjoy a robust economic growth from a regional and global standpoint,” the analysts said.
Some of the BRI projects are already starting to roll in. After more than two years of negotiations, the government and China’s state-owned CITIC Group on November 8 agreed to proceed with the construction of a deep-sea port in Kyaukphyu, Rakhine State, as part of the BRI.
In the first out of four phases, the deep sea port will be implemented for $1.3 billion. The original estimated cost of development for the entire project had been $7.2 billion, with the first phase expected to cost $1.6 billion. The new arrangements came after the Chinese acquiesced to a 70pc stake in the port, from 85pc initially agreed in 2015.
The second BRI project includes the construction of the Muse-Mandalay railway line. This project aims to connect Ruli East Railway Station in China to Muse, Larshoe, Kyaukme, and Pyin Oo Lwin in Mandalay with 43.5 kilometres of railway track. A feasibility study for the project is expected to be completed this year.
“These BRI projects can help to improve connectivity within Myanmar and with the region, and have the potential to achieve positive spillover effects on trade opportunities if barriers on trade facilitation are overcome,” OCBC said.
China’s investments in Myanmar are coming onstream at a time when FDI appears to be waning. During the first half of this year, approved FDI totaled just US$1.7 billion compared to US$4.1 billion during the same period in the previous fiscal year.
In a bid to attract FDI, the Ministry of Commerce in 2018 also removed the restrictions on foreigners to engage in retail and wholesale businesses. As promised, the government also enforced the new Myanmar Companies Law in August. The law permits foreign ownership in local companies up to 35pc.
“These reforms were expected to improve efficiency in Myanmar through the promotion of competition,” said OCBC.
In that light, OCBC appears to be bullish on the prospects for Myanmar for 2019. “Global economic prospects have darkened amid the escalating US-China trade tensions and the global GDP growth is forecasted to grow at a moderate pace of 2.9pc in 2018 as compared to 3oc in 2019. Moving into 2019 with a potentially more volatile global trade environment, Myanmar’s 6.2pc forecasted economic growth for 2019 is regarded to be robust,” it said.