Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
As a frontier economy, Burma faces market challenges and obstacles. Obtaining accurate and relevant market and financial data can be onerous. Demand for well-educated and trained workers outstrips supply. Weak infrastructure remains a barrier to growth. Only 40 percent of the road network is paved, and 20 million people, half of the rural population, do not have access to all-weather roads and electricity.
According to the Asian Development Bank as of 2020, $120 billion will be needed by 2030 to improve infrastructure and add needed roads, rail, bridges, and airports. At least 77 percent of the population has no access to financial services, according to consultancy Roland Berger. As of 2019, a large part of Burma’s foreign investment is concentrated in the oil, gas, power, and telecom sectors, according to an analysis by the World Bank, with manufacturing accounting for less than 10 percent of GDP.
COVID-19 Pandemic Impact
Burma’s economy has been weighed down by restrictive measures taken to control the pandemic. This slowdown led to uncertainty around Burma’s future economic growth and negatively impacted recent progress in poverty reduction.
February 1 Coup Impact
After the February 1 coup, the most acute economic challenge was the cash flow crisis. Along with the banking sector vulnerability, international trade and investment was crippled due to military activity against the civilian population, border restrictions, international community-imposed sanctions on projects and businesses related to military organizations and personnel, and civil disobedience by tens of thousands of employees from various industry sectors. In addition, the military government ordered restrictions on internet connectivity that impacted mobile banking transactions for businesses. The World Bank forecasts an 18 percent GDP contraction with a possible doubling of the poverty rate.
Since late 2017, the Burmese market has been subject to growing reputational risk. In August 2017, a small militant group representing a Muslim minority - the Rohingya — launched a violent attack in Rakhine State, a western region of Burma bordering Bangladesh. The response by the Burmese military to this attack was swift and disproportionate. Ultimately, the protracted military response – amid widespread international condemnation – forced 700,000 Rohingya out of the country. This unresolved situation continues to be a setback for Burma’s political and economic progress and has had a significant impact on the market outlook, particularly for some U.S. companies.
The February 2021 coup brought military control of the government, a rise in unethical business practices, and a nontransparent business environment. Some Western firms may still be hesitant to enter the market due to Burma’s current reputation. U.S. companies should be mindful of this situation while considering entering the Burmese market.
Prior to the coup, market challenges that Burma had begun to address include:
- An unstable political situation and safety concerns for foreigners and local employees
- Weak financial infrastructure and recent banking sector instability
- A legal and regulatory system that relies on practices and government discretion rather than written laws
- Poor physical infrastructure, including communications and transportation networks
- A weak educational system and unskilled workforce
- Unsettled and evolving economic policies
- A limited supply of electricity outside major urban areas
- No standard law on public-private partnerships (PPP)
- Weak intellectual property laws with limited implementation
- Weak rule of law and property rights; the judiciary is not independent and lacks experience with commercial litigation and arbitration