Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
According to the Asian Development Bank, $120 billion will be needed by 2030 to improve and expand needed infrastructure, including roads, rail, bridges, and airports. A large share 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.
Burma also faces significant market challenges and obstacles following the February 2021 coup: 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; less than 40 percent of the road network is paved; and half of the rural population, 20 million people, do not have access to all-weather roads and electricity.
The World Bank estimates Burma’s economy is 30% smaller than it would have been in the absence of the pandemic and the military coup. Recent regime-enacted import and export limitations and foreign exchange flow control measures will negatively impact growth, and the continual Burmese kyat (MMK) depreciation and shifting currency rates may trigger a spike in inflation in the near term. As of May 2022, employment and capacity in the manufacturing sector has stabilized, and exports recovered to a limited extent.
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 reversed recent progress in poverty reduction. Several sectors have recovered to pre-coup levels, but most sectors have not. The regime Ministry of Health claimed that 32.2 million people had been vaccinated (approximately 60 percent of population) as of May 2022.
February 1 Coup Impact
The military coup caused a massive negative impact on the country’s economy, already weakened by the COVID-19 pandemic. The most acute economic challenge is a sustained cash flow crisis. Banking sector vulnerabilities, military activity against civilians, border restrictions on exports and imports, unstable foreign exchange policies, targeted international sanctions, and ongoing civil disobedience in various industry sectors and government ministries have crippled Burma’s international trade and investments. In addition, the military regime continues to order restrictions on internet connectivity in rural areas that impact mobile banking transactions for businesses and foreign remittance transfers. The World Bank estimates an 18 percent GDP contraction, a sharp decline in FDI, and a possible doubling of the poverty and inflation rate.
Since late 2017, the Burmese market has been subject to growing reputational risk, following the Burmese military’s attacks on the Rohingya people in Rakhine State, causing more than 700,000 to flee to Bangladesh. On March 21, 2022, Secretary of State Blinken determined that members of the Burmese military committed genocide and crimes against humanity against Rohingya. These events and subsequent determination were another setback for Burma’s political and economic progress and have had a significant impact on the market outlook, particularly for some U.S. companies.
The February 2021 coup returned military regime control to a majority of the country, triggered a rise in unethical business practices, and expanded the nontransparent business environment. U.S. companies should be mindful of this situation while considering entering the Burmese market.
Following the 2021 military coup, market challenges include:
An unstable political situation and safety concerns for foreigners and local employees
New and complicated restrictions on export and import policies
Ineffective financial infrastructure and recent banking sector volatility including the military’s recent draconian measures over foreign exchange controls
A legal and regulatory framework based on customs and government discretion rather than codified legislation.
Inadequate physical infrastructure, including communications and transportation networks
A lackluster educational system and underqualified workforce
Unsettled and drastic changes in economic policies
A limited supply of electricity outside major urban areas
Limited access to telecommunication outside of large cities
No standard law on public-private partnerships (PPP)
Ineffective intellectual property laws with no enforcement implemented
Weak rule of law and property rights; the judiciary lacks independence and experience in commercial litigation and arbitration
For investors remaining in Burma, considering new investments, or seeking to exit the market, it is indispensable to undergo a comprehensive due diligence review of operations and plans, considering applicable sanctions, restrictions, and human rights violations.