Chez Roopen‎ > ‎

Where China meets India: Myanmar

Myanmar must realise its importance

By Roopen Roy Sep 23 2014

Tags: Op-ed
Myanmar must realise its importance
MARCH ON: Myanmar is still a predominantly agricultural country and it uses outdated technology and low skills in its occupations. Its economic isolation has resulted in lack of investments in various sectors

Myanmar is not just one of the neighbours of India. As Myint U Thant suggests — Myanmar is where “China meets India”. He goes on to assert that Myanmar “borders to the east with China and India to the west. It stands exactly midway between Delhi and Mumbai and Shanghai and Hong Kong. It is the missing link.”

The first time I visited Yangon, I could not but notice the similarity of colonial architecture of Kolkata and Yangon. The elegant Strand Hotel that stands on the bank of the Yangon River looks straight out of the British Raj. India and Burma were both part of the empire. We have a shared history and cultural connect.

India is helping Myanmar to build a new seaport. Plans are underway to re-open the Stilwell Road which was constructed by the Allies at enormous cost during World War II to contain Japanese military operations. For decades, it remained abandoned. This road would link eastern India to China’s western province Yunnan. With global economic activity shifting to Asia, Myanmar’s location is one of its strategic advantages.

Myanmar today is a relatively poor country with a nominal GDP of around $60 billion. Its ambition is to quintuple its GDP to $300 billion by 2030. It is clearly doable. However, there are a number of complex and difficult-to-overcome challenges. But it has many advantages too. The biggest advantage is its location at the intersection of geographies with a market of 500 million people.

To achieve the CAGR that will catapult its GDP to $300 billion, it will need vast amounts of investment estimated between $400 billion to $700 billion. Much of these investments — at least in the initial years — have to be sourced from outside Myanmar.

These large doses of investments will be required for Myanmar to catch up with the progress of the rest of the world as it emerges from its isolation. It must accelerate its GDP growth to make up for lost time. Between 1900 and 1990, the world GDP grew at about 3 per cent per annum. Myanmar grew during the same period at just over half the rate at 1.6 per cent. However, between 1990 and 2010, Myanmar picked up pace and grew at 4.7 per cent. It is reaching a growth rate now of just under 6 per cent.

The root cause of the lack of fast growth was low productivity. While Thailand’s per capita has an economic value added of $8,400, China’s sums up to $7,800 and India’s stands at $3,600, Myanmar is at the bottom of the pile with an economic value added of only $1,500. Myanmar is still a predominantly agricultural country and it uses outdated technology and low skills in its occupations. Its economic isolation has resulted in lack of investments in education, skill-building, research and technological modernisation.

And yet it is endowed with many natural advantages. It has 7.8 trillion cubic feet of known natural gas reserves with two of the hungriest consumers at its doorstep. But oil and gas resources have been a curse rather than a blessing in many countries in Africa and western Asia. Unless Myanmar is able to drive good governance and transparency around its gas industry — it has a risk of being cursed by corruption and inefficiency with the benefits of the resource not trickling down to its citizens.

Myanmar produces a good deal of precious stones. In fact, 90 per cent of the world’s jades and a significant portion of the highly prized pigeon blood rubies come from Myanmar. It is, like India, blessed with a young working age (defined as 15-64 years) population of 45 million. But not unlike India and indeed even more so, the skill deficits of the young population of Myanmar can turn the seeming advantage into a political nightmare. Skill building programmes must be implemented on a war footing. Myanmar’s dominant agricultural sector is seen as a drag as it is the cause of much of its disguised unemployment and low productivity.

As it transitions a large chunk of its population to manufacturing and adopts strategies to modernise farming, the natural advantage of Myanmar will become clear.

In the future, our planet must step up its food production to feed an increasing population. Myanmar has 12.25 million hectares of arable land. In the future, our planet will realise how precious precipitation is as a resource. Myanmar has 10 times water per capita than China and India, and will be a major food exporter.

As a country strategy, Myanmar must use its backward technological state to its advantage. First, it can adopt digital leapfrogging. By embracing the latest appropriate combination of telecom technology, it can thrust ahead in the digital world. Secondly, it must connect with the global market and the cross-border supply chain. For this, it needs investments in infrastructure. But as a senior policymaker in Myanmar pointed out to me, the toughest challenge will be to develop the “soft” infrastructure in lockstep with the “hard” infrastructure. He said they could build a university and equip it with labs if they had the money. How do they build the institution? For this, Myanmar must for a period of time look at foreign managers and attract back non-resident nationals. Some of its accelerated development will come from rebuilding the new silk route that increases trade and investments through renewal of physical infrastructure. Eastern and northeastern India must develop at a rapid pace because it has fallen behind. Likewise, western China must grow faster as well. Located bang in the middle Myanmar has the opportunity of being part of a high growth geography and it can create its thrust to defy the gravity of low growth by integrating and connecting. Thereby, a new sun will rise on the banks of the Irrawaddy and it will cease to be a “river of lost footsteps”.

(The writer is managing director of Deloitte Consulting, India. These are his personal views)