- Money Morning Australia

Burma: The Biggest Emerging Market Story Since China in 2001

Written on 21 April 2012 by MoneyMorning

Burma: The Biggest Emerging Market Story Since China in 2001

About five years ago I had the fortune to take a month-long tour through Myanmar (Burma) with a group of Burmese and Japanese friends. For the most part, we travelled on buses – relics from World War II that were crammed with people throughout our trip. Our fellow passengers offered us miniature wooden stools placed in the middle of the aisle to sit down on. And we stared out the window at the strange country that rushed past.

Myanmar absolutely mesmerised me. It is blessed with lush paddy fields, dramatic mountain ranges and people who seemed untouched by the modern world. We’d pass women and children with exquisite white-painted faces from thanaka cream. And almost every corner had an ancient Buddhist temple where local people asked for alms to paint or repair it. I was considering learning Burmese and staying.

For the last month, Myanmar has been back in the spotlight. On 1 April, the country held a landmark by-election, which could soon sweep the recently freed Aung San Suu Kyi to power. If the election is deemed fair, the EU and the US will lift some of their long-standing trade sanctions. Myanmar is also set to float its currency, the kyat, to attract investments and reduce corruption.

These reforms could bring decades of international isolation to an end. And the country has been swarming with foreign businessmen and politicians in recent weeks. Western companies are queueing up to get into the country, sandwiched between China and India and offering huge potential in energy and tourism. Even David Cameron has announced his intention to visit.

But you can forget China, India – and certainly David Cameron. Because Burma is part of a far more interesting investment story. In fact, I think that this will be the most exciting story of the next five years. And it promises to deliver some explosive returns for early investors.

What Does Burma Offer?

You can call it Myanmar or Burma (it doesn’t matter all that much to the locals I speak to), but this country has long been the subject of colonial interest. A century ago, the British used the Irrawaddy as a back door to the markets of China. Unfortunately the river – which starts in the perennially snow-covered Himalayas and descends a thousand miles to empty into the Bay of Bengal – passes through massive mountain peaks which were inhibited by hostile tribes.

But it still emerged as a major exporter of commodities: hard wood, gems and rice (the world’s biggest exporter until the onset of the World War II). However, following independence in 1947 and a flirtation with democracy, Myanmar turned inwards and pursued a mixed ideology of Buddhism and socialism, leading down an economic cul-de-sac it has yet to escape.

Today Burma’s economy has three things going for it. First, it is a regional transport hub providing an alternative shipping route from Asia to the Middle East, India and Europe, by-passing the Malacca Strait. Second, the development of Myanmar’s natural resources will provide energy and food to much of Southeast Asia. And third, rising incomes in Myanmar and the expansion of the transportation network from Bangkok (east-west and north-south) will become a magnet for foreign direct investment inflows to the region.

Those factors place Myanmar right at the heart of the most exciting development in emerging markets since 2001.

Burma The Biggest Story of the Next Five Years

We are entering the era of the Asian world economy. This era can be dated back to China’s entry to the World Trade Organisation in 2001.

China’s membership changed Asia. Improved rule of law led to an investment boom, fuelled by capital mainly supplied from other Asian countries. The result was high-octane Chinese economic growth and rapid industrialisation due to competitive labour and land costs and proactive local governments.

The rest of Asia also saw increased intra-regional trade. Smaller neighbours fine-tuned their economic growth models and focused on niches that they can compete and thrive in in a China-dominated Asia. That adaptation is ongoing and the full benefits will be visible over the next few years.

But this won’t necessarily be a China-dominated story. Because Asia is changing. China and its economic might scares Myanmar. For the last 12 years China has pursued a ‘Go West’ policy – sending people, industries and energy demand to China’s western hinterland. And there are grave concerns about the ability of the Chinese government to avoid a devastating economic crash.

Those concerns are now being felt in Myanmar, triggering a strategy shift towards affinity with rest of Southeast Asia. And one development could prove an enormous catalyst for this process.

In 2015 the Association of Southeast Asian Nations (Asean) will reduce the tariffs and other non-trade barriers for member countries. This will create a new economic zone called the Asean Free Trade Area.

Asean, home to 600 million people and $2.5trn in combined GDP, has decided that six of the ten member states will completely abolish taxes on goods. For the newly admitted members, Cambodia, Laos, Vietnam and Myanmar, the 7% VAT on trade goods will be abolished by 2018. In fact, Myanmar will chair Asean in 2014.

The goal is obvious: cut red tape and reduce trade barriers for products and services. And as those trade barriers are removed, we are likely to see a total transformation of this region of Asia. There will be massive investment in infrastructure – from ports to factories – to facilitate these new trade links. And it will all happen in the next few years. In fact, I think there are parallels here with Eastern Europe in the very early years of European integration.

That’s why a delegation of 50 Malaysian businessmen flew into Myanmar last month. They see that 65% of the population is below 35 years of age, of which millions of are employed in neighbouring countries. They have seen how the rest of Asia prospers and enjoys increased political freedom.

And the labour cost advantage combined with abundant natural resources makes it an alluring Asian tiger candidate. According to a JETRO survey of companies operating in Asia, labour costs in Myanmar are 55% of the wages in Vietnam, 24% of those in Thailand and 22% of those in China.

That’s why bilateral trade between Malaysia and Myanmar stood at US $795m in 2011, an increase of nearly 27% from the previous year, according to Malaysian government figures. And this isn’t just a story of Malaysia developing links with Myanmar; bilateral trade is exploding right across the Asean region.

Singapore, for instance, is looking to specialise in service sectors such as biomedical science, offshore private banking and tourism. So it is busy outsourcing its manufacturing base to Iskandar – near where I live in Malaysia. For years I’ve watched vast tracts of land rezoned around the province. And I’ve followed the development plans as enormous infrastructure projects have been laid out – linking warehouses to rail to ports, from one side of the Malacca Strait to the other.

Thailand is following in the footsteps of Malaysia. It is planning to invest large amounts of money to upgrade its ancient railway system. China and Japan are willing to support the push with long-term soft loans.

The end game is simple: bring down logistics costs, spread the economic wealth to new regions and allow Asean to better capitalise on its resources of rice, palm oil, coal, gas and other natural resources as well as its relatively young and inexpensive labour pool.

But for now, the opportunity lies with those companies helping to foster bilateral trade between Asean countries. That means infrastructure plays. That means transport companies, but also financial companies helping to foster trade.


Lars Henriksson

Contributing Writer Money Week (UK)
This is an edited version of an article that first appeared in MoneyWeek (UK)

From the Archives…

The Deep Ocean Frontier For Mining Profits
2012-04-013 – Dr. Alex Cowie

The Turkish Economy: Knocking At The Door
2012-04-12 – Karim Rahemtulla

Inflation and Sovereign Debt – Why The Best Is Yet To Come
2012-04-11 – Nick Hubble

How to Make the Most Out of Small Cap Investing
2012-04-10 – Kris Sayce

Why You MUST Speculate
2012-04-09 – Kris Sayce

Already a subscriber to Money Morning... or simply, just like what you're reading? Then show your support and spread the word...
Share this post on...

At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day - and tell you how to profit from it. We know the best investments are often the hardest to find. So that's why we sift through mountains of reporting, research and data on your behalf, to present you with only the worthwhile opportunities to invest in. Become a more informed, enlightened and profitable investor today - by taking out your free subscription to Money Morning now.

Leave a Comment

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.

If you would prefer to email the editor, you can do so by sending an email to moneymorning@moneymorning.com.au

1 Comments For This Post

  1. mel Says:

    This is a real stretch and pushes the envelope of what are doing with this website.

How Money Morning Can Help You Can Become a Smarter, Better, Investor

Privacy Statement
We will collect and handle your personal information in accordance with our Privacy Policy.
You can cancel your subscription at any time

Diggers and Drillers

A 3-Point Plan to Re-Engage with the Aussie Mining Boom

This new video reveals a way for Aussie share investors like you to RE-ENGAGE with the next phase of the mining boom…while valuations are still dirt-cheap…

The plan centres round three specific stocks.

To find out what they are, click here.

Australian Small-Cap Investigator

The Australian wildcatter
exploring oil's 'final frontier'

The US Geological Survey says this area contains up to 71 billion barrels of oil.

Only a few explorers have secured licences to drill.

One of them is a daring little Aussie firm that begins drilling 'in early 2014'.

According to small-cap analysts Tim Dohrmann it's impossible to speculate just how high this one could go. Find out why here.

World War D

Couldn’t make it to our
‘War Summit’?

Don’t sweat it. Click here for the next best thing…

World War D was the most important meeting of minds of the decade so far. What came out of it will almost certainly force you to reshape your investment plan for the rest of the decade. There's no way to go back in time and get inside the Savoy Ballroom of the Grand Hyatt.

But you can do the next best thing…
to find out what it is, click here.

  • ^NDX3591.029+33.993 - +0.96%
  • ^FTSE6703.00+28.26 - +0.42%
  • ^AORD5515.500+13.300 - +0.24%
  • ^AXJO5531.000+13.200 - +0.24%
  • AUDUSD=X0.9265
  • USDJPY=X102.3115

Graphic Ad 1 – Blue Chip Stocks Report

Revolutionary Tech Investor

This report is about TECH MOON-SHOTS

Four of them, to be precise.

It's an early-days project. But one biotech aiming for the cancer moon-shot is already up - get this - 497.14% since tipped.

For four more tech moon-shots, click here.

Gowdie Family Wealth

The worst mistake you can make when handing wealth on to your kids

This brand new investor briefing shows you what your family’s in for if you don’t take care to leave your wealth to them in exactly the right way.

And it shows you precisely how to prevent infighting, recklessness and misunderstanding over money.

Read it here.

The Money For Life Letter

Holden. Toyota. Qantas. BUST

Do you really expect the share market to boom in times like these? That's why Nick Hubble says the best thing you can do right now is invest for safety and income.

This brand new video shows you how you can get predictable, reliable and rock solid cash flow no matter what happens in the wider economy.

You could lock in up to $20,000 a year - and that's just the start. See how here.

Sound Money. Sound Investments. [bullish prediction]

Greg Canavan's first bullish prediction in four years

Greg Canavan
doesn't make forecasts like this often.

When he does, it's because he’s found something that could make you money for years to come.

Read more here.

Is the Australian Housing Boom Really Back?

The Denning Report

2014 Predicted

Dan Denning accurately forecast 2013's flight from
bonds to stocks, the commodities crash and the
Aussie dollar top…to the exact week

In this brand new forecast report, he shares his
three critical predictions for 2014…

More Recommended Reading Below...

The Pursuit of Happiness & The Daily Reckoning

  • The Pursuit of Happiness
  • The Daily Reckoning Australia

Two days from now Australia will get a taste for what happens in American sports stadiums every day [Read More...]

Would you approve this chemical? Would you allow this to come to market? Table salt would simply not [Read More...]

If these lessons can be passed onto the next generation, what a world it would be. Healthier, genuin [Read More...]

3D printing is changing medicine, consumer products, art and manufacturing. The impact it’s having o [Read More...]

Done properly, a retirement business can not only help fill a retiree’s time and replace their work [Read More...]

It was necessary just to stay in the same place. Take it away, the US stock market crashes...and the [Read More...]

The end of Australia’s recession-less run is waiting somewhere. Even the US is due for another reces [Read More...]

You can see the property cycle and how it moves and turns, all around you. Get used to it. Australia [Read More...]

A high Australian dollar means we’re doing well at exporting. A low one means our trade balance is l [Read More...]

From the invasion of the Philippines to the Vietnam War…the US empire was financed by the rich, prod [Read More...]


"I think you're fantastic! I love to read what you write...you're so interesting and amusing and I've learned so much" -
Money Morning reader, Chris Gadd

"You guys are brilliant. I feel more relaxed about the future than ever simply because I know what is going on rather than floundering around with smoke screens and mirrors from the government and mainstream" -
Money Morning reader, Helen Carter

"Wow what can I say? I was an economically confused moron until I read your newsletter and even though I've been a subscriber for a short period I can now see how easy it is to understand, if you use common sense and can have the spin translated into everyday language. Thanks for an entertaining read." -
Money Morning reader, John

"Keep up the good independent and well thought out articles offering a view that often debunks mainstream myths." -
Money Morning reader, Craig

"I do admire your straight talking and simple analysis of the situation, I think of you as the Jeremy Clarkson of finance." -
Money Morning reader, Jeffery