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Myanmar and Mongolia
Many well-wishers welcomed Myanmar opposition leader Aung San Suu Kyi at the Yangon
International Airport on May 7 as she arrived back from Mongolia."As her arrival time was very late at night, I was worried that there wouldn't be many well-wishers. I
wanted many people to welcome her. Now, a lot of people came to welcome her. I believe that
whenever she went on foreign trips, she did beneficial things for the country," said Khin Saw Mu,
vice chairperson of National League for Democracy branch office.
The Nobel Prize winner was in Mongolia for a week to participate in the 7th Ministerial Conference
of Community of Democracies at the invitation of Mongolian PresidentElbegdorj Tsakhia.
She delivered a speech at the summit and received an award for her lifetime struggle to bring
democracy in Myanmar.
She also met with President Elbegdorj at the Government House in UB and gave a joint lecturewith him.
J ust like Investment Agreement between Rio Tinto and Mongolian Government has opened the
door for Mongolia to access to international investments in 2009, the visit of Mrs. Clinton and
President Obama in 2011/2012 marked the significant event for the start of Myanmar Boom. Both
Mongolia and Myanmar have become Symbol of the Frontier Markets in the last few years.
In this report, we have compared the two countries and provided implications for investors.
MyanmarWith its beautiful natural resources and a diverse range of cultures such as Buddhist and Bamar,
Myanmar should have vast opportunities in tourism. In fact, since 1992, the government has
encouraged tourism in the country. However, until very recently, only one million tourists entered
the country annually as much of the country is completely off-limits to tourists, and the military very
tightly controls interactions between foreigners and the people of Burma, particularly the border
regions.
But, the tourism will flourish in coming years because of its nature, culture and others.
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On the other hand, the much bigger opportunities exist in other industries as well. In fact, since the
visits of Mrs. Clinton and President Obama, a significant amount of interests have been created
among international communities.
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The country has been completely shut out from international business until recently. But, many
multinational companies are rushing to enter the market. Below (Facts about Myanmar and
Myanmar: Economic Data) are the basic information about the country. Below are several
characteristics which I want to emphasize especially compared with Myanmar.
1. Population
Decent size of population. 20 times bigger than Mongolia2. Lots of ethnic groups
3. Life expectancy
Very short! Probably one of the shortest in Asia. Around five years old shorter than Mongolia
and 20 years shorter than J apan.
4. GDP
Decent growth rate (5.5%)
Growth rate should be higher in the next 2-3 years because of the boom
But, 15-20% increase which Mongolia has experienced in 2011 will be difficult to achieve
5. Trade
Surprisingly, trade surplus already.Thanks to Natural Gas and thanks to China..
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Natural resources
Strategically and resource-wise, there is no doubt that Myanmar has value. Resources include jade,
gems, tin, zinc, copper, tungsten and lead. Other resources include natural gas, petroleum, timber,
coal, limestone and hydro power. Around a year ago, state-run media trumpeted that SIPC
Myanmar Petroleums exploration project in Magwe had found gas reserves of at least 900 billion
cubic feet, and possibly as much as 7 million barrels of gas condensate. That is just one exampleof many.
However, we do not have exact data on the resources and reserves just like Mongolia does not
have. So, it is difficult to compare the two countries. However, our guess is, in terms of resource
and economic value of minerals, Mongolia is bigger. But, in terms of feasibility, it may be true that
Myanmar has better potential because they face coastline and less control by Government (So far).
Speaking of infrastructure, both countries have problems and lots of time and money should be
spent in a future to develop. In terms of environmental concerns, both countries have strong
anti-mining industry sentiments. But, the approach to solve problems is quite different. One of the
examples is protests against the Letpadaung copper mine in northwestern Burma which began last
year in reaction to forced relocation and environmental concerns. Yet the liberalizing political
system in Burma/Myanmar begins from a context forged in decades oftop-down military rule.
Protest may be tolerated, but the politicians can still decide when and how to listen. This is quite
different from rather bottom-up approach in Mongolia.
Cheap Labor and Strategic Potential
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One of the biggest reasons why investors are interested in Myanmar is because of its cheap and
abundant labor. Monthly basic salaries are probably cheapest in Asia. Average workers salary in
the manufacturing industry is only 53 USD in Myanmar. Also, salary for engineer and manager are
very reasonable. In addition, the workers are young and they work very hard.
Speaking ofstrategic potential, Myanmar is surrounded by big markets in Asia like China, India,
Bangladesh and Thailand. The total populations of those surrounding countries are2.8 bill ion andthat accounts for 40 % of world population. Also, those countries are considered to be the fastest
growing economy in Asia and the world. Therefore, there will be a huge opportunities to trade with
them in a future.
Cheap labor together with strategically important location, has added Myanmar as one of the most
promising manufacturing hub. At this moment, there is only one industrial park in Myanmar which
has global standard infrastructure. And, that particular park is fully occupied. But, after two years,
when other industrial parks have started operations, many big global manufacturing companies
should build their factories in Myanmar to diversify risks and to reduce cost away from China,
Thailand and others. The boom of making new factories in Myanmar will certainly happen in two
years just like what happened in Thailand, Vietnam, Philippine and Indonesia in 1990s.
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Infrastructure
According to CIA World Fact Book statistics, Burma has just 3,000 km of paved roads for a land
area of 677,000 square kilometres. Some 30 per cent of the population has still to receive a clean
drinking water supply. There are railways though 5,000 km of it but all on a narrow gauge.
What Burma does have though, in addition to its mineral riches, are a long coastline facing India
and the west, and pipelines. China is already a major investor in Burmas gas and oil sector and islikely to be the end-user of much of its oil and gas production. CNOOC is building twin pipelines
from a coast to Yunnan province in southwestern China.
Mongolia is also desperately in need of infrastructure (railroad, road, power plant, water etc).
However, Mongolia is handicapped because of much smaller population and also because it is
landlocked by Russia and China.
Foreign Direct Investment Law
Rich in natural resources and home to a series of growing industries, Myanmar seems poised to
benefit from growing foreign investor interest. While much of Myanmars post-independence
history has been dominated by military rule, in the last two years, there have been significant
moves towards a more open and democratic political and civil society. Myanmar is gaining
increasing international attention, resulting in an easing of sanctions. Nonetheless, it is still facing a
number of challenges including legal framework.
To broaden investment and development in the economy beyond the extractive and energy
industries. A much anticipated foreign direct investment law has passed in 2012. In addition, the
Government is willing to accelerate the speed of the legal reform. One of the biggest outcomes of
recent Japanese Prime Ministers visit to Myanmar was providing technical assistance to the
country especially to improve legal system. a move which, if implemented, would likely facilitate
further modernization of industries over the coming years.
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In addition, joining to ASEAN Economic Community (AEC) means Myanmar will be included in
the same framework as other ASEAN Nations in terms of trade, free movement of capital and
mobilities of people and policies etc. Therefore, it will significantly increase the convenience and
reduce risks of foreign investors.
Myanmar-SWOT
Below are the SWOT analysis of Myanmar and summaries of comparisons of Myanmar and
Mongolia.
1. Similarities
Young population, Rich in Natural Resources, Strategic location, Fiscal weakness, weak
infrastructure, under-developed financial sector, Next Frontier for high growth, Environmental
sustainability & Pollution, Inadequate urban and industrial planning, corruption
2. Advantages for Myanmar
Less concerned on ownership issues of Government, Tax incentives (tax holiday etc),Population, Long coastal lines, cheap and abundant labor, ideal for manufacturing business
3. Advantages for Mongolia
Huge economic value of Mining assets (both TT and OT are world class assets), higher
impact to GDP growth with relatively smaller investments as size of GDP is 5 times smaller
than Myanmar, real estate is cheaper and easier to purchase, Democracy
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Conclusion
Both Myanmar and Mongolia have huge potentials for investors. However, there should be risksrelated to investments. The question is how to mitigate those risks. At this moment, Investors are
rushing to Myanmar because of the conviction that the route to the modernization is impossible to
retreat. However, the country is still governed by the military regime.
And, the reform has just begun. There are huge potential to be Factory of the world. But, it will
take at least two years before they are ready. So, before then, you may invest in real estate?
However, the price has gone up ridiculously expensive. Therefore, it is very difficult to identify
proper projects to invest in Myanmar.
On the other hand, Mongolians are tough negotiators and sometimes change their mind. Also, the
country is landlocked and skilled labors are scarce and expensive. However, the country is very
democratic and infrastructure is under developed with the proceeds from Chinggis Bond. There are
many projects eager to look for investors as well. And, some of them can generate attractive return
if they choose right partners. One of the investors who has boldly invested to Mongolia recently is
Orix Corporation who has recently announced to purchase 16% of shares in Tenger Financial
Group. Orix is very different from typical J apanese financial groups. They enjoy taking risks and
have been challenging to create financial innovation in J apan since they have been founded about
50 years. The companys move to invest in Mongolia may show that there is significant value in the
country.
Please remember that the DNA of Orix is One step Ahead