Myanmar economy could quadruple to $200 bn by 2030: report

Myanmar, a nation located in the heart of the world's fastest-growing region, could quadruple the size of its economy to more than $200 billion from $52 billion last year, if it embraces major economic reforms and focuses on the manufacturing sector, claims a new study by McKinsey Global Institute.

In the process, over 10 million non-agricultural jobs could be created that could lift around 18 million people out of poverty.

The report titled Myanmar's moment: Unique opportunities, major challenges released yesterday discusses the challenges of meeting this ambitious goal and points to several areas that could help unlock high growth.

Myanmar is one of Asia's poorest countries with spells of ethnic struggles and conflicts in several regions as the civilian government which replaced the military rule two years ago is pushing ahead with political and economic reforms to stimulate economic growth.

The under-developed country with a population of 60 million and abundant natural resources is uniquely placed close to Asia's fastest-growing economies, China, India and other South East Asian nations.

Overall, it is close to a market of more than half a billion people, providing it a ''greenfield'' advantage: an opportunity to build a ''fit for purpose'' economy to suit the modern world, besides having the benefit of starting the reforms ''during the digital era'', the report said.

In the two decades from 1990 to 2010, the country's economy grew at an average rate of 4.7 per cent, which is lower than the 6 per cent posted by its Asian neigbours.

According Asian Development Bank's estimates, the country's economy has grown 6.3 per cent for the fiscal year ended March 2013. The improvement reflects business optimism on the back of government's economic liberalisation and reforms which started two years ago. The bank expects that economic growth will clock 6.5 per cent this year and 6.7 per cent next year if the momentum of policy reform is maintained.

McKinsey believes that the country's economy has the potential to grow at an annual rate of 8 per cent if it improves significantly the annual labour-productivity growth to 7 per cent from the current level of 2.7 per cent which is a monumental task but not impossible.

Exclusive reliance on mining and energy sector is not sufficient and the economy should diversify encompassing other sectors to improve the labour productivity.

The report identifies four key areas that could underpin growth and productivity: harnessing mobile and internet technology by developing the telecommunications infrastructure, structural shifting from agriculture to manufacturing, prepare for urbanisation and connecting to the world by increasing investment, trade and population flows.

The country's manufacturing sector is currently very small and has the potential for a seven-fold growth to $70 billion becoming the largest sector by 2030. Currently, agriculture is the main driver for the economy which contributes around $21 billion or over 40 per cent of the total gross domestic product (GDP).

It is estimated that Myanmar needs more than $170 billion of foreign capital to meet its overall investment requirement of $650 billion. Around $320 billion will have to be spent in the infrastructure sector alone.

Investors "want reassurance that the government can resolve ethnic and communal violence, maintain its momentum towards political and economic reform, and ease constraints on doing business" McKinsey said.

To implement the growth plan, the government should continue vigorously with political and economic reforms and the nation's business could consider opportunities in different markets, attain international quality standards and explore foreign partnerships.

"If it fails to build a compelling growth plan and implement it effectively, today's goodwill and cautious optimism could evaporate all too rapidly," the report warned.