Myanmar's Moment
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McKinsey Global Institute McKinsey Global Institute Myanmar’s moment: Unique opportunities, major challenges major opportunities, Unique moment: Myanmar’s June 2013 Myanmar’s moment: Unique opportunities, major challenges The McKinsey Global Institute The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. 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McKinsey & Company in ASEAN McKinsey & Company is a global management consulting firm that helps many of the world’s leading organisations address their challenges. With consultants deployed in more than 50 countries across the globe, McKinsey advises 95 of the 100 largest corporations, government agencies in more than 85 countries, and leading institutions in the social sector on strategic, operational, organisational, and technological issues. For more than eight decades, the firm’s primary objective has been to serve as an organisation’s most trusted external adviser on critical issues facing senior management. Situated in a region of unique economic, cultural, and religious diversity, McKinsey & Company in Southeast Asia is one of the Firm’s fastest-growing office complexes. Since McKinsey established Jakarta as its first office in the Association of Southeast Asian Nations (ASEAN) region in 1995, it has opened offices in Malaysia, Singapore, the Philippines, Thailand, and, most recently, in Vietnam in 2008. With a team of more than 300 global and local professionals, McKinsey has served clients across the public, private, and social sectors in the region to address their most important challenges as Southeast Asia grows as an important, integrated regional market. McKinsey & Company in Southeast Asia is led by McKinsey director Oliver Tonby. Copyright © McKinsey & Company 2013 McKinsey Global Institute June 2013 Myanmar’s moment: Unique opportunities, major challenges Heang Chhor Richard Dobbs Doan Nguyen Hansen Fraser Thompson Nancy Shah Lukas Streiff Preface Between June 5 and 7, the World Economic Forum on East Asia meets in Nay Pyi Taw, Myanmar’s new capital city. The fact that Myanmar is hosting such a high-profile international gathering of luminaries from industry, government, and academia is a firm signal of the world’s interest in this country’s economic prospects. Myanmar’s economy is relatively small—only 0.2 percent of the Asian economy overall. Yet the potential of Myanmar’s economy is currently subject to intense curiosity. Myanmar is a very unusual case: a large country with a rich history that remains an underdeveloped agrarian economy in the heart of the world’s fastest-growing regional economy—perhaps one of the few remaining, largely untapped markets in the world. It is in this context that the McKinsey Global Institute (MGI) decided to launch a research project on Myanmar’s economy. Very little is known about it, and data are generally lacking or of questionable accuracy. We nevertheless have tried to build as strong a fact base for our analysis as possible under the circumstances. A MGI team based in Myanmar for four months collected data from a range of government agencies with the help of local researchers, and conducted field research and more than 200 interviews with experts, political leaders, and business people. We used data from international organisations including the International Monetary Fund (IMF), World Bank, UN Development Programme (UNDP), and Economist Intelligence Unit (EIU). We also used comparison data from many other countries that have undergone transitions similar to that which could be in prospect in Myanmar today. While the unreliability of data is undeniably an issue, our hope is that this assessment will be a starting point for those looking to better understand Myanmar’s economic prospects. In this report, we discuss Myanmar’s new beginning after a long period of economic stagnation and look at how the economy might develop. We have used MGI’s experience of bottom-up sector analysis to size the potential economic opportunity of Myanmar’s key sectors in the period to 2030—both in terms of their contribution to GDP and the creation of jobs. We highlight the importance of raising labour productivity across the economy. We have also looked at four areas that arguably deserve a greater focus: (1) the fact that Myanmar’s transformation is beginning in the digital age, giving the country the opportunity to leapfrog in its development; (2) the importance of a structural shift towards manufacturing; (3) the impending urbanisation of Myanmar and the imperative to prepare for it; and (4) how to quickly reconnect to the global economy through investment, trade, and people. The task Myanmar faces is monumental—virtually every aspect of economic and social development is on the agenda—and we close the report with a discussion of some of the implications for government as well as businesses from Myanmar and overseas. McKinsey Global Institute Myanmar’s moment: Unique opportunities, major challenges Heang Chhor, a McKinsey director in Singapore, and Richard Dobbs, a McKinsey and MGI director in Seoul, led this research together with Doan Nguyen Hansen, a partner in Vietnam, and Fraser Thompson, an MGI senior fellow in London. Consultant Nancy Shah led the Myanmar-based project team, which consisted of Kuntala Karkun, Stephanie Knight, Meik Laufer, Lukas Streiff, and Christabel Su- Huey Sunmugam, with help from Tim McEvoy, an MGI research fellow. We are grateful for the advice and input of many McKinsey colleagues, including Jonathan Ablett, Suvradipta Banerjee, Timothy Beacom, Shannon Bouton, Marco Breu, Martin Checinski, Li-Kai Chen, Nicola Chiara, Mutsa Chironga, Brian Cooperman, Eoin Daly, Dumitru Dediu, Driek Desmet, Georges Desveaux, Lucia Fiorito, Michael Fleming, Francois Godin, Andrew Grant, Anna Gressel- Bacharan, Shishir Gupta, Supriya Handa, Johan Hesselsøe, Jimmy Hexter, Eduardo Doryan Jara, Martin Joerss, Karen Jones, Priyanka Kamra, Anushia Kandasamy, Duncan Kauffman, Tomas Koch, Kinshuk Kocher, Elif Kutsal, Peter Lambert, Cecile Lavrard, Jean-Christophe Lebraud, Armin Lohr, Susan Lund, Anu Madgavkar, Laurie Mahon, Alan Martin, Tobias Meyer, Jan Mischke, Ellen Mo, Sabrina Mustopo, Derek Neilson, Bettina Neuhaus, Stagg Newman, Raoul Oberman, Gordon Orr, Vivek Pandit, Moira Pierce, Herbert Pohl, Ali Potia, Tamara Rajah, Sree Ramaswamy, Lou Rassey, Markus Rebman, Stefan Rehbach, Jaana Remes, Alfonso Villanueva Rodriguez, Sunali Rohra, Morten Rossé, Lorraine Salazar, Brian Salsberg, Sunil Sanghvi, Shirish Sankhe, Halldor Sigurdsson, Vivien Singer, Seelan Singham, Pornnipa Srivipapattana, Matt Stone, Jennifer Sternberg, Tilman Tacke, Nadia Terfous, Oliver Tonby, Asli Ucyigit, Danny Van Dooren, Sergio Sandoval Villalba, Jue Wang, Jonathan Woetzel, and Haimeng Zhang. The team benefited from the contributions of Janet Bush, MGI senior editor, and Roger Malone, who provided editorial support; Penny Burtt and Rebeca Robboy, for their help on external relations; Julie Philpot, MGI’s editorial production manager; and Marisa Carder and Joanne Willis, visual graphics specialists. We would like to give particular thanks to the advisers on this project: Martin Baily, Bernard L. Schwartz Chair in Economic Policy Development at the Brookings Institution; Richard Cooper, Maurits C. Boas Professor of International Economics at Harvard University; Richard Horsey, independent Myanmar analyst; Nobel Laureate A. Michael Spence, William R. Berkley Professor in Economics and Business at the Leonard N. Stern School of Business, New York University, and chairman of the Commission on Growth and Development; and Sean Turnell, professor of economics at Macquarie University, Sydney. Many experts in Myanmar and around the world from the fields of academia, government, and business have also offered invaluable guidance, suggestions, and advice. We are very grateful to Nay Aung, founder and CEO, Oway Company Limited; U Set Aung, deputy minister, Ministry of National