PREPARATIONS for the first section of the Thilawa Special Economic Zone (SEZ) included clearing nearly 400 hectares of land and building roads to a nearby port. The industrial park is scheduled to open in the middle of next year and some of the 22 companies set to move in will begin building their factories by the end of the month. Yet the most immediate beneficiary will not be Myanmar’s economy. Takashi Yanai, head of the Burmese-Japanese joint venture developing Thilawa, jokes that the monastery sitting in a finger of forest jutting into the park has much to gain. “You cannot touch a monastery in this country,” says Mr Yanai. With every corporate groundbreaking will come a donation to the monks that may one day pay for a grand golden stupa.
If the monks represent the country’s past, the tenants of Thilawa and the two other SEZs in the works (see map) are bets on its future. Thilawa, the furthest advanced of the three, will employ 70,000 workers when running at full tilt, turning out food, consumer products and construction materials for the domestic market, as well as export-oriented goods such as shoes, car parts and garments.
President Thein Sein came to power in 2011 with the promise of reforms to reconnect Myanmar to the global economy. Since then the optimists have dreamed of supermarkets and fast-food outlets on every street and of mobile technology allowing the country to “leapfrog” development stages to draw level with Thailand, or even Singapore. But its economic future depends on low-skilled workers churning out labour-intensive goods for export. Before it can aspire to Thailand’s level of industrial development it should aim to be a hub for low-cost manufacturing like its western neighbour, Bangladesh.
Investors are right to dream, though. Myanmar sits between the massive markets of China and India and also gives Thailand a quick westward route to the sea. According to the McKinsey Global Institute (MGI), a think-tank, by 2025 more than half the world’s consumers with incomes above $10 a day will live within a five-hour flight of Myanmar. It abounds in arable land, water and natural resources—it is richly endowed with oil, natural gas and precious stones such as jade, rubies and sapphires.
Thailand’s labour force is ageing, shrinking and getting more expensive; Myanmar’s is cheap and young, and is benefiting from the return of some of the 3m-5m Burmese working abroad. Jasmine Thazin Aung left in 2003 to study finance in Singapore because she saw no opportunity at home; now she heads the Myanmar office of PricewaterhouseCoopers, an accountancy firm. She says that her three room-mates in Singapore, all Burmese women studying finance, have also returned to the country.
After several false starts the government appears committed to creating a market economy where new businesses might thrive. Between 2010, when the country held its first general election in nearly two decades, and 2013 foreign direct investment almost tripled, rising from $901m to $2.6 billion. A few foreign banks have been licensed to operate on a limited scale—but broader financial liberalisation is in the works. The economy is forecast to grow by 7.8% this year and next; commodity exports are rising, as is production of oil and gas. The central bank is now formally independent of the finance ministry; it is expanding its staff and improving its capacity to conduct monetary policy.
There is still plenty to do. The most recent of the World Bank’s annual reports on the ease of doing business puts Myanmar 182nd out of 189 economies. Regulatory uncertainty is a huge problem but archaic laws are getting some attention at last: Myanmar’s Companies Act, which sets the rules for corporate activity, was enacted by the British in 1914 and left untouched until this year, when the Asian Development Bank began helping the government to update it. In time such updates will reduce the need to “feel your way through the legal and financial system,” says John Hamilton, who heads the Myanmar office of CEA Projects, a logistics company.
Even the most vigorous regulatory scrub-up and revamped central bank will not create a well-trained workforce: that will take years of massive investment in education. The average Burmese spends just four years at school; the country has a teacher-pupil ratio of one to 30 compared with one to 13 in Malaysia. As other Asian workforces grew more productive and diverse, Myanmar’s went in the other direction: between 1965 and 2010 the share of Burmese employed in agriculture rose, from 35% to 44%, even as it fell in most of the rest of the continent.
Yet that massive agricultural workforce could be put to good use. The country has 12.3m hectares of farmland, only slightly less than Thailand. It was once Asia’s biggest rice exporter, yet its agricultural sector remains woefully underproductive. Most farmers grow small plots of rice, often without machinery or fertiliser. Soe Tun, head of the Myanmar Farmers’ Association, notes that most rice is organic not by choice but because non-organic farming never reached rural Myanmar. Even a modest introduction of modern farming methods would have a big impact on farms and the country’s labour productivity as a whole.
It would also free more workers to look for jobs in factories in cities—another strong driver of growth. MGI found that every 15 percentage point increase in the share of GDP from manufacturing and services is associated with a doubling of GDP per person. The work in factories and fields may not be glamorous or interesting but people will always need rice, shoes and concrete. Myanmar’s abundant supply of low-skilled workers need productive jobs if its economy is to shine like the sun reflecting off a golden stupa.