Risk Summary - Risk Summary - Myanmar - NOV 2014

South East Asia Vol 1 October 2014 / Myanmar / Economy 

BMI Political Risk Ratings

Uncertainties In Policy Direction Will Continue

Myanmar's general election in November 2010 resulted in a landslide victory for the junta-backed Union Solidarity and Development Party (USDP). Inconsistent policies previously adopted by the former ruling State Peace and Development Council (SPDC) created uncertainties in the government's policy direction. Given that the USDP is likely to be heavily influenced by the old politburo, we believe uncertainties in policy direction will continue. This is reflected by a weak score of 40.0 for the 'policy continuity' sub-component of our risk ratings, keeping the overall short-term political risk rating for Myanmar at 56.9. Over the longer term, we see ongoing insurgencies against the government and growing discontent among the public as a threat to Myanmar's political outlook, although the government's recent push for reform may progressively reduce these risk, particularly if 2015's general elections go well.

BMI Economic Risk Ratings

Inflationary Pressure To Remain A Threat

Persistently high inflation that saw consumer price inflation in Myanmar average more than 20.0% over the last decade has led to a weak 45.0 score for the 'monetary' sub-component of our long-term economic risk rating. Although inflation has come down into single digits on the back of a more stable kyat, we believe inflationary pressure will remain a threat as long as the government's fiscal policy remains both opaque and irresponsible. Furthermore, the ongoing opening up of the economy could create even more upside pressure on prices. An overly concentrated trade structure that relies heavily on exports to Thailand informs a score of 41.8 for the 'structural' sub-component, although this reflects a slight upgrade from 40.0 as prospects for trade diversification have improved. As a result, Myanmar's score for our long-term economic risk rating stands at 47.5.

BMI Business Environment Risk Ratings

Policy Uncertainty A Threat To Investment

The lack of information and timely economic data on Myanmar remains a key factor preventing foreign investors from assessing the true potential of the economy. However, we have recently assigned an overall business environment rating of 20.9 to the country, indicative of the high risks in doing business in the country combined with the major logistical and structural hurdles. Uncertainties as to the government's direction on economic policies pose additional risks to business investment in Myanmar. The government's decision in July 2010 to order businesses to pay taxes two years in advance serves as a perfect example of the uncertainties involved in doing business in Myanmar.