In March, I will be heading into Myanmar as part of a syndicated
research project with the objective of profiling the country’s healthcare
infrastructure.
We will be evaluating
distribution channels for pharmaceuticals, medical devices and
diagnostics. Included in our analysis
will be profiles of the existing distribution companies who currently have the
footprint in country to effectively and efficiently access Myanmar’s healthcare
system. We will also be profiling
regulatory issues in general, as well as those specific to healthcare.
Once among the most reclusive
nations in the world, Myanmar (also known to many as Burma) has begun a series
of political reforms that are designed to attract foreign investment into the
country. With a population the US
government estimates at approximately 55 million, Myanmar is the 24th most
populous country in the world and the second largest country in Southeast Asia
in terms of landmass. Despite its
plentiful natural resources such as natural gas and timber, Myanmar is the
poorest country in Southeast Asia. The
country’s poverty stands in stark contrast to its relative wealth from only 50
years ago when, at the beginning of the military junta’s rule, Myanmar was the
wealthiest country in Asia.
Much of the hopes foreign
investors have today for Myanmar are based on a recollection of what Myanmar
once was, and hopes the foundations for a prosperous country can still be
found. In addition, for many multinational companies (MNCs), Myanmar further
adds to the commercial opportunities in the region. Many MNCs believe they will be able to pivot
from their operations in Thailand (65.9 million people) to serve Cambodia (14.5
million), Laos (6.4 million) and Vietnam (87.8 million) and now, the
possibility of Myanmar as well. Viewing
the combination of these five countries together and crafting distribution
strategies tailored to the almost 230 million consumers in the region
constitute an important and compelling business opportunity.
For Myanmar to become a viable
emerging economy where MNCs and private investors can confidently deploy
resources, the recent attempts at democratization of the country’s political
system and liberalization of its economy must continue. Neither is certain. The country’s recent political reforms took
place against a backdrop of long-standing grievances by its people regarding
political and economic issues. At a very
basic level, the new government’s pledge to triple the country’s GDP in five
years is a reflection of the political reality that further turmoil is likely
unless the economy can find its footing.
This admittedly audacious goal may be within reach providing Myanmar is
able to pivot government economic development away from central planning and
military spending towards free markets and investments in education and
healthcare specifically.
Political reforms have certainly
created latitude for the new government to act even in the face of a similar
crisis; however, the final note potential investors should keep front of mind
is that Myanmar’s reforms are still reversible.
While the release of 700 political prisoners, the accommodation of
certain limited but substantial democratic reforms, and the relaxation of basic
freedoms are encouraging, Myanmar has a long way to go. Nobel Peace Prize winner Aung San Suu Kyi
pointed this out earlier in 2012 when she noted, “”Ultimate power still rests
with the army so until we have the army solidly behind the process of
democratisation we cannot say that we have got to a point where there will be
no danger of a U-turn. Many people are beginning to say that the
democratisation process here is irreversible. It’s not so. We must wait until
after the elections to find out whether or not there have been real changes.
And depending on these changes, there should be suitable changes in policy.”
The Myanmar government of today
led by Thein Sein has retained many of the same military officers who
previously constituted the junta. While
it is not surprising these former military officers now have positions in the
new government, their resistance to key democratic reforms and their
willingness to allow foreign companies to compete with previously protected
domestic companies will be key to monitor.
In the same way, most of the established businesses that had found a way
to survive and prosper under Myanmar’s repressive political and economic system
for the last several decades are likely losers in the midst of a broad opening
of the country’s economy to outside investment.
President Thein Sein’s proposed changes to the State-Owned Economic
Enterprises Law (SEE Law) resulted in significant pushback from the established
businesses, largely a reflection of these fears.
Regardless of these cautionary
notes, Myanmar has already been successful drawing FDI. Some of the early
in-bound investment has come from Chinese and Thai investors in low-wage, high
labor-content industries eager to take advantage of these factors. Other more promising areas that have driven
FDI thus far have been oil and gas exploration (in particular natural gas, of
which Myanmar is estimated to have the world’s 10th largest reserves of),
mining and forestry. Cumulatively, China
has close to US$14 billion of investments in Myanmar, followed by Thailand
(US$9.6 billion) and then third Hong Kong (US$6.3 billion). Most of these
investments have gone to secure oil and gas resources as well as mining and
some agricultural land. Myanmar’s
potential as a regional agricultural exporter is significant; China already is
looking to source feed crops from Myanmar. Thus far, Myanmar’s FDI patterns are
noticeably different than those of what are commonly referred to as the Asian
Tigers.
As other resource-rich countries
globally have illustrated, simply having access to bountiful natural resources
does not guarantee a wise use of tax revenue and national wealth accrued as
resources are extracted and exported.
Those hopeful about Myanmar’s future believe the country has the
capability to develop political leaders capable of rooting out corruption and
ensuring FDI and tax revenues flow towards the nation’s economic
development. One of the primary
beneficiaries of such a positive approach would be the further development of
Myanmar’s healthcare system. However,
the danger does exist that Myanmar’s FDI may be misdirected. Some analysts believe the comparison between
Myanmar and other regional economies is, at least thus far, an un-earned
comparison. Jared Bissinger, an academic
researcher on Myanmar’s FDI policies recently wrote, “While there’s also some
interest in telecoms and banking, it’s the extractive industries that are
Burma’s main draw for potential investors.
The Asian Tigers, by contrast, were mostly resource-poor and relied on
export-oriented manufacturing to develop.
Their foreign direct investment (FDI) was mostly in manufacturing, not
resources. They also developed in a much
different international environment, one with far fewer competitive exporting
countries. They sold their wares mostly
to the high-consuming countries of the West, the same countries that are now
grappling with the lingering effects of the global financial crisis.”
Over the course of the next
month, our blog will be introducing more details about the challenges specific
to healthcare FDI into Myanmar with an eye on how to best capture the opportunity
represented in the country’s recent opening to foreign investment and
expertise. We will be discussing
structural issues related to basic infrastructure (power, water, road, rail,
etc.) as well as very specific questions such as how to get the necessary
government approvals for new drugs to be brought into the country. Ultimately, the research completed as part of
this project will be summarized in a market research report that will be
available for purchase.
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