BrazilBusiness confidence in Myanmar plummets, finds Roland Berger study
Investor confidence in Mynamar has taken a hit over the past year according to a survey report from Roland Berger, with concerns over a lack of clear government economic policy, but the long-term outlook among business leaders remains positive.
At the conclusion of 2016, the global strategy consulting firm Roland Berger published its inaugural Myanmar business survey, titled ‘Myanmar: a wave of optimism – will it last?’ One year on, and it would seem the business community of Myanmar has given its answer, with the firm’s latest survey reporting a dramatic drop from 73% to 49% of respondents expecting an improvement in the business landscape over the coming 12 months.
The previous positive sentiment, suggested by the firm as possibly unparalleled anywhere else in the world at the time, had been driven on the back of the political and economic changes sweeping the nation following its transition to democratic elections, including the lifting of international sanctions and government trade and economic reforms. Now, of the 500 business owners and senior executives surveyed, upwards of 70% have cited various governmental regulatory concerns as significant or very significant issues challenging their operations.
And the figures balloon further where it concerns international companies operating in Myanmar. When questioned on the key challenges they faced, 86% of international respondents cited ‘No clear government economic policy’ – with over half considering it a ‘significant’ challenge. At +11%, this was the largest rise across categories on last year’s results. In addition, 80% also pointed to each the ‘Unpredictable legislative environment’ and ‘Selective and unpredictable enforcement of regulations’, while peripheral regulatory issues such as ‘Too much administration’ also attracted a high number of responses (73%). 
Yet, while responses as to the importance of potential government measures to boost economic growth were commensurate with these concerns, with ‘transparent policy making and implementation’ (95%), ‘Simplification of licensing and regulatory procedures’ (92%) and ‘Regulatory capacity building’ (90%) all drawing a high significant numbers, these figures have in fact fallen from the previous survey. Here, the report contends that, while businesses have noted the positive impacts of certain recent policy developments, such as the new Investment Law (64%) and the development of special economic zones (60%), issues around clarity remain the overriding concern;
“What the private sector has been looking for and what is missing so far is the communication of an overall economic transformation roadmap, with clear targets, timeline and quick wins, followed by clear, comprehensive and consistent sector policies, at least for key sectors such as financial services, electric power & energy, agriculture, transport infrastructure, tourism and manufacturing,” the report states.
Perhaps as a reflection of these resolvable blips, the mid-to-long-term outlook of the business community in Myanmar remains overwhelmingly positive, with 92% of local and 82% of international firms optimistic or very optimistic about the country’s economic potential. Further, the general rationale for businesses entering the country continues to prevail irrespective of the sluggish rate of reform; of the key reasons given for their company’s move into the market, 86% cited the nation as ‘one of the last frontiers’, while 85% noted its ‘large domestic market’ (with a current population above 50 million).
Corresponding to this positive long-term sentiment, and despite the drastic dip in shorter-term confidence, 74% of international companies indicated that they still planned to expand operations in the country over the next twelve months – along with 79% of their local counterparts projecting the same – and 15% overall signalled their intent for an ‘aggressive’ strategy. However, while these figures appear encouraging, they are well down from the previous year, where the equivalent international and local categories as to plans for expansion tallied a notable 94% and 90%.
The authors warn of a potential further deterioration ahead, should developments in policy continue to stall or progress at an insufficient rate. “Low investor confidence has negatively impacted investment plans. And if the root causes of the drop in confidence are not swiftly addressed, this may be just the beginning of a potential downward spiral in confidence, investment, and company performance,” Thomas Klotz, Managing Partner of Roland Berger in Southeast Asia and co-author of the report stated. “It may take a year or two for businesses to regain confidence. It’s easy to lose confidence and much more difficult to earn it back again. So, more and faster will hopefully be the motto for the government’s economic agenda in 2018.”
Nevertheless, compounding these concerns for investor confidence over the short-term is the ongoing humanitarian crisis in Myanmar’s Rakhine State, with the latest developments unfolding after the survey period and bound to have a further negative impact on business sentiment. In its conclusion, the consulting firm says; "It is our firm belief that stronger sustainable economic growth will also facilitate other government priorities, such as healthcare, education and the peace process."
The ongoing long-term business sentiment in Myanmar mirrors that of the greater APAC region, with a recent Grant Thornton report highlighting rising CEO optimism backed by an earlier finding from Big Four firm PwC.
