Myanmar may attract as much as $100 billion in foreign direct investment over the next two decades if it spends enough to achieve its economic growth potential, McKinsey Global Institute said in a report today.
The former military regime’s gross domestic product could more than quadruple to $200 billion with an 8 percent annual growth rate, according to McKinsey, almost double the pace from 1990 to 2010. That may help lure $170 billion in capital inflows, it said, with FDI accounting for $100 billion -- more than twice as much as it attracted in the previous two decades.
“Myanmar is unique in terms of a country being isolated for many decades and opening up, trying to make changes very fast,” Heang Chhor, a McKinsey & Co. director in Southeast Asia, said by phone. “The $170 billion would come only if Myanmar keeps its credibility and support with the international stakeholders, investors in particular.”
President Thein Sein has allowed more political freedom and loosened controls on the economy following about five decades of military rule, attracting companies including Ford Motor Co. and Coca-Cola Co. He met with President Barack Obama and Japan Prime Minister Shinzo Abe in the past two weeks, and Myanmar will host a meeting of the World Economic Forum next week.
Myanmar’s economy may grow 6.75 percent this fiscal year, led by natural gas sales and investment as the country moves to modernize its financial system, the International Monetary Fund said in a report earlier this month.
Heang Chhor declined to say whether McKinsey is advising Myanmar’s government, saying the company has a policy not to comment on its clients. The report is “neutral” and not commissioned by anybody, he said.
Myanmar’s economy remains heavily dependent on agriculture, contributing to a low productivity rate, according to McKinsey. Diversifying the economic base and increasing competition would allow Myanmar to boost productivity, it said.
Financial services and telecom sectors could each grow at a compound annual growth rate of 23 percent from 2010 to 2030, McKinsey said. That compares with 17 percent for tourism, 10 percent for manufacturing and eight percent for infrastructure, it said.
“Economic development and foreign direct investment in Myanmar will take off only if all parties remain committed to the reform agenda and if there is domestic political stability and security,” the McKinsey report said.
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