Myanmar will be better able to compete in Southeast Asia if domestic institutions can evolve and enact long-term plans, according to Oliver Tonby, business advisory group McKinsey and Company’s managing partner of Southeast Asia.
Industrialisation needs to look past industries such as garment manufacturing to more advanced and profitable ventures, Tonby told Myanmar Business Today.
“Myanmar needs to concentrate on industries that are higher value added than the garment industry. The number of dollars per person is not enough. In the garment industry, it is lower than chemicals, auto, etc. Myanmar needs to encourage these higher value industries, and it is absolutely paramount if Myanmar is to grow.”
In the firm’s 2013 report “Myanmar’s Moment: Unique Opportunities, Major Challenges,” McKinsey Global Institute estimated that the manufacturing sector could grow from employing 1.8 million people in 2010 to 7.6 million in 2030.
Under this model, if Myanmar follows the growth pattern of Bangladesh with growth in low value-added industries such as textile manufacturing, the manufacturing sector could contribute $33 billion to Myanmar’s GDP. However, if Myanmar follows Vietnam or Thailand into higher-level production, industrial output could reach as high as $73 billion.
More stable electricity is necessary for industry, but short-term coal based solutions won’t solve the problem, said Tonby. Power from large hydro plants is some of the cheapest available, but this requires a large initial investment. Myanmar is one of the few places left on the planet with this much untapped potential for hydro, Tonby said.
The recent development of Myanmar’s energy sector has been largely based around coal, and while Tonby believes that should be part of the landscape in the future, “Myanmar needs something larger scale than small to medium-sized coal plants.”
The most economic growth will occur in cities, but, according to Tonby, “there is a huge difference between poorly-run cities and great ones.”
Tonby said that cities, likewise, need to be more proactive in urban planning to anticipate the rapid urbanization that will occur in Myanmar. He said that mayors and municipal executive agencies need to have the power to enact change and build necessary infrastructure such as roads and communications networks.
McKinsey’s Myanmar report said that while Myanmar’s urban population is expected to grow from 13 percent of the country’s population in 2009 to approximately 25 percent in 2030, urban areas are expected to produce over half of the nation’s GDP. The report said that in other countries, urbanisation has led to greater rural productivity as well by creating greater incentives for farms to become more efficient, and increased capital from family remittances.
However, the report states, urban areas in Myanmar require as much as $150 billion in investment on the public and private level by 2030 to effectively modernise, largely in the areas of housing and public infrastructure. These would need effective leadership, as well as a coherent master plan for the city which would include planning for the arrival of migrants into the urban fold.