Business Monitor International


Cambodia, Laos and Myanmar Business Forecast Report

Published 16 December 2014

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Cambodia, Laos and Myanmar Business Forecast Report

November's ASEAN summit in Myanmar shone the spotlight on the country's political reform drive, which we believe has lost considerable momentum over recent months. In particular, the government has not shown the willingness to make substantive amendments to the constitution, suggesting that opposition leader Aung San Suu Kyi will not be allowed to run for president in 2015's general elections. Furthermore, it looks increasingly likely that the military (Tatmadaw) will retain its automatic 25% share of seats in parliament. Combined with efforts from the ruling USDP to adopt a proportional voting system rather than the first-past-the-post system that has been used in the past, it is likely that the USDP and Tatmadaw will maintain a considerable preference beyond the upcoming elections. At the same time, we also note rising risks that general elections may be postponed, as the government has tied the elections to a nationwide ceasefire which is looking more tenuous by the day.

Chinese assistance for Cambodia's economic development has ramped up considerably over recent years, and we believe that this is a trend that is set to continue. During Hun Sen's visit to China earlier in 2014, the Prime Minister secured an agreement that will see China provide USD500mn in grants and loans per annum to assist Cambodia in developing its woefully lacking infrastructure. Domestically, however, Cambodia continues to face significant political challenges despite the fact that the opposition has rejoined parliament. In particular, a group of Cambodians has lodged a complaint with the International Criminal Court (ICC) against a group of politicians, security chiefs, and business tycoons. The complaint alleges that Cambodia's ruling elite has systematically seized land from its rightful owners, and that in many cases this land has been sold to multinational firms. Given the strong vested interests associated with Hun Sen's regime, we believe that the probable inaction on the part of...

Table of Contents

Executive Summary
11
Chapter 1
13
Domestic Politics
13
Heightened Scrutiny Over Land Policies
13
The increased international scrutiny of the Cambodian government's land policies, including a petition filed at the International Criminal
The increased international scrutiny of the Cambodian government's land policies, including a petition filed at the International Criminal
Court, is likely to deter foreign investors from undertaking projects in the country
However, we believe that a change in government
policy remains a long way off, as the continuation of the current system of patronage is crucial for Prime Minister Hun Sen to retain his
policy remains a long way off, as the continuation of the current system of patronage is crucial for Prime Minister Hun Sen to retain his
tight grip on the levers of power
Table: Political Overview
13
Table: Macroeconomic Forecasts
14
Long-Term Political Outlook
15
Addressing Corruption And Inequality Will Be Key To Stability
15
Cambodia's long-term political outlook largely depends on the ruling Cambodian People's Party (CPP)'s ability to address widespread
Cambodia's long-term political outlook largely depends on the ruling Cambodian People's Party (CPP)'s ability to address widespread
corruption and income inequality, which have been fuelling public dissent against the government in recent years
The recent rise in
support for the main opposition party shows that the CPP's grip on power is waning, which could lead to heightened political uncertainty
support for the main opposition party shows that the CPP's grip on power is waning, which could lead to heightened political uncertainty
over the coming years
Chapter 1
17
Economic Activity
17
China Assistance To Boost Growth Potential
17
Cambodia's infrastructure is set to benefit from an acceleration in economic support from China over the coming years
The
establishment of Silk Road Fund by the Chinese government should be hugely beneficial to Cambodia's infrastructure, helping the
establishment of Silk Road Fund by the Chinese government should be hugely beneficial to Cambodia's infrastructure, helping the
economic to move up the value chain in industries such as garment manufacturing
Chapter 2
19
Domestic Politics
19
Unending Political Repression To Jeopardise Foreign Aid
19
Political liberalisation in Laos will remain hard to come by, as we expect the Lao People's Revolutionary Party to keep a tight grip on
Political liberalisation in Laos will remain hard to come by, as we expect the Lao People's Revolutionary Party to keep a tight grip on
governance
Table: Political Overview
19
Long-Term Political Outlook
20
Growing Dissent Against LPRP Poses Risk Of Upheaval
20
Laos's long-term political outlook will depend heavily on how well the country balances the need to spur economic growth to achieve its
Laos's long-term political outlook will depend heavily on how well the country balances the need to spur economic growth to achieve its
Millennium Development Goals and the need to address widespread corruption and dissent against the government
Chapter 2
23
Economic Activity
23
Banking Sector Development To Progress At A Gradual Speed
23
The ongoing development of Laos' domestic banking sector will allow local banks to tap on the immense growth opportunities brought
The ongoing development of Laos' domestic banking sector will allow local banks to tap on the immense growth opportunities brought
about by continued strong economic growth and an underbanked local market
That said, progress on this front will be gradual, as a
deteriorating fiscal position will delay banking infrastructure development in the country
Table: Economic Activity
23
Chapter 2
25
Power
25
Laos At The Forefront of Regional Grid
25
Laos is set to become the largest exporter of electricity in ASEAN, and this can be attributed to its geography and demographics
We
are also witnessing an increase in the level of cooperation in the power sector between member states of ASEAN
Chapter 3
27
Domestic Politics
27
ASEAN Summit Highlights Reform Struggles
27
The 25th ASEAN Summit has once again shone a spotlight on Myanmar's widely-followed economic and political reform process
Although economic reforms have maintained momentum over recent months, political reforms have stalled in some areas, and we note
Although economic reforms have maintained momentum over recent months, political reforms have stalled in some areas, and we note
that the struggling national ceasefire process in particular could endanger next year's crucial general elections
Should these elections
not go ahead as planned, Myanmar's economy could be hit by a rapid deterioration in foreign investor perception
Table: Political Overview
27
Long-Term Political Outlook
29
Regime Change From Within-
29
Myanmar remains one of very few Asian states to have withstood the tide of democratisation since the 1980s
Although Myanmar held
its first elections in 20 years in November 2010, these were widely considered a sham, with the military-backed Union Solidarity and
its first elections in 20 years in November 2010, these were widely considered a sham, with the military-backed Union Solidarity and
Development Party winning most of the seats
However, the government has since mid-2011 embarked on a surprisingly strong reform
path that is leading to its re-emergence on the international scene
Chapter 3
33
Economic Activity
33
Moderate Kyat Sell-Off In Line With Medium-Term Forecast
33
The Myanmar kyat's recent sell-off is in line with our expectations for the currency to gradually depreciate as a result of the country's
The Myanmar kyat's recent sell-off is in line with our expectations for the currency to gradually depreciate as a result of the country's
rising trade deficit as well as moderate to high inflation
As such, we are happy to maintain our forecast for the unit to end 2014 at
MMK1,015/USD before selling off further to MMK1,046/USD by the end of 2015
Chapter 4: BMI Global Assumptions
35
Global Outlook
35
Warning Signs Growing
35
Table: Global Assumptions
35
Table: Developed States, Real GDP GrowtH, %
36
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
36
Table: Emerging Markets, Real GDP Growth, %
37

The Cambodia, Laos and Myanmar Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Cambodia, Laos and Myanmar and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..

An influential new analysis of Cambodia, Laos and Myanmar's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Cambodia, Laos and Myanmar's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • ContextualiseCambodia, Laos and Myanmar's country risks against regional peers using BMI's country comparative Risk Ratings system.
  • Evaluate external threats to doing business in Cambodia, Laos and Myanmar, including currency volatility, the commodity price boom and protectionist policies.

The Cambodia, Laos and Myanmar Business Forecast Report by Business Monitor International (BMI) includes two major sections: Economic Outlook and Political Outlook.

Economic Outlook:

How will the Cambodian, Lao and Myanmar economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Cambodia, Laos and Myanmar through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Cambodia, Laos and Myanmar Business Forecast Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Ratings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Cambodia, Laos and Myanmar and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Cambodia, Laos and Myanmar, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Cambodia, Laos and Myanmar over the next 5-years?

BMI's Cambodia, Laos and Myanmar country Risk Ratings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Cambodian, Lao and Myanmar Market - Political Strengths, Weaknesses, Opportunities and Threats facing Cambodia, Laos and Myanmar.
  • Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for Cambodia, Laos and Myanmar's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Cambodia, Laos and Myanmar's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express