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June 13, 2013

Myanmar needs a strong accountancy profession in order to succeed

Myanmar gets a lot of attention at the moment. This week, ICAEW signed an agreement with the Myanmar Institute of Certified Public Accountants (MICPA), to work together to support and strengthen the accountancy profession in the country. We have similar agreements in place with many other bodies in the South East Asia region, but what makes this particularly interesting is that until very, very recently, it would have been almost unthinkable.

Myanmar has only relatively recently opened its borders to the outside world. A series of bold political, economic and social reforms mean that the country, until a few years ago isolationist in outlook, is now on the road to global integration and economic growth. It is still too early to tell what the eventual shape of the economy will be. Whilst it remains at the moment a low income nation with a large agricultural sector, it would come as no surprise if, like some of its ASEAN neighbours, the government quickly put in place plans for rapid change.

Myanmar is certainly geographically well-placed to build a thriving financial sector. Not only is it on the western edge of the dynamic ASEAN bloc, it is also between the industrial and economic powerhouses of China and India. The economy grew around 6% last year, and foreign direct investment is expected to be a strong driver of growth for the foreseeable future. According to ICAEW’s Economic Insight: South East Asia report, services trade is a particular growth area; tourism grew considerably in 2012 with over half a million visitors, more than double the 2009 figure. Opening up to global players and becoming integrated into the global value chains will mean Myanmar could become one of the countries helping to drive ASEAN’s regional output in the near future.

However, there are many challenges. The banking sector, for example, is having to modernise at breakneck speed in what is still largely a cash-based economy. The country is still in the process of developing a robust financial regulatory and supervision regime, financial infrastructure, and capital markets. As Asia’s last ‘frontier economy’ it is tempting to outside investors, but may not have the sophistication – and definitely lacks the experience – to manage this step change in a controlled manner.

The danger is that Myanmar could develop too fast, too soon, and damage economic growth in the process. Vietnam’s experience in 2008 provides a valuable cautionary tale; high levels of foreign direct investment led to a huge growth in bank lending, which in turn fuelled equity and property bubbles and an eventual stock market crash. In order to avoid this, robust financial management will be vital.

Highly-skilled finance professionals capable of giving sound, sober advice will be key to Myanmar’s successful global integration. And finance professionals, as so many other skills, are in shortage in the country. Having a strong accountancy profession will be a firm foundation on which one of Asia’s fastest-developing economies can build a sustainable and prosperous future. Some forecasts are suggesting that the Myanmar economy could quadruple in size over the next two decades and it is sure to become a major player in the region. I believe that the work of finance professionals over the next few years will determine whether Myanmar becomes a shining example or a cautionary tale. In the meantime, it will be an exciting place to see the fundamental role that accountancy and finance plays in building a sustainable future.

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