Myanmar’s sudden reversal of years of diplomatic isolation in 2011 has left leaders and investors around the world scrambling to adjust to the new status quo. As Southeast Asia’s second largest country, with vast resources and a history as an agricultural exporter, Myanmar has the clear potential to join the ranks of the boom economies of the 21st century. Avoiding the pitfalls of inequality will require Myanmar to learn from its neighbors’ past mistakes and encourage institution-building and transparency from the outset of its integration into global affairs. However, challenges that stem from structural and underlying conditions will not change for some time. Investors would be wise to weigh these obstacles moving forward, but there are also opportunities.

Myanmar’s neighbors are well-positioned to continue benefiting as the economy develops, especially China, even as resentment towards the Chinese government remains high. The U.S., Japan and other countries such as Thailand and India have a role to play, as well. There is indeed a calling for leadership from these developed nations in helping Myanmar develop. Even for the US, determined as it is to seek pastures in the East to graze in, there are benefits in developing strong ties and alliances with countries like India who understand the region better and have shared history to fall back on and ongoing experience in doing business. Historical underinvestment in infrastructure and education in Myanmar, along with building a stable system remain as strong challenges holding back growth. Organizations like the IMF can play a role in helping to establish systems that guide social reforms and also build investor confidence in institutions there. An important bellwether will be the country’s chairmanship of ASEAN in 2014 and the 2015 national elections, which represent a test of the government’s commitment to democracy.

Myanmar’s political transition was swift and may yet prove to be lasting, but those seeking to take advantage of concurrent GDP growth will need to be patient as the country’s economic and social systems play catch-up. more…