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A man walks pass cigarettes on display on a street in Yangon on April 2, 2012. Myanmar's economic output is just two fifths that of Vietnam, though its 62 million population is 30 per cent smaller.


"This is Burma, and it will be quite unlike any land you know about," Rudyard Kipling wrote. That remains true today. The victory by Aung San Suu Kyi and her National League for Democracy in elections on April 1 is a positive step in the government's commitment to reform. But potential investors should not get carried away about Myanmar's so-called opening up.

Positive things are undoubtedly happening. The latest was Monday's start of a managed exchange rate for the kyat, which should go some way towards closing the enormous gap between the official and unofficial exchange rates. Another was Ms. Suu Kyi's untroubled campaign, which could encourage the U.S. to lift economic sanctions. When the U.S. trade embargo on Vietnam was lifted in 1994, average economic growth accelerated to 8.3 per cent in each of the following five years, from 6.5 per cent previously, led by manufacturing, according to CLSA.

Of course, every country has to start its economic development somewhere. But Myanmar is coming from an exceptionally low base. Its output is just two fifths that of Vietnam, though its 62 million population is 30 per cent smaller. Its work force is also unskilled: annual spending on education is half that on defence, making it hard for foreign direct investment to capitalize on the country's low wage levels - half those of Vietnam and a fifth of China's. Public-sector corruption is the worst in the world after North Korea and Somalia, believes Transparency International. And infrastructure is poor, yet public opposition to construction is rising.

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Perhaps the biggest risk is that Myanmar's military hates being marginalized. It cracked down the last time the country opened up, in the 1990s, halting foreign trade reforms. It may not be clear what the regime thinks of these election results until a general election due in 2015. Sure, the potential for investors in resources, banking and telecoms sectors is huge: only 4 per cent of the population has a mobile phone. But Myanmar has barely set out on its rocky new road.

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