Recent political and economic reforms in Myanmar have led to a considerable transformation in the business environment. Market liberalization has opened wider doors for foreign companies eager to set foot in this potentially emerging country with increased foreign direct investment and relaxation of EU & US sanctions in 2013 continuing to drive the economy.

Myanmar’s economic growth reached up to ~8.6% in 2016 and is expected to stabilize in the coming years. However, unexpected landslides and widespread flooding in 2015, decreasing the growth rate to 7.0%. Before the political and economic reforms started in 2011, Myanmar’s average GDP growth was 5.5% and quickly escalated to 7.3% in FY2012 (ended 31 March 2013).

Source: IMF, World Bank, Solidiance Analysis

Along with the overall economic growth, Myanmar’s construction market presents tremendous opportunities in real estate, building construction materials & building finishing materials. The market grew from USD 2.4 billion in 2011 to USD 3.95 billion in 2013, with 87% of spending coming from the private sector, particularly from local companies. In the coming years, Solidiance forecasts Myanmar’s construction market to reach at least USD 6.6 billion by 2018, making this frontier market the fastest growing construction industry in the region.

Foreign investment in Myanmar’s construction comes mostly from Asian companies like HK & Shanghai group, Capitaland and Lotte. As foreign companies can not buy land in Myanmar, they tend to partner with large local conglomerates like Yoma, Max, Naing & Shwe Taung Group.

Source: IMF, DICA Myanmar, Solidiance Research and Analysis

Myanmar’s economy is heavily based on agriculture-related industries. Meanwhile, there has been a shift towards industrialization in economic and infrastructure development. Although the newly-elected government in 2016 now focuses on accelerating agricultural productivity and land reforms, total foreign investment in these sectors remain negligible with ~USD 200 million in the last five years.

On the manufacturing front, FDI is expected to grow increasingly due to the government’s promotion of export-oriented manufacturing by giving attractive incentives and development of the upcoming special economic zones (SEZs).

Oil & Gas and power sectors, on another hand, have been main source of FDI flow. With the high demand and needs in infrastructure development, foreign investment in the power and infrastructure sector will play an effective role in upcoming years.

Furthermore, FDI for construction sector was humble in 2012 but these numbers will increase sharply in the short to mid term. The majority of FDI in Myanmar’s construction segment mainly comes from Japan, Singapore and Thailand.

Construction industry in Myanmar was valued at ~USD 4.9 billion in 2015 and is expected to grow at a CAGR of ~11% until 2020, despite uncertainty regarding construction sector policies, reflecting an underpenetrated market.

Industry growth was robust after 2010 because of increase in investment opportunities in energy and public infrastructure projects with FDI inflows from Thailand, Vietnam, China, Singapore & Malaysia.

The growth from 2015-18 will be driven by investments across all segments – rising interest in residential construction, government’s focus on infrastructure development, low-cost construction as well as construction of industrial zones and SEZs to support industrial development.

Yangon is the key hub for construction activities; both from a population demographics and economic importance, accounting for 90% of total trade

With a population of over 7 million inhabitants, Yangon has ~700 people per square kilometer, ahead of Mandalay (~200 people/sq. km) & Ayeyarwady (~170 people/sq. km), while national average lies on 76 people per sq. km

Source: The 2014 Myanmar Population and Housing census, Sollidiance Interviews and Analysis

Total CAPEX on Myanmar’s construction market saw a big forward jump in 2013 mainly due to heavy investments in residential, retail and office space. Yangon remains to be the center of construction activity and it is unlikely to change in the near future. A new town, close to new international airport, is being built in Yangon. Moreover, the increasing number of expats and locals moving to Yangon for job opportunities are carrying significant demand for housing.

Large global and regional companies have set up offices in Yangon, and the current supply is far below the demand for office space. There are 7 large projects in the pipeline to meet some of this demand.

The tourism industry is also found to have positively impacted the construction sector. Myanmar saw 1.5 million tourists in 2013, a 50% increase from 2012. While there may be a serious shortage of hotels in the country, heavy investments are being made to cater to this growing need of hotels, with some notable large projects such as Lotte, Shangri-La and Novotel in the pipeline.

Residential and Infrastructure accounts for ~80% of the overall construction market in Myanmar