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Camb., Laos & Myanmar Country Risk Report Q2 2016

  • March 2016
  • -
  • Business Monitor International
  • -
  • 37 pages

Cambodia We estimate real GDP growth to have come in at around 7.0% in 2015, marking the fifth consecutive year of plus-7.0% growth. We continue to warn of the risk associated with the ongoing slowdown in the global economy and the leverage-fuelled construction boom that has been in play over the past few years. We forecast 6.9% real GDP growth in 2016, compared with the IMF's forecast of 7.2%. The Cambodian government is looking to improve regulation in order to attract more investment into the country's casino industry. An expanded casino industry would help the Cambodian government achieve its goal of boosting Chinese tourist arrivals over the coming years.

Laos Despite external headwinds, we maintain our bullish outlook on the long-term growth prospects of the Laotian economy, and expect real GDP to continue growing at an average pace of 6.5% per annum over the coming decade. Following an estimated real GDP growth rate of 7.4% in 2015, Laos' economic growth is likely to moderate to 7.0% in 2016, but will remain a regional outperformer. That said, the poor business environment could hamper a diversification of the country's economic base into manufacturing, posing downside risk to its long-term economic growth prospects. Although there was a significant change of leadership for the Lao People's Revolutionary Party (LPRP) during its 10th party congress (held from January 18-22), we believe that the new politburo is unlikely to make dramatic changes to existing policies that would risk disrupting the rapid economic development that has marked recent years. However, Vientiane will likely adopt a more balanced foreign policy stance over the coming year given that the country is set to chair the ASEAN Committee for 2016, and the new leadership appears to be more balanced.

Myanmar The transition between the Union Solidarity and Development Party (UDSP)-dominated former government and the National League for Democracy (NLD)-dominated one has gone as well as could have possibly been expected so far, with the latter group having taken their places in Myanmar's parliament on February 1. However, significant questions still remain as to the identity of the NLD's presidential nominee, as leader Aung San Suu Kyi remains barred from the role by constitutional article 59(f). At the time of writing, Suu Kyi's chances at the role appear to be very minimal, with wide-ranging reports indicating that negotiations between the two parties on the subject have not been successful. Instead, the NLD is likely to elect a loyalist candidate who will be heavily influenced by Suu Kyi, in line with our longheld core view. Despite what may be seen as somewhat of a setback for the NLD, the party still holds a massive majority in parliament, and can legislate somewhat effectively on its own accord. However, the former opposition party will not be able to amend the constitution without the consent of the Tatmadaw, meaning that the military retains significant powers that are not typical of a democracy.

Table Of Contents

Camb., Laos and Myanmar Country Risk Report Q2 2016
BMI Index 6
BMI Risk Index - Cambodia6
BMI Risk Index - Laos7
BMI Risk Index - Myanmar8
BMI Index League Tables9
Executive Summary 11
Chapter 11: Economic Outlook - Cambodia 13
Cambodia Economic Growth Outlook 13
Growth Boom Facing Multiple Headwinds13
We estimate real GDP growth to have come in at around 70% in 2015 marking the fifth consecutive year of over 70% of growth We
continue to warn of the risk associated with the ongoing slowdown in the global economy and the leverage-fuelled construction boom
that has been in play over the past few years We forecast 69% real GDP growth in 2016, compared with the IMF's forecast of 72%
Cambodia Key Sector Outlook 14
Looking To Casinos To Boost Tourism14
The Cambodian government is looking to improve regulation in order to attract more investment into the country's casino industry An
expanded casino industry would help the Cambodian government achieve its goal of boosting Chinese tourist arrivals over the coming
years
Chapter 12 Political Outlook - Cambodia 15
Cambodia Domestic Politics 15
Economic And Military Cooperation With China To Increase15
Cambodia will continue to strengthen economic and military ties with China as the former looks to secure economic and military
assistance and the latter seeks closer ties with its ASEAN allies amid ongoing disputes in the South China Sea
TABLE: POLITICAL OVERVIEW15
Cambodia Long-Term Political Outlook 16
Addressing Corruption And Inequality Will Be Key To Stability16
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
over the coming years
Chapter 21: Economic Outlook - Laos 19
Laos Economic Growth Outlook 19
Growth To Moderate But Still Remain Solid19
Despite external headwinds, we maintain our bullish outlook on the long-term growth prospects of the Laotian economy, and expect real
GDP to continue growing at an average pace of 65% per annum over the coming decade Following an estimated real GDP growth rate
of 74% in 2015, Laos' economic growth is likely to moderate to 70% in 2016, but will remain a regional outperformer That said, the
poor business environment could hamper a diversification of the country's narrow economic base, posing downside risk to its long-term
economic growth prospects
Laos Key Sector Outlook 21
Demand For Prescription Medicines To Strengthen21
Laos' disease profile will increasingly favour prescription medicines Chronic diseases such as cancer and diabetes are growing, which
will drive demand for prescription medicines, while entrenched infectious diseases such as HIV are also largely treated by antiretroviral
prescription pharmaceuticals Drugmakers seeking to tap onto this demand will have to navigate the low purchasing power in Lao as
well as the widespread use of traditional medicines
TABLE: NUMBER OF NEW CANCER CASES IN LAO21
Chapter 22: Political Outlook - Laos 23
Laos Domestic Politics 23
New Leadership Unlikely To Lead To Dramatic Changes23
Although there was a significant change of leadership for the Lao People's Revolutionary Party during its 10th party congress (held from
January 18-22), we believe that the new politburo is unlikely to make dramatic changes to existing policies that would risk disrupting the
rapid economic development that has marked recent years However, Vientiane will likely adopt a more balanced foreign policy stance
over the coming year given that the country is set to chair the ASEAN Committee for 2016, and the new leadership appears to be more
balanced
TABLE: POLITICAL OVERVIEW23
Laos Long-Term Political Outlook 24
Growing Dissent Against LPRP Poses Risk Of Upheaval24
Laos's long-term political outlook will depend heavily on how well the country balances the need to spur economic growth to achieve its
M illennium Development G oals and the need to address widespread corruption and dissent against the government Heavy reliance
on foreign aid and development assistance also means that the country's policies will remain susceptible to the political and economic
interests of its much more powerful neighbours
Chapter 31: Economic Outlook - Myanmar 27
Myanmar Economic Growth Outlook 27
Economy Poised For Take-Off27
Myanmar has cleared a major hurdle following the success of its November general elections, and we retain our highly constructive
outlook towards the economy assuming the consolidation period proceeds smoothly While we have upgraded our 2016 real GDP
growth forecast to 80% (from 75% previously), we note that overheating risks are building as the current account deficit widens and
inflation rises
Myanmar Key Sector Outlook 29
LNG Needed To Cover Gas Deficit29
Woodside's dual gas discoveries in the Rakhine Basin pose upside risk to Myanmar's gas production, albeit in the long-term as the
company struggles with oil prices However, it is inevitable that Myanmar will have to import LNG due to falling production
Chapter 32: Political Outlook - Myanmar 31
Myanmar Domestic Politics 31
Crucial Period As NLD Forms New Government31
The January-April period will be a particularly crucial one for Myanmar as the NLD assumes the reins in parliament and elects a new
government While it remains unclear who the NLD will put forward for the presidency and speakerships, we retain our expectations
for Aung San Suu Kyi to assume a dominant role in government in any case It appears increasingly likely that the NLD will look to
include some USDP lawmakers in the government in order to bolster the national reconciliation process, particularly following Suu Kyi's
meetings with top Tatmadaw and USDP stakeholders
Chapter 4: BMI Global Macro Outlook 33
Global Macro Outlook 33
Tail Risks Mounting Amid Sub-Par Growth33
TABLE: GLOBAL ASSUMPTIONS33
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 34
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%) 34
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %35
TABLE: CAMBODIA - MACROECONOMIC DATA and FORECASTS37
TABLE: LAOS - MACROECONOMIC DATA and FORECASTS37
TABLE: MYANMAR - MACROECONOMIC DATA and FORECASTS37

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