Think Again: Burma's Economy - By Jared Bissinger

"Burma is the next Asian Tiger."

Don't bet on it. The economies of the Asian Tigers don't look anything like Burma's, which is driven by primary industries such as natural gas, agriculture, timber, jade, and minerals. Together these industries made up over 80 percent of exports last year. They also dominate foreign investment: oil, gas and mining alone comprised almost 90 percent of FDI over the last half decade. Burma's rapprochement with the West has brought even more interest in these sectors. The new government signed deals for 10 oil and gas blocks earlier this year and is offering 23 more. They're also awarding mining concessions and land for plantations. While there's also some interest in telecoms and banking, it's the extractive industries that are Burma's main draw for potential investors.

The Asian Tigers, by contrast, were mostly resource-poor and relied on export-oriented manufacturing to develop. Their foreign direct investment (FDI) was mostly in manufacturing, not resources. They also developed in a much different international environment, one with far fewer competitive exporting countries. They sold their wares mostly to the high-consuming countries of the West, the same countries that are now grappling with the lingering effects of the global financial crisis.

Unfortunately for Burma, countries that have relied on primary product exports tend to grow more slowly than countries like the Asian tigers due to unequal investment in other parts of the economy, a concept known as Dutch Disease. Burma already suffers from this illness, and it will continue to hamper the country's development in the years ahead. The export of natural resources helped drive up the value of the country's currency, the kyat, from over 1400 to the U.S. dollar in 2007 to less than 700 in 2011 - a major obstacle for any reform effort. The continued overvaluation of the kyat -- along with high transaction costs, poor infrastructure, and a competitive international environment -- will all make it difficult for Burma to develop the manufacturing sector it needs to emulate the Tigers.