Posted on Nov 19, 2012 by Sergio Ulloa
President Obama meets today with both Myanmar's party leaders in Rangoon, the country's commercial centre. It will be the first official visit for a sitting US President to Myanmar (also known as Burma) in an effort to support recent reforms undertaken by its President Thein Sein. Obama has revealed a strategy that 're-focuses on engaging fast-growing Asian nations', choosing South East Asia as his first destination since his re-election as Head of State.
The visit comes not long after a state decision to introduce private insurance companies back into the market, allowing them to offer six types of insurance to customers. In September, it was announced that foreign investors would also be allowed to enter as early as 2015, after local insurance companies had "time to establish themselves," and a clearer picture of the market had emerged. Since 1963, state-run Myanmar Insurance Enterprise
has been the sole provider of insurance in the country. It will continue to provide insurance for government projects and the oil and gas industry while private providers begin to establish themselves in the competitive market.
U Aye Min Thein, president of Myanma Insurance, outlined the requirements for interested companies. To offer life insurance, a minimum of US$ 7.46 billion in capital is needed, and at least US$47 billion is required for policies offering general insurance. The high capital requirements come as a result of the state's desire to only accept businesses with "strong financial positions," as they attempt to avoid "potential bankruptcies or absconders." Insurance providers choosing to apply to join the market will need to deposit their capital in the Myanma Economic Bank
The insurance sector is relatively uncovered by rating agencies or debt and equity analysts, presenting a problem with collecting accurate market information. Corruption in the country has historically been an issue with a number of business men appearing on blacklists.
The presidential visit has been criticised for political reasons, with claims that more should have been done to secure the release of political prisoners. Although important, this will not weigh heavily against the economic impact that the symbolic support will have on the region. Confidence in the government from western nations will rise as reforms take shape, while international companies look to explore untested territory and begin investing time and energy to develop the economy. With a population over 60 million and an expected real GDP growth of about 6% over the next five years, Myanmar's market growth potential is an appealing field for international companies. Estimations from Reuters show the country eventually generating between $1bn and $2bn in premiums a year.
After today, President Obama will continue on to Cambodia, joining a meeting of the Asean community to further discuss US foreign policy with the Asia-Pacific region.