Myanmar emerges from decades of isolation. Following a general election in 2010— which installed a civilian government albeit with still considerable military influence—Myanmar has undertaken significant political, economic and policy reforms. The initial steps taken by the government, including the release of political prisoners, numerous ceasefire agreements with rebel groups, and ending direct media censorship, have been welcomed by the international community, triggering the lifting of sanctions by some countries and resumption of aid and economic cooperation with the country.

Myanmar has a lot of catching up to do. In the 1960s, Myanmar was one of Asia’s leading economies with per capita income more than twice that of Thailand. Today, it is Southeast Asia’s poorest country.

No doubt, Myanmar possesses immense potential given its abundant natural resources, cheap labor, and its strategic location at the crossroads of the People’s Republic of China (PRC) and Southeast Asia, on one hand, and India and South Asia, on the other. However, history is the witness that testifies such potential is neither a necessary nor a sufficient condition for economic success. One of the most successful economic stories was written by the Republic of Korea (Korea), which had to rebuild its economy after the Korean War destroyed all basic infrastructures and had almost no natural resources to begin with. On the other hand, the Philippines, once Asia’s darling for investors given its strong potential, fell from fame to obscurity following years of political instability and macroeconomic mismanagement.

So what should Myanmar do to realize its economic potential?

ADB released in August an important economic study of Asia's sleeping giant: Myanmar. Entitled Myanmar in Transition: Opportunities and Challenges, it is the first overall study of the economy by the donor community in years. The report highlights the key strengths of the country centered on natural resources, its young workforce, and its strategic location in Asia. And it draws on the lessons from the region’s fast growing economies to help guide Myanmar in charting its course towards strong, sustainable, and inclusive growth.

Asia has many success stories. Although it is impossible to generalize these, rich development experiences offer important lessons. These suggest Myanmar needs to maintain low inflation and sustainable budgets through effective macroeconomic management, encourage domestic savings, invest in human capital, modernize infrastructure, and create sound institutions. Easier said than done, but as a Korean national, I am a big believer of economic miracles. Certainly, Asia is not short of success stories where dramatic economic transformation has been achieved in a relatively short time period given the right policy mix and commitment.

According to the report’s baseline scenario, Myanmar could grow 7-8% per year and raise its per capita income to $2,000–$3,000 by 2030 if it stays true to the path of reform. There is also a significant upside potential relative to this baseline scenario, especially as the upcoming Asian Century presents a unique opportunity for Myanmar. Asia is expected to account for about a half of world income and more than 40% of world consumption by 2050 and Myanmar stands to gain enormously if it can effectively leverage its location as an economic corridor.

However, I would also like to highlight key assumptions underlying this baseline scenario and the challenges associated with these. First, it is absolutely crucial that the country maintains political and social stability. A series of political reforms since 2011 has offered some hope and optimism to political observers around the world. However, whether the ongoing reforms can secure long-term peace and stability in the country is still a big question.

Myanmar has a long history of ethnic and intercommunal tensions. Resurgence of ethnic conflicts in Rakhine, Kachin, and other States could spread, threaten public security and national stability, and derail the reform process. As the pent up demand for human rights and economic needs becomes loose with new freedom, social tensions could escalate. Myanmar’s rapprochement with the West could be also disrupted if the issues of human rights violation surface during the widespread ethnic strife. Addressing these issues while continuing the reform efforts will be extremely challenging. It requires building a public trust that Myanmar’s economic and political transition will be inclusive through proper distribution of power and resources during the process. Better representation of ethnic groups in the parliament may be helpful to promote inclusiveness and reconciliation, while addressing the fundamental issues, such as granting basic human rights and citizenship status to ethnic minorities such as Rohingya Muslims, would be essential to avoid future violence.

Second, strong leadership with political commitment is key to successful reforms and steering the course of economic and political transition. Wide-ranging reforms of politics and economy have been driven by the government and the legislatures. However, the success of reforms depends on broad grassroots support, especially as the political dynamics become more complex surrounding the next national election in 2015. President Thein Sein continues to consolidate his authority with more reformists in the cabinet. A good group of technocrats has been also instituted to further implement the reforms. With growing new roles of the Opposition party leader, Aung San Suu Kyi can influence the reform directions. The successful leadership will be derived from good working relations between the President, Aung San Suu Kyi and the lower parliament.

Lastly, inadequate institutional and human resource capacity remains the biggest hurdle to Myanmar’s economic and political transition. Basic legal, regulatory, and institutional frameworks have to be in place for nation building, but more importantly, new institutions need to have adequate capacity and capable human resources. Generations of neglect have left the country with a vacuum in skilled labor and a large group of uneducated youth. High youth unemployment is a ticking bomb, if not properly addressed. Proper jobs and learning opportunities need to be created for the youth. Reforms should bring better chances at grasping economic opportunities soon. Undue delays would mean slim chances that reform will be successful.