Since the economic borders of Myanmar opened up and the transition from Burma to an apparent capitalist and democratic state began, international investors and businesses have been excited by the potential to break ground in an untapped market. But is the potential as good as it seems, and what are the real obstacles at hand for businesses in a Southeast Asian country undergoing such rapid change?
Myanmar has made enormous strides in recent years that encourage investment, including the introduction of laws on foreign exchange management and foreign investment; regulation of the local currency, the Kyat; and the mooted establishment of the Myanmar Stock Exchange. In April 2013, the EU lifted the last of the sanctions it had on the former military-ruled country, and, finally, two months later, the granting of two licenses for private telecommunications firms had investors’ tails wagging at the prospects.
Rich in natural resources such as timber, minerals and gems, Myanmar has in recent years also emerged as a natural gas exporter, making China its largest foreign investor followed by Thailand, Hong Kong and the UK. The country has signed multiple economic and trade agreements and is a member of the Asean Free Trade Area (AFTA). The liberalisation of trade and the ongoing reforms have resulted in a rapidly changing business, political and social climate.
A Foreign Influx
In a recent seminar to lay out the opportunities, Stephanie Ashmore, executive director of the British Chamber of Commerce in Myanmar, pointed out that Myanmar had the fastest growing economy in Southeast Asia – GDP growth in 2013/14 was 8.25% – and said the number of global brands and corporations entering the country would increase accordingly. The BritCham office, which opened June 2014 in Yangon, has more than 150 firms signed up, she says, including giants such as Rolls Royce, GSK and Unilever, which is investing hundreds of millions of dollars.
According to Samuel P. Britton, a legal advisor and head of Sciaroni and Associates in Myanmar, the process of legally establishing a business entity is fast and simple, as long as the investor is organised. “Understanding and knowing how one’s line of business fits within the regulated framework of activities not open to foreigners, and targeting and engaging in those activities that are allowed is also important,” he says. “Determining whether to be a 100% foreign-owned business or attempting to joint venture with a local partner is another consideration.”
Some business sectors, Britton says, are restricted to locally owned companies. Due diligence is key. “There are Western companies here that have properly done their homework, entered the market place, and are holding their own,” he says.
“ INVESTORS SHOULD BE SEEKING LONG-TERM REWARDS RATHER THAN QUICK GAINS. ”
Local partnerships are essential, as is as capacity building and being ahead of the game on corporate social responsibility.
-Stephanie Ashmore, Executive Director, British Chamber of Commerce Myanmar
Ashmore laid out some of the greatest challenges – banking restrictions, low skilled staff, rental prices, increasing competition, and transportation – but indicated that newcomers were fast learning how to navigate them. Additionally, working within a legal structure that has not been updated since British colonial rule in the 1950s brings its own set of headaches. And, as is the case in Cambodia, retaining staff that you have trained is difficult, as their value increases with their skillset.
After 14 years in Thailand, Thazin Wah, aka Bo, returned to her native Myanmar recently and opened her own Thai restaurant – Green Gallery – which is now rated number one in Yangon by Trip Advisor. From the inside, she sees the often-unwritten challenges that foreigners encounter when moving into Myanmar’s business landscape. Expats, she says, are often charged 10 times as much as locals for common services. But navigating such issues, she believes, is worthwhile, with evolving local tastes and increasing tourists providing the basis for a steep economic uptick.
“There are huge gaps in the market here,” she says, adding that locals are increasingly looking for new things, while foreigners, predictably, are seeking comforts from home. “We are slowly growing in terms of what people want and need. There is a call for almost anything at the moment.”
Foreigners setting up in Myanmar, like anywhere, are bound to make mistakes, and failing to embrace local culture is a common pitfall in any new market. “When opening up a business here, the lack of understanding in terms of Myanmar culture and law can cause serious problems. The culture here is very different to other countries and the law is very tricky, however with sufficient research, good contacts and knowledge, these should become less of a difficulty,” says Bo.
Get in on the Ground
Ashmore’s advice was that, despite the risks, speculators should not delay in getting in on ground level. Investors, she says, should be seeking long-term rewards rather than quick gains. Local partnerships are essential, as is as capacity building and being ahead of the game on corporate social responsibility. Planning for the unexpected is crucial, she adds.
While there is a lack of skilled workers, particularly in fields that a foreign firm would enter, Bo says that she can already see young locals soaking up the knowledge of expats and furthering their education or skillset. “Education is changing within the country; there are apprentice training programmes for those who would like to train in a specific career. So whilst there is a lack of skills in the local population, I think time could bring with it some great changes,” she says, sentiments echoed by Ashmore.
With national elections due in November, the political climate is also an area of concern for foreigners looking at Myanmar as a potential new market, and there is a good case to make for waiting until the ballot passes, especially given new pieces of legislation introduced or pending. Ashmore, however, says that the government is fully aware that the eyes of the world are on them and their ability to conduct a free and fair election.
“Be prepared and patient. Do your research, make sure you have sufficient resources, talk to as many business owners as you can and make good contacts” is the sound advice from
Bo.And while her Thai restaurant may be small scale, the influx of foreign giants such as KFC, Pizza Hut, Novotel, Heineken, Coca-Cola and Carlsberg, and the Peninsular Hotel earmarked to open within two years, are not. These multinationals are investing for the long-term, and with the Myanmar Investment Commissions reporting $8.1 billion in foreign direct investment for 2014/5, it is hard to foresee a slowdown any time soon.
Words by Steve Noble