With Burma opening to the outside world, the opportunities for investors
and its people are vast. The challenges may be equally daunting.
RANGOON – Khin Yu Waddy Myint is
manager at Pyrex Trading and Distribution, a Burmese pharmaceutical company
that employs 250 people across the country. Part of her job is to source and
import medicines from India and Australia, a task she concedes she doesn't know
enough about.
“It is the first time for me to
learn many of these things about how to tender,” she says, taking a break from
some business training at the SME Center inside a Ministry of Commerce building
in Rangoon, a short walk from where opposition leader Aung San Suu Kyi spent 15
years under house arrest during Burma's military government.
Now that military rule is a thing
of the past, formally at least, and more donor-funded NGO work is being done in
a country where Western aid was, until very recently, on ice for the most part
as a part of sanctions imposed on the military junta.
And while eyes might roll at the
notion of another NGO doing yet more training in a poor country, the group
behind the course says that its work is all about boosting local business and
creating jobs.
Yuki Kuronuma is Business
Development Manager at Building Markets, an NGO that aims to bridge the
business-aid divide. She says that “part of what we try to do is link local
business and entrepreneurs with international suppliers and business
opportunities. In Myanmar the need for
this is quite clear, given that the country has been closed to the much of the
outside world for so long.”
Burma's economic prospects are on
the rise, now, with the World Bank saying on December 19 that “the Myanmar
economy continued to accelerate in fiscal year 2011-12, with GDP growth at 5.5
percent, and expected to reach 6.3 percent in fiscal year 2012-13.”
But a lot of that growth might
not be conducive to small businesses or job creation. Exports and inward
foreign investment are almost entirely based on natural resources such oil,
gas, hydropower — sectors that might bring in vast revenues but not a huge
number of jobs for the country's young.
7 out of 10 Burmese work in
agriculture, much of which is low-tech, low-yield subsistence — while 32%
percent of the population lives under the poverty line. The country has the
lowest GDP per capita in Southeast Asia and only a quarter of the population
has electricity.
Job creation is the cornerstone
of economic policy for Aung San Suu Kyi, who described her country as sitting
on an unemployment “time bomb” when speaking at the World Economic Forum in
June, while urging investors to try provide jobs for young Burmese.
Similarly, the
military-in-disguise civilian government headed by President Thein Sein, a
former army man and Prime Minister of the old military dictatorship that
formally ceded control after its proxy party won a rigged election in late
2010, is hoping that a new foreign investment law coupled with low labor costs
will attract foreign business.
That's a maybe, for now, and
while companies such as General Electric and Coca-Cola have investments lined
up for Burma, there's little indication yet that Rangoon will play host to the
sort of mass production job-hub industrial parks seen in neighbors such as
Thailand and Vietnam — no matter what laws the government passes.
“The new foreign investment law isn't
perfect by any means, and gives a lot of discretion to the investment
commission to rule on whether a proposed investment is valid or not, opening
the way for possible corruption,” says Jared Bissinger, an economist who
specializes on Burma.
“It does seem though that the law
is geared towards job creation,” Bissinger says. But entrepreneurs want more
than just words on paper. “There are other hidden costs that might counter the
attractiveness of low wages for investors — be that a lack of skilled people,
unreliable electricity, poor infrastructure,” warns Bissinger, who recently
undertook a survey of 150 local businesses.
His findings so far indicate some
growth of small and medium enterprises (SMEs) in Burma, something that SME
Center director Aye Aye Win also believes to be the case.
“We have 40,000 SMEs listed,” she
says, “but we estimate that there are maybe 300,000 such businesses in Burma
altogether.”
The disparity in numbers is
caused by some of Burma's other main business hurdles — poor communications and
a lack of reliable data.
“The communication process for us
in Myanmar is so slow, that is probably the most difficult thing about doing
business here,” says Khin Yu Waddy Myint. The country awaits the liberalization
of the telecommunication sector — change that could in time bring Burmese
people the type of cheap and fast mobile phone and internet services seen
elsewhere in Southeast Asia.
For now, however, it has been
estimated that 3-5 percent of the population have mobile phones, while internet
penetration may be as low as 1 percent, both legacies of a paranoid military
government. And despite its optimism about next year's projected growth
numbers, the World Bank warned this month that the country needs to improve its
telecommunications if it is to maintain growth.
Lack of data and statistics is
another hurdle, as Aye Aye Win suggested. There hasn't been a census since 1983
(a new one is planned for 2014), and William Aung, a Burmese who returned from
Canada after the country's "glasnost" began, says that finding out
business-relevant information – how many of what and where – can be difficult
to impossible in Burma.
Mr. Aung is a director at Thura
Swiss, a Rangoon-based business consultancy. “Information is hard to come by
here, for many sectors, there is no official data available. We literally have
to get out and walk the streets to find things out ourselves.”
As for Burma's immediate economic
prospects, Mr. Aung says that “the economy will grow, but little by little. But
we have very poor infrastructure, land is expensive, office space is hard to
come by.”
Land prices have been jacked up
by a cabal of well-connected business crones that have grown wealthy from
Burma's natural resources. With the country's limited banking and financial
infrastructure many have put their money into property and land.
The result is office space rental
prices of around U.S. $50 per square foot in downtown Rangoon — where the total
floor space available is only 3 percent of that in Bangkok, an hour's flight
away.
Such scarcity and high prices are
another deterrent to doing business — for Burmese and foreigners alike.
Nonetheless some ambitious
companies are pushing ahead. Leafing through a glossy brochure, Ye Yan Naung
Soe, marketing manager at the construction company Yadanar Myaing, tells me
that one high-end high-rise condo block that is still under construction is
almost sold-out.
Sitting on the edge of Kandawgyi
Lake, a prize waterfront location in the heart of Rangoon, the
as-yet-unfinished apartments are highly-sought after, it seems, amid a shortage
of accommodation across the city.
“We have one room left to sell,
out of 66 units in total,” he says. “People want to move here now as the
economy develops, and many buyers are foreign, from Japan, Korea, Singapore.”
Simon Roughneen
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
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