Doing Business in Myanmar: What, When, and Where?

ผู้เขียน: Dr. Sutapa Amornvivat

Amidst the spectrum of reforms to launch Myanmar into the world's new investment Mecca, the key questions for investors remain: what sectors to invest, when to enter, where and how to start?

Riding on reforms, investors who are first to fill in the gaps of infrastructure-building will benefit immensely. With all the hypes about being the world's last frontier, Myanmar has to remain attractive in the long-term to keep foreign money invested. It therefore must undergo urgent reforms on its soft infrastructure-such as the healthcare, financial and legal systems.  Investors should take the opportunities in providing financial and legal services, as well as basic medical needs. At the same time, hard infrastructure-such as telecommunication, logistics, electricity and water-is in serious need for the country to stay competitive and connected. Ample incentives would be offered to foreign investors in modernizing telecom and logistics services, or supplying electrical and water equipment such as wires and pipes to local community.

Labor-intensive sectors remain the hot destination owing to cheap labor market, as long as firms are aware of the limited extent of the cost-saving benefits. There are hidden costs that must be assessed ahead of time, such as the rising employee benefits demanded by the strengthening labor union. Power shut-downs at various hours can leave unprepared firms scrambling to invest in large electric generators, or risk having to shorten workers' hours. This issue will also impact investors who plan on bringing cutting-edge production technology, only to face frequent power outages and high maintenance costs.

Next step on the horizon is to offer more sophisticated and customized products in narrowing the gap on human capital. Once infrastructure-soft as well as hard-is on track towards successful transformation, after-sales service centers can cater to the owners of mobile phones, cars and industrial machinery. Subsequently, skill and language training institutes as well as printing and media outlets will soon be needed to improve the country's largely unskilled workforce. The rise of local elites and expatriates will also trigger the demand for the best available alternatives such as serviced apartments, private transportation to Thai hospitals, or a franchise of a prestigious international school right in Myanmar's major cities.

Location, location, location: where to invest in Myanmar? Strong customer demand is usually found in large cities like Yangon and Nay Pyi Taw, which form the heart of Myanmar's trading and distribution and therefore can easily absorb Thai products. Special Economic Zones are more suitable for setting up plants as they are better equipped with basic infrastructure, and are associated with well-defined laws and regulations. Thai investors should not ignore huge potential of border trade, arguably constituting 40-50% of existing Thai-Myanmar business activities. Thai investors can bank on established border relationship among local businesses.   

The right form of investment is also crucial, and calls for thorough assessment of the level of risk tolerance and the capital available. Exporting allows a company with limited risk appetite and resources to find its products a fresh market. Selling a franchise to a Myanmar entity is another good platform, albeit with non-compliance risks in production. Direct investment (e.g., a distribution center or a production base) will expose investors to highest levels of investment risks and capital commitment, and demand strong partnership with the right Myanmar firms that possess distribution network capabilities and, in the case of joint ventures, adequate funds.

Myanmar experts are all agreed on one thing: a right partner is the ultimate key to success. Most successful firms have set up their bases in Myanmar long before the current re-opening. New entries must therefore have realistic expectations, and recognize the ground rules and the risks involved. Lastly, take advantage of the unique know-how of more than 3 million Myanmar workers in Thailand who are already familiar with doing business with Thais, and a great source of information on Myanmar.

This is the final part of the three-part series on Myanmar.