Has Myanmar come across your mind for regional expansion? In her transitional phase, this article analyses the potential promises and pitfalls when making the decision to establish yourself in Asia’s latest emerging market.
Before 2012, Myanmar was not the mainstream market for investment for many companies.
Only recently has the country created much anticipation and hype over this promising land for businesses. The country’s political transition has lured a new rush of attention, sending a welcoming signal to foreign investors.
The environment is already conducive for foreign ventures, and there is demand for investments in crucial areas. Companies with a strategy to expand have a strong incentive to take advantage of this transitional period by entering this last Asian frontier market, and establishing their global footprint before it is too late.
WHY YOU CAN AND SHOULD MOVE TO MYANMAR NOW?
1. Leverage on the uncertainty surrounding new Foreign Investment Law (FIL)
Since its introduction in 2012, ongoing discussion surrounding the ambiguity and unclear regulations addressing foreign investments has yet to cease. Many have perceived the restrictions on business activities by foreign investors as permanent. However, on the
contrary, the FIL has witnessed many legislative changes in recent years so as to remain relevant for its economy. Foreign projects that are regulated under the Myanmar Investment Commission (MIC) can now be discussed on a case-by-case basis, depending on the economic benefits it will bring to the country.
2. First mover advantage
Several multinational companies have already taken their first step, giving them the opportunity to leverage and further develop Myanmar’s infant industries. In addition to getting their brand familiarized with the locals, they also have a longer lead time to establish networks, giving them an edge before the real competition, such as big foreign players, enters the market.
3. Organizational investments will continue to
increase Apart from the regulatory uncertainty, issues pertaining to human resources are expected to persist in the short-term. With Myanmar experiencing a growth rate of around 8% year-on-year, foreign investments are likely to continue increasing, on the presumption that government does not retract on its economic reforms. The influx of foreign investments in recent years is seen as a catalyst for positive change, more so as the government is subjected to international public and media’s attention. This certainly promotes greater accountability and transparency in the investment framework.
COMMON DRAWBACKS HINDERING INVESTORS FROM STEPPING FOOT IN MYANMAR
1. Lack of access to information
Finding information and data that is reliable and trustworthy can be a real challenge. With no credit bureaus to rely upon, the best solution is get inside the country, establish strong rapport with the locals, and gather required information through your network directly. Doing so greatly eliminates the hearsays and empowers you with decisions to be undertaken.
2. Weak financial and banking systems
Myanmar’s developing financial system unfortunately shows no signs of major headway towards a sound and efficient banking system in the short run. Payment modes are still predominantly cash based, although card based transactions are making a comeback. While E-commerce is possible, majority of businesses still operate on a cash-on-delivery basis. With the US announcing its lifting of a wide array of sanctions, and the awarding of 13 foreign banking licenses by the Central Bank of Myanmar (CBM), the country has indeed taken a great step forward in liberalizing its financial industry. The presence of these foreign banks serve to develop and advance the banking reform, whilst improving access to capital. Myanmar’s banking infrastructure is also progressing with the Internet and mobile banking platforms being introduced into the market by both local and foreign banks.
3. Corruption & lack of experience leading to poor execution of Myanmar’s business regulations
Myanmar still faces challenges of corruption, with bribery still prevalent. Little is known on the specific forms of corruption but it is believed that decades of military rule, political and systematic repression are contributing factors. On a positive note, the newly elected government has demonstrated its commitment to improve the country’s institutional and legal framework, although the improvements will take some time.
Many find dealing with different government officials an arduous task, with most still uncertain of the legislative rules and framework. When dealing with numerous officials, they may provide conflicting information. Although improvements have been made through the formulation of guides on the Directorate of Investment and Company Administration (DICA)’s website, it is always recommended to seek professional advice from a reputable corporate service provider.
4. Skill shortages; a key concern
The local workforce is progressing but it currently lacks the capabilities to support its own rapid growth. Businesses will have to be prepared to provide not just capital injection, but time and readiness to share technical expertise. For foreign companies placing a heavier emphasis on fast profit growth rather than cost, an option to consider would be to recruit Myanmar nationals who have had overseas exposure.
SETTING THE STAGE FOR SUCCESSFUL ONBOARDING
Frontier markets are not for the mild or meek. The challenges across economic and political sectors are real. Despite the difficulties and challenges investing in these frontier markets, the upsides can be tremendous.
Now the anticipation is such that the base for future opportunities will be established somewhere between now and 2017, companies should start planning for it. Although market entry costs are high, what you are trading for is a golden opportunity to gain an early mover advantage into adequacies turned opportunities.
Nobody likes the unfamiliar stimuli. However, expose yourself to the change and find out more about Myanmar. It is highly likely you will find yourself enjoying the unfamiliarity this new venture brings you and the new opportunities that await.
- Nyi Nyi Htun, Founder and Chief Executive Officer, Inter Group -