Myanmar is surrounded by China, India, Bangladesh, Thailand, Laos. And all these countries contribute towards trading in Myanmar, making it like a hub itself. It’s only a matter of time before this market will be a very interesting destination to do business. Those who get in early will have a prime mover advantage. But at the same time, there are risks involved. And that’s why I had invited Dr John Vong, Former Adviser to the World Bank to share on this topic in my webinar not long ago. Here is a summary of the sharing from his
Looking at the business intelligence chart, they are 24 East Asia Pacific countries. And by comparing Myanmar with Vietnam, Cambodia, Laos and Thailand. The higher the number the more difficult it is to start a business. Starting a business in Cambodia ranks number 24, the highest among all countries listed in the chart. In terms of building and construction, Cambodia is also the toughest whereas the easiest could be Thailand. Getting electricity is an interesting part, because not every country has a constant supply of
electricity. There are black outs and there are brown outs. Vietnam is the highest in terms of brownouts. This means a shortage of electricity. To register a property in their company’s name or personal name, Cambodia is also quite difficult whereas Thailand is the easiest. Getting credit when you enter a country to do business means you may want to get bank credit from the country.
Laos happens to be the most difficult because there are too few banks there. And Vietnam is the easiest among all of them. Protecting
investors…the protection of investors in Thailand of course is the best, and then you have Vietnam which is at 21 while Laos is at 24 in the protecting investors sector. Paying taxes, it is difficult to pay taxes in Vietnam and Laos. Cross border training means trading with countries that surround a particular country. Cambodia is difficult but Laos is even more difficult. Why, because Laos is a land locked country. There are no ports, no seaports and no airports. For the enforcement of contracts, you find in Cambodia and Laos it is pretty
difficult to enforce contracts even if you are given the contract. What about resolving insolvency? In case somebody doesn’t pay you and you want to take action. You find in some of these countries it is difficult to be insolvent. The key question is where does Myanmar stand in terms of ranking among all this? Right in this moment there is no official rank. So therefore it is anybody’s guess.
But if you ask people who had experience in countries in this region you will find that Myanmar may be closer to Cambodia and Laos rather than to Vietnam. And as Myanmar was controlled by the military, a lot of enterprises and businesses are also controlled by the military. Before it was under the military government but now it is beginning to open up. So there is a phase of transition and this transition is not going to be easy.
Let’s look at this because it is a very interesting chart and by closely analysing this chart, one will sort of find out the potential for Myanmar in comparison to its neighbours. Population wise, Myanmar has 60.6 million, that’s twice the population size of Malaysia but similar to Thailand (67.6 million). In any country you must have the size of the population that will determine its growth. That is one of the factors. The labour force is 32.5%, that is a good number of people who are able to work which usually are between the ages of 15-64. So the labour force is 32.5million people in Myanmar. Malaysia has 11.9 million and we see how Malaysia has grown. Thailand is very similar to Myanmar, 39.6 million. So you can see that Myanmar has the potential to grow in a similar economic way to Thailand.
The next area we look at is the critical mass of the urban population because you have a large population but it is all over the place as it is distributed across a big land mass. It does not have critical focal points but urban population tells you to a large extent how a population can grow and the level of migration from the rural country side into the cities. Myanmar’s urban population is 34%, which is exactly that of Thailand. Malaysia has many cities therefore we have a large population that is urban; 72%.
I also wanted to look at the potential of Myanmar over the next 10 years. I looked at the 0- 14 year old population of Myanmar and in Myanmar it is 27.1% of the population, this means that almost ⅓ of the population is 0- 14 years old. That means this range of people
within the next 10 years will definitely join the workforce. I compared that with Thailand whereby the 0-14 year old range is only 19.5% of the population,
Also let’s look at median age. The median age means the most common age of the population. In Myanmar it is 27, in Thailand the median age is 34. What does this mean? It means the population is aging in Thailand as compared toMyanmar. Myanmar is USD 83.7billion in terms of GPD, but when you look at Thailand which is USD 609 billion, this is many times more than Myanmar given the same sized population and similar size of labour force. This points immediately to the potential of Myanmar which is able to grow maybe 5 times of what it is today. That means if you invest $1 today in Myanmar, over the next five years, you have a chance to make 500% return. That is higher than any term deposit in Malaysia or many other countries.
Then you can also look at the GDP per capita. Per capita means it is per person of the population. Myanmar is $1300 per person, compared to Thailand a very similar country, which it is $9500. This means, potentially the purchasing power of the Burmese people can increase 9 times. What does this mean? This means that for FMCG market, there is a chance that this will grow very fast. In most countries, any per capita income that’s above $1000, means that people have the means to purchase things at supermarkets, that is the benchmark figure, above the $1000 GDP per capita.
Myanmar is right for people in the FMCG markets but what about when it comes to below poverty lines, the level of poverty in the nation? Myanmar is a very poor country. 25% of the people are living below the poverty line which usually means having less than $1.25 to live on per day. Nevertheless what it shows is that a quarter of the population is below poverty line, but the rest of the 75% that is above the poverty line has spending power. So business can still take off there.
Let’s look at this SCOR (Strength, Constraints, Opportunity & Risk) chart and let’s look at the strengths. It is indeed moving towards reform. The cost of labour is low, in fact amongst all the neighbouring countries, the lowest costs for factory workers is in Myanmar, it is even lower than Vietnam. There is also plenty of natural resources in gas. The others are aminerals, gemstones and timber. The backbone of the economy is agriculture. There’s also tourism potential in Myanmar because it is still unexplored. Here the tourism potential lies in eco-tourism.
The constraint is of course that the macroeconomics is weak. The country in terms of managing the economy still has a long way to go. There is a lack of experience from the government on what is called free market enterprise. All these are controlled by the military government. However, now, for the first time they are going into a free market enterprise. How will they deal with that? Free market enterprise means they have to allow the market to move on its own and you react normally to it. There’s limited fiscal resource, in other words the government does not have large amounts of money to spend in developing the country. The financial sector is underdeveloped. This means there is no proper banking system as such and a lot of people still keep their money under in their pillowcases or in tin cans. But if you look at microcredit of course it is thriving. Infrastructure is inadequate. Infrastructure in terms of electricity, power supply, roads, ports, telecommunications is inadequate. Education levels are low and the quality of education is low. Health services are low. You have multiple exchange rates whether you change it at an official level or unofficial level. And in an unofficial level there is also the black market and the grey market. There is a lack of rule of law because laws are not transparent at the moment. Inflation is uncertain and this links up to the macroeconomics.
But the opportunities are there. Firstly, the location is fantastic as it is cradled by many countries. And then you have a lot of renewable energy opportunities in terms oil and gas, renewable or natural resources (wind power, solar power or a bio-gas type of resources). And there is huge FDI investment potential. To go in now is rather easy rather than later when there will be a lot of other conditions.
Looking at the risk of course, reforms will be stop and go. You can expect that a country in this infancy to go fullsteam ahead and when they feel there is danger they will stop. When they feel it is less dangerous, they will go again. So it is stop and go and just like stopping at the traffic lights, you too will just have to stop and go.
In this article (part 1), we shared on business intelligence, key socioeconomic, the SCOR (strength, constraints, opportunity & risk) of doing business in Myanmar market. We’ll share more overview information about doing business and opportunities in Myanmar from Dr John Vong.