Small and Medium Enterprises can Play Big Role in Myanmar’s New Economy
Anu Seth
July , 2016

S mall and medium sized enterprises, commonly known as SMEs, form the backbone of business and manufacturing in most countries. Myanmar is no different and over 99% of all its business falls in the privately owned SME segment. This is part of the transforming business landscape that existed till just a few years ago when only two types of businesses existed, namely, small family run businesses or large conglomerates, and SMEs barely heard of, though not nonexistent. With the opening up of the economy and a new government in place, Myanmar will see a transformation and modernization of business setups since it has emerged as the land of opportunity with tremendous growth potential, and plenty of aid and advice available.

An enterprise gets defined as a small or medium enterprise according the rules and regulations set in a country. The potential of SMEs and their contribution to economic development is recognized by all government and new rules and regulations are brought in to ease their setting up process and facilitate operations. Though they all form part of the private sector, they need government support in the form of better infrastructure and communication facilities even as funds and technology pose big challenges. The Myanmar government passed the SME Development Bill in January 2014, according to which, small enterprises are those that have a capital base between Kyat 50 million (equivalent to approximately USD 50,000) and Kyat 500 million (approximately 500,000) or employ 30 – 300 employees. Enterprises employing 60 – 600 people or having a capital base ranging between Kyat 50 million (nearly USD 50,000) and Kyat 1 billion (approximately USD 1 million) fall under the medium enterprise segment. The business of course, needs to be registered and the stipulated laws have to be followed in order to be eligible for the incentives provided by the government for their business category.

However, setting up an SME is not easy, raising funds tough, exploring market opportunities difficult, starting production arduous, and making profits even more so. These factors are big deterrents for potential risk averse entrepreneurs. The trend however, is changing with a new set of Myanmar citizens returning after studying overseas, and are willing to take risks to participate in their country’s development.

Some of the tough impediments that they need to overcome include:

  • Overcoming barriers to business development – business development faces numerous hurdles including lack of employable skilled workers, inadequate government support, multiple authorities to report to, lack of infrastructural support and many more.
  • Inability to access information on opportunities – there is talk of a plethora of opportunities waiting to be tapped, but for the novice or aspiring entrepreneur, there are no details available about these opportunities, and he does not know where and how he can get more information.
  • Finding funding for starting and expanding later is one of the biggest impediments and also a big deterrent.
  • The existing systems may not be transparent enough and do not often adhere to international standards. The balancing act between expectations and regulations can be frustrating.
  • Connecting to investors and service providers in the line of business is a big challenge.
  • Lack of exposure to education, language and technical training and ignorance of international standards makes the work force ill equipped to deliver high quality products.
  • A different work culture without the level of professionalism required, can reduce efficiency.
  • Tapping new markets and attempting to expand the customer base is tough.

The advantages that will help in overcoming these challenges include improved laws and regulations, setting up of the 27 member Central Committee for SME Development, the lifting of most international sanctions, a change in attitudes and a section of the educated and qualified Myanmar diaspora opting to return to their homeland and set up new businesses. An SME link platform also kicked off 18 months ago – a project of the Sustainable Business Network supported by UN ESCAP. The platform is ideal for business to business interaction and networking, sharing of information and providing the ideal setup to connect local entrepreneurs with global opportunities in products and services.

The birth of a new, growing middle class only helps SMEs expand their market demand through the introduction of new products, using the latest technology and professionally managed businesses. Also emerging is the young population with the enthusiasm to improve their lot who are willing to learn how to perform with skill and efficiency.

Accessing new markets and finding income opportunities

Experts feel that waiting for funding will mean loss of opportunities since there exists a market demand waiting to be tapped. The time to begin is now, and delays will only reduce chances of success and other players will enter that particular segment and increase competition while reducing market share. The advice all around is to start small with whatever little amount is available and build gradually by reinvesting the profits made, irrespective of how small they may be. Gradually, the regional markets must be tapped and instead of staying in the local markets, it makes sense to look beyond the borders at growing trade opportunities. This was one of the many suggestions given at the ASEAN Business Forum 2015, held at Bangkok.

Other inputs included taking advantage of online resources for business promotion especially when budgetary limitations prevent aggressive sales promotion campaigns. Online resources include using the internet to innovatively explore expansion options, advertise, create brand awareness and hence create passive income opportunities

Passive income opportunities can be defined as the ways and means of earning income without having to really put in effort and work for it directly. Passive income is generally a supplement to the main income earned with hard work and pursuit of a profession, and could come from rent, adverting and internet related sources. Small businesses making a foray into the world of internet and cyber space, can find many passive income opportunities by even so much as launching a website.

Websites carry a world of information about the specific business, the products and services offered, including unique features which can be attractive to a select clientele. In fact, websites go a long way in building brand image and enhancing the brand value for even the smallest of businesses. Well designed websites carrying order forms and payment methods help to convert a click into a sale Websites have the potential of becoming money spinners through online marketing tools like affiliate marketing, advertising, blogs and newsletters, videos and tutorials. Affiliate marketing involves carrying information about other products that may or may not be related to the business and each sale gets the host site a commission. This requires no additional effort and as the number of website visitors increases so does the chance of sales of the advertised products.

The biggest obstacle of internet connectivity being poor is now disappearing with multiple local and foreign operators providing even mobile internet and the internet speed is gradually improving. The next step is to educate entrepreneurs in computer skills and understand how to use various applications available on mobile phones and tablet computers to further their business.

Exploring business expansion opportunities beyond Myanmar borders makes sense for all SMEs. This helps to tap a larger clientele with greater spending power and providing them with products at cheaper rates. A big advantage emerging for these small manufacturing enterprises is that foreign brands are looking at Myanmar to set up manufacturing units in cities like Yangon where fewer language barriers exist. The rapidly growing textile industry with its tailoring units stands to gain significantly. Participation in international business fairs and exhibitions and inviting prominent suppliers is one effective way to promote their products.

As long as there is a growing market and there is demand for products and services, there is room for growth of SMEs. Small enterprises need just a bit more perseverance to initiate and innovate to produce the range of products that suit the market needs and they are bound to be successful.