Phyo Min Thein, Chief Minister of Yangon Region, Nilar Kyaw, Minister of Electricity, Industry, Road and Transportation, Communication of the Yangon Region Government and representatives from the European Union, received the EuroCham White Book 2017 from Arnoldo Abruzzini, Chief Executive Officer of EUROCHAMBRES and Filip Lauwerysen, Executive Director of EuroCham Myanmar Last month. The European Chamber of Commerce in Myanmar published the first edition of the EuroCham White Book for Myanmar. It primarily describes the year’s focal business, trade and investment issues. The European Chamber of Commerce in Myanmar, commonly known as EuroCham, serves as the voice of European business in Myanmar. Its main mission is to advocate member interests with organizations in Myanmar, the ASEAN region and the EU.
Compiled from white papers drafted by EuroCham’s advocacy groups, the White Book offers holistic and realistic recommendations. Myanmar economy went through a number of ups and downs in its history due tochanges in its political system. In a shift to democratic nation, the first civilian government led by Thein Sein took office in 2011. The international community is one of the key to drive Myanmar economy. FDI has been increasing over the years starting from 2011. From 2012, The European Union and United State relaxed sanctions on Myanmar. Myanmar shows a lot of potential for foreign companies willing to invest in a frontier market.
According to economic forecast of Asia Development Bank (ADB), Myanmar has attained the highest GDP growth rate among ASEAN members. The following charts shows the trend of GDP growth over the years since the country’s transformation into a civilian government and future projections.
According to International Money Fund’s World Economic Outlook in 2016, Myanmar was ranked the world’s fastest growing economy with GDP growth of 8.6%.
There are many factors which garner the foreign investor’s attention to invest in Myanmar. White Book discussed about primary factors such as large labor force with low costs, infrastructural improvement gradually taking place and commitment to economic development.
Large talent pool with low labor costs; in terms of the population that falls within a working age group, this particular group accounts for the largest percentage of the country’s total population. Myanmar offers minimum wage of 3,600 Kyats(approximately $3) per day. To compare with counterpart of neighbor country, Thailand offers 12,200 Kyats (approximately $12). Myanmar offers investors the opportunity to benefit from a large pool of labor at low costs. But there were issues like recruiting the right people because of shortage of qualified, skilled labor.
Infrastructural improvements; in past, lack of developed infrastructure in Myanmar is the main reason why it cannot attract the foreign investors. But infrastructural development in Myanmar gradually taking place. Increased mobile phone penetration, better access to electricity, banking systems, better road connectivity, development of special economic zones and deep-sea ports, development of new airports and the upgrade of existing ones are the most significant infrastructural developments that have taken place.
Government Commitment to economic development; under the previous administration, many reforms have been initiated, enabling a hike in the economic indicators such as Foreign Direct Investment (FDI), Gross Domestic Product (GDP), etc. The present administration of President Htin Kyaw has also put forward economic development as one of its key priorities. However, at this stage, many private sector investors feel that greater emphasis is given to the peace building and national reconciliation process. Myanmar FDI experienced a decline in 2016-2017 financial year as investments showed down in line with policy changes as the new government that took office in April 2016.
With aims to raising awareness of the underlying main obstacles in the relevant sector, EuroCham’s White Book pointed out five specific sectors which need to be addressed effectively and gave recommendations:
Construction and Infrastructure
To implement policies and apply effective control measures to ensure the safety of the population.
To striking a balance between the growth of the construction industryand environmental preservation. To develop a master plan to restore Yangon and elevate it to the standards of other cities.
Corporate Social Responsibility
To develop a clear roadmap for navigating rightful practices of CSR in Myanmar with the involvement of all stakeholders
To advocate the avoidance of regulations requiring mandatory spending on CSR
To raise awareness on a business-oriented approach of CSR
To promote good corporate governance as an initial step towards CSR To enhance collaboration between the public and private sectors to create synergies
To improve coordination among the ministries involved in the energy sector to enhance efficiency and effectiveness To formulate more agile procedures for the optimization of the processes at the Ministry
To introducing a risk allocation framework and clear, well defined electricity pricing policies
To enhance investment in renewable energy through different means
To develop stringent measures and effective policies for controlling generics with no bioequivalence To enforce a transparent reporting system among the stakeholders involved To increase awareness and emphasis on patient safety by incorporating this into the curriculum of healthcare professionals
To settle up Infection Control Units at hospitals for preventive measures To enact policies and guidelines for the installation and maintenance of medical equipment at hospitals
To streamline the pharmaceutical product registration process at the Department of Food and Drug Administration (FDA)
Logistics and Transport
To develop a deep-sea port at the delta region with a special economic zone and road networks
To adhere to the World Trade Organization’s agreements and standards in the customs valuation process
To increase customs’ operating hours at ports and optimizing overall efficiency To implement rules that restrict the gate-in of containers before completion of the customs clearance process additional burden on the taxpayers. The primary objective is to embrace tax culture throughout the country. Campaigns could be designed to effectively enhance tax education and raise awareness of the importance of tax in the country. Changes in procedures and systems should only take place with prior notice while also allowing time for the taxpayers to adapt to the new system.
There should be conformity between International Accounting Standards and actual practices to avoid confusion. The government could also enforce effective measures to combat tax evasion such as penalty schemes.
Corporate Governance Practice still Need to Improve
governance in companies is still in its early stages. When dealing with many local businesses, foreign investors are Trade Marks/Service Marks. In 2013, draft laws for industrial designs, patent, trademarks and copyright were submitted to the parliament and are still pending as it is unknown when these bills will be passed. Once Intellectual Property Laws are in place, European investors believe it is
Bureaucracy Slows down Processes
Bureaucracy has been a longstanding issue both in the public and private sectors in many countries. Hierarchical organization structures, slow decisionmaking process, redundant steps and processes and low level of division of tasks are the factors that often cause significant slowdowns and delays for investors creating jobs in Myanmar.
Government agencies could start reviewing their own processes and conduct a thorough assessment by mapping out a clear process so that steps that are consuming the most resources in terms of time and manpower can be identified. Once these steps are identified, they can be streamlined to optimize the processes. It is also advised that government agencies exercise some level of empowerment and delegation of tasks to encourage more efficient processes.
Prioritization of Local Businesses
In an attempt to protect domestic businesses, legislative reform efforts have had a special focus on Local companies. So far, foreign businesses are operating amid restrictions such as restrictive trading rights. In order to attract foreign investors, Myanmar needs to offer an investment-friendly climate and provide a level-playing field. At the moment, the government is considering allowing foreign imports of agricultural, medical and construction materials, a very positive move towards enabling a level-playing field.
The government could review which industries that could have positive impacts on the economy by allowing trading rights. This could be done by means of prioritization on their level of importance and the impacts they could bring.
There are still many infrastructural needs to be addressed. Although there is improved access to electricity, the provision of reliable electricity is still a concern. In order to attract more investments, a reliable infrastructure is essential so that foreign investors consider expanding their services to Myanmar.
The government could prioritize infrastructural needs on the basis of their level of importance and the impacts they could have. Regional Infrastructure Master Plans could be better developed encompassing infrastructural developments planned in the long run.
Myanmar is situated between China and India, the two biggest powers in Asia, and on the border of South and South-East Asia. Myanmar enjoys its abundant natural resources such as teak, jade, sapphire. So taking advantages of location and low-wage labor, Myanmar garner the interest and attention of international investors. But it still has a number of challenges to overcome in order to capitalize more on the investment potential from foreign investors.