Since the rapid growth of automobile after the market opening in 2011, Myanmar has been encouraging the development of automobile assembly industry, allowing auto manufacturers to import products that are essential to make vehicles in the country, according to reports.

Automotive industry is comprised of a wide range of companies and organizations that involved in the design, development, manufacturing, marketing, and selling of motor vehicles. It is said to be one of the world’s largest economic sectors by revenue and Myanmar’s automotive industry is set to grow.

In 2018 November, the Ministry of Industry launched a new automotive policy for 2019, which aimed to support the transport and auto-related business through sustainable development and more foreign direct investments.

Under the new policy, it is stated that only the vehicles with left-hand drive can be imported for the purposes of road safety and to suit the country’s traffic route direction, according to an announcement of the Supervisory Committee for Motor Vehicles Importation. Control measures on imports of used right-hand drive vehicles, which dominated the market, will would also be implemented.

So, the new policy is expected to drive further growth in domestic automotive manufacturing and auto-related businesses along the supply chain, such as machinery and parts manufacturing, supply of raw materials, after-sales services, parts distribution and insurance and financing services providers. It will also generate many employment opportunities, Yi Yi Kyaw, the general manager of No.1 Heavy Industrial Enterprise under the Ministry of Industry said.

International motor companies such as British brand Jaguar Land Rover and Roll Royce started entering in Myanmar as the country continues to open its doors to foreign investment. In addition to factors such as the relaxing of foreign investment rules and the passing of the new foreign investment law, the landscape of the automobile industry is experiencing a major overhaul.

According to Myanmar Times, the number of vehicles used in Myanmar had spiked since the authorities liberalized vehicle imports in 2012. Now, automakers estimate that the number of vehicles used in Myanmar will exceed two million in 2020, more than doubling from 721,324 in 2016, or 15 units per 1000 people. More than half the number of vehicles is in Yangon. In 2011, there were only 365,000 vehicles on the road.

According to the statement of British Chamber of Commerce, 90% of used vehicles are imported from Japan and the number of new international branded vehicles on the road is increasing due to the ease of purchase from local automotive authorized dealers

Automobile Market

The majority of car sales centers in Myanmar are owned by locals, though 100% foreign investment is allowed in the auto industry. Among the total of over 100 sales centers in Yangon, more than 90% are owned by Myanmar nationals.

With less than 100,000 passenger cars and 30,000 commercial vehicles sold in Myanmar in a year, on average, it would be quite a challenging for the the industry to experience a ban on Yangon licenses, unstable car import policies and tax regulations, along with increasing office and land rental fees. Limited resources may also hinder the growth of Myanmar’s automotive industry.

According to market survey in 2018, it was reported that most of the local people could not buy brand-new car due to high prices. So, some people opt for an installment plan in the automobile market while many still buy second-hand cars. But now in 2019, the sales figures may be better compared to the previous year.

Challenges   

Even though Myanmar has potential for a boom in its automotive industry, it may take more than five years to enjoy tangible benefits in reality, according to Soe Tun, president of Myanmar Automobile Manufacturers and Distributors Association and managing director of Farmer Auto Trading.

In 2016, the Yangon Regional Government, in an effort to tackle the serious traffic congestion in Yangon, stopped issuing Yangon license in order to reduce the pace of additional numbers of vehicles on the road. In order to import a car to be driven in Yangon, you must have an existing Yangon license. However, they do issue licensees for locally manufactured and assembled vehicles.

So, it has been about three years since the authorities prohibited the issuing of licenses to vehicles registered in Yangon region. Currently, discussions are underway to relax this restriction. There are expectations that the regional government would re-allow the import of cars for its residents. Potential buyers have been waiting for the announcement.

Additionally, as the number of vehicles on the road grows, it is expected that the demand for vehicle spare parts would be rising. According to the statement of British Chamber of Commerce, 90% of used vehicles are imported from Japan and the number of new international branded vehicles on the road is increasing due to the ease of purchase from local automotive authorized dealers. This will support the market for international vehicle spare parts which is expected to grow in the coming year, allowing the growth of parts production manufacturers.

Future

According to the EuroCham Myanmar’s White Book 2019, Yangon is the market hub for automotive brands. Therefore, the competent government bodies were advised to address the issues related to the registration of imported vehicles in the city. Restrictive measures on imports, which may not be in line with the World Trade Organization (WTO), are making European brands—worldwide leaders in the automotive sector—more reluctant to invest in Myanmar. Finally, the future of the automotive industry in Myanmar should be properly discussed by involving all parties, including local associations, non-government organizations and chambers of commerce.

Corporate governance requires that business enterprises should take lead in solving environmental issues. It is their responsibility to check the consequences of their actions and also to protect environment and its resources.  “It is important for Myanmar companies to improve their corporate governance practices whether they are seeking to expand their business, foster stronger ties with international partners, or develop a smooth succession plan” said U Maung Maung Win, chair of Securities and Exchange Commission of Myanmar, earlier this year.  A sincere commitment by the top management of the business to cultivate, maintain and develop work culture for environmental protection and pollution prevention is needed.

Shwe Taung Group with a business portfolio covering six core sectors – building materials, distribution, engineering and construction, infrastructure investment, lifestyle, and real estate has reportedly made an impactful and sustainable contribution towards preserving the environment and promoting people’s role as active and responsible citizens. Activities such as developing clear-cut policies and programmes for purchasing good quality raw material, using latest technology, using scientific techniques of disposal and waste management could be done. Further, attempts could be made to develop the skills of the employees for the purpose of pollution control.

Banking sector

Efficient corporate governance is needed in banking sector as well because it is a major contributing factor for the financial stability of Myanmar banking industry.  It involves regulatory and market mechanisms; the roles and relationships between a company’s management, its board, its shareholders, and other stakeholders; and the goals for which the corporation is governed.

In 2003 in Myanmar, a banking crisis had occurred due to liquidity shortage, the main reason of which was ineffective corporate governance. Studies reveal that if companies boost their corporate governance practices they will become sustainable in Myanmar and regional markets. Practices such as risk management and anti-corruption controls are areas where Myanmar companies need to address in order to access finance from international sources as well as from domestic banks, observers say. This is increasingly relevant for Myanmar banks as greater controls are put on non-performing loans by the local banking sector. 

After several years of rapid expansion and double-digit credit growth, Myanmar’s banking sector underwent several necessary reforms in 2017 and 2018. The Myanmar Corporate Governance Scorecard 2018 published by the International Finance Corporation (IFC), the Securities and Exchange Commission of Myanmar, the Yangon Stock Exchange and the Directorate of Company Investment and Company Administration (DICA) is the first report of its kind in the country that assesses the performance of 24 companies in the country.

IFC says that banks could require their client to have clear and transparent financial reporting and adopt the rules on approval and disclosure of related party transactions, in large part to reduce their own credit risk. This could be achieved by good corporate governance which is an important consideration for local banks as well as foreign banks operating in Myanmar to provide access to finance to Myanmar companies.

To experience the financial sector as transparent and inclusive a program titled ‘Banking and Financial System Development’ was started in 2017 whose objective was that small and medium-sized enterprises have comprehensive access to banking services. Also the aim was to achieve greater transparency while ensuring that demand-based financial services are available to SMEs. The program after two years achieved desired results.  Good corporate governance not only ensures corporate success and economic growth, it also lowers the capital cost.

Healthcare sector plays an important role in developing the nation. In Myanmar, the NLD-government has been setting priorities through the annual budget allocations for each of the sectors. According to a recent report by MOPF Executive Budget Proposal, the ministry of health and sports was not in the list of five most spending ministries in 2019-20 Fiscal year based on the percentage of total expenditure although the government allocated 4.5% of the 2018-19 budgets to health care.  Nevertheless, the number of hospitals have increased over time according to the Hospital Statistics Report 2014-16  by Ministry of Health and Sports.

According to Oxford Business Group, rising health care costs, ageing populations and changing lifestyles in emerging economies are stoking demand for medical technology (med tech) solutions.

This entails not just smart devices that remotely monitor and transmit biometric data, but any instance of technology that helps to deliver health services. These initiatives are happening everywhere, but there are significant differences in the speed and scale of med tech adoption across emerging markets. 

UBS Investment Bank estimates that the emerging market health care sector will grow 6.3% annually over the next decade – double the speed of developed markets – as governments make up for historic underinvestment. Emerging markets routinely spend less than 10% of GDP on health care, contrasted with close to 15% spent by developed countries, but are working to reduce the deficit. Ageing populations are a catalyst, and the UN estimates that by 2030, the 65-and-over demographic in emerging markets will rise to 15% of the population, up from 10%.

There are two main bodies that operate health care operations in Myanmar: the MoH, which manages the country’s entire health sector and the Department of Public Health (DoPH), a subset of the MoH, which acts as the regulatory body for providers. Besides DoPH, there are six other departments of medical services. However, the private sector and the NGOs play important roles in overall health care sector, working together with Myanmar Medical Association (MMA).

Even with all this stated underinvestment and decreasing spending percentages, there are more than 1,100 hospitals in Myanmar. But there is a question about the quality of health care service they deliver. When it comes to the quality, the medical technology and the advancement of the equipment or the machineries cannot be left out of the topic.  Myanmar is still in developing phase; the technologies cannot be as advanced as the most developed countries. However, there are a number of international hospitals with international standard equipment. 

The table shows some of the famous public and private hospitals in Yangon.

Hospitals such as Grand Hantha International Hospital, Victoria Hospital, Pun Hlaing Silom Hospital, ArYu International Hospital and many other private hospitals have a good reputation and trust from the patients because of the technology and service they provide despite their higher fees than that of public hospitals.  

A regular patient who used to do medical check up once or twice a year in Bangkok said, “I am satisfied with ArYu hospital’s service and the quality they provide. The prices are a lot cheaper than that of medical check-up in Bangkok. And, the hospital has almost the same check-up packages and the price are affordable”.  If people can get the quality healthcare in Myanmar without having to go out of the country, their lives will become a lot less troublesome. 

Lately, there are many healthcare websites and free counselling applications that are available for Myanmar people, for example, KoeKoeTech, Klenic Software, Telenor Mobile Health App, MayMay and HMIS etc. A person can also reach out to experienced doctors who are available on social media, mostly Facebook pages, to consult healthcare needs. Getting access to medical advice is getting easier these days. 

Klenic Software is a cloud-based web platform where doctors and health clinics can store and retrieve a patient’s information and medical history at the click of a button. Klenic helps health practitioners digitize medical records and queue management. Since the hospitals in Myanmar have been using manual record keeping with books, which can get lost and misplaced easily, this kind of hospital management technology can improve the record system which in turn leads to improving the quality of healthcare sector in Myanmar. There are other ways through which advancement in digital technology can be used to improve the quality of lives.

Despite making numerous campaign promises, a vast majority of them have not come into fruition for the NLD government, even after nearly four years of being in charge. Nor are they likely to be realised in the foreseeable future. As Lee Kuan Yew put it wisely, “people tend to select politicians based on how good they look on TV (or how good they talk). The result has always been poor for the voters”.

One of quoted phrases mentioned by Aung San Suu Kyi has been the one she said at the forum for Myanmar citizens working or staying in Singapore. There, she said, in response to a question, “we (her government)are not just catching up with Singapore in 20 years, we would overtake Singapore in 20 years”. That was four or five years ago. The economic reality on the ground cannot be further from this. At the current rate that the economy is growing and based on the way that the government is managing the economy, Myanmar will be no where near Singapore in 20 years time. A more plausible aim would have been to try and catch up with Vietnam.

Myanmar Insider’s editorial staff were in Vietnam in September and we observed the economic development first hand in the city of Saigon (Ho Chi Min City). Because of significant investments by large Vietnamese companies in Myanmar (Hagl, Viettel, FPT, etc.), Vietnam airline carry regular passengers to and fro the two countries. Of course, there are Vietnamese professionals and SMEs venturing out into Myanmar, too. Based on a recent Asean survey, Vietnam has been one of the top three countries making outbound investments in other ASEAN countries.

There are daily flights between Saigon and Yangon. The flight is very affordable, ~$200+ for an economy class return ticket. There is also a reciprocal visa free entry between the two countries. The flight takes around two and a half hours. The current Saigon airport (SGN) does not seem to be much bigger than the new Yangon International Airport, although the plan to build the new much bigger Saigon airport has already started.

Vietnam’s currency, Dong, probably bears the largest denomination among ASEAN countries. 1 million Dong is equivalent to about 66,000 Kyats (as of September 2019). Dong exchange is available at the money changer next to the Thai embassy in ManawHari Road, Ahlone township, in Yangon. It is advisable to exchange some Dong before you fly to Vietnam.

The immigration is worse off than Myanmar’s. The queues were extremely long. We have waited nearly half an hour in the queue. The current queuing time at Myanmar immigration is less than five minutes on average. May be due to coming out of a communist era, we did not notice any smile or any small talk forthcoming from any of the Vietnamese immigration officers.

We had arranged for airport pick up service by the hotel. We promptly found our concierge and followed him. A hotel car picked us up a couple of minutes later. The concierge was reasonably well spoken. He talked about having internet connection in the car as well as availability drinks. None was offered by the driver. The driver did not speak to us at all, along the way to the hotel.

The architecture in Saigon was a combination of French, modern and Chinese styles. The roads are wide and reasonably clean

One outstanding difference you notice immediately is the presence of a large number of commuters on motor bikes, which are absent in Yangon.

On Day 2, we visited the most popular attraction in Saigon, the Cu Chi Tunnels. Vietnamese work hard. They are generally more hard working than the Myanmar or Thai. The tour guide tried her best to make sure we were happy so that she would eventually get a bigger tip. Cu Chi tunnels are about one and a half hour drive from Saigon. It was a good eye-opener to experience what would have been like during the Vietnam war time. There was also a shooting range, where one can actually fire weapons used during the war. You just have to buy the bullets.

In the evening, we took a tour of the night scene of Saigon. The guide brought us to many local food stores, roadside eating and sightseeing across town. One thing we noticed was that there were no flies or mosquitos on the road side places we visited at night or during the day. In terms of cleanliness, Vietnam is way ahead of Myanmar. We also toured the city and the new suburbs being developed. The city skyline at night is dominated by a single 81 storey Landmark 81, developed by Vietnam’s largest conglomerate, Vin group. The new suburbs has many new offices, commercial and residential spaces, yet most of them are unoccupied at present. May be a case of supply and economic development mis-match, just like the present Yangon’s property market. Most of the roads are good, without potholes or bumps, yet we experienced flooded streets in the suburbs. Officially southern Vietnam has two seasons, rainy and hot. The tour guide told us, unofficially, hot and hotter seasons.

We had a series of business meetings and visits lined up Day 3. One thing Myanmar is a little bit ahead is the English language proficiency level of average man on the street. We got lost along the way in the morning in a taxi and there is no way to communicate with the taxi driver. Traffic significantly slowed down in the morning rush hour, due to thousands of workers heading to work on their bikes. Traffic rules were loosely followed, we observed. Food was significantly cheaper in Vietnam than in Myanmar. In Myanmar if you head to an air-conditioned restaurant, you ended up paying close to Singapore prices. In Vietnam, prices are a lot lower, even the ones charged by the hotels. Even movie tickets were cheaper in Vietnam.

Another challenge in Vietnam, especially during the rush hours is crossing the roads. As mentioned prior, the bikes seldom follow traffic rules. They do not stop for pedestrians, they drive on the platforms, they are everywhere. One has to be courageous enough to weave through this tsunami of bikes, just to get to the other side of the road. We do not notice any policeman in sight either. Yangon was right in not allowing motor bikes in the city.

The car models used are quite the same as Myanmar. Taxis are slightly more up-market, with significantly cleaner interior.

Vietnam 8 years ago would be just like Myanmar. Vietnam, however, has kept up its momentum of growth, FDI, infrastructure development and innovation, to reach current levels of economic development. Myanmar has lost its growth momentum from 2016 till now and with every year passed by, it becomes more difficult to catch up. The refocus on the FDI and tax amnesty might help, yet the dream of catching up even with Vietnam (not Singapore), would remain just a dream for many years to come, at the current rate of economic growth and with the current team of so-called ‘experts’ managing the economy.