Southeast Asia’s ‘final frontier’ ripe for investment
New industrial and special economic zones have been sprouting up across Myanmar as part of the country’s efforts to woo foreign investment. Growth in the Golden Land is expected to rise to 6.7 percent, up from 6.5 percent last year, as more changes come down the pike.
Compared to its more developed neighbors in the Association of Southeast Asian Nations (ASEAN), Myanmar still lags far behind in terms of economic development, following decades of military rule and isolation from the global economy.
Dubbed the “final frontier” by investors for its untapped potential, Myanmar first reopened its doors to foreigners in 2011 and has not looked back since.
Amid a deteriorating global environment in recent years, the government, led by State Counselor Aung San Suu Kyi, has prioritized the liberalization of key sectors as part of its plans to shore up investor confidence and drive new investments into its economy — currently one of the poorest in Southeast Asia.
Said Suu Kyi at the Czech-Myanmar Business Forum last June: “I invite all those present to come and visit and see first-hand what Asia’s final frontier market has to offer you and your business. I promise you will not be disappointed.”
While its road to progress is fraught with challenges, the government is determined to catapult the nation into its next phase of growth.
At the heart of the country’s economic boom is the Myanmar Investment Promotion Plan (MIPP) launched in October 2018 to stimulate its economy and attract US$200 billion (€182 billion) in foreign investment over 20 years.
The plan outlines key objectives, such as building a transparent legal framework and improving critical infrastructure, which will help Myanmar to achieve its goal of developing into a middle-income country by 2032.
Key objectives of the MIPP
- Establishment of a fair and transparent regulatory regime for investment
- Enhancement of institutions for investment promotion
- Infrastructure improvement
- Establishment of supportive business-related systems
- Establishment of competitive industrial linkage and improved human resources
One of the key gripes of doing business in Myanmar has been the nascent legal and regulatory framework that is based on “practices and government discretion rather than written laws”.
Acknowledging the shortcomings of the system, Suu Kyi said, “Myanmar is in the process of transforming an opaque, non-competitive, connections-based economy into a larger, more transparent, more competitive, rules-based economy.”
For Myanmar to stay competitive at an international level, it is imperative to establish a conducive business environment that keeps the barriers to entry low for foreign investors.
With changes afoot, progress so far has been promising. In the 2020 World Bank ranking that measures the ease of doing business in 190 economies, Myanmar rose six places from the previous year to a ranking of 165 — an improvement attributed to its reforms such as the digitization of the company registration process and the upgrading of public infrastructure.
Buoyed by the government’s ambitious reforms, European companies in Myanmar also appear to be increasingly confident of operating in the country.
In a business confidence survey conducted by the European Chamber of Commerce in Myanmar last year, more than a third of the respondents observed a marked improvement in the local business environment during the year.
Major foreign investments have continued to pour in, especially within the industrial zones and special economic zones (SEZs) that have been developed around Yangon and other states in the country.
Japanese automaker Toyota, for instance, announced last year its intention to invest several billion yen to construct an assembly plant for pickup trucks in the Thilawa SEZ — a joint venture between the Japan International Co-operation Agency (JICA), the governments of Myanmar and Japan, and a group of private companies.
Having attracted investments from up to 13 foreign countries since its 2015 opening, the country’s first economic zone has processed and approved 113 investment projects while 76 companies have begun commercial operations.
Even though the Thilawa SEZ is regarded as the flagship project, the government recognizes that there is still some way to go before its infrastructure, and those of the other industrial zones, meets international standards.
To close this gap, the regional government has committed to working with private entrepreneurs on the upgrading and development of Yangon’s 29 industrial zones including Thilawa, according to U Phyo Min Thein, Yangon Region Chief Minister.
Upgrading plans include providing utilities, purified water, electricity, transportation, sewage and waste management.
The liberalization of key sectors, such as retail, insurance and banking, to allow for foreign ownership has also played a crucial role in raking in new investments.
Foreign players have been allowed to take full ownership of retail and wholesale businesses within the country since 2018.
Last November, the Ministry of Planning and Finance also gave the nod to 11 foreign-owned and joint-ventured insurance companies to operate within Myanmar, further unlocking new opportunities in the local monetary and foreign investment sector.
On the logistics front, DHL Supply Chain — so far the only 100 percent foreign-owned logistics company to have acquired an investment permit from the Myanmar Investment Commission — invested K1.58 billion (€1 million) in a multi-user warehouse facility located in Yangon’s Dagon Seikkan Industrial Zone last year.
“Myanmar is an exciting market to be in, and we have been very successful in ensuring that our capabilities are customized to meet our customers’ needs, enabling them to grow their business footprint here,” said Kevin Burrell, CEO, DHL Supply Chain, Thailand Cluster (Thailand, Vietnam, Myanmar and Cambodia).
The warehouse caters to the needs of the expanding local customer base from the consumer, technology and, most recently, the food and beverage sector with Nestlé.
Added Burrell on Myanmar’s market potential: “As the country shapes up to be a bigger player in intra-regional trade, and with the local economy projected to grow by more than 6 percent next year, we can expect more investment from various international players, who will need our expert local knowledge and executional excellence to optimize their supply chain.”
With strong public-private support and a huge emerging middle class presenting new opportunities in Myanmar, success at the final frontier could arrive earlier than expected.