Vietnam - Myanmar: Plentiful Business Opportunites

Myanmar is known for its rich natural resources, enormous economic potentials and a market of nearly 60 million people. Besides, Myanmar keeps a very important geopolitical position in Southeast Asia and South Asia. Therefore, in recent years, many companies from Asia and other continents have sought measures to cross the trade embargo to do business in Myanmar.

 

Foreign direct investment (FDI) in Myanmar only reached US$15 billion. Rice productivity is only about 3.5 tonnes per hectare. In the construction material field, particularly cement, while the demand is more than 6 million tonnes, local facilities can churn out only 1.5 million tonnes. Production can meet only 10 percent of domestic demand while the remaining 90 percent is made up by cross-border imports from China, Thailand and India. The quality of goods is extremely low. Hence, Vietnamese goods will have more opportunities to penetrate deep into this market, Mr Chu Cong Phung, Vietnamese Ambassador to Myanmar said at a recent meeting on Vietnam - Myanmar trade promotion conference in Ho Chi Minh City.

 

Vietnamese businesses sold out all items before the closure of the Vietnam - Myanmar international trade fair in November 2009 and the Vietnam Goods Fair in Myanmar 2010 in early April 2010. This demonstrated a huge demand for goods in this country. Besides, Myanmar consumers are very keen on Vietnamese goods thanks to its good quality, said Ambassador Phung.

 

Especially, the labour cost is relatively low in Myanmar, with about US$60-80 per month for manual workers and US$200-400 per month for middle-level workers. This is also another favourable condition for businesses to invest in Myanmar.

 

At the Myanmar working visit by Vietnamese Prime Minister Nguyen Tan Dung in April 2010, the two sides signed many agreements in finance, banking, aviation, energy, mining, seafood, services and others. This bout, Vietnamese investors registered to invest some US$1 billion in more than 20 projects in Myanmar. Typical investors include Hoa Sen Group, Hoang Anh Gia Lai Group and the Bank for Investment and Development of Vietnam (BIDV).

 

BIDV’s opening of a representative office in Yangon laid the first groundwork for the two countries to set up a joint venture bank, Mr. Hoang Huy Ha, Deputy General Director of BIDV, said. He added that a BIDV commercial bank will be established to support capital for Vietnamese enterprises in Myanmar as well as facilitate payments in trade with Myanmar. The lender is also applying for establishment of investment and development company in Myanmar this year.

 

Recently, a direct air route from Hanoi to Myanmar has been officially opened and the two nations planned to open more in the future.

Mr Tu Minh Thien, Director of the Ho Chi Minh City Investment and Trade Promotion Centre (ITPC), said, in many years, Vietnamese enterprises have overlooked the Myanmar market. However, the Vietnam - Myanmar relations have constantly strengthened and expanded in many aspects. Several Vietnamese big corporations have invested in Myanmar. The two-way trade in 2009 reached US$74 million, in which Vietnam earned US$24 million from exports to Myanmar.

 

Vietnam can export coffee, pepper, tea, cashew, processed foods, candies, agricultural materials, and seafood to the Myanmar market. The two nations can forge investment cooperation in agricultural technique, cultivation development, offshore fishing, aquaculture, animal feed production, veterinary drugs, industrial processing, post-harvest preservation, agricultural product processing, wood and forest product, ice production, textile industry, shipbuilding industry, mechanical industry, agricultural expertise, health care and education.

 

At present, Myanmar still allows export of round and sawn timber. Timber export is the second largest forex earner in Myanmar after oil and gas. In 2008, Myanmar exported 1.62 million tonnes of round timber. This is also a good supply for Vietnamese woodwork companies to approach.

Businesses will face up with following difficulties in doing business with Myanmar: complex and troublesome export regime, distressing foreign investment law and bureaucracy. Electricity, water, telephone service, gasoline are still subsidised by the Government, said Mr Tu Minh Thien.

 

Also, international payment with Myanmar must be through some banks in Singapore. If BIDV set up an affiliated bank in Myanmar, payment procedure between the two nations will be much easier.

The information about the Myanmar market is limited. International telecommunications networks in Myanmar are very backward. Internet and telephone accesses are not very convenient in Myanmar. Actually, these setbacks make Vietnamese enterprises hesitant in doing business in Myanmar.

 

Another difficulty needed to be taken into consideration is the price of Vietnamese goods may be higher than that of China and Thailand because we have to pay more shipping costs. This is reason why Vietnam has not exported many favourite goods to Myanmar. But, according to Ambassador Chu Cong Phung, this difficulty can be dealt, given the success in two consecutive trade fairs mentioned above. Many people in Myanmar can pay higher for better goods, he said, citing the upper class. Last but not least, the Myanmar government applies the dual price mechanism to some essential commodities like electricity and water. This is a nuisance to Vietnamese enterprises.

 

As Myanmar is also being imposed an embargo by the United States and Western countries, Vietnamese enterprises should deepen their roots in this market before it opens. Vietnamese firms should choose big firms in Myanmar to enjoy easer administrative and export procedures.