Myanmar: Much-wanted Market for Vietnam Businesses

Myanmar or Burma is one of a few countries that Vietnam established diplomatic ties quite early. Only two years after gaining independence, in 1947, the Democratic Republic of Vietnam opened the Representative Office in the capital city of Rangoon (present-day Yangon). At that time, the Representative Office was assigned to perform a series of important tasks, including the purchase of weaponries and transportation to Vietnam to serve the resistance war against French colonialism. In November 1954, Prime Minister U Nu paid an official visit to the Democratic Republic of Vietnam, and in December 1958, President Ho Chi Minh officially visited Myanmar. In December 1957, the two countries established consulate general-level diplomatic ties and brought to embassy-level in May 1975, which turned the Consulate General into the Embassy in Myanmar.Since then, Vietnam - Myanmar relations have strongly and continuously strengthened for the sake of mutual interests of the two peoples and for peace, stability and cooperation in the Southeast Asian region.

 

In May 1994, Prime Minister Vo Van Kiet paid a visit to Myanmar and in March 1995 President Than Shwe visited Vietnam. In May 1997, Party General Secretary Do Muoi toured Myanmar. In December 1998, President Than Shwe attended the sixth ASEAN Summit in Hanoi. In May 2000, Prime Minister Phan Van Khai visited Myanmar. In May 2002, President Tran Duc Luong visited Myanmar. In March 2003, Prime Minister Nguyen Tan Dung took a tour to Myanmar. In August 2007, President Than Shwe visited Vietnam again. The visits of the two countries’ leaders have laid a good foundation for the friendship relations of the two peoples and of the leaders themselves.

 

Geographically, Myanmar is the largest mainland nation in Southeast Asia and the 40^th largest country in the world with a total natural area of 678,500 square kilometres. Myanmar is also rich in natural resources, with known natural gas reserves ranking 13^th-14^th in the world. Myanmar also boasts an important geopolitics location and thus becomes an interest of powerhouses in the world, including China, India, the US and Japan. Given favourable internal conditions, with the opening policy at the back of a long-time closed door period, I believe that Myanmar is receiving much support from investors around the world.

Myanmar always regards Vietnam as a long-lasting friend in the ASEAN Economic Community. The countries are cooperating closely with each other to guarantee all ASEAN principles, boost economic development cooperation, and carry out projects in the framework of the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS) and Greater Mekong Subregion (GMS). Trade relations between Vietnam and Myanmar have strongly developed in recent years. Specifically, the bilateral trade turnover climbed from US$2.5 million in 2002 to US$74.1 million in 2006 and US$108 million in 2008. Vietnam now has seven investment projects in Myanmar with a combined registered capital of US$460 million.

 

Notable projects include a US$135.9 million oil and gas project offshore southwest of Myanmar, an US$18.1 million soft stone project in Rakhine invested by Simco Song Da; and a US$300-million hotel complex project. Besides, many big projects are in the process of negotiations with Myanmar authorities like flight routes by Vietnam Airlines, bank establishment by BIDV Bank, and telecom project. When these projects are carried out, the investment cooperation between Vietnam and Myanmar will be further strengthened.

 

Many economists agreed that Myanmar is a golden land for foreign investors, including those from Vietnam. In early 2012, many Vietnamese businesses visited Myanmar to survey the market and to seek investment opportunities in real estate, telecommunications, information technology (IT) industries and agriculture. The real estate industry has the presence of Hoang Anh Gia Lai Land, a leading property developer from Vietnam.

 

The telecommunications sector saw the quick-footed arrival of Viettel Group of Vietnam. Myanmar is a potential market as it has more than 60 million people but only 10 per cent of them have access to mobile phone services.

 

FPT Corporation has also invested in the Myanmar information technology industry. The government of Myanmar is now providing very favourable conditions and incentives for investors of information technology, high tech and education. This good preference is not only for investors from Vietnam.

 

As I said above, as Myanmar initiated the opening policy quite late in terms of time and placed under strict embargo, the government of Myanmar has thus created open, friendly policies to attract investors. However, investors are posed to inherent challenges in Myanmar.

 

Due to insufficient infrastructure, office rents are quite high in Myanmar. In particular, the rent of Grade C offices in Myanmar is US$65 per square metre, 50 per cent higher than the rent for Grade A offices in Hanoi.

 

As Myanmar’s culture evolved on the foundation of English culture, it keeps a cautious eye on investors. Myanmar businesses are very cautious when they choose business partners. They even visit their partners’ factories to learn about their facilities, estates before they sign contracts. Foreign investors should make long-term business plans to win the recognition of local partners.

 

Last but not least, as an emerging country with a lot of incentives, many investors will come to Myanmar and the competition is thus very intense.

 

Currently, there are different views about Myanmar market. Some cite difficulties like high tariff barriers (with some kinds of products imposed up to 30 per cent), unclear investment laws, high service prices, unfavourable traffic connections, and high internet and telephone charges. However, in my opinion, Myanmar is a very potential market where there are 60 million consumers and lower labour costs than Vietnam, Laos and Cambodia. The government of Myanmar is performing political and economic reform to catch investment capital waves. In fact, Myanmar was a militarily run country for over 20 years and it just turned into the civil state in March 2011. Besides, during my term there, I found out that Myanmar businesses always keep their promises. In trade exchange, they prefer full pay via bank transfer prior to delivery. This requires absolute mutual trust. In case of paying in cash, they only receive clean, new foreign currencies. Gift-presenting culture is very important, especially before and after signing contracts. This must be carefully prepared if foreign investors want to sign deals with Myanmar partners.

 

Legally, Vietnam and Myanmar signed an agreement on investment encouragement in 2000 and issued the joint statement to this effect in 2010. Currently, the government of Myanmar has applied the controlled floating exchange rate policy since April 1, 2012. This is an important move to eradicate barriers and challenges against operations of foreign investors. Besides, the government of Myanmar also has investment encouragement policies for potential sectors such as forest product processing, seafood processing and breeding, household goods production, textile and garment, oil and gas. Vietnam is strong in these industries.