Myanmar: Much Untapped Potential

According to statistics, the trade turnover between Vietnam and Myanmar reached US$228 million in 2012 and US$300 million in 2013, up 30 percent year on year.

 

Vietnam’s main exports to Myanmar include steel, raw materials for apparel production, chemical fertilisers, construction materials, electrical equipment, vehicle tyres, office equipment, processed foodstuffs, machine parts, medicines, cosmetics, computer and electronic components and raw materials for food industry. Meanwhile, it imports from Myanmar agricultural products (green beans, black beans, sesame seeds), raw rubber, raw copper, timber and forestry products, seafood (lobster, frozen seafood, dried fish, molluscs, etc.) and cow leather.

 

According to recent surveys, Myanmar is an attractive, potential market for Vietnamese goods. Myanmar people are keen on Vietnamese products because of their good quality, nice design, diversity and affordable price. Meanwhile, Myanmar companies also welcome and want to do business with Vietnamese companies. Hence, the two-way trade turnover has increased rapidly in recent years although it remains modest in relation to potential. The Vietnamese Embassy in Myanmar said Vietnam is now behind many countries in exporting goods to Myanmar, including Singapore, China, Indonesia, Japan, the US, Thailand, South Korea and other nations.

 

As its industry can supply only 10 percent of domestic demand, up to 90 percent of industrial products are imported. Up to 30 percent of Myanmar people can afford high-end goods, while the remaining 70 percent prefer cheap or average goods. Myanmar is also a potential market for Vietnamese tourism businesses. This country lacks hotels, especially three-star hotels or higher rankings, particularly in big cities like Yangon.

The production capacity of Myanmar construction enterprises is very low and unlikely to be improved in the short term. Its construction companies, both state-run and private-run, lack skills, techniques and experience. Construction materials in Myanmar are very poor. Construction projects must use materials from multiple sources with unstable quality and high price. According to a recent survey by C.T Group, based in Ho Chi Minh City, Myanmar needs about 5.35 million tonnes of cement a year, but domestic producers supply only 65 percent and the remainder is made up by imports from Thailand and China. Every year, this country spends approximately US$29.25 million on imported cement. Myanmar needs some 500,000 tonnes of steel a year but domestic production meets only 1 percent and the rest is imported from South Korea, China, Thailand and Vietnam. Myanmar can now supply about 70 percent of its brick demand and the rest is offset by imports. In addition, this market also seriously lacks interior decorations and household appliances.

 

The Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC) said Vietnamese enterprises can export many other goods to Myanmar in the coming time, like animal medicines, fertilisers, animal feeds, fish feeds, farming tools, technologies, machines, preserving and storing equipment, and small fishing boats. The Vietnamese service sector will also have good conditions to expand its presence in Myanmar, including tourism, telecommunications, aviation, marine, design, construction, fishing port, warehousing and storage of agricultural, forest and aquatic products. In addition, Vietnamese firms can boost cooperation with Myanmar partners in other fields such as engineering in agriculture, forestry, fisheries, farm development, garment, textile, shipbuilding, agricultural expertise, health and education.

 

The Embassy of Vietnam in Myanmar said Myanmar’s economic policies are market-oriented, aiming to attract foreign investment and encourage the private sector. This country also enacted the Foreign Investment Law (FIL). According to this law, foreign investors will have more favourable conditions when they invest in Myanmar, such as an eight-year tax exemption, 50-year land lease, no limit on capital contribution, and short waiting time for investment licensing.

 

In addition, many European Union (EU) countries lifted sanctions against Myanmar and its exports to the EU are granted preferential tax rates. The United States and Australia are also easing their sanctions against this country. Hence, many companies from the EU, Japan, and other nations have flocked to Myanmar to study the economic environment and make investments. So, if lagging behind, Vietnamese enterprises will lose their market share in Myanmar

 

Nevertheless, as this potential market, with a lot of geographical advantages, is new, and setting foot here is not easy at first. Many companies do not clearly understand procedures, forms of payment and market demand, among other things, in Myanmar. C.T Group said it is advisable to make inroads into the Myanmar market by taking part in an existing distribution system in order to enjoy many benefits, shorten market survey time, reduce investment costs, utilise experience of each other, minimise initial penetration risks, and create a stable premise for next investment steps.

 

Currently, both Vietnam and Myanmar are making efforts to bring trade turnover to US$500 million in 2015.