Investment in Myanmar Requires Good Strategy and Wise Plans

 

The Association of Vietnamese Investors in Myanmar was established under direction of the Vietnamese Prime Minister, initiated and chaired by the Bank of Investment and Development of Vietnam (BIDV). AVIM currently consists of 76 members, including many Vietnamese groups and corporations.

 

During the past three years, AVIM has organised for more than 160 delegates of Vietnamese businesses of more than 3,000 businessmen to visit Myanmar to research and study investment opportunities, coordinating closely with the two countries’ relevant departments and agencies to hold economic cooperation events linked with visits of high-level officials to connect the two sides’ businesses such as: Vietnamese Investment Cooperation in Myanmar Conference; seminars in the fields of industry, tourism, and information technology; also bridging and organising meetings between Vietnamese businesses with governmental and ministerial officials of the two countries.

 

On investment: currently, there are 45 Vietnamese investors officially operating in Myanmar, of which 26 businesses were licensed to operate with 15 representative offices, 4 branch companies and 7 associated companies; other 19 businesses are license-pending. Besides, there are still many Vietnamese investors interested in investing in fields such as health (factory manufacturing syringes); industry (face towels weaving, roofing sheets manufacturing); agriculture (rice, rubber tree,). Vietnam has seven investment projects licensed in Myanmar with total registered FDI of US$600 million, ranking 8th among 33 nations investing in Myanmar. Big corporations invested in Myanmar include Hoang Anh Gia Lai, PVEP, ASV Holdings Group, and Simco Song Da.

 

On trade: exports and imports of the two countries have enjoyed strong growth. In 2007, two-way trade between the two countries reached only US$55 million, after seven years, in 2013, this figure increased six-fold to US$350 million. The average growth rate is more than 40 percent, 2013 growth increased 54 percent compared with 2012.

 

On tourism: Vietnamese tourists to Myanmar also continued to go up in 2013, reaching approximately 22,000 visits, an increase of 10 percent compared to 2012 and are expected to continue rising in the future.

 

Vietnamese businesses have many potential investment opportunities in Myanmar thanks to this country’s current process of reform and opening up process which is very attractive to foreign investment.

 

First, Vietnam and Myanmar have traditional friendship; the Myanmar government has always given Vietnamese investors preferences and favourable treatment. Governments of the two countries have signed several important agreements in various fields of cooperation, reflecting the policy of promoting good political-economic cooperation.

 

Second, the potential economic sectors of development priority of Myanmar lie in Vietnam’s strengths. For example, in the agricultural sector, Myanmar is following the strategy of boosting rice exports to resume its position as a top rice exporter of the world like in the 1960s. Myanmar’s agricultural land has great potential for development, while Vietnam has the advantages in domestic production and exports.

 

Besides, fields such as seafood farming and industrial plans also hold massive bilateral cooperation potential, Vietnam is a leading exporter of catfish, basa fish in international market, top five in industrial crops such as rubber trees, cashew. Myanmar is a large market with population of over 60 million, rich in resources, however, current industrial production in Myanmar can meet only about 20 percent of the domestic demand. Vietnamese businesses therefore can deploy cooperation and investment in Myanmar in agricultural production, forest plantation, industrial crops planting, agricultural products and seafood processing.

 

In addition, Myanmar and Vietnam have many similarities in culture, beliefs, and traditional customs, Vietnamese businesses therefore also receive much support and love from the local authorities and people of Myanmar.

 

The two biggest challenges for Vietnamese enterprises come from legal and policy systems and infrastructure.

 

First, due to many years of sanctions, Myanmar's legal system right now is not complete and lacks synchronization, the tax exemption and preference policies are unclear, especially corporate income taxes remain high by regional standards; financial markets underdeveloped, lack of international payment instruments; and the domestic distribution system not allowing foreign companies to participate.

 

Second, Myanmar’s infrastructure is underdeveloped and has many shortcomings. The country’s telecommunications background is poor with low coverage ratio; power and water supply system not being able to meet the production demand; transportation system like roads and ports is insufficient and of low quality, land rent, electricity and water costs are relatively high compared to other countries in the region and Vietnam. On agriculture, irrigation canal system remains underdeveloped, seedlings and fertilizers for agriculture is still lacking.

 

Another challenge comes from the fierce competition from other foreign partners in Myanmar such as Thailand and China. Vietnamese businesses should do their best to not fall behind in this competition.

 

Myanmar currently is having no policy specifically dedicated to Vietnamese businesses. However, recent positive changes in the political system, the legal system as well as the administrative procedures has been creating more favourable conditions for enterprises.

 

First, Myanmar is focusing on opening for development, creating favourable conditions for economic - trade development. In 2013, there were eight Acts passed including important laws such as the Central Bank Law, the Law on Foreign Investment. Myanmar also has begun negotiations to draft bills on telecommunications, journalism and anti-corruption. The administrative machine in Myanmar has been changed and improved. In particular, the 2012 amended foreign investment law brought many advantages to foreign investment enterprises. Specifically, Myanmar has given numerous tax preferences for foreign investment projects, for example implemented mechanism of five-year income tax exemption (the old law allowed three years) including the year began production or services supply, exempted import tax of raw materials for all industrial investment projects in the first three years of operation.

 

The policy of land rent also has been improved to be more favourable, lease term for a project is 50 years (30 years before the amendment), allowing 2 renewals of 10 years each. Investors are also able to request another extension after the 70-year term ended, or get a lease from the government and private sector.

 

In addition, investors will be able to use banking, financial and insurance services of licensed institutions in Myanmar. Myanmar also ended their dual exchange rates, eliminating the gap risk in capital transfer process. BIDV and VietinBank will soon establish branches in Myanmar in order to provide financial and payment tools for Vietnamese enterprises.

 

Vietnamese businesses need to be proactive and take advantage of the opportunity to not fall behind investors from other countries. To be able to do that, Vietnamese enterprises should prepare clear strategies.

 

First, amendments in policies and laws, particularly the law of foreign investment, have created many advantages for Vietnamese investors, especially when many sectors calling for investment of Myanmar are of Vietnam’s strength. Moreover, due to the good relations between the two countries, Myanmar has always shown goodwill and given certain preferences for our investors. Vietnamese businesses therefore should proactively explore the market, draw plans and more strongly promote investment in Myanmar.

 

Second, Myanmar’s demand in development areas such as fundamental infrastructure construction, real estate, industrial manufacturing, service is enormous. Businesses should study to understand it and quickly set up projects and strategies, because the later the business, the fewer opportunities it gets.

 

In addition, Myanmar, with a population of over 60 million, presents a huge consumer market. Vietnamese businesses need to timely capture market information to deliver products in accordance with the people's needs.

 

Currently, in this period, the two governments have been jointly organising many programs, events and workshops on investment promotion. Interested businesses should attend those events, seizing opportunities for finding partners as well as discuss difficulties and suggestions in the process of investing in Myanmar.

 

To succeed, businesses need to take wise steps and be prepared with a reasonable investment strategy.

 

First, enterprises should conduct a serious market study on different fields such as law, policy, markets, domestic demands, even the working style of local labourers.

AVIM has been aiding businesses in this field, coordinating with ministries and agencies to organize seminars, conduct working visits to Myanmar. Therefore, enterprises should also actively cooperate with BIDV and AVIM to make the market research more productive.

 

In addition, companies also should design plans to improve financial and operational management capability of investment projects, also the ability to run professional management projects.

 

Finally, when had been licensed to invest and operate in Myanmar, businesses should implement projects properly with determination, trying to stay on schedule and plan, ensuring local security and welfare to always receive support from the government and the people.