THE news out of China is about a “new normal” of slower economic growth – down to about 7 percent. But at the recently concluded 2015 Asia-Pacific Council of American Chambers of Commerce (APCAC) held in Singapore, the focus was on the growth potential of the 10 nations comprising the Association of the Southeast Asian Nations (ASEAN) and the upcoming ASEAN Economic Community, with Myanmar grabbing a significant amount of attention as the new investment destination.
Indeed, as the “Golden Age” of investment in China driven by Beijing’s one-time focus on unbridled economic growth fades, a new one seems to be rising in Myanmar and elsewhere on the investment frontiers of Southeast Asia as businesses look to diversify away from the Middle Kingdom.
The interest in Myanmar from the APCAC delegates was evident at a special session convened after the summit had formally closed where US Ambassador to Myanmar Derek J Mitchell spoke to attendees about the investment opportunities and challenges in the country.
This is in contrast to the recent news coming out of China. Microsoft’s mobile phone division – acquired from Nokia – is closing production facilities in China, eliminating roughly 9000 jobs. Some of those jobs will shift to Vietnam. Japan’s Citizen Holdings and Panasonic have also announced the closing of factories in China.
Questions also persist over whether China is unfairly targeting foreign companies as it seeks to protect its own state-owned enterprises. Yet, even as companies when viewing China take off their rose-colored glasses, the Philippines, Indonesia and Vietnam cannot stand still. They as well as other ASEAN nations must also act to improve their own investment climate if they are to take advantage of a slowing China.
While Singapore continues to rank number one in the world for ease of doing business, Myanmar ranks number 177 out of 189 due to weak governance and rule of law, according to the World Bank. Upcoming elections will also bring new challenges and uncertainty to the business environment.
So, whether focused on Phnom Penh or Yangon, how does one succeed in business in countries where the rule of law and transparency are still very much areas for improvement? As we have shared in media and discussed in forums across the region, there are lessons to be learned from business professionals who have found success in some of Southeast Asia’s frontier markets.
First, be realistic about your timeline for success. International brands have succeeded in part by taking a longer-term view to networking and to developing relationships with local partners.
Granted, relationships are important in every country, but this can be particularly true in parts of Asia. As with marriage, trust needs to be built over time before a commitment is agreed to, and just as in a marriage, the hard work begins when the signing ceremony ends.
Second, leverage local talent. This can include local nationals who work with locally-based business organisations such as chambers of commerce. They, and other organisations as well as law, accounting and consulting firms with local expertise, can help with introductions and provide valuable insight into the nuances of the local business environment.
Third, recognise you are not alone. There is strength in numbers. Businesses that have done well in nations where corruption is endemic have often partnered in efforts to change the environment in their favor by together refusing to take part in illegal business practices.
Fourth, educate your local partners of the consequences to violating anti-graft laws. Local business partners may well be unaware that foreign laws, such as the United States’ Foreign Corrupt Practices Act or the United Kingdom’s Bribery Act, apply to multinationals outside their own country. Local partners may well assume that because you are doing business in their country you are not required to abide by the laws back home.
Fifth, understand and address the challenges of corruption’s close cousin: cronyism. Many businesses entering Asia’s frontier economies seek to do so in partnership with the family and friends of the political elite. Companies that follow this approach must be aware of both the benefits, and the potential for an extreme downside. The power imbalance in the relationship along with deficiencies in the regulatory environment can make it difficult to fairly resolve any disagreement should the partnership go bad.
Finally, and most importantly, don’t hesitate to walk away from a deal. Or, as in the case of Nokia, Citizen Holdings or Panasonic in China today, to shift and to adjust as one market opportunity closes and another opens.
Source: Myanmar Times