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More SMEs Tap Myanmar’s Potential

SINGAPORE’s small- and medium-sized enterprises (SMEs) are increasingly seeing the potential of the Myanmar market, with more local companies venturing out into the country. Singapore was the second largest investor in Myanmar as of 2016, with a cumulative investment of US$15.6 billion (S$21.2 billion), according to figures collated by the Myanmar Directorate of Investment and Company Administration (DICA).

With its strategic location at the crossroads of India and China, as well as sharing borders with Bangladesh, Laos and Thailand, the country stands as a big combined potential market for Singapore businesses to tap.

One such SME that has taken the leap into Myanmar’s market is cold chain logistics service provider ITC Holdings Pte Ltd.

The Singaporean company has been doing business in Myanmar for more than 10 years, but made the move to open an office in Yangon this year after changes made by Myanmar’s government.

The country passed a Myanmar Investment Law (MIL) in 2016 which gives more equitable treatment to foreign and local businesses. The law relaxed criteria for long-term land leases, allowing any investor with an MIC permit to enter into long-term leases.

Economic benefits

Teresa Chan, director of ITC Holdings, said Myanmar is an “exciting country” to foray into. “With the changes in government and law, we decided that it was as good a time as any to venture into the country. Also, Myanmar is geographically close to Singapore, so travel between both countries is very convenient. As Myanmar is part of Asean, there are economic benefits for expanding into another Asean country,” said Ms Chan.

Favourable business conditions also make Myanmar an attractive business venture, according to IE Singapore. More than half of Myanmar’s population of 52 million are under the age of 30, presenting sustainable economic growth with its sizable potential workforce, which boasts a high literacy rate of 89.5 per cent.

Relatively low labour costs in the country will also allow SMEs that have limited resources to be able to recruit the team needed to run their businesses smoothly.

Consumer spending in Myanmar is projected to triple from US$35 billion to US$100 billion, with the consuming class expected to grow from 2.5 million in 2010 to 19 million in 2030, according to a study by McKinsey.

This presents a high growth segment for SMEs to tap, namely in retail, food and beverage, lifestyle and recreational services. Singapore-headquartered Norbreeze Group is an Asian retail specialist that has ventured into the retail market in Myanmar, distributing and marketing international brands such as Pandora and Bering in Asia.

CEO and co-founder of Norbreeze Group, Anders Peter Juel Sauerberg said: “Myanmar has been described by some as one of the last frontiers in Asia. For us, Myanmar offers exceptional opportunities for international brands and consumer products with their population of about 55 million people, strong GDP growth and a rapidly growing middle class.

“While it is still early days for the retail industry in Myanmar, we strongly believe that now is the right time to invest in the Myanmar market and in our partners.”

The group, which also has plans to expand into Cambodia, expects about five per cent of its total revenue to come from Myanmar, with the figure growing rapidly in the coming years.

Bullish sentiment

One Singapore SME that has Myanmar as its base surge in revenue is Teck Huat & Company Pte Ltd, with 80 per cent of its revenue coming from businesses in Myanmar. The company, which sells dairy and agricultural products, as well as wine and spirits, has operated in Myanmar for over two years, penetrating Yangon, Mandalay and Nay Pyi Taw through local distributors. Teo Ching Wei, managing director of the company said that their success has not come without struggles.

“Myanmar is a very challenging market, and predominantly operates with cash. It was through sheer determination and hard work from the team that made us what we are today. The challenges we faced were the initial lack of understanding of the country’s laws and regulations. Language was also a barrier but we managed to overcome it shortly,” he said.

According to IE Singapore, decades of under-investment have led to a lack of infrastructure and human capital development, which impacts businesses.

Ms Chan of ITC Holdings adds: “Myanmar is still developing and there are many areas where there are uncertainties, such as the law. It’s difficult to do business when the government is in the midst of changing foreign investment laws and you aren’t sure how the new laws will affect you. Also, the level of education is not what we are used to, and the pace of work is also slower.”

With the establishment of the Asean Economic Community (AEC) in 2015, it has created favourable conditions for SMEs in Singapore to expand into foreign markets such as Myanmar. The AEC aims to drive deeper regional integration and stronger growth by lowering barriers to boost the flow of trade, services and investments.

In addition, Singapore-based investments into another Asean country is protected by the Investor-to-State Dispute Settlement (ISDS) mechanism, which gives investors additional recourse to seek compensation or redress if they find that they are unfairly treated by the host government.

Ms Chan, like many other Singapore SMEs, is optimistic about Myanmar’s future.

She said: “While there are many areas that they can be improved on and catch up with the world, it’s likely that they will leapfrog in certain areas like technological advancements – simply because they are opening up at a time when the traditional way of doing business is being disrupted.”

 

Source: Singapore Business Times

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