Why Some Are Waiting on Myanmar
I have had an acute fascination with Myanmar since reading Emma Larkin’s “Finding Orwell in Burma” in my college days. My three-week visit this May was fantastic and I hope for a prolonged return visit sometime in the near future (if the State Department taps my wife on the shoulder to serve there).
Today the US has eased its ban on imports from Myanmar, one of the last major economic sanctions in the country. Coupled with the recent opening of US investment, Myanmar seems poised for dramatic growth in the near future. However, many of my friends and colleagues are taking a wait and see attitude. Here’s why:
1. Infrastructure – Roads in, around and between Yangon and Mandalay are fine. However, electricity is utterly unstable.
2. Rent – With the recent influx of prospectors and international aid workers/consultants, rent prices are through the roof. A friend of mine is looking to open a cafe chain, but rents have already surpassed Thailand and Vietnam. Available spaces are in dire need of restoration/improvements and there is little local capital (or incentives) for landlords to do this.
3. Relationships – Myanmar, I am told, is a classic example of doing business in Asia. You need to have strong relationships, not just contacts. This takes time and a deep understanding of the context. While the government is opening up, there are still numerous gatekeepers throughout the system that can make or break your start-up (just as in Cambodia and Vietnam).
4. Local Demand/Buying Power – Consumer demand is concentrated and buying power is limited. Because of the sanctions and close ties to China, many cheap imitations are available in markets. Western brands will have to establish their value in order to charge a premium. The expatriate population (with spending power) is small compared to other countries in the region, though this will undoubtedly grow quickly. Hospitality businesses, in particular, can’t yet count on the volume to generate profits.
5. Taxes and Business Law – Myanmar’s government is rushing to develop, clarify and clean-up business laws and bureaucratic processes. For example, there are currently two official exchange rates, one for your accounting ledgers and one when (if) you pay taxes.
As in other contexts, aid will likely rush in as 2013 begins and large INGO’s have a budget/plan to start or increase operations in Myanmar. With the aid will come new jobs and an influx of cash, driving a bit of local demand from Burmese and expatriates alike.
Those with a long-term strategy in Myanmar will tolerate the ambiguity and collaborate in developing the private sector environment. However, I expect it will be a bumpy road for the next few years.
~ by responsiblenomad on September 28, 2012.