The military coup in Myanmar is being resisted by elements within the country and the threat of some violence occurring has increased.
The United States has placed sanctions on some of the Military concerned, and their families and as some of these control specific supply chains such as FDA approvals, the foreign investment operational environment in Myanmar could deteriorate – and fast.
- Myanmar business border relocation options with Cambodia, Laos, Vietnam, Bangladesh, China and India
- Wage, trade and incentive comparisons
- Winding Up a Myanmar Foreign Invested Company
Contingency plans therefore are required to work out what to do if an exit is advisable.
The first elements to ascertain are the triggers for an exit:
1) Local safety; and working conditions;
2) Impact of sanctions (this may only affect certain nationals such as US citizens);
3) Reliability and sustainability of supplies;
4) Increasing operational costs such as electricity, fuel, energy;
5) Financing (at present Forex can only be transmitted through the Ayeyarwady (AYA) Bank);
6) Ability to export
All of these may be compromised. As business owners on the ground, you will be best able to monitor the risks. Before exiting however, alternative manufacturing domiciles need to be considered.
Hosting a company in ASEAN is useful because of the free trade nature of the bloc, meaning sourcing can be conducted duty free throughout ASEAN and its other member states Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam.
All have their specific pros and cons depending upon specific industry sectors, although the majority of smaller foreign investment in Myanmar are in garments, agriculture, real estate and light manufacturing. ASEAN also has free trade agreements with China, and India, with both of these having recently been amended to provide improved market access.
There is also the recent RCEP agreement which includes Australia, New Zealand, Japan and South Korea. Manufacturers from these countries are specifically looking at investment destinations in the lower cost base nations in ASEAN, with Cambodia, Laos and until two weeks ago, Myanmar. It probably makes sense to look at lower-cost base manufacturing destinations in ASEAN as it can be presumed that this factor has been a driver in establishing a business in Myanmar in the first place.
The minimum wage in Myanmar is calculated by the hour and variable, averaging US$3.29 or about US$630 a month, although there have been calls to increase this to over US$1,000 pcm. In which case, three main ASEAN candidates as Myanmar alternatives stand out:
Op/Ed by Chris Devonshire-Ellis
This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]