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Investing in Myanmar requires patience

The recent reforms by the Myanmar government means entrance of foreign investment is becoming easier, but investing in Myanmar will require patience.

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Pagoda Yangoon

The recent reforms by the Myanmar government means entrance of foreign investment is becoming easier. Some of such changes, according to Ms Thida Thant include: reduction of export tax and income tax, liberalization of documentation process for trade, and laws pertaining to use and leasing of land are slowly changing to allow in foreign companies.

A managed float of the currency, the kyat, was formalized in April 1st this year, unifying the exchange rate which was previously either a black market rate or an official rate, with great discrepancy between these. Transfer of payments between bank accounts will become more common, and at present only a few banks are authorized to transfer to foreign bank accounts

Pagoda Yangon

The recent reforms by the Myanmar government means entrance of foreign investment is becoming easier. Picture: Yukari Sekine

There is promise of credit and debit cards being available to use by the SEA Games of 2013. But although ATM machines can be seen in some places in Yangon, “they often don’t work, and are unreliable. On a rainy day they can break down and you may lose your money”, said Ms Cho Cho Myint.

Investing in Myanmar: the formation of a business entity

The formation of a business entity in Myanmar, according to Ms Cho Cho Myint, is subject to either one of these two laws:

Myanmar Foreign Investment Law (MFIL), which  covers heavy investments. Joint ventures require a minimum of 35 percent foreign capital, with minimum capital requirement of US$ 500,000 (in the manufacturing sector) or US$ 300,000 (in the services sector).

Tax incentives and guarantees such as against nationalization and termination of projects are granted under this law..

Secondly, the Myanmar Companies Act (MCA) oversees investments for services and trading. The minimum capital requirement for these investments are of US$ 170.000 (for industry) and 50.000USD (services).

Social contribution

There is still a huge deficit in healthcare and education, and while the government has not yet solved these social problems, businesses must aim to contribute with social responsibility.

The Coca-Cola Foundation announced in mid June support women’s economic empowerment job creation throughout the country”, that it would grant US$3 million, as it seeks other investment opportunites with the recent easing of US sanctions against Myanmar.

Although the common marketing strategy for  business is known to be “location, location, location”, in Myanmar, the important is ‘donation, donation, donation’, joked Mr. Zaw Naing, CEO of Myanmar Business Executives Association.

Corruption

Corruption has been widespread in Myanmar during the five decades of military regime, and facilitation payments, bribes and giving expensive gifts has been used as common forms of developing and consolidating business relationships. However, Mr Zaw Naing said the best advice was “not to get involved”.

Perspectives for 2015 

There are great expectations for the 2015 general election in Myanmar, when the main opposition party NLD is expected to win a great majority of seats. But although significant change will take place, some members of the current government have experience and management training that other opposition members may not have. “A total change may also not be good”, said Ms Cho Cho Myint, pointing to the need of a power balance.

There are still challenges ahead, such as the formation of a legal framework still under way to facilitate foreign investment, restrictive land laws, lack of skilled labor at managerial level, and the underdeveloped infrastructure and banking system. “But this is the moment to invest. You cannot wait for all these things to be ready before you begin, or you will lose your chance behind others”, said Mr. Zaw Naing.

“Over 90 participants were present at the event, of which approximately 40% were European, 40% Asian, 15% American and 5% from other countries, according to Interactive. Different sectors were represented, including oil and gas companies, media, law firms, financial institutions, construction, food industry, export companies, ICT, private equity firms and chambers of commerce.”
About the speakers at the seminar. They are all members of the Myanmar Business Executives Association:

 

  • Ms Thida Thant: BA International Relations, MBA, Managing Director, New Link Marketing Ltd.
  • Ms Cho Cho Myint: BA English, MBA, DBL, Managing Director, Interactive Myanmar
  • Ms Lynn Lynn Tin Htun – B Com, MBA, Managing Director, Mango Marketing Services Co, Ltd
  • Mr. Zaw Naing: B. E Electronics, MBA, CEO Myanmar Business Executives Association.

 

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