2018 Outlook
FAO Global associates were treated to a beautiful view of Shwedagon Pagoda from their hotel in Yangon's China Town.
The outlook for Myanmar’s economy as a whole in 2018 is hopeful but tempered. The most significant inhibitor to substantial foreign direct investment and growth so far were public relations implications due to the Rakhine humanitarian crisis, which prompted many international observers to call for increased sanctions. In Yangon, Mandalay, and Bagan, the effects of the crisis were primarily seen in the lack of tourism and foreign visitors compared to the available hospitality amenities that were built in anticipation of a much greater interest. To the locals on the street and businesses in Yangon, the crisis was primarily a non-issue to many in the cities. When locals were asked about the issue, most did not perceive the crisis the same as international observers, with a few going as far to say that the crisis is only a crisis to foreign governments and advocates, and does not play into daily life or business.
Scope of the Trip
FAO Global sat down with the director of the American Chamber of Commerce in Myanmar (AMCHAM Myanmar), who described how many of the underdeveloped infrastructure projects were on hold due to perceived support of military involvement in Rakhine. However, there are no indications that companies are pulling out of projects or selling off investments due to the current crisis. By all accounts, larger foreign multinational corporations (MNCs) are in a wait and hold pattern until the crisis is resolved to international standards.
Discussions with the Economic Attaché and Deputy Director of Mission for the Myanmar Embassy (in Washington, DC) indicated a positive attitude towards economic development through FDI and foreign development projects. However, each industry holds its own challenges and processes. Being familiar with current procedures is imperative, but future investors should be aware of the changing regulatory processes which can affect operations in Myanmar. Many risks associated with the change can be mitigated by being involved in policy discussions and engagement with Myanmar legislators.
Opportunities & Challenges
The streets in Yangon are crowded with small vendors. There are still limited industries in Myanmar, and most small shops sell electronics, stationary, or clothing items.
In addition to privileged conversations that cannot be shared on a public forum, we outline a few key opportunities and challenges that are apparent in our on-ground assessment of the political, economic, and security environment in the three cities previously mentioned:
General Opportunities
In every recommendation given to FAO Global, infrastructure projects in the rural countryside and agricultural land seem to be universally understood as the biggest areas for growth. Agriculture processes, equipment, and logistics are touted not only as the most overlooked aspect of development, but of great opportunity for western organizations. 30% of a company can now be owned by a foreigner without being ‘foreign owned’, which allows for more equity and stake for investment projects while reaping local benefits.
Opportunities to Profit & Serve the Public Good
In many outlying areas, such as the mountain highlands of Shan State, investment into local economies brings much needed funds into relatively poor agricultural communities. This allows for profit margins to remain high while simultaneously supporting the growth and development of local townships. Western businesses have the opportunity to build long lasting relationships that will benefit both communities and companies involved. From a strategic perspective, this is soft power at the core, with even small scale involvement on projects likely to reap huge rewards in the future.
Most Prominent Areas:
- Massive infrastructure opportunities
- Agriculture sector, relatively untapped
- Language and education support
- Fintech sector
- Use of mobile devices and adoption of tech
- Security environment in central areas are relatively stable with more government engagement for in peace processes with ethnic conflicts along border states
Challenges
Indications of nepotism and corruption are present, but not at the levels one might expect from a developing country. It is generally accepted that high-levels of corruption are widely discouraged. Most examples are seen at the local levels of government administrators due to low salary and historic use of “bribes” to grease the wheels of buearacratic processes. However, in baseline discussions, many western businesses do not encounter widespread issues of disruption due to government corruption. On the contrary, the developing regulatory system and newly untested bureaucratic procedures transitioning into a civilian government are the biggest inhibitors to rapid growth and development. Implementation of FDI rules and interpretation are still being developed. At the consumer level, foreign owned businesses must contend with inconsistent implementation of law. One hotelier described how the local influencers (behind the scenes) will look the other way if profit focused initiative cuts corners for a Myanmar citizen, but a foreign owned/operated venture faces increased scrutiny by both local and state administrators.
- Government Infancy
- Restrictions on foreign involvement
- Lack of Infrastructure
- Uneven application/enforcement of law
- Military linked businesses risk sanctions if the humanitarian crisis continues. This is also bad Public Relations and increase due-diligence is vital to vet any partner.
Yangon Assessment
FAO Global Associates provided a brief assessment of Yangon.
Immigration & Arrival
The process to enter Myanmar is relatively straightforward. The government offers E-Visa services which process and approve entrance in minutes for both business and tourist visa types. Upon arrival to the Yangon International Airport, FAO Global’s associates waited in a short immigration line after taking an early morning 2-hour flight from Bangkok, Thailand. Immigration went smoothly and taxi services were readily available immediately outside of the security checkpoints. A hotel-provided car cost $30 US dollars, but a normal taxi costs between $8-12 USD or 10,000 -12,000 Kyat (pronounced “Jet”) for transportation from the airport to the downtown area.
Local Food
The following travel notes wouldn’t be of value without mentioning a few food favorites. In Yangon, your party MUST stop at 18th Street for local BBQ (grilled meat, vegetables, and seafood). Food in Yangon is not always cheap, but you certainly get your money’s worth. Expect to pay $15-20 USD per person for beer and large plates of grilled deliciousness. There are a few fast food vendors and western chains, but you will likely fall in love with the local dishes. Street food can cost as little as $1 per plate or bowl of noodles; ask your hotel first for some recommendations to fit your budget.
Living in Yangon
To maintain Western Living standards, Yangon rent is considered high for Southeast Asia, with the exception of Singapore. A one bedroom flat can easily run $1,500-2,000 USD in Yangon, and foreigner leases are only good for one yea
r at a time. Food and beverage for local fair costs between $3-5 USD per person, while eating at a restaurant could run $10-15 per person depending on the meal and style. All different types of food and price ranges can be consumed in Yangon, with each day having a wide array of options available.
ANALYST COMMENT: The high cost of living and short term stay mentality has the potential to be abused by overzealous landlords. However, by all indications, other than the high cost, FAO Global consultants did not hear of that taking place, albeit the sample set was relatively small.
Infrastructure
Yangon and the country as a whole is drastically behind in infrastructure development. In Yangon, an observer instantly notices that roadways are clogged and relatively narrow in the downtown areas. Large truck traffic is regulated by a toll highway that is badly dilapidated and not as direct as a (western) newer national high-way system. The lack of infrastructure is a primary barrier to low cost procurement of agricultural products on a large scale.
Travel & Logistics in Country
In-Country Travel
In many of the large markets, art is a top seller. Many of the same patterns and images are used, but you can still find many original works from local artists.
Travel in the country is relatively straightforward, but logistics creates undue hassle on the travelers. Often travel by bus or train does not take you directly through the downtown areas, with stops that are located outside of the city. In Yangon, a taxi from downtown to the bus station was easily one to one and a half hours. While only costing between $8-12 USD, the bumper to bumper traffic was not pleasant. Once you arrive at a bus and/or train station, you can purchase a ticket easily. Most staff and vendors in the areas (even for local bus-lines) are capable of providing service in English. There is a slow train that is optional, but our team found out on a short 6 hour ride that the ride was not for the faint of heart. The even track caused the train to sway from side to side the entire time, and derailments are not uncommon. Air travel is available, but our team did not take it in country or book local travel. We were informed that only Myanmar airlines serviced domestic routes and costs around $100 to each city for foreigners. We have not verified this claim and cannot confirm that this information is valid.
ANALYST COMMENT: FAO Global recommends paying for a “VIP” bus which often comes with an in-seat entertainment system and larger room. Our team paid roughly $28 for a one-way ticket from Yangon to Mandalay, and roughly the same price from Bagan to Yangon. Most hotels will be able to book your taxi to the station and the ticket at the same time. This might run you a few extra dollars, however the convenience is worth it.
Local Markets
As all travelers tend to do, one will venture into a local or “famous” market. Often these travels can net one amazing purchase at prices well below western rates. With that being said, prepared to bargain and know what the relative cost is in your home country. The only area that felt like a “tourist trap” was Bagan, especially at the markets. Everything else was relatively easy to afford. Credit cards seemed to be accepted at major outlets and in all upscale shops. It is recommended that you have access to at least $200 USD in cash, or in Kyat. Locals take both and tend to give a $1 to 1000 Kyat exchange rate. At the time, it was closer to 960 to $1, but the simplicity helped us calculate costs easily. One of the more memorable experiences in Yangon was walking through the streets lined with fresh seafood and vegetables.
Security Environment
Law enforcement and military presence was minimal, and FAO Global associates only noticed one armed soldier/guard at the airport. This conflicted the idea that Myanmar was a highly secure police state, as warned by colleagues prior to the trip. While there are heavy police and military presence in many border states, there is a noticeable lack of police and military presence in Yangon. Aside from the airport, the only other security presence that was seen was a motorcycle police officer or the errant patrol car. It was clear that the security risk in the city due to government security was low. It was understood that in the event of a protest or riot, a heavy police presence should be expected.
ANALYST COMMENT: Since returning from Myanmar, there were a few instances of “grenade” and small scale attacks against government offices. These attacks appear to be isolated instances, and FAO Global has seen no indication of an increase risk to business travel in the main cities at this time.
FAO Global Assessment
Investors should be aware of the various geopolitical and cultural considerations that come from doing business in Myanmar. Compared to the rest of Southeast Asia, Myanmar customs and traditions are noticeably different. From the dress, to greetings, and English fluency, setting up shop in Myanmar poses unique opportunities to western firms, as well as challenges. There are opportunities to invest, build up an industry, and develop local communities. This is not only good for PR, but it creates long-term relationships allowing for increased western involvement. Many other countries such as Japan, China, and Malaysia are already involved in large projects, and the potential is certainly there for small and medium size enterprises (SMEs) to be involved. FAO Global analysts, consultants, and partners will continue to support the development of rural areas in addition to the growing opportunities in the city. The country is in need of capacity building and involvement from investors now will likely reap huge rewards over the next 10 years.
