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    Southeast Asia
     Apr 25, 2012




Page 2 of 2
European firms face Myanmar catch-up
By Chris Stewart

If China turns out to be the big winner in a growing Myanmar market place, companies from other Asian countries also aim to thrive there. Malaysian air-conditioner maker Acson is already entrenched in Yangon, Mandalay and elsewhere in Myanmar.

The poor state of Myanmar's education system for the largely rural population (some 75% is involved in agriculture) means a low-skilled workforce and under-funded technical and academic institutions - New Light of Myanmar last year highlighted the donation of colored paper to one school; Education Minister Mya Aye told MPs in February that there was no plan for universities to have their own web sites but he confirmed that all universities have now been equipped with Internet access.

Even so, Japan's NTT Data, the world's eighth-largest software

 

company with $14 billion in annual revenues, said on Thursday it plans to set up a subsidiary in Yangon in September for development of computer systems, with as many as 500 employees within five years.

Low education standards are, however, fine for factories making low-end goods gobbled up by the likes of WalMart, many of them run by manufacturers in China and elsewhere in Asia looking for lower-cost production locations.

Thailand's clothes makers are racing to take set up shop in neighboring Myanmar, where labor costs are one-third of those at home. Up to 10 garment manufacturers, including Thailand's six largest, plan to set up plants around Yangon this year at an average cost of $10 million, according to the Thai Garment Manufacturers Association. The new plants will be larger than their other factories in the region as Myanmar "is the highest-potential destination for investment", The Nation reported last month, citing association president Sukij Kongpiyacharn.

The EU sanctions had removed Myanmar from the Europe's General System of Preferences "GSP", which exempted garments made in the country from import duties.

A return to the GSP could create up to 25,000 new jobs this year in the textile industry alone in 2012, Myanmar's Garment Manufacturers Association chairman Myint Soe told Associated Press. A further easing of sanctions (they have so far been relaxed only slightly) by the United States, which used to buy 75% of Myanmar's textile products, could prove even more beneficial, AP reported.

US hotel groups aiming to target Myanmar's tourist and business accommodation sector will have to contend with local big business outfits, such as Max Myanmar Group, as well as Asian leaders. Max Myanmar is run by the well-placed and hitherto sanctioned Zaw Zaw, who accompanied former leader Than Shwe on his state visit to China in September 2010.

Zaw Zaw, who owns a quarter of Dawei Development, a planned $8.6 billion deep-sea port and industrial zone in the southeast of the country, plans "to shift his strategy" to banking, hotels and tourism, Reuters reported this month. Construction is a "big headache", he said. "We have to look at which business is good for the future, which business we can partner with foreign companies." [7]

Incomers will also have to tie up with the government and/or compete with the well-established outfits such as Singapore's Sedona Hotels, a unit of Keppel Corp, the world's biggest oil-rig builder, and hotels run by Malaysian Robert Kuok's Shangri La and Traders Hotel chains.

Less classy hotel chains from around China and the rest of Asia are also familiar with the Myanmar market. Singapore last year was leading foreign investment in Myanmar's hotel sector with $598 million, followed by Thailand ($263 million) and Japan ($183 million), according to Xinhua.

When it comes to food and beverage without accommodation, Western multi-nationals will have to compete with the likes of Malaysian noodle and snacks maker Mamee Double Decker, established in Myanmar since the 1990s and used to seeing off Western rivals. While holding 48% of the potato product market in Malaysia, it claims to have taken over from Mr Pringle products in stores as far afield as Australia.

Still, early arrivals are not guaranteed an easy ride. A unit of Italian-Thai Development, Thailand’s biggest construction company, last year received a 30-year concession to export coal from a new mine in the northeast of the country at Monghsat, near the Thai border. [8] But the parent company has run into problems in the Dawei development, of which it is a lead company. The government recently scrapped Italian-Thai's original plan to use coal for a proposed 4,000 megawatt power plant that would drive new factories in the area while also exporting power to Thailand.

Myanmar's new civilian government plans to offer eight-year tax exemptions to foreign investors, Minister for Industry U Soe Thein told reporters in Davos in February. His claim that "our people know the English language, it is easy to communicate", may also help attract businessmen, though newcomers might find "our people" applies to only a few, albeit essential, counterparts - that is, those just released from EU sanctions.

Eight years ago, under Senior General Than Shwe, at the time head of the ruling junta, all senior army officers seeking promotion had to pass examinations in English - redundant when shooting protesters or kicking peasants off the land but the lingua franca of the international business world. [9]

One restraint on commerce Soe Thein and his colleagues will find harder to fix is laws in some countries, including the United States, that prohibit bribing officials. Myanmar rates as the world's third-most corrupt nation on Transparency International's Corruption Perceptions Index of 183 countries, rating 1.5 out of 10 (10 being least corrupt and 0 being highly corrupt) as of 2011. That should ensure that creative accountants are one group of professionals certain to make a killing in the Myanmar gold rush.

Notes
1. China now No. 1 investor in Burma, Mizzima, citing Myanmar's Eleven News, January 18, 2012.
2. Potential Pitfalls for Myanmar’s Economy, Wall Street Journal, April 11, 2012.
3. Firms See Myanmar as Next Frontier, Wall Street Journal, November 30, 2011.
4. China Construction Machinery Business Online, March 1, 2011.
5. Norinco International Wins $700M Contract In Myanmar, Capital View, August 29, 2011.
6. See "China's Strategy to Secure Natural Resources: Risks, Dangers and Opportunities", Theodore Moran, Peterson Institute for International Economics, July 2010. (p37)
7. An image makeover for Myanmar Inc, Reuters, April 12, 2012.
8. Thai coal mining in Burma begins despite of local concerns, Shan Herald, May 4, 2011.
9. "Burma's Military: Purges and Coups Prevent Progress Towards Democracy", Larry Jagan, Myanmar's Long Road to National Reconciliation, ed Trevor Wilson, Institute of Southeast Asian Studies, Singapore. (2006).

Chris Stewart is business editor of Asia Times Online

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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