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Businesses in Myanmar not ready to take on ASEAN rivals

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Burma Foreign Minister Wunna Maung Lwin (l) and ASEAN S-G Lê Lương Minh pictured after joint press conference in Bagan in January 2014 (Photo: Simon Roughneen)
Burma Foreign Minister Wunna Maung Lwin (l) and ASEAN S-G Lê Lương Minh pictured after joint press conference in Bagan in January 2014 (Photo: Simon Roughneen)

 

YANGON – Ahead of the proposed establishment of the ASEAN Economic Community (AEC) at the end of 2015, many of Myanmar’s businesses are trembling.

“There is a perception among people in Myanmar that local products are low quality,” said Nwe Ni Wai, Executive Director of Yangon-based United Paint Group. She worried aloud that companies in Myanmar might struggle to compete with rivals from more advanced markets in the region, and in turn might struggle to make the most of opportunities in other markets.

Nwe Ni Wai’s concerns were echoed in part by the boss of one of Myanmar’s leading conglomerates –  beverage maker Loi Hein. “Thai products are familiar to the Myanmar consumer,” said Loi Hein chairman Sai Sam Htun, who in turn wondered “will the Thai customer trust in our Myanmar products?”

Their concerns might be allayed, or postponed at least, by the possibility that Myanmar, along with Cambodia, Laos and Vietnam, could be exempted from the AEC for several years after 2015. The delay could allow these countries’ businesses time to gear-up for full-on competition from Malaysia, Thailand and Singapore.

ASEAN member-states range from wealthy Singapore, an island state with an OECD-standard economy that makes it 40 times better-off than Myanmar on a per capita basis. Cambodia, Laos, Myanmar and Vietnam are the region’s least-developed economies, and Myanmar, despite its size and plentiful resources, lies at the foot of most southeast Asian economic league tables.

Myanmar joined ASEAN in 1997, and is currently the bloc’s Chair – a landmark for the formerly army-ruled country which was previously denied the post due to pressure from the West.

While some of Myanmar’s junta-linked companies and businesspeople are thought to have lobbied the government against liberalisation of the economy – likely down to concerns that Myanmar’s old junta-era cronyism would have to end under fairer competition – Sai Sam Htun said that he had no such concerns and welcomed the opening-up of Myanmar’s economy.

“The value of my business went up five times since Myanmar opened up,” said Sai Sam Htun.

“Multinationals will either kill you, buy you up or work with you,” said Sai Sam Htun, who already has bigger players to contend with than anything ASEAN rivals can bring.

Coca Cola and Pepsi have both set up shop in Myanmar since the nominally-civilian government led by President Thein Sein took office in early 2011.

“We are waiting to see what these big names will do,” he said. “What will Coca-Cola’s [marketing] campaign be?”

But there are signs that Myanmar’s officials are realising that local companies might not survive open competition from foreign rivals.

Speaking at a forum of foreign manufacturers visiting Yangon on a scouting mission, Aung Tun Thet, who advises President Thein Sein on economic policy, said “we want to liberalise, but we cannot take investment at all costs.”

In a not-so-subtle hint to would-be investors, Aung Tun Thet said that Myanmar’s government recommends joint venture proposals, lamenting that “our competitiveness is not as strong as it should be” – another reminder that in Myanmar, the AEC is causing concern.

Aung Tun Thet, who is a member of the Myanmar Investment Commission, the government body that vets investment applications, said in turn that investors were sometimes too timid, beckoning foreign businesses to “take the plunge.”

Whether or not Myanmar companies will be as keen on joint ventures as the Myanmar government is another matter however. Nwe Ni Wai said there are cultural differences between local businesses and those used to operating in countries where basics like reliable electricity, internet and telephones are a given – which is not the case in Myanmar.

“A joint venture is bit ike a marriage, there has to be trust and respect,” Nwe Ni Wai said.

For its part, Loi Hein is trying to expand in the style of junta-era Myanmar conglomerates, and develop banking, insurance and property development wings. During military rule, corrupt businesses were able to balloon in this manner, without spreading themselves too thin, due to lack of foreign competition and because of close ties with the opaque junta.

Whether or not Loi Hein can emulate this business model now, as Myanmar opens up to foreign investment and gears up for the AEC, is something of a gamble.

“Who will be the winner, the loser? We don’t know,” said Sai Sam Htun.

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