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A new Timberland store is seen at the Junction Square mall in Yangon Myanmar Major international brands such as Chevrolet Ford and Coca Cola have started doing business in Burma taking advantage of the promising market and the country opening its doors to investment

Myanmar is Ripe with Economic Opportunities

July 14, 2014
Myanmar holds the promise of rapid growth for US investors but they will need to keep these three business principles in mind.

Over recent decades, sustained strong economic growth and significant quality of life improvements have contributed to Southeast Asia’s dramatic success. In a 2012 report, the Asian Development Bank reported that China, Malaysia, Thailand, Vietnam and Cambodia grew by 6 to 10% annually during their high-growth periods, while reducing poverty by as much as half in just a decade.

Will Myanmar (formerly Burma) be the next inspiring economic success? And how can it best be integrated into the world economy, while also protecting its environment, human health and social fabric?

Located midway between India and China, Myanmar is geographically Asia’s second largest country. It boasts vast natural resources, including oil and natural gas, a climate conducive to extensive agricultural production, and promising tourism and telecommunications sectors. It has a population of more than 55 million.

The Organisation for Economic Co-operation and Development (OECD) recently reported, “… Myanmar is well positioned to engage a multi-pronged development strategy that draws on agriculture, mining, and extraction, manufacturing, and services.” The Asian Development Bank notes that Myanmar could grow at 7 to 8% per year for a decade or more.

Myanmar holds great promise to be a manufacturing hub, because of escalating labor costs in China, its close proximity to major markets, and a population that needs many manufactured products.

All this, however, hinges upon Myanmar building its basic economic infrastructure. Currently, only 30% of the country has electricity, and there is a pressing need for ports, roads, office buildings, hotels and wastewater facilities.

Myanmar holds great promise to be a manufacturing hub, because of escalating labor costs in China, its close proximity to major markets, and a population that needs many manufactured products.

Myanmar is evaluating the growth practices and strategies of its Asian neighbors as it emerges from decades of economic and political isolation. As the Asian Development Bank points out, it will be important for the country to have a strong commitment to broad-ranging reforms while guarding against environmental degradation.

The upshot is that there is a tremendous amount of energy and optimism in the country, particularly in light of the democratic elections set for 2015, and the lifting of U.S. sanctions last year.

Any company considering doing business in Myanmar would be well advised to adopt the following three central principles as part of its approach and strategy.

Plan for the Long Term. Like other emerging economies, Myanmar will not transform overnight. Its move toward economic progress is likely to be accompanied by political and economic uncertainty.

However, recent developments signal some stability. In November 2012 Myanmar enacted a new Law on Foreign Investment (NLFI) and issued accompanying regulations in January 2013. NLFI permits foreign entities to own up to 100% of companies in certain sectors and outlines what businesses need to do to obtain a permit for such investments.

Myanmar is also a party to several international business treaties—including the ASEAN-Australia-New Zealand Free Trade Area, the World Trade Organization and the Bay of Bengal Initiative for Multi-Sector Technical and Economic Cooperation.

Conduct Business in Accordance with High International Standards. It will be important to establish long-term relationships in the country, to understand and respect its business practices and traditions, and to stay abreast of developing and changing regulations, including those focused on protection of human health and the environment.

Asian Presence is Advantage in Entering Myanmar

Companies entering Myanmar should expect that its new and emerging regulations will be based on best practices and other financial guidelines for responsible development of the World Bank’s private-sector lending arm, the International Finance Corp. (IFC). This includes the Equator Principles (EPs), which apply to more than 70% of the project finance debt in emerging markets. The EPs are a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing. The 10 EPs are based on key elements of the IFCs Environmental and Social Review Procedures.

It will also be important, if not a standard operating procedure, to conduct environmental and social impact assessments of proposed development projects. With Myanmar holding considerable promise today and in the decade ahead, companies that hold themselves to high standards will be demonstrating a long-term commitment to the country, while strengthening their business standing and opportunities for new projects.

Work with Knowledgeable and Experienced Partners. Companies that have established business operations in Asia will be better able to gauge the opportunities and challenges in Myanmar. Furthermore, entering Myanmar will be better facilitated by synergies from resources in other Asian countries.

Companies that do not have an Asian presence should consider working with firms that do in order to mitigate risk and operate more efficiently.

The opportunities and challenges in Myanmar are both very significant. Businesses that address them strategically and diligently will be better positioned to prosper and succeed.

Mark Travers is executive vice president for Global Practice Development with ENVIRON. ENVIRON is an international consultancy that helps companies resolve environmental and human health issues. The firm’s interdisciplinary network of more than 1,000 consultants operates from more than 90 offices in 22 countries, including Myanmar, China, Singapore, Malaysia and Hong Kong.

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