Business and Investment Opportunities in the NEW MYANMAR

Transcription

1 Business and Investment Opportunities in the NEW MYANMAR EXE CUTIVE SU MMARY Prepared by: KWR International, Inc KWR International, Inc. All rights reserved.

2 TO THE PEOPLE OF MYANMAR, WHO HAVE LONG AWAITED THE OPPORTUNITY NOW BEFORE THEM. TO ALL MY FRIENDS, FAMILY AND COLLEAGUES WHO HAVE LONG SUPPORTED AND INDULGED MY PASSION FOR THE GOLDEN LAND. Keith Rabin in Bagan, 1984 Keith Rabin with H.E. Ambassador U Than Swe, Myanmar National Day Celebration, Washington, DC, 2013

3 TABLE OF CONTENTS Forward IV Executive Summary 1 Introduction 5 Why Myanmar is Important 7 Myanmar History 10 Recent Political Developments 12 Foreign Relations/Sanctions 18 Export: Near Term Potential Growth and Development 29 Mining and Minerals 29 Energy 32 Electricity 34 Agriculture & Agribusiness 37 Forestry & Timber Products 39 Fisheries and Aquaculture 40 Manufacturing 40 Domestic: Sectors Benefiting from Reform and Rising Living Standards 44 Tourism 44 Technology and Telecommunications 49 Financial Services 52 Healthcare 57 Education 62 Retail and Real Estate 64 Infrastructure 68 Additional Issues: Potential Difficulties and Concerns 72 Ethnic Minorities 72 Political Prisoners 79 Democracy 80 Fragile Institutions and Processing Rapid Change 82 Legal System 84 Regional Catalysts that Reinforce Reform Process Southeast Asia (SEA) Games ASEAN Summit ASEAN Economic Community 90 Conclusion 92 Appendix: Myanmar s Foreign Investment Law 93 About KWR International 107 To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit KWR International, Inc. All rights reserved. No part of this document may be reproduced or redistributed without the written permission of KWR International, Inc. Project Director: Keith Rabin Lead Analyst: Michael Auerbach & Christina Madden Design & Layout: Neva Design Cover Photos: Istock Other photos: as credited For more information on business and investment opportunities in Myanmar and KWR International, please contact: Keith Rabin, President KWR International, Inc. Tel #: / myanmar@kwrintl.com Website: THIS COPY SUPPLIED FOR THE EXCLUSIVE USE OF THE PUR- CHASER IMPORTANT NOTICE REGARDING THE USE OF THIS REPORT: This report is protected by copyright and may not be copied or reproduced in any form without express written permission from KWR International, Inc. This report is sold subject to the condition that it shall not, by way of trade or otherwise, be resold, lent, hired out or otherwise circulated outside of the purchasing organization without the prior written consent of KWR International, Inc. Data, statistics and the reference materials presented within this report have been compiled by KWR International, Inc. from interviews, publicly-released media and other research accounts. Although these statements are believed to be reliable, KWR International, Inc. does not guarantee their accuracy, and any such information should be checked independently by the reader before it is used to make any business or investment decision. CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc.

4 FORWARD Myanmar is now in the midst of historic change, which is occurring at a pace that was almost unimaginable only two years ago. I first visited the country in 1995, and came away extremely impressed. Then from , I became the first head of the Japan External Trade Organization (JETRO) s Yangon Office. My work focused on developing exports from Myanmar, while helping Japanese companies to invest and do business in this largely closed market. At the time, Myanmar s military government was overpowering and the people smoldered under its rule. Complicated procedures, regulations and an array of economic sanctions imposed by the West constrained business and investment activity, as well as people s motivation and the potential for development. At the same time, Myanmar possessed abundant natural and agricultural resources, a strategic position, excellent talented people, a large and rich, but not overpopulated, geography, and many other strengths. The country clearly had massive potential, but lacked the capacity and framework needed to open its economy, and there was substantial pessimism about the future. I encouraged people inside and outside Myanmar to prepare, believing there would be a time when the world would come rushing to Myanmar s door. I emphasized that Myanmar would have to try hard, providing foreign businesses and investors with support mechanisms and access to timely and accurate information not only about politics, culture, and society but also economic matters including its human and physical resources, industry, companies, macro-economy, opportunities and barriers, as well as various systems of trading, business and investment procedures. Progress came slowly as the world viewed Myanmar more in political terms, focusing on conflict between the nation s military government and its pro-democracy movement, rather than the dramatic growth that could be realized if steps were taken to unleash the countries competitive strengths, to allow Myanmar to transform itself from one of the least-developed nations into a truly dynamic trade and investment destination. The election of President Thein Sein and his government in 2011, and the positive working relationship that has been emerging between the majority and opposition parties, are two of many factors helping to introduce unprecedented change to, and expanded political and economic reform in, Myanmar. This is giving rise to CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. IV

5 an amazing array of new opportunities and bringing increasing numbers of foreign companies and investors to Yangon and Naypyitaw to assess their prospects. Foreign and domestic companies and entrepreneurs, however, are faced with the need to understand the dramatic changes now underway, as they are significantly altering the way business is conducted in Myanmar. Creating a fundamental reevaluation of policies, regulations, and business practices, this transition is essential if Myanmar is to access the capital, technology, infrastructure, capacity upgrades, and broader interactions and partnerships with foreign investors that is needed to develop an open, efficient, and competitive market economy. By developing an attractive and secure environment in which foreign businesses and investors can locate and profit from activities based within its borders, Myanmar will advance its development and employment opportunities raising living standards and achieving long-term goals and objectives in a manner that realizes its national aspirations. The first step in initiating a foreign investment, however, is obtaining accurate and reliable information. And understanding the complexity of Myanmar, which is now overcoming a long history of distress, is impossible within a short visit or a reading of a hastily prepared consulting report. KWR International s comprehensive analysis, prepared under the direction of Mr. Keith Rabin, who has a decades-long association with Myanmar and a large network of human connections there, is well versed in the social structure and other issues that face the country. The report also highlights both potential business and investment opportunities as well as the drivers and factors that will influence their development. It will give you reliable guidance on Myanmar in all economic aspects. Yoshihiro Araki Chief Director, ASEAN Industries Integration Overseas Research Department Japan External Trade Organization (JETRO), Tokyo V For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. CONFIDENTIAL

6 EXECUTIVE SUMMARY Myanmar possesses vast resource wealth in the form of natural gas and oil reserves, precious gemstones and metallic minerals, and has substantial fertile land for agriculture. To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit marbusinessdevelop ment.com Myanmar is undergoing significant transformations to its politics and economy and appears to be making the reforms necessary to open-up the country to the world. President Thein Sein s rise to the presidency may have been marked with some controversy due to complaints about the legitimacy of the election; however, his actions as President deserve the international acclaim he has been awarded. Myanmar remains an enigma. Its natural resource wealth and large population, combined with recent overtures towards inclusiveness with the international community offer incomparable promise, but the amount of progress it must sustain to truly develop remains large. Myanmar is undergoing significant transformations to its politics and economy Myanmar s underdevelopment can be traced to its isolation from much of the world, rather than its lack of potential. Myanmar possesses vast resource wealth in the form of natural gas and oil reserves, precious gemstones and metallic minerals, and substantial fertile land for agriculture. Its preservation of temples, pagodas, and colonial buildings combined with its natural beauty heightens its attractiveness as a tourist destination and adds value to its real estate market. Myanmar s geographic location is ideal for commerce with China, India and other parts of Southeast Asia with coastal access providing an opportunity to become a central shipping country and a major actor in international and regional trade. Its population size also provides it with the labor force necessary to develop a proficient manufacturing sector and constitutes a sizeable consumer market with potential demand building from extremely low levels. Myanmar s underdevelopment can be traced to isolation, rather than potential Myanmar s development has been constrained primarily by two factors its political system and international sanctions. Since his inauguration, President Thein Sein has rapidly led Myanmar toward greater inclusiveness, increased transparency, and improved domestic institutions. CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. 1

7 EXECUTIVE SUMMARY President Thein Sein s administration has passed the reforms frequently demanded by Myanmar citizens and the international community. He has attempted to quell internal conflict by releasing political prisoners, agreeing to cease-fires with ethnic rebel groups, and opening up the democratic process. President Thein Sein demonstrated his commitment to an inclusive democratic process by encouraging Aung San Suu Kyi to run for a seat in parliament, which she won in the by-elections of April of this year. Suu Kyi s NLD party won all but one of the parliamentary seats it contested. President Thein Sein s administration has taken steps to transform Myanmar s economy by reducing restrictive regulations on foreign investment, introducing a managed float of its currency, relaxing restrictions on the media, and increasing labor rights for domestic workers. Myanmar has signaled to international investors that the country wants to become more business friendly and now welcomes investments that may advance its economy. Furthermore, after some initial tension in which Aung San Suu Kyi and elected NLD officials refrained from taking their oath of office given their reluctance to swear to safeguard a constitution they are seeking to amend, this controversy was resolved. The ruling and opposition parties have since developed a good working relationship and common views on many key issues including the removal of economic sanctions. Myanmar has signaled to international investors that the country wants to become more business friendly and now welcomes investments that may advance its economy. Myanmar moving toward inclusiveness, transparency, and improved institutions Despite the progress achieved through Myanmar s domestic reforms, there is still much to be accomplished. Cease-fires have yet to sustain peace within its borders particularly in Kachin State. There has also been severe ethnic violence and tension in Rakhine State. Significant improvements must also be made to Myanmar s physical infrastructure and domestic sectors like education, healthcare, and technology to foster sustainable development. Additionally, Myanmar s institutional capacity must grow to ensure that reforms can be implemented effectively and Myanmar burn-out avoided. There is also concern that reform may be happening too quickly, and disagreements might To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit marbusinessdevelop ment.com 2 For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. CONFIDENTIAL

8 EXECUTIVE SUMMARY At the same time large multinationals... have begun selling their products in Myanmar. To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit marbusinessdevelop ment.com form between liberal reformers and hard-liners that could reverse Myanmar s progress. Similarly rapid change will require significant changes to legal and regulatory standards as well as domestic business practices which must evolve over time. Accurate, up-to-date information is also difficult to access. As a result, local companies will need to develop new strategies and otherwise improve their productivity to meet the challenges of international competition. Despite Myanmar s domestic reforms, there is still much to be accomplished As a result of Myanmar s path to reform, its isolation both self-imposed and through the result of sanctions is coming to an end. The United States, European Union, Australia and Japan have eased sanctions and begun to restart the flow of aid to the country. This September both President Thein Sein and Aung Sang Suu Kyi visited the US and the bilateral relationship has evolved to the point where it has been reported that the US may invite Myanmar military officials to attend the annual US Cobra Gold multilateral training exercise in the Asia-Pacific region, which is expected to bring together thousands of troops from the United States, Thailand, Singapore, Japan, South Korea, Indonesia and Malaysia, as well as 13 observer nations, in At the same time large multinationals including General Electric, Coca-Cola and Caterpillar as well as many large companies from Japan, Korea, Europe and other markets have begun selling their products in Myanmar. Increased access to aid, trade, and investment can provide Myanmar with the ability to realize its potential and develop into the next emerging market in Asia. US, EU, and Japan reconsidering relations with Myanmar as progress continues There are a number of regional catalysts in place that will help to ensure that Myanmar maintains its path toward further openness and reform. Myanmar is scheduled to host the 2013 SEA Games and is committed to making the event a success. The games provide an impetus to im- CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. 3

9 EXECUTIVE SUMMARY prove its physical infrastructure and reduce conflict within its borders. In 2014, Myanmar will host the ASEAN Summit. ASEAN Secretary-General Surin Pitsuwan believes the country is ready for the chairmanship and hosting the ASEAN Summit ensures that political progress continues. Finally, Myanmar s political and economic progress will increase the possibility that ASEAN meets its anticipated 2015 deadline for the development of the ASEAN Economic Community. Myanmar s role as Chair of the 2014 ASEAN Summit will both increase its engagement with other member countries and more fully align its national priorities and direction within the ASEAN Economic Community timetable. The ASEAN Economic Community promises to augment Myanmar s trade relations and to provide greater information sharing between member-states. This will also help to develop its institutional capacity and to elevate the importance of Myanmar to US, Japanese, EU, and other foreign investors who are seeking to expand their present in a rapidly growing and increasingly important Southeast Asia. The 2013 SEA Games provide an impetus to improve its physical infrastructure and reduce conflict within its borders. Regional catalysts help ensure Myanmar maintains path toward further openness Given the transition to a New Myanmar will be an ongoing process, foreign companies and investors are advised to balance their enthusiasm over the many real opportunities that are emerging with a nuanced understanding of the changes now underway. By understanding these dynamics and gaining the right support, long-term relationships can be formed, and the most beneficial structures established to effectively navigate the many complex factors that will be part of any Myanmar-focused investment or business strategy. Companies and investors advised to balance enthusiasm with nuanced understanding of changes now underway To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit Source: Bongdaplus 4 For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. CONFIDENTIAL

10 EXECUTIVE BRIEFING For more ON MYANMAR information SUMMARY on business and investment opportunities in Myanmar and KWR International, please contact: Keith Rabin President, KWR International, Inc., Tel #: / Website: Project Director: Keith Rabin serves as president of KWR International, an Asia-focused consulting firm. Sectoral experience includes engagements focused on energy and alternative energy, natural resources, environment, technology, telecom, hard and soft goods, tourism, defense, real estate, autos, macroeconomic policy and investment, trade and export services. Earlier in his career, he managed a global trading company that specialized in the development of trade with Myanmar. Lead Analyst: Michael Auerbach has served as an analyst on several KWR International research projects. He obtained a Master of Arts in International Affairs from the New School University and a Bachelor of Arts in Political Science from Swarthmore College. Lead Analyst: Christina Madden has served as an analyst on several KWR International projects including a phase-one scoping study concerning Myanmar s electrification needs. She obtained a Bachelor of Arts in International Affairs and Political Science from the George Washington University and has studied at the Institut d Etudes Politiques de Paris. About KWR International: KWR International, Inc. (KWR) is an Asia-focused consulting firm specializing in the delivery of research, communications and advisory services with a particular emphasis on business and technology development, public/investor relations, public affairs, cross border transactions and market entry programs. This includes engagements for a wide range of multinational, national and local government agencies, trade and industry associations, start-ups, turnarounds, venture/technology-oriented firms and multinational corporations; as well as financial institutions, investment managers, financial intermediaries and legal, accounting and other professional service firms. To purchase a complete copy of this report, including the additional information outlined in the table of contents, please visit CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. 107

11 ACCLAIM FOR BUSINESS AND INVESTMENT OPPORTUNITIES IN THE NEW MYANMAR Source: KWR International, Inc. Source: KWR International, Inc. This book is an excellent overview of Myanmar s economic development. As KWR International notes, Myanmar s underdevelopment can be traced to its isolation from much of the world, rather than its lack of potential. Now, however, President Thein Sein s administration has passed the reforms that are necessary to unleash rapid economic development. At the same time, transportation links are being established between Vietnam, Laos, Cambodia, Thailand and Myanmar, which will provide the entire region and its companies with an enormous economic potential. Marc Faber, Chairman of Marc Faber Limited and Publisher of the Gloom, Boom and Doom Report Myanmar, a country with a population of over 55 million and abundant resources, is in the midst of an amazing transformation. While it is still an enigma to most outside observers, KWR International has been able to present a succinct overview of the evolving political and economic setting while highlighting the sectors with the most near term development potential. This is a valuable reference tool for anyone who needs to get quickly up to speed on emerging trends in this new market. Arthur M. Mitchell, Senior Counselor, White & Case Tokyo, former General Counsel, Asian Development Bank ( ) For anyone looking for a new frontier in investment, Myanmar has to be considered and KWR International s book provides a highly insightful primer. Under the guidance of long-time Myanmar observer Keith Rabin, KWR International covers essential information on the political and economic developments in this Southeast Asian frontier economy. This is a must read for emerging market frontier investors and businesses in the early 21st century. Dr. Scott B. MacDonald, co-author of Asia s Rise in the 21st Century, former Sovereign Analyst, Donaldson, Lufkin, Jenrette and Credit Suisse First Boston 108 For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. CONFIDENTIAL

12 Myanmar s potential to become the next Asian Tiger economy is undeniable. The frenzy of interest from our members is no better endorsed than through President Obama s immediate visit following his re-election. Myanmar s location, coupled with it s youthful population, provides an excellent platform for the country to capitalize on its vast endowment of natural resources. KWR International s report clearly highlights this potential with its in-depth analysis of Myanmar s government, economy and opportunities in key industries. A must-read for anyone looking to gain valuable insight into this exciting frontier market. Josie Tulipano, Executive Director, American Chamber of Commerce in Singapore Although it is attracting significant international attention, Myanmar remains an enigma, as this KWR International report indicates. The book highlights the most important milestones in Myanmar s recent development and pinpoints potential business and investment opportunities in nearly all sectors. It should help to promote greater understanding of this fast-changing nation and is well suited, not only for the busy executive, but also for those seeking a reliable reference. U Myoe Myint, Senior Analyst, ITOCHU International Inc. KWR International s latest report on the New Myanmar is a must read for anyone looking to participate in the fast emerging opportunities in Myanmar today. Myanmar maybe the last frontier country to enter the global market and to become a full fledged trading and investment destination intimately linked to South East Asia, the fastest growing region in the world. Having a population of 55 million with significant natural and human resources, Myanmar is now positioned to more fully participate in the global and regional economies. Similar in ways to other fast growing South East Asian economies, Myanmar should attract significant investment across the board. Though there are many challenges, there are many opportunities especially for businesses with skill entering new markets. I expect to see considerable investment from Vietnam and other countries in the region. Bradley C. Lalonde, Co-Founder & Managing Partner, Vietnam Partners LLC.; CEO, Citibank Vietnam ( ) and co-founder AMCHAM Vietnam Source: KWR International, Inc. Source: KWR International, Inc. CONFIDENTIAL For exclusive use of intended recipient(s). Please do not distribute to other parties without permission of KWR International, Inc. 109

13 While Myanmar continues to move ahead with transforming its politics and open up its borders for foreign companies, the opportunities for investors are impressive. At the same time, much reform remains to be done before the country can meet its promise of becoming a prime destination for business in Asia. In this new publication, KWR International provides readers with a useful overview of where Myanmar sits today and the challenges lying ahead, hence enabling newcomers to assess the potential risks and rewards in one of the region s last untapped frontiers. James Van Zorge, Senior Fellow, Global Business Policy Council, A.T. Kearney KWR International s Myanmar Briefing is a treasure trove of information and intelligence on this large but little-known Southeast Asian country. Myanmar s importance is obvious just looking at the map, situated between India and China, with a landmass larger than France. But facts on its economy are not easily come by, which makes the Myanmar Briefing all the more impressive as it is replete with them. There are individual entries on each of the main sectors of the economy, including which companies are involved or will be in them. There is also much discussion on politics, and the report does not gloss over or sugar-coat difficult issues such as ethnic problems and the weak regulatory system, which are areas any potential investor should be aware of. Mark S. Matthews, Head of Research Asia, Bank Julius Baer Given the recent rapprochement by the US and Japan towards Myanmar, this up and coming nation has become the focus for strategic presence in South East Asia as a counterbalance to China. KWR International s well researched study is required reading for anyone or any firm that wishes not to miss this unique opportunity. T. W. Kang, Managing Director of Global Synergy Associates and former member of the board, NEC Electronics Corporation Myanmar has set an ambitious goal of graduating from the ranks of the world s leastdeveloped nations in a manner that meets the aspirations of its people within the next decade. Their Framework for Economic and Social Reform calls for a wide range of reforms and development initiatives dealing with trade and investment, infrastructure, agricultural and telecommunications, with governance that is effective and transparent. Myanmar s Chair of ASEAN in 2014 will give them an opportunity to leverage ASEAN commitments and programs to advance their national goals while boosting regional integration and growth. In this report KWR International has given a sharply detailed, comprehensive lay of the land for any executive, investor and policy maker who wants to seriously understand, and consider positioning, their activities in what holds the potential to become a dynamic economy within one of the most economically vibrant regions of the world. James Wallar, SVP, International, Nathan Associates; Advisor to ASEAN Secretariat; US Treasury Department Official ( )