အမိေျမ မွာ နိုုင္ငံတကာကလုုပ္ငန္းရွင္ေတြ စီးပြားေရးလုုပ္ခ်င္တဲ့ သူေတြကို စကာၤပူက စီးပြားေရး အၾကံေပး အင္ဒရူးတန္ အက်ိဳးေတာ္ေဆာင္ အဖြဲ႕ က တင္ျပေဆြးေႏြးထားတာေလးကိုု နားေထာင္ၾကည့္လိုုက္ပါအံုုး...
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Doing business in Myanmar - What you need to know as an entrepreneur from Singapore
The title for this PowerPoint presentation was based on the remit chosen by the National University of Singapore MBA Study Group a month before they visited my office in Yangon on 24th September 2013. As I am an alumnus of NUS the business school contacted me a month before their visit to Yangon.
I originally wanted to put the presentation on Slideshare -- however when I looked at the presentation 60% of the information are in the speaker's note and if you view the presentation as a slideshow alone it does not really make sense. As many people are now using smart phone and tablet to surf the net I decided to spend a few days to put the PowerPoint presentation as a YouTube video with proper voiceover and subtitle so you can view it from any platform without having to read the speaker's note simultaneously.
Doing business in Myanmar Part 1 - What you need to know as an entrepreneur from Singapore
Part 1: http://youtu.be/pCvYiQYDHcE
1. Economic history of Myanmar -- how Myanmar ended up where they are, as one of the poorest country in Asia despite its rich natural resources.
2. A simple story of why it is more profitable to invest in Myanmar than in Singapore. Caveat: You need to have strong stomach for risk if you want to invest in an emerging market like Myanmar.
3. As an entrepreneur:
a. Is inefficiency good or bad?
b. Is the continuing US financial sanction good or bad?
1. Economic history of Myanmar -- how Myanmar ended up where they are, as one of the poorest country in Asia despite its rich natural resources.
2. A simple story of why it is more profitable to invest in Myanmar than in Singapore. Caveat: You need to have strong stomach for risk if you want to invest in an emerging market like Myanmar.
3. As an entrepreneur:
a. Is inefficiency good or bad?
b. Is the continuing US financial sanction good or bad?
Part 1:
YouTube http://youtu.be/pCvYiQYDHcE
To download the MP4 video http://goo.gl/gLBU1X
- Economic history of Myanmar – how Myanmar ended up where they are, as one of the poorest country in Asia despite its rich natural resources.
- A simple story of why it is more profitable to invest in Myanmar than in Singapore. Caveat: You need to have strong stomach for risk if you want to invest in an emerging market like Myanmar.
- As an entrepreneur:
- Is inefficiency good or bad?
- Is the continuing US financial sanction good or bad?
Part 1:
1
Hello. I am Andrew Tan – I an alumnus of NUS. I am also the founder and Managing Director of Consult-Myanmar Co Ltd.
This is my presentation to the NUS MBA Group entitled “Doing business in Myanmar – What you need to know as an entrepreneur from Singapore”. Take note that this topic was chosen by the NUS MBA Group one month before their visit to my office.
The actual introduction to the NUS MBA Group is 4 min long I have moved it to the end of this presentation for those who are interested.
2
Let’s start with a little story about myself.
I first came to Myanmar in May 2012 to attend a Burmese friend’s wedding.
When the new Foreign Investment Law was passed in Nov 2012, I read the content understood that I can start a 100% foreign owned company with only US$50,000 I came over to Myanmar straight away.
I moved to Yangon permanently in Jan 2013 and rented this office and started the business.
I must state that I am very impressed by the way President Thein Sein has led the country through national reconciliation and reforming the economy. The President has always walk the talk.
My presentation will dissect many aspects of the Myanmar way of life and way of doing business. It is not meant to be disrespectful. It is meant to be a constructive criticism of how as a Singaporean who has a vested interest in this country how I would like to see this country developed and grow
3
Now to understand Myanmar we need to look at the economic history of Myanmar.
I am going to use a series of 7 charts that was developed by Mckinsey in their recent report on Myanmar.
When it comes to designing charts that tell a vivid story about a business issue or challenges facing a country– there is no one better than McKinsey.
So I am not going to reinvent the wheel I will just use the charts that they developed.
4
This chart shows that a combination of 2 factors cause Myanmar to have the lowest GDP per capita in ASEAN .
This is the Per Capital GDP in 2010 in Thousand of Dollars.
Myanmar has the lowest GDP per Capital in ASEAN at US$800.
This is caused by 2 factors:
Only 50% of its population is employed and
It has very Low labour productivity at $1,500. In fact it is the lowest in ASEAN.
5
McKinsey assumes that Myanmar want to grow from US$45 bil in 2010 to US$200 bil in 2030, quadrupling its GDP in 20 years.
To do that Myanmar needs to grow by 8% annually from 2010 to 2030.
1% of the growth will come from increased in labour inputs such as new people joining the workforce.
That means that Myanmar labour productivity need to grow by 7% annually for the next 20years.
However historically Myanmar has only manage to grow by 2.7%.
So to grow from 2.7% to 7% – Myanmar need to more than double its labour productivity growth for the next 20 years.
This additional labour productivity growth is a big challenge for Myanmar but it is also a big opportunity for entrepreneur as a lot of resources have to be spent on education, training and automation.
6
Focus on the 2010 column. This chart shows the 7 major sectors of Myanmar economy.
Myanmar is predominantly an agricultural society, even though agriculture makes up to 40% of the economy it employs up to 70% of its population. Most farms are small land holding and the work is still done by hand with very low level of mechanization. So it is very unproductive. Myanmar export mainly pulse and beans to countries in South and North Asia.
The other sectors that contribute significantly to the export earning of Myanmar is mining and energy. This is a resource base industry where a lot of effort is put into extracting mineral resources from the ground. The mining and energy industry is not a big employer of manpower in Myanmar as compared to agricultural.
Myanmar has a small manufacturing sector which is predominantly focus on the domestic market. As it has been under Western sanctioned for a long time – there were not much export market for Myanmar’s manufactured product in the past. At the moment most of Myanmar’s manufactured product are low quality product that is targeted at the domestic market.
Despite Myanmar’s rich heritage and natural beauty – tourism is an under performing sector due to the economic sanctions in the past.
Financial and telecom sectors are wash-outs in Myanmar due to under investment and mismanagement.
7
Myanmar population are mainly rural. Only around 13% live in urban area in 2009. 87% of its people live in small towns and villages.
According to McKinsey around 12 million people will migrate from rural to urban area in search of a better life by 2030. So there need to be a lot of investment in infrastructure such as building new town, industrial zone, road, bridges, port, airport, power plant, water treatment plant, etc.
8
This chart shows a timeline over 130 years. It shows that Myanmar GDP per capita stagnated in the middle of the 20th Century from like 1960 to 1980 when they experimented with socialism and then it became a military ruled country. The rest of ASEAN surged ahead during the same period.
9
This chart tells the same story. GDP has been stagnating from 1940 to 1980. In the 1990s Myanmar’s GDP started to pick up.
10
Even in the 1990s when Myanmar’s GDP improved – its growth rate is at the lower end of the Asia average of 4.2% just above Pakistan and Philippines.
11
Now if you are from Singapore which is famous for its clean street, green parks and world class airport – what challenges will you find in Myanmar?
12
Dysfunctional banking system. Most people still do not want to put their money in the bank due to past bank failures and prefer to hold cash. As banks have problem getting deposit they also do not give out loan for buying car or house.
Crumbling infrastructure. Daily power outage; roads with portholes and overcrowded broken sidewalks; painfully slow internet speed; buildings that are poorly maintained; blocked drainage and no potable water.
Outrages hotel rate & property rental. A 4 star hotel room cost like US$250 per night. A Grade A office in downtown Yangon is renting out of US$ 100 per square foot which is higher even than Manhattan or Tokyo.
Inefficient civil service – when you go to government department many are still using pen, paper, carbon paper and typewriter. Everything is done manually using the abundant cheap labour that they have.
13
This is my bar chart to give you an overview of the level of efficiency that Singapore and Myanmar are operating at.
In Singapore I would say that everything is running at 99% efficiency.
In Myanmar I would say that everything is running at say 30% efficiency.
The question we need to ask ourselves as an entrepreneur is this “ is inefficiency good or bad?”
14
As an entrepreneur when you approach a new market segment and you are trying to develop your products or services. You must constantly ask yourself 2 key questions:
!) Where is the inefficiency in the system?
2) Due to the inefficiency where is the pain points for the consumers or business users?
If you can find the pain points for the consumers or the business users you will be able to develop products or services that will delight them and they will be more than willing to pay for.
15
Let’s recast the question and look at the issue from another angle.
We can say that in Singapore you only have 1% of inefficiency or pain point that you can exploit to develop good products or services. In Myanmar you have a much much broader range – maybe 70%.
If you look at it this way – then Myanmar is every entrepreneur’s dream.
16
Since I am a Singaporean and I know that many people in Singapore are flushed with cash and they want to put their money in investments that make money. Let’s look at what returns you get when you put money in the bank.
Due to the low interest rate environment – if you put your money in the bank in Singapore over the last 3 years you are lucky you get 0.2% interest. If you put into a fixed deposit you get maybe 0.4%. After deducting for inflation – you basically earn nothing.
17
There is this truism in Singapore that says that you can never lose money investing in property due to the scarcity of land in Singapore. Due to the low interest rate environment over the last 3 years – many investors have placed their savings into property thinking that it is a hedge against inflation. As a result everyone is aggressively buying property and then renting it out, driving the price up so much that the rental yield have all been plunging. At the same time rental has been easing as the government has tightened the tap on foreign labour. Rental yield is now going down below 3% and is barely compensating for inflation. So you don’t make money investing in property now in Singapore.
18
Another truism in Singapore is that you can’t lose money opening a restaurant as Singaporeans love to eat and they must eat at least 3 time a day and they are not price sensitive. You pay US$10,000 a month to rent a shop in a good shopping mall, spend US$200,000 renovating it and then what happen? You can’t hire foreign workers to be waiter, waitresses and dishwasher as the government is tightening the foreign labour tap. So you round up all your relatives to help to serve tables and clean the dishes. At the end you sell off your restaurant or closed it down as it is straining your relationship with your relative and it is not viable anymore.
19
So it is becoming a vicious cycle. You put money in the bank – don’t make money. Put money in property – don’t make money. Put money in opening a restaurant don’t make money. Put money in the bank again – still don’t make money. Singaporeans are fighting to make money in that 1% inefficiency space and in the process bid up the price of all the asset class in that small space and thus not getting any return.
Have you heard this saying “insanity is doing the same thing again and again and hoping to get different results each time”?
Guess which famous man said this? Albert Einstein.
Now I must qualify this statement by saying that our Prime Minister Lee Hsien Loong has tried to address this issue during the recent National Day speech by creating new space for growth for our future generation.
20
He said that over the next 20 years he is planning to move the air force base from the central-eastern region of Singapore to the eastern tip of the island next to the current Changi airport.
He is going to move the Port of Singapore from the South of the country to the Western tip of the country.
In the process freeing up large tracts of land for development. With the air force base removed from the central eastern region of the country it allows us to build another new town in the vacant land. At the same time it also removes the height restriction on buildings in the central eastern region of the country. So now we can build upwards and the sky is the limit.
When the port is moved out from the south of Singapore – the vacant coastline can be turned into waterfront cities & marinas.
He said that these projects will take 30 years to reach fruition and it will create space and opportunity for our children.
I say why wait 30 years?
You have the opportunity and the space now in Myanmar!
If you are a young Singaporean you need the opportunity now. Come to Myanmar where there is so much opportunity for growth, experimentation and creativity.
21
Next question. As an entrepreneur the continuing US financial sanction on many Myanmar tycoons– is that good or bad?
22
To an American entrepreneur.
They faced the problem of finding the right partner in Myanmar as most of the Myanmar tycoons are on the US watch list – meaning that most US entrepreneurs can only partner the small Myanmar businessmen.
The due diligence & reporting requirements significantly increase their cost of doing business in Myanmar. Most small businesses will go bankrupt if they have to meet all these due diligence process and reporting requirements.
As a result American companies will be slower in entering the Myanmar market.
To an Asian entrepreneur.
It is a godsend as you do not have major US brands to compete with. Imagine No McDonald’s, KFC, Pizza Hut or Starbucks. Instead you find Korean brands like Lotteria and BBQ Chicken. The Korean are setting the reference taste for burger and fried chicken among the Myanmar consumer as well as in terms of pricing and service level. So by the time the American arrives after 2015 – they will be seen as not the original taste but just a copy cat and a me-too product.
Our Singapore’s retail brand such as Chewy Junior & Yakun are not doing too badly either. As there are many Burmese living in Singapore it is very easy for Singapore brands to enter into Myanmar quietly without having to pay a premium.
I don’t expect the American to lift the remaining sanctions till after the 2015 election.
So now is a good time for Asian brands to enter the Myanmar market while the US brands are absence.
23
As an entrepreneur if you are entering a new market that is culturally different from your own you need to examine all your assumptions – especially if it is key assumptions about the market that underlie your business. You cannot believe 100% in everything you read in textbook or newspaper– you need to develop your own hypothesis about the market and find some quick way of testing your hypothesis to see if it is true. Because if your assumptions are wrong your actions will be wrong.
If it is true – adopt it and exploit the opportunity quickly.
If it is false – you need to discard it and to develop new hypothesis about the market.
Have you heard this saying “it ain’t what a man knows that makes him a fool. It’s what he knows that ain’t”? This quote is attributable to American humorist Josh Billings.
Doing business in Myanmar – what you need to know as an entrepreneur from Singapore
Part 2: http://youtu.be/bLCMJ8Y6IhA
Doing business in Myanmar Part 2 - What you need to know as an entrepreneur from Singapore
4. What are the opportunities by industry in Myanmar?
5. Is your organization suffering from Giganitis?
6. Why emerging markets favour entrepreneurs.
7. Low entry barrier for entrepreneur in Myanmar versus China and India
8. Understand the role of the Central and State government.
9. What is the role of the JV Partner in Myanmar.
10. The importance of training in creating the right culture in you company.
11. How to operate in a cash based society like Myanmar.
12. Should you wait for after the 2015 election before entering the Myanmar market?
..
You can download the MP4 video and PDF transcript of the presentation at
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