Local firms urged not to miss out in Myanmar

Opportunities could be lost if Thais wait for clear-cut regulations to develop

Thai enterprises should cast extreme caution aside and start trading more with Myanmar and investing in its industries to promote growth for both sides, since the neighbouring country is already attracting huge interest from Western investors with its political and economic reforms, according to officials and bankers.

"Every foreign investor wants to come here now. If Thais wait for clear-cut rules and regulations, we may be unable to compete with others and lose the chance to grow with Myanmar from the very first step," Prajuab Supinee, director of the Thai Trade Centre in Yangon, said last week.

The message resonated during a road trip organised by Siam Commer-cial Bank (SCB) for Thai enterprises last week. In Yangon and Nay Pyi Taw, they learned that Myanmar will be a perfect partner for Thailand if Thai investors promise recognition and mutual benefits. Benefits could be strengthened upon Myanmar people's desires to have Thailand help develop the economy. Plenty of opportunities are waiting in all sectors including farming, trading, industrial and services. However, Thai enterprises still show hesitation to make investments on concerns over political stability, changes in rules and regulations, the logistics system and the long-term benefits of export privileges granted by Western countries.

After joining the business trip, giant Thai corporations now see ample opportunities to do business in Myanmar in all sectors including farming, trading, industrial and services, but they are still vacillating.

They say that they may need to conduct more in-depth studies on the risks and rewards this year before making a final decision on investment next year. This year, they will send more teams to explore the market, seek local partners and continue to trade with the country.

OVERVIEW OF OPPORTUNITIES

Prajuab said Thai firms should not wait for clear-cut policies from the Myanmar government before making any decision as it may be too late to compete with foreign investors.

With 60 million people, mostly of a working age, and abundant natural resources, Myanmar is becoming the new rising star in Asia.

Thai companies should see that political stability is a separate issue. Myanmar will not step back to the past after it has already moved on to democracy. The current government wants to show the world that Myanmar desires economic development. The government is now changing its rules and regulations to attract new investment, so Thai companies should quickly grasp the opportunity.

Companies should explore Myan-mar to understand that there are some unstable rules and differences. They should study consumer demand and draw up an investment plan that will be mutually beneficial.

According to Myanmar government's objectives, each investment project should promote employment and training opportunities for its people.

The Thai Trade Centre said the biggest opportunities are in agriculture, processed food and energy. Many multinational companies from Thailand like CP, Sahaphat and Gunkul have already invested here. In a few months, a giant firm involved in farming from Thailand will also make public its investment plan for Myanmar.

According to the centre, Thailand has slipped to second place among Myanmar's largest foreign direct investors, losing the lead to China last year. However, Thailand should soon regain its top rank by year-end as many large investors want to start businesses here in various sectors, Prajuab added.

Wichien Cherchutrakuntong, vice chairman of the Federation of Thai Industries' Chiang Mai chapter, said Myanmar will become a new target market for Thailand in the present and the future.

Thailand and Myanmar will be a perfect couple, as their cultures are similar and most Myanmar people are familiar with Thai tastes and traditions.

Myanmar will soon announce its new investment rules. Thai investors should urgently study market demand, the rules and the banking system.

To start up a business and begin trading with Myanmar, Thai firms should look for local partners as they will have a better understanding of the market and connections with government agencies. Thai firms that want to trade with Myanmar might start with cross-border trading, as more than 40 per cent of two-way trade takes place along border provinces.

Thailand is the third largest trading partner with Myanmar after China and Singapore. The products with highest potential for trade are petroleum products, vehicles and parts, iron and construction materials, machines and spare parts, palm oil, plastic and raw materials, ships and boats, and pharmaceuticals.

BANKING AND FINANCE

Although Thai banks have not yet been able to open a branch in Myanmar to assist investors, two Thai banks have already received permission to set up a representative office in Yangon. The one from SCB will be ready to help Thai companies this year.

Sarut Ruttanaporn, head of commercial banking, said that although SCB could not yet provide any financial transaction services to customers, it is a good start for the bank to explore market opportunities with Thai investors.

The Myanmar government will allow foreign banks to do business in the country in the near future, as more foreign direct investment will come in, he said.

SCB is one of 17 foreign banks to secure licences from the Myanmar government, and also the second bank from Thailand after Bangkok Bank to be allowed to open a representative office in Yangon.

SCB's office will first provide information and investment advice about Myanmar and also offer business matching.

After Myanmar's central bank announced the move to a single exchange rate on April 2, the kyat has become more stable, which should make it easier for Thai companies to do more trade and investment here.

Previously, Myanmar had two exchange rates - an official rate and an underground rate, which was very different. Now each bank can quote the kyat up to 0.3 per cent above or below the daily reference rate of the central bank.

As of June 8, the kyat was worth 842 to a US dollar, while 1,000 kyat was valued at Bt26.62.

Junya Srireunsawad, manager of trade structuring and solution-wholesale banking at SCB, said the kyat is more stable, as its value is determined by supply and demand and is announced only once a day.

SCB has three allied banks in Myanmar, which are owned by the government and are authorised to provide foreign transactions. The bank is ready to serve customers and support their trading and investment, she said.

The three partner banks are Myanmar Foreign Trade Bank, Myanmar Investment and Commercial Bank and Myanmar Economic Bank.

RULES AND REGULATIONS

Myanmar is scheduled to issue its new Foreign Investment Law next month, which will promote more and faster development of the country.

Tubkwan Homchampa, senior analyst of SCB, said the floating of the kyat has not only led to a stable currency, but also to better financial operations for investors. The revised foreign investment law is expected to provide a better tax-holiday period for investors. It should define clearer rules for land leases.

The suspension of sanctions on Myanmar by Western countries has also encouraged the Myanmar government to accelerate the modernisation of its rules to facilitate more investment, he added.

Aung Soe, director of the International Trade Promotion Department under Myanmar's Commerce Ministry, said Myanmar's parliament is expected to pass the amended Foreign Investment Law next month, and it may be enforced immediately.

Myanmar has completely overhauled its strict rules and regulations to support growth in commerce. After the EU suspended its sanctions, the economic environment has improved significantly. This is a very good sign for promoting trade and investment.

AUTOMOBILES AND PARTS

Suvit Vongsariyavanich, managing director of Deestone, a tyre maker, said the firm will open a plant in Bo Nam Pu in the border province of Kanchanaburi to export its products to Myanmar.

Investing directly in Myanmar may be too fast for his company so the firm will use the new Thai plant as a strategy to penetrate the Myanmar market.

Deestone may consider setting up a factory in Myanmar in the near future if it gets a good response from consumers here.

The rapid growth of auto purchases should drive growth of rubber tyre sales, he added.

Wirat Kitgarndethwut, assistant general manager of Siam GS Battery, said the firm will not yet invest in Myanmar as it wants to wait for clearer rules and more political stability.

However, since the market is growing exponentially, the firm will hold more campaigns and activities to promote the sales of its car batteries. It only exports its products to the country. Among neighbouring countries, sales to Myanmar have witnessed the highest growth, he said.

Perapat Thinsuntisuk, managing director of Cosmo Truck and Equipment, said that after the opening of the country, Myanmar is a new frontier for investors. The firm will try to find a business partner to import its products, including heavy trucks and equipment, to serve the explosion in investment projects in Myanmar.

FARMING

Lackchai Kittiphon, president and CEO of Thai Hua Group, said he plans to lease land and raise rubber trees in Myanmar as the environment is suited to that type of agriculture. He would consider building a plant to process rubber in the near future.

Manut Saensiripongpun, managing director of Chokchai Starch and Chokchai Modified Starch, said the firm will not yet start operating in the country as it wants to ensure that the investment law is practical. However, he sees good prospects for Myanmar to become a production base for tapioca and a base for exporting the product to third countries.

Charoen Chanpalangsri, managing director of Thai Polycons Plc, said he is highly interested in developing oil palm plantations in Myanmar as the country has to rely heavily on palm oil imported from Thailand.

TOURISM AND ACCOMMODATION

Kamonwan Wipulakorn, president of The Erawan Group, said she is keen on opening a hotel in Yangon to serve foreign businessmen and tourists, who have been flocking to Myanmar's commercial capital.

Although the government has moved its capital to Nay Pyi Taw, Yangon still serves as the centre of trade and tourism.

"Myanmar will be a target for the group's investment from 2011-15. A budget of Bt8.5 billion has been set aside for investment," she said.

However, the firm needs to do more studies before investing and most of the investment budget will continue to be for Thailand.

Since the border is near, Thailand can serve as a gateway to Myanmar for tourists. An investment in Thailand will also serve the growth of the tourism industry connecting Thailand, Myanmar and other Asean countries.

Worawut Chiayoburana, vice president of Bager Co, said the firm will consider a plan to set up a paint plant here in the future.

However, since accommodation projects in Myanmar are booming, the firm will hunt for new dealers to help promote the sale of Beger paint in the country.

U Hlaing Oo, director of the Directorate of Hotels and Tourism under the Hotel and Tourism Ministry of Myanmar, said the tourism industry has taken off in the past year.

Myanmar is projected to welcome 1.7 million visitors this year, about double last year's 816,369 visitors.

The government has granted operating licences for 759 hotels, of which 50 are joint ventures of local and foreign investors.

Foreign hotel investment was worth US$1.14 billion. The largest foreign hotel operators are from Singapore with 12 hotels, followed by 11 hotels owned by Thais, six by Japanese, four by Hong Kong investor and two by Malaysians.

The Asean Economic Community has also helped promoted better trade and investment in Myanmar, Soe said.

Duties on more than 80 per cent of goods have been cut to zero in Asean, which should create more opportunities for trade with Myanmar for Thailand and other Asean countries.

The country has also relaxed more of its import rules by allowing in long-banned products, including MSG, soft drinks, assorted biscuits, canned foods and instant noodles.

Cho Thiri Maung, who sits on the executive committee of the Union of Myanmar Federation of Chambers of Commerce and Industry, said her country has tended to promote more investment and industries that focus on value-added processes and hi-tech transfers as well as business that are environmentally friendly and promote sustainable growth.

Many industries and services are beckoning Thai and foreign investors. They are agriculture, livestock, processing, trading, banking, fisheries, energy and hydro projects, mining, tourism and infrastructure development. Under the current Foreign Investment Law, foreign companies investing in manufacturing must inject at least $500,00 into each project and $300,000 into a service business.

The Myanmar government lets foreigners lease land for 30 years, with two options to extend for 15 years each time.