Last year around this time, co-blogger Steve Dickinson and I were in Yangon, Myanmar, assisting a company in figuring out whether to go into the country and, if so, how. We were there with Bob Walsh who studied Burmese in the Army and has maintained a close interest in the country ever since and has done several projects there since 2001. Last year a group of clients urged him to go to Myanmar and undertake projects on their behalf, and he hasn’t left yet, and it’s looking like it will be a long time before he does.
Since our last trip to Myanmar, we have been involved in a few Myanmar matters, but truth be told, Myanmar is a difficult place in which to do business and many of the companies going there are bigger companies mostly looking to get in now and make money later. In the last year, Bob has spent more time in Myanmar than outside Myanmar and we were thinking that now would be a good time to update the situation there. So after getting a few email updates from Bob, we asked him to provide us with his on the ground report on what it is like these days for foreign companies doing business in Myanmar or seeking to do so. Here goes.
After a year of almost continuous residence, I’m starting to see improvements, but they are not everything that was expected.
Cars: Cars have flooded in, mostly used (less than 7 years old) Japanese cars, but the odd Hyundai and Kia can be seen as well. Ford is actually selling now, but I haven’t seen that many on the roads. This has led to a few traffic bottlenecks in Yangon that would have been undreamed of a few years ago, but to its credit, the city government is putting in overpasses in most of the right places. The outlawing of motorbikes keeps the place from looking like Jakarta or Bangkok. The other good news is that the older rattletrap taxis are steadily disappearing; some of these actually harbored vermin like scabies and bedbugs and it is nice to “see” them disappearing.
Roads: Nothing is happening immediately with roads, but that is to be expected. Having made several pilgrimages to government offices in Naypyidaw, I can tell you that a lot of help is needed in designing and building high-speed roadways. The highway to Naypyidaw is supposed to be the best in the country, but there’s something “off” about it, and driving at night is tricky. Over the holiday weekend a group of us went to Chaungthar Beach, on the West coast of the Irrawaddy delta; roads headed that way were pretty poor as well, notwithstanding the additional degradation caused by the monsoons. Although Chaungthar is a prime tourist destination, the last 25 miles of road is 1-lane blacktop winding through the southern Arrakan Yomas. A few of the bridges crossing pretty wide rivers are actually scary as hell. Various countries’ foreign aid plans are budgeting for highway improvements in Myanmar, and the Naypyidaw government is considering allowances for state and division-level private companies to build and toll roads.
Electricity: When it comes to electricity supply, there is still much talk, but little real improvement. The supply is at its most intermittent at the end of the early spring dry season, when hydroelectric dams are low, and demand for power is high due to the extreme heat. Accordingly, most businesses and the better residential buildings will have their own generators, which is an additional expense (as much as $25K/mo for a medium-sized factory). Still, power from the grid is pretty steep, about twice what one pays in the United States. As it seeks to fill the industrial parks and newly forming SEZ’s, electricity, then roads should be top priorities. The sad numbers are that at most 14% of Myanmar people are even on the grid, and the per capita supply is something on the order of less than 120kwh per year; neighboring Bangladesh gets more than twice that.
Who’s coming in: Aside from Coca-Cola, American companies don’t seem to be trying to claw their way into Myanmar. But we are seeing waves of Thai companies, especially CP Group, coming in big, mostly to take advantage of agricultural land and low wage labor. Japanese companies are flooding in as well, to do all sorts of stuff, bilateral trade, local manufacturing, and development of infrastructure.
That aside, we’re working with a couple of sizable Myanmar companies who are less interested in investment than they are in getting a solid project off the ground with a foreign partner. Many of these companies are actually sitting on quite a bit of cash, or are holding thousands of acres of land, which at the moment is as good as cash. Most of them are willing to be reasonable in pricing land leases, as long as the incoming foreign project is attractive and bankable.
Real estate/Hotels: More and more renovated properties are opening, and what we were told to expect last summer, in terms of the market returning to equilibrium after an early boom, seems quite a likely scenario. Still, it’s the low season for tourism. The true benchmark for what it costs to stay here will be the US State Department’s per diem rate, which is currently $234/day for lodging. Land for industrial use and development is still in stratospheric price ranges, but many of the owners are willing to enter into long-term lease arrangements for co-development under terms that are a bit more sane. This report by Scipio (you will need to give them your email address to get it) very nicely addresses the real estate situation here.
One set of laws that are under consideration for draft are those intended to curb speculation by forcing landowners to actually develop what they are sitting on. A good example are hundreds of plots in the Thilawa SEZ, which were snapped up by speculators and have yet to be developed.
Lands that have been seized/confiscated or acquired using coercion are being addressed, and in many cases the original landowners are successfully getting redress and remedy. For foreign companies coming in to do anything land intensive, job #1 is to make sure that clear title exists and there is no historical baggage associated with what is being leased.
Law: The national legislature is grinding its way through the making of laws. I don’t follow it closely, but the latest thing circulating is the draft on the condominium law. As you’ll remember, there were several drafts of the foreign investment law circulating last year in the spring. With this bill, the main source of interest is whether or not expats will be permitted to buy apartments outright, versus leasing/renting. A petition is being circulated to draft a law to restrict interfaith marriages. This is intended to curb Muslim men from marrying Buddhist women. As you and Steve have pointed out, what has to follow are implementing instructions. As it happens, relatively few applications under the Foreign Investment Law are actually in process.
On the company registration front, we note that MIC, the watchdog over foreign companies in Burma, is already going around inspecting foreign companies in Myanmar to make sure that they are working within the scope of business they declared. And of course they are finding piles of companies that never quite bothered to get any sort of registration at all.