Myanmar Investment Guide
June 2017 AEC+ Business Advisory World Business Division
1 Table of Contents
Country & Economic Overview
Key Industries & Opportunities
Doing Business in Myanmar
KASIKORNBANK’s Support
2 Why Myanmar?
Strengths of Myanmar:
Wealth of natural resources Youthful and cheap labor force Strategic location Fast growing and sizable market
3 Table of Contents
Country & Economic Overview
Key Industries & Opportunities
Doing Business in Myanmar
KASIKORNBANK’s Support
4 Country Overview
Although economic activity in Myanmar has slowed somewhat in 2016-2017, its economic growth remained strong at 6.5%, with positive future prospects in the long run as the progress of reform takes shape.
Country Name: Republic of the Union of Myanmar
Area: 676,578 sq.km
Population: 52.91 million (2017 e)
Government: National League for Democracy (NLD)
Currency: Kyat
GDP (Current Price): USD 68.3 billion (2016)
GDP per capita: USD 1,307.0 (2016)
Timeline and Milestones: 1990 2010 2012 2013 2015 2016 Goal
1990: 2010: 2012: 2013: 2015-2016: 2016-2017: 2030 ASEAN First election in Implement new EU lifts NLD won election; US sanctions Become a ‘Modern, Membership 20 years. Foreign sanctions and first civilian president lifted; developed and Investment grant GSP in 50 years New Investment democratic nation’ Law 2012 Law 2017
5 Data Source: ADB, HKTDC Research, IMF, World Bank Economic Overview
Economic Growth Outlook, 2012-2019 Changes in Economic Composition, 2010-2016
In the next 3 years, Myanmar’s economy is expected The service and agriculture sectors’ contribution to to grow at an average of 7.1% per year. the economy grew significantly.
. FDI and trade should pick up – Despite a decline from the global . Telecommunication grew on the back of emerging demand for ICT- slowdown and sluggish real estate, investment is projected to rise. related services from a wider demographic. The lifting of U.S. sanctions and growing interest from China would . Agricultural production had also begun to pick up, as the sector also have positive impacts on trade. gradually recovered from the flood in 2015 that had cut . Structural Reform – The release of its new investment law and productivity drastically. company act should help modernize Myanmar’s antiquated legal . Government spending in agriculture to rescue the agriculture system and attract more foreign investment if implemented sector after the flood was also another factor that pushed up effectively. growth.
6 Data Source: World Bank, CIA, ADB, FAO Foreign Direct Investment
There was a clear shift in FDI trends, from mainly pouring into extractive and resource-dependent sectors such as oil and gas to being more focused on non-commodity sectors such as services, manufacturing and hospitality.
FDI Inflow by sector, FY2016-FY2017 Top Foreign Investors, 2016
China st th Hong Kong 1 USD 18.6 billion 4 USD 7.6 billion
nd Singapore UK 2 USD 16.9 billion 5th USD 4.1 billion
Thailand South Korea rd th 3 USD 10.9 billion 6 USD 3.6 billion
► FDI dropped from USD 9.5 billion in FY2015/16 to USD 6.9 billion in FY2016/17, as investors had adopted a wait-and-see approach following Myanmar’s major change of government. Total ► The large investment in transport & communications, manufacturing, USD 6.9 billion power and real estate signifies growing interest in Myanmar as a consumer market and production hub, as opposed to being only a source of commodities. ► Singapore has risen as the top investor by cumulative value since 2012, outranking China, though China remains the top investor in 2016.
7 Data Source: : Directorate of Investment and Company Administration, Myanmar, ADB Myanmar Trade Overview
Myanmar’s trade deficit continued to persist, with the flood affecting agricultural exports and falling commodity prices affecting the value of it oil & gas exports. Imports also contracted somewhat in line with the slowing economy.
Trade Flows and Balance, 2012-2016 Total Exports and Top Total Imports and Top Export Products, 2016 Import Products, 2016
Total exports in 2016 was Total exports in 2016 was USD 12 billion USD 21 billion 6% 0.9%
compared to USD 12.9 billion in compared to USD 21.2 billion in 2015. 2015.
Oil and Gas Electronics USD 3.4 billion USD 2.4 billion
Apparel Machinery USD 1.6 billion USD 2.2 billion Top Trade Partners 1. China Agricultural Autos & Parts 2. Thailand USD 2.1 billion 3. India USD 1.1 billion
8 Data Source: : International Trade Center, World Bank, ADB Myanmar – Thailand Border Trade
The majority of Myanmar’s trade with Thailand is unrecorded and occurs through the borders.
There are 6 official trade points 45% of Myanmar’s border occurs through the Mae Sot border but the Mae Sai – Tachileik and Mae Sot – Myawaddy as the border is the closest entry point for Thai goods to reach are the most . Yangon, from where goods heading to other provinces are disseminated.
Mae Sai – Tachileik: Mae Sot – Myawaddy: Gateway to Mandalay, Gateway to Yangon and key Northern Myanmar and economic cities, South Asia, Southern China Europe, and the East-West Economic Corridor
Key Products 2016 Myanmar-Thailand Border Trade Volume, 2016 Myanmar’s Exports Myanmar’s Imports
Exports: USD 2.3 billion 28%
Imports: USD 3.2 billion 10% Fuels Fishery Beverages Sugar
Exports dropped significantly due to a 37% drop in natural gas exports and other commodities, while imports grew on growing sugar, beverages and auto parts imports. Live Animal Meat Textiles Phones
9 Data Source: : Department of Foreign Trade, Thailand Myanmar – China Border Trade
1 Official border: Ruili – Muse Ruili- Muse is the border with the Future Developments: most traffic, accounting for 85% of 1. New Muse Central Economic Zone to total border trade. be completed in fiscal year 2017-2018.
Strategic Importance: 2. China-Myanmar Border Economic Cooperation Zone to be established to • Gateway to Bay of Bengal. boost border trade • On route of Kyaukpyu Pipeline
Shan State Key Products 2016 Nay Pyi Taw Myanmar’s Exports Myanmar’s Imports
Fuels Ores Electronics Machinery China-Myanmar Border Trade Volume, 2016
Exports: USD 3.7 billion Woods Precious stones Vehicle Iron and Steel Imports: USD 1.6 billion
10 Data Source: : Ministry of Commerce, Myanmar, International Trade Center Infrastructure Overview
Road transport dominates long-distance travel, supporting 90% of freight transport and 86% of passenger transport.
Domestic Volume of Freight by Type of Road Aviation Transport (million tons), 2014 Road transport is the dominant mode of There are 3 international airports in passenger and freight transport but only Yangon, Mandalay and Nay Pyi Taw. The 53% of the truck road network is currently new Hanthawaddy Airport, near Yangon, is paved. However, this is due to improve as expected to be completed in the term of the government pushes for GMS network current government. development.
Water Transport Telecommunication There are 5 major ports in Myanmar: The mobile industry saw major reforms Sittwe, Kyaukpyu, Yangon, Thilawa, and when the government issued licenses to Dawei. Yangon is the busiest port which Telenor, Ooredoo and most recently handles 85% of cargo, and Thilawa is an up- Viettel. and-coming deep-water cargo hub. Market Share Myanmar’s ports have the potential to
become regional hubs due to the possibility MPT (State-owned) 45%
to save shipping time by going over land in Telenor 38% Myanmar. Ooredoo 17%
As of mid-2017, mobile penetration rate has grown to around 79%, while internet
penetration rate is 87%. 11 Data Source: : ADB, Myanmar President Office Road Network
GMS Network Roads Tamu – Mandalay - Muse Tamu – Nay Pyi Taw - Mawlamyine
• Part of Northern Economic Corridor • Part of Western Economic Corridor • Strategic route from Myanmar-China border • The significant and the most traffic route for (Muse-Ruili) through Mandalay, Myanmar’s domestic freight. It runs through Myanmar’s northern economic center, and Myanmar-India key cities including Mawlamyine, Yangon, and border (Tamu-Moreh) Nay Pyi Taw
Mongla – Tachileik (Mae Sai) Dawei – Bhunamron (THA)
• Part of North-South Economic Corridor • Part of Southern Economic Corridor, it runs • Known as Myanmar’s R3B route, that links through Vietnam – Cambodia – Thailand – China (Kunming) – Myanmar – Mae Sai Myanmar (Dawei SEZ) • Used for transport of Thailand-China trade • Although Dawei is still under development, it has potential to become an alternative route, linking the South China Sea and the Indian Mawlamyine – Myawaddy (Mae Sot) Ocean • • Part of East-West Economic Corridor The route is uncompleted in some parts due to missing links in Myanmar. • One of the most used routes in the GMS region. It links Myanmar’s new Mawlamyine SEZ, Thailand’s Tak SEZ, Laos’ biggest industrial zone Savannakhet SEZ and Vietnam’s deep sea port and industrial zone at Da Nang.
12 Data Source: : ADB, Secondary Research Port Infrastructure
With a 2,800 km coastline running along the eastern side of the Bay of Bengal, Myanmar has the potential to become an alternative international trade route to Asia and Indochina Yangon Port Sittwe Port • Myanmar’s gateway port which • India’s strategic commercial and handles 85% of water cargos. political port rivaling China. • International trade center and • Deep-water port that links Sittwe and central distribution point. India’s Mizoram. • India handed it back to Myanmar Sittwe Thilawa Port government in March, 2017. Kyaukpyu • Deep-water multi-purpose terminal for larger vessels next to upcoming Kyaukpyu Port Thilawa SEZ. Yangon • A new container terminal to be • Important link in China’s energy Thilawa completed in early 2018. security. • Part of transport network between Middle East and Africa. Dawei Port • Can supply 440,000 barrels of oil and Dawei [Phase I completion: 2023] 12 billion cubic meters of gas per • Hub linking the GMS network, South year. Asia and Southwest Asia. • Oil pipeline started to transport oil in • Phase I to take 8 years, with 2 small May 2017 after having signed the ports for 400 TEU and 1,600 TEU. agreement in August 2016. Small port and road construction has started. 13 Data Source: : ADB, Secondary Research Air Infrastructure
2015-2016 3 international New Aviation Development Plan airports International air Domestic air And 30 domestic passenger grew: 17% passenger grew : 15% Yangon : airports from 4.7 million to And overall traffic has New terminal opened 5.4 million passengers. doubled since 2012. The new building is able to handle 6 Mandalay million passengers a year, more than double the previous capacity of 2.7 Air cargo enters mainly through Yangon, while million. Mandalay mostly receives cargo from China via direct air freight Nay Pyi Taw Mandalay: Regional Logistics Hub Current and Future Passenger Capacity Upgrade passenger and cargo facility. Cargo tonnage to be increased to 8,000 Yangon from 4,000 by 2023.
Hanthawaddy: Main International Hub Beginning 2016 to finish by 2020 and to increase capacity to 12 million passengers a year in Phase I.
14 Data Source: Department of Civil Aviation, Myanmar, Secondary Research Major Cities for Economic Activities by Region
Yangon & Mandalay Nay Pyi Taw Main business hub for: Capital city and main • Trade, light industry, real administrative hub. estate, media, • Location of government entertainment, tourism and government offices
Taunggyi Myeik Rich people community Large fishing community. • Tourism, agriculture • Fishery, pearls, natural resources, forestry, and tourism
Mawlamyine Dawei City near major Mae Sot – Site of upcoming deep water Myawaddy border port. • Agriculture, forestry, • Agriculture, fishery power, oil & gas • After port completion: heavy industry
15 Data Source: AEC+ Business Advisory Table of Contents
Country & Economy Overview
Key Industries & Opportunities
Doing Business in Myanmar
Kasikorn Bank’s Support
16 Key Industries & Opportunities
Myanmar has many attributes that are likely to attract foreign investors: its endowment of natural resources, large and young population, rich culture and strategic location
Construction & Agriculture Retail Construction Tourism Resources Garment Business Material
17 Retail Industry
18 Food & Beverage - Overview
Key drivers: growing young middle class, number of expats and tourists, Did you know… “Consumer spending has the potential to increase to together with growing awareness of foreign products with higher over $100billion per year by 2030, which is triple the quality and increasing demand for processed food and drinks current $35 billion” - Oxford Business Group
2016 Top Imported 2016 Top Imported Target Consumers Foods Beverages Segment High Income Low-Middle Income 1. Sugar & confectionery 1. Soft drinks • Elites, tourists, expats • Working class, small 2. Cooking oil 2. Beer business owners 3. Baked products 3. Liqueurs 4. Fruits & nuts 4. Wine 5. Cereals 5. Drinking water • Major cities: Yangon, • Taung Gyi, Yangon, 6. Dairy products 6. Spirits Mandalay, Nay Pyi Taw Mandalay, Nay Pyi • Tourist destinations : Taw, Bago, Monywa, Bagan, Ngapali Magway, Mawlamyine Key Global Players • Premium meat and • Snacks • Unilever • Coca-Cola • Carlsberg seafood • Cooking ingredients • Nestle • Lotte • Yum brands • Dairy products especially cooking oil • P&G • F&N • Heineken • Cereal /pasta • Dairy products • Premium alcohol: • Juice and soft drinks Top Trade Partners wine, liquor , beer • Lower price liquor • Functional drinks: juice, healthy drinks, India Thailand Indonesia China and beauty drinks
19 Data Source: UN International Trade Center, AEC+ Business Advisory Other Retail - Overview
Myanmar’s urban populations are becoming more aware of regional brands and have greater access to new purchasing channels, especially convenience stores, where about 80% of products are imported from countries including Thailand.
Key Retail Players Consumer Demographics
City Mart – Myanmar’s largest retailer 180 Outlets including: supermarkets, hyper-centers, convenience stores in Yangon and Mandalay. 34% 66% Urban Grab and Go Rural 100 stores. Open 24 hours. Has branches in Yangon, Mandalay and Nay Pyi Taw. 4 people per household 2.5% on average Urbanization Rate Aeon – First foreign retailer 1 Aeon Orange supermarket. Joint venture with Orange, who has 14 supermarkets. Plans to open 10 more branches within 5 years. Consumer Spending
2016 Top Imported Other Popular Products 5% Utilities Consumer Goods • Home care 5% Toiletries • Fashion Food and Beverage • Kitchenware 52% • Baby products Others Medicine • Perfumery 38% • Sporting goods of household expenditures • Cosmetics goes to groceries Personal Care
20 Source: MMRD, Nikkei Asia Review, International Trade Center Retail Consumer Behavior
Myanmar consumers generally prefer local Channel Preference: Modern Trade products due to familiarity and lower price; Product Category Yangon Mandalay however, preferences have been gradually shifted Beverages 52% 29% to foreign brands and modern trade outlets. Confectionery 54% 16% Packaged Foods 51% 20% Purchasing Behavior: Personal Hygiene 61% 23% Segment High Income Low-Middle Income Household Appliances 90% 37% Geography Urban Urban and rural Product Origin Preference Outlet Type Supermarkets and Grocery shops and wet convenience stores markets. Product Origin Product Category China Apparel, confectionary, small household appliances
Product Choice, novelty and Price and convenience Thailand Soft drinks, packaged foods, personal care products, Selection quality confectionery Korea Personal hygiene products, minor household Expenditure 50% spend more 70% spend USD15 – appliances than USD 36/week. USD28/week. 60% spend more than Japan Major and minor household appliances USD 28/week. Western Alcoholic beverages, confectionery
21 Source: Deloitte’s Myanmar Consumer Survey, 2016 Retail - Opportunities
There are vast opportunities for exporting consumer goods. Establishing retail and wholesale chains is also possible, but the market is rapidly becoming more competitive, with large foreign chains establishing themselves.
1 Food & Beverage 2 Other Consumer Challenges Goods Tense competition from global brand names. Gaining consumer’s trust in quality is key. Infrastructure Concerns Electricity supply can be unstable at times. Consider back- up electricity supplies. Drivers: Drivers: Distribution methods . Local producers lack high-tech . Emergence of new retail channels equipment and cannot meet such as hypermarkets, online Logistics network may be inefficient at times. Should international standards shopping and convenience store establish relationship with local distributors or agents. . Growth in hotel and restaurant . Preference for foreign products industry Regulation Update 2017 Opportunities: Opportunities: • Retail and wholesale is now open to foreign 1. Set up processing facilities to 1. Export products to local retail investment, given approval from the Ministry of supply high-quality goods to chains Commerce. local market. 2. Operate local production for the 2. Export to meet growing local local market and foreign market. • For more details on other investment restrictions and demand and cater to restaurants 3. Establish retail chain list of promoted activities, see the Doing Business and hotels section.
22 Construction & Construction Material Industry
23 Construction - Overview
Construction Sector Output, 2016 Key Drivers… 1 32% Government’s push in affordable housing program, rapid Industrial Projects economic growth demand for residential buildings
68% Residential & 2 Commercial Projects Huge infrastructure development needs, increasing industrialization ,and energy sector growth demand for infrastructure and industrial buildings Average Building Construction Cost (per average size)
Factory with steel structure USD20,000 – 25,000 Projects by Ownership, 2016 Factory with reinforced concrete USD 30,000 Additional tile flooring and wooden ceiling USD 15,000 10% Foreign Investment & Things to consider: large companies Land price is rising rapidly Commercial land lease is USD 0.10 – 5.50 per square foot. 90% Most projects are overseen by large developers, who subcontract High-skilled labor shortage SMEs various parts of the project to Construction worker wage is rising. Some projects have seen rates of minor subcontractors USD10/day – 3 times the normal rate
24 Data Source: DICA, The International Trade Administration, Foreign Investment Law Construction Material - Overview
Despite a slowdown in 2016 that resulted in a fall in cement demand, growing industrialization foreign investment will drive up demand for construction material, particularly in more advanced or higher-quality products.
2016 Prices of Common Materials Other Materials Used: Material Unit Price (USD) Segment Materials Preference Cement Ton 87.36 Roof • Corrugated steel • 60% usage. Popular due to cheaper price Sand Square meter 9.16 • Aluminum zinc • Used in more expensive buildings Gravel Square meter 26.07
Brick Piece 0.09
Walls • Brick and mortar • Used in both traditional 2016 Top Imported Top Importers and modern buildings. Materials Locally produced. • Cement Steel and Iron • Fiber cement/plywood • Used for inner walls USD 886 million China Aluminum Flooring • Steel and concrete • Used as floor base USD 187 million frames • Tiles, laminate floors, • Used for decorative Cement and 65% wood parquet, marble purposes other stones Compared to USD 283 million USD 89 million in 2015 Thailand
25 Data Source: UN International Trade Center, mmbiztoday Construction & Construction Material - Opportunities
1 Construction 2 Construction Key • Demand growth exceeds Material Drivers local supply capacity • Lack of high-tech equipment • Lack of quality raw materials • Lack of technical know-how
Challenges Opportunities: Opportunities: 1. Project developer 1. Export raw materials or ready- Registration System • High risk: Must be mindful made materials to local No proper registration system. Often difficult for of ownership and distributors or contractors foreigners to become contractors and most target regulations 2. Produce raw materials locally consultancy 2. Contractor : oversee construction 3. Supply heavy machinery for for developers production of ready-made Lack of high-skilled labor 3. Consulting service: offer services materials High-skilled workers are more costly and hard to find. to developers or offer consulting Should consider investing in training and capacity-building for: • Engineering • Architecture and design 4. Machinery supplier for Myanmar National Building Code was established in August 2016 and includes quality requirements construction such as cranes, for materials and other procedural standards for construction projects. forklifts, trucks ► For more details on investment restrictions for the sector and list of promoted activities, see the
Doing Business section.
26 Agriculture Industry
27 Agriculture Business - Overview
The flood in 2015 had a devastating impact on Myanmar’s agricultural productivity. However, the situation is set to improve, supported by government funding and growing demand from abroad, particularly China.
Agriculture Share of GDP, 2016 Key Produce 2016 Key Trade Partners
Agriculture accounts China India for 26% of Myanmar’s GDP Rice Maize Myanmar exports most of its products to China and India. It also imports a lot of 12.2 million 2.2 million machinery from China. Total GDP metric tons metric tons USD 68.3 billion 2016 Key Exports 2016 Key Imports Myanmar does not have a diverse It imports lots of higher value agriculture New Law to Buoy Sector agricultural sector and faces and processed products as well farming competition from those producing inputs such as fertilizers and machinery • The Myanmar Investment Commission has higher quality produce identified the agriculture sector as one of the key 20 promoted industries and now allows trade in Legumes USD 1,077 million Tractors USD 285 million some products. Rubber USD 194 million Harvesters etc. USD 156 million • For more details on restrictions and list of Rice USD 119 million Fertilizers USD 71 million promoted activities, see the Doing Business section. Nuts USD 55 million
28 Data Source: UN International Trade Center; Ministry of Agriculture and Irrigation, Myanmar, FAOSTAT Key Agricultural Products by Region
Kachin State (1,452 ha) Chin State (1,209 ha) Kachin Principal occupation of population is Main crops: paddy, maize and State agriculture • Paddy, sugarcane and groundnuts are grown millet. in river valleys • Other crops include wheat, • Paddy and sugarcanes are grown on the groundnuts, chili, cotton and plains sugarcane • Orchard fruits include apples, oranges, damsons and grapes. Chin Shan Shan State (1,943 ha) State State Agriculture is the main economic activity • Crops: tea, coffee, wheat, chili, cotton, sesame, pulses, groundnuts and onions. Ayerwaddy Region (30 ha) • Fruits: oranges, pears, peaches, grapes, pineapples. Main paddy production region Ayerwaddy due to fertile soil. • Other crops are groundnut, State sesame, coconuts, bananas, jute, Tanintharyi Region (263 ha) tobacco, chili, onions, pulses and tapioca. Main crops are paddy, betel nut, coconut, • Also major producer of fish- rubber paste, dried fish and dried Tanintharyi • Tapioca, rambutans, durians mangosteen and prawns. State oil palms are also grown.
29 Data Source: Ministry of Agriculture and Irrigation, Myanmar Agriculture Business - Opportunities
The agricultural sector is extremely underdeveloped despite having an abundant labor force in the sector. This presents ample opportunities to improve production efficiency and value-added technology 1 Plantation & 2 Processing 3 Marketing Production
Drivers: Drivers: Drivers: • Productivity is still low due to lack • Productivity not maximized due to • Individual small farm owners do not of advanced technology lack of high-tech equipment have the resources to directly • Lots of unused cultivable land • Quality not up to international market to consumers • Local input production not enough standards to meet demand
Opportunities Opportunities Opportunities 1. Plant, cultivate or produce for 1. Export or locally supply technical 1. Opportunity to function as link exports. inputs such as processing between farmers and consumers: 2. Export or locally produce farming machinery, farming machinery or • Storage inputs such as seeds, pesticides, heavy autos and equipment. • Distribution fertilizers and other chemicals to • Trade boost productivity.
30 Tourism Industry
31 Tourism - Overview
Hotel Projects Status, as of 2015 Competition is intensifying…Due to significant Interest in Myanmar as a tourist growth in investment in the past few years, room destination saw a sharp rise a few 34 projects, USD 1.7 billion rates in middle to upper end segments have been years ago, though the rate of growth falling. Completed - while still positive - may be more Hotel Type Price Range (USD) moderate in the coming year. 11 project , USD 0.8 billion Constructing 5-Star 130 - 600 4-Star 60 – 100 2016 Tourism Trends 3 projects, USD 0.1 billion Permitted 3-Star 45 - 55
Tourists’ Perception and Behavior Purpose Vacation/ Sightseeing 70% 38% Business/ (and Vacation) 21% 2.9 million arrivals Others 9%
The decline results partly from a change in Number of visits One time 50% calculations. Figures now no longer include 2-3 times 26% day-trippers who pass through land borders, More than 3 times 24% which is a major entry point. Top Attractions 1. Beautiful architecture and buildings 2. Cultural and historical attractions Point of arrival: 3. Interesting customs and culture 34% through border gateways 4. Scenic and natural beauty 66% through Yangon Airport Pain points . Relatively unstable political situation
. Standard of sanitation and hygiene . Very few fashionable brands for shopping 32 Data Source: Ministry of Hotels and Tourism, Myanmar, APHEIT Journals Tourism - Destination
Bagan: Capital of Myanmar’s first dynasty. Home to various Mandalay: Home to many temples and the renowned hot- famous pagodas and rich hair balloon tour religious architecture of the old kingdom
Mrauk-U: From the 15th to 18th centuries, Mrauk U was the capital of a mighty Arakan Inle Lake: kingdom Country-side lake town and fishing community
Ngapali Beach: Most natural and untouched Hpa-An beaches in Myanmar with 3 km Hpa-An: of white sand Dawna Range and natural sceneries such as Mt. Zwegabin and Sadan Cave
Mergui Archipelago: Comprises of over 800 Yangon: Attractions include small islands. Mostly still the world famous Shwedagon uninhabited by people Pagoda, colonial era structures and national museums
33 Tourism - Opportunities
Easier access to the country through improving quality of transport and the opening of borders has drawn more tourists. Local spending power is also growing, which will help to boost the tourism sector.
1 Tour Operating 2 Hotel & Restaurant Regulations Foreigners are not allowed to provide tour guide services, but can engage provide local tour services under a joint venture.
► For more details on regulations, see the Doing Business section.
Drivers: Drivers: Challenges • Market dominated by English- • Increased flow of tourists and speaking tour companies. Thai growing wealth of locals Underdeveloped Infrastructure companies are limited. • Number of foreigners increase and Electricity supply problems and logistic infrastructure • Expected continuous growth in more demand for quality products problems especially for hotels. Presents problems tourist inflow regarding travelling method, time and cost for tour operators
Opportunities Opportunities 1. Expand tour operations to 1. Open hotel or restaurant to cater Distribution Network speakers of other languages to to travellers For hotel supplies, should partner with local agents or increase consumer base 2. Cater to hotels or restaurants to distributors with established networks. Myanmar has a provide quality products for traditional distribution structure of importer, distributor, higher-end hotels and restaurants wholesaler, retailer. Hotels and restaurants often order through local importers
34 Resources Industry
35 Power - Overview
Myanmar’s abundant natural resources makes it extremely Current and Future Power Capacity (MW) attractive for investment in the power sector. According to the ADB, the country has a huge hydropower potential of over 100,000 MW and potential coal reserves of nearly 500 million tons.
2016 Cumulative FDI 2016 Source of Power
FDI in power sector makes up Solar 13% 29.3% of total cumulative FDI Wind at USD 20.6 billion 13% Government Plan 2016 – 2031 Top Investors Hydropower The Ministry of Electric Power plans to expand its power 74% sources to thermal and green energy since hydropower can be unstable China Hydropower 29 projects Short term: by 2016 Long term: by 2031 Wind Power 5 projects Singapore Increase total capacity Promote 41 new power Solar Power 5 project to 6,823 MW plants to boost capacity to 29 GW
36 Data Source: Directorate of Investment and Company Administration; Myanmar Electric Power Enterprise Mining - Overview
Closed off by years under sanctions, Myanmar has a Prohibitions for Foreign Investors wealth of natural reserves of metals and minerals have remained unexplored. The sector is also in need Prospection, exploration and production – in the of experience and advanced technology in exploration 1 jade and gemstone subsector and refinery. Small and medium scale production of all minerals Myanmar mainly exports raw mineral products, but lacks sufficient 2 technology to produce more value-added finished products. It is also A new Myanmar Gemstone Law is currently being drafted, reliant on imports of machinery. which may change some of these restrictions
Top Machinery Imports 2016 Key Exports 2016 HS Code Product Import Value (USD) 8429 Excavators, bulldozers 126 million 8474 Machinery for sorting 53 million 8430 Machinery for leveling 17 million Ore esp. Tin, Iron Precious Stones Copper 8459 Machinery for drilling, boring 5 million USD 950 million USD 350 million USD 270 million
Top Importers’ Share of Imports: 138% 84.8% 170% Compare to USD 0.4 Compare to USD 2.3 Compare to USD 0.4 China: 50% Korea: 15% Japan: 13% billion in 2015 billion in 2015 billion in 2015
37 Data Source: Ministry of Mines, International Trade Center Oil & Gas - Overview
Myanmar has abundant and relatively untapped hydrocarbon reserves, with 10 trillion cubic feet of proven gas reserves and 50 million barrels of proven oil reserves. Domestic demand for oil and gas is also growing rapidly
2016 Foreign Direct Investment Key Exports 2016 Key Imports 2016
Petroleum Oil FDI in Oil & Gas makes up Natural Gas USD 3.3 billion USD 2 billion 35% (not crude) of total cumulative FDI Petroleum Gas at USD 22 billion Crude Oil USD 36 million USD 23 million (Propane, Butane) USD 4.8 billion was approved in 2015 3 Existing refineries Thanlyin – Yangon Chauk – Magway Operating at 41% of capacity Mann Thanpayarkan - Magway Existing Oil and Gas Blocks Upcoming refineries Tanintharyi Region 2 Mann Thanpayarkan - Magway 51 Offshore Blocks 53 Onshore Blocks
► Major buyers of oil and gas in Myanmar are State Owned Enterprises: 18 Operating 17 Operating Myanmar Oil and Gas Enterprise (MOGE), Myanmar Petrochemical Enterprise (MPE), and Myanmar Petroleum Products Enterprise (MPPE), 20 Awarded in 2014 16 Awarded in 2013 ► MOGE has the exclusive right to carry out O&G operations with private entities. 13 Government-owned 20 Government-owned ► For more on regulations, please see the Doing Business section.
38 Data Source: Ministry of Energy, Myanmar; Trading Economics, International Trade Center, export.gov Resources - Opportunities
1 Power 2 Mining 3 Oil & Gas
Drivers: Drivers: Drivers: • Huge natural resource potential. • Underdevelopment means ample • One of the most supported industries • Still very low access to electricity opportunity for rapid discovery by the government especially in rural areas • Need for more sophisticated surveying • Low local capacity: need for • Strong demand pull as industrial sector and extraction technologies technological development; aging and private sector income grows existing infrastructure
Opportunities Opportunities Opportunities 1. Invest in power plants such as 1. Engage in prospection, exploration 1. Engage in onshore or shallow/deep hydropower, coal-fired , gas-powered and large scale production of water offshore exploration and or thermal power plants minerals apart from precious stones production 2. Can produce jewelry for precious 2. Engage in petrochemical processing stones sector 3. Supply machinery and autos to sector
39 Garments Industry
40 Garments - Overview
The garment sector has been expanding rapidly, with FDI constantly flowing into the sector, drawn by cheaper labor. The sector is mainly focused on importing textiles to produce garments for re-exporting.
Textile & Apparel Trade, 2014-2016 Overview 400 400,000 31% Import Export garment factories workers employed in growth rate of operating in the domestic apparel garment exports in Myanmar industry. 2016
Top Export Destinations for CMP Garments, 2016 1. 2. 3. 4.
Japan Europe Korea USA 33% 25% 25% 2.4%
“The vast majority of Myanmar’s garment factories ► Trade privileges will help Myanmar to boost its trade volume exponentially in years ahead. operate under the CMP system ”
This is a typical form of contract work. Foreign investors ► With prospects of the US further relaxing sanctions and granting GSP often pay contracting fees to local garment factories to benefits, Myanmar’s apparel exports is expected to reach USD 12 carry out labor-intensive apparel production. billion by 2020.
41 Data Source: International Trade Center Garments - Opportunities
1 Textiles 2 Garments Challenges Sourcing Labor T&A clusters are located in few locations where skilled labor may be hard to find. This may result in competition in recruiting workers.
Drivers: Drivers: • Growth in global apparel companies • Abundance of affordable labor High operating cost investing in Myanmar force Underdeveloped infrastructure leads to extra • Lack of textile manufacturers and • FDI incentives and export privileges costs such as setting up back up electricity materials that meet international • Most companies still in entry stage generators. Poor logistics in certain parts also standards (CMP) leads to lengthy transportation time.
Opportunities Opportunities Infrastructure & electricity 1. Produce raw materials for foreign 1. Produce OEM products in the Though they are problems for all industries, apparel producers, focusing on downstream stages of the textile Myanmar’s electricity supply problems are high-quality raw material sourcing and apparel value chain to especially detrimental to manufacturing. integrate with the global supply Ensuring there is back-up supply raises chain production costs dramatically
42 Table of Contents
Country & Economy Overview
Key Industries & Opportunities
Doing Business in Myanmar
KASIKORNBANK’s Support
43 Major Costs - Labor
Having an abundant and affordable labor force is one of Myanmar’s main attractive points. However, most workers are unskilled or low-skilled, and competition for higher-skilled workers is high.
Minimum Monthly Wage in ASEAN (USD), 2017 Other things to consider… . Minimum wage committee set up in February 2017 to revise the current law, but it is uncertain when the law will be revised. 1 Minimum Wage . OT rate: approximately double hour pay . Annual bonus: 2-3 times monthly salary . Employment benefits are standard: • Annual leave: 6-21 days • Some firms have unpaid leave • Salary increment is 5% minimum • Some have extra provisions such as Average Monthly Salaries by Position (USD), 2017 travel or accommodation expenses Salary & Benefits General Manager 1,200 – 5,100 2 . Under the new investment law, there is no Manager 750 – 4,200 longer any local-to-foreign worker ratio Accountant 350 – 1,385 requirement for foreign firms. . However, there the law does state that low- Office Staff 200 – 500 Hiring skilled workers must be local. General Worker 100 - 300 3 44 Data Source : DICA, JICA, Myanmar Survey Research Major Costs - Utility
Water Rate Electricity Rate
Usage: USD/m³ Usage: Household (kwh) USD/kwh
Household 0.44 Meter service charge 0.40 Business 0.64 1 – 100 0.025 101-200 0.030 More than 200 0.037
Key Considerations Usage: Business (kwh) USD/kwh Electricity blackouts and blowouts happen on a daily Meter service charge 3.66 1 basis 1 – 5,000 0.05 5,001 – 10,000 0.07 Most manufacturing plants utilize their own diesel power 2 generators for electricity or as back-up. This may drive 10,001 – 50,000 0.09 effective costs up to USD 0.30 – 0.40 / unit. This is often 50,001 – 200,000 0.11 higher during the dry season, when blackouts occur most often. Generators cost anywhere between USD 3,500 – 200,000 – 300,000 0.09 14,000. More than 300,000 0.07
45 Data Source : DICA, JICA, Myanmar Survey Research Exchange rate: 1 MMK : 0.00073 USD Major Costs – Rent & Logistics
Industrial Land Lease in Yangon Cross Border Logistics by Land Location Price / sq.. (USD) Destination Cargo Size Price (USD) Thilawa Zone 0.12 Myawaddy to Yangon 20-foot Container 1,500 Other Zones in Yangon 0.07 – 0.40 Invoice, packing list and license are required at the border. Handling time is around 2 days if all documents are in order.
Commercial Land Lease in Yangon Domestic Logistics by Truck Area Price / sq.ft. (USD) Destination Cargo Size Price (USD)
Mingaladon 0.10 – 5.40 MIP/AWPT Ports to 20-foot container 200 Bahan 0.45 – 1.70 Industrial Zones in Yangon 40-foot container 400
Space Lease in Yangon Key Considerations Space Type Price / sq.ft. (USD) . Logistic service business in Myanmar is still underdeveloped, particularly in more rural areas. However, the situation is improving with more foreign Office Space 0.25 – 4.00 firms entering the market. Commercial Space 0.25 – 3.00 . Land price is rising fast, especially in Yangon, which is driving up rent in Warehouse 0.15 – 0.65 key areas as well.
46 Data Source : DICA, JICA, Myanmar Survey Research Tax System
Corporate Tax Personal Income Tax Taxpayer Tax Rate Taxable Income Residency Status Tax Rate 25% Resident Company Worldwide income for Resident citizen Progressive Rate: and residents; • Living in Myanmar for 183 days or 0% - 25% on salary; Non-Resident Company Income within Myanmar more during the tax year 3% to 30% on income from for non-residents under MIC and FIL (also • Working for FIL company other sources applies for branches)
Non-resident foreigner • On income within Myanmar
Commercial Tax Note . A Commercial Tax is not the same as a Type of Goods and Services Tax Rate VAT with full credits system. Standard Commercial Tax 5% . Items subjected: 17 “Special Goods” 5% - 80% or charged as amount per unit . Sale of goods produced locally 87 Exempted Goods 0% . Importation of goods 23 Exempted Services 0% . Providing services Customs Duties 0 – 40% . Trading activities
47 Data Source : Myanmar Union Tax Law 2017 Business Registration
Depending on the type of investment, steps for registration can be categorized into the following 3 types, involving DICA (Directorate of Investment and Company Administration) and MIC (Myanmar Investment Commission) 1 2 3 Branch of a foreign company Restricted business by FIL Businesses that require or a service company (except or approval of relevant for restricted or prohibited Ministries businesses) Businesses that desire tax incentives and land rights
DICA DICA DICA Register Company Register Company Register Company
SEZ Committee MIC MIC Get Approval from SEZ Get MIC Approval Get MIC Approval Management Committee – for and MIC MIC large export-oriented businesses Approval of Relevant Ministries only Permit Endorsement 48 Data Source: Foreign Investment Law Data Source : Foreign Investment Law Business Registration
Steps for Company Registration
1. Check availability of company name Note 2. Obtain registration form and pay stamp duty • Steps may vary slightly for 3. Submit form and any required documents setting up a representative office 4. Obtain temporary registration or joint venture agreements. 5. Transfer minimum required capital: • Establishing in the Thilawa SEZ • USD 50,000 for service companies or representative offices requires a separate set of • USD 150,000 for other foreign companies procedures. See the Setting Up in SEZ page. 6. Obtain permanent registration to be used for application with MIC.
Different Types of MIC Approval
• Mandatory for large projects with value exceeding USD 100 million MIC Permit • Projects that require the use of land of more than 100 acres • Projects that may have significant impact on the environment and local community 2 Types: • Eligible for tax incentives and land rights authorization. • For smaller service-based businesses that do not need the MIC Permit but desire tax incentives or land rights authorization. See the Land Rights section, for more detail. MIC Endorsement • Not mandatory • Has simpler application process 49 Data Source: Foreign Investment Law Setting Up in SEZ
Setting up in Thilawa requires a separate process even if a company has already previously registered with DICA since the SEZ offers a separate set of incentives.
Steps for Setting Up in SEZ
1. Conclude reservation agreement 2. Obtain investment approval with Thilawa SEZ Management Committee (TSMC) at Thilawa’s one-stop service OSSC 3. Register company at OSSC 4. Obtain sub-lease agreement 5. Pay paid-up capital
Zones Types Minimum Capital Requirement Free Zone Free Zone • Considered situated outside the country. • Manufacturing: USD 750,000 • Granted to: • Service: USD 500,000 • Export-oriented businesses: export at least 75% • Supporting: USD 300,000
of production • Export-supporting businesses: supply at least Promotion Zone 80% to exporting business in the zone • All activities: USD 300,000
Promotion Zone • Any other type of business
50 Data Source: Myanmar SEZ Law LandConstruction Rights – -MIC Regulations & SEZ
Land Ownership Restriction
Land ownership is ONLY for Myanmar nationals . Foreign investors can lease land from government or private land owners if investment is permitted by the MIC or SEZ Committee . In Myanmar, a company with any share owned by a foreigner is considered a foreign company . The definition of a foreign company may be subject to change in the future when the new Myanmar Company Act is released later in 2017. . However, under the new Condominium Law (2016), foreigners are allowed to buy a housing unit of condominium.
Land Rights Comparison under MIC & SEZ
Legal Provision MIC SEZ
First term of long-term lease allowed 50 years 50 years
Extension of long-term lease allowed Two 10-year extensions for total of 25 years 20 years total possible Possible only to investors with MIC Ability to sub-lease, mortgage or transfer lease rights Possible with SEZ Committee Permit or Endorsement and given Approval MIC approval
51 Data Source: Foreign Investment Law InvestmentConstruction Incentives - Regulations – MIC & SEZ
Both investors with MIC approval and those set up in SEZs are eligible for various benefits. The comparison between those with MIC approval, and investors in SEZ Free Zones and Promotion Zones are compared below.
Legal Provision MIC Free Zone Promotion Zone
Zone 1: 7 years Income tax exemption from commencement of Zone 2: 5 years 7 years 5 years commercial operation Zone 3: 3 years* **Only for promoted sectors
Additional exemption and 50% relief for 2nd 5 years; 50% relief for 2nd 5 years; Additional income tax exemption/relief exemption/relief on re- 50% relief for 3rd 5 years 50% relief for 3rd 5 years if invested profit is negotiable if profit re-invested profit re-invested
Exemption/relief on capital Exemption on imports of 5-year exemption and a Exemption/relief of customs duties and raw material allowed capital, raw material and further 5-year 50% relief with approval goods facilitating trade on capital only
Exemption on commercial tax Yes Yes Yes
Taxable income deductible for R&D expense Yes No No
*Zone 1 is the least developed area etc. ** See the Other Relevant Regulations page
52 Data Source: Foreign Investment Law PermittedConstruction Activities - Regulations for Foreign Investors
Activities not listed are deemed open to foreign investment without condition. Maximum foreign ownership for a joint venture is 80%. Retail Sector Not Permitted for Permitted Only as Joint Venture Permitted with Approval Foreign Investors with Local Entity from Relevant Ministry • Convenience store of size less than 10,000 • Preserving and canning of food products Ministry of Commerce square feet except dairy • Retail service • Manufacturing and distribution of: • Wholesale service • Cereal products • Confectionary Ministry of Health and Sports • Alcoholic and Non-alcoholic • Manufacturing of medicine products, beverages traditional drugs and pharmaceutical • Soap and cosmetic products materials Construction & Construction Material Sector Permitted Only as Joint Venture Permitted with Approval with Local Entity from Relevant Ministry • Development, sales and lease of residential Ministry of Construction Note: apartments or condominiums • Construction of: Under a build-operate-transfer (BOT) lease • Roads and bridges agreement, foreign investors can have 100% • Urban projects above 100 acres ownership on leases up to 50 years, with two • Housing projects above 50,000 sqm. optional 10-year extensions given approval of • Urban redevelopment above 4 acres the Ministry of Construction in regional capital cities 53 Data Source: Foreign Investment Law PermittedConstruction Activities - Regulations for Foreign Investors
Agriculture Sector Permitted as Joint Venture Permitted with Approval with Local Entity from Relevant Ministry • Cultivation, domestic distribution and export Ministry of Agriculture of crops • Manufacturing, distribution and exporting of seeds, plants an fertilizers • Research on agricultural products
Tourism Sector Not Permitted for Permitted as Joint Venture Permitted with Approval Foreign Investors with Local Entity from Relevant Ministry • Tour guide service • Local tour service Ministry of Natural Resources • Ecotourism
Resources Sector Not Permitted for Permitted with Approval Foreign Investors from Relevant Ministry • Prospecting and refinery of minerals for Ministry of Natural Resources Ministry of Electricity and Energy small and medium scale project • Prospecting and refinery of minerals for • Large scale electrical business (> 30 MW) • Prospecting and refinery of jade and large scale project • Offshore exploration and distribution of oil gemstones • Marketing of gems and jewelry and gas products • Onshore exploration of shallow oil wells • Refinery or pipeline construction
54 Data Source: Foreign Investment Law OtherConstruction Relevant - Regulations Regulations
Other Investment Restrictions Promoted Industries (Notification 13/2017)
► Activities not permitted to foreigners: ► Activities in the following industries are eligible for tax incentives. Check the Notification for a list of detailed • Publication and media activities. • Fresh water fishery • Pet care service • Manufacturing of forest products • Agriculture and related services • Plantation and conservation ► Activities permitted only as joint venture with local citizen: • Livestock production • Manufacturing • Manufacturing of plastics, chemicals, flammable liquids, • Industrial zone establishment oxidants, industrial gases • Urban area establishment ► Activities permitted with approval of relevant Ministries • City development and management activities • Infrastructure construction • Broadcasting and radio • Transportation services • Marine fishing • Renewable energy production • Livestock-related businesses • Telecommunication services • Logistics and transportation services • Education services • Construction of transportation infrastructure • Health services • Postal services • Information technology • Wood-based industries • Hotel and tourism • Manufacturing of paper products • Research and development • Health and medical practice
55 Data Source: Foreign Investment Law Special Economic Zones (SEZs)
Kyaukpyu SEZ 1,900 hectares Local resources, agricultural goods, minerals China pipeline Connection to South Asia and Middle East Kyaukpyu Delay in progress due to Human Rights and Environmental issues Dawei SEZ Thilawa SEZ Thilawa 20,000 hectares 2,400 hectares Heavy, chemical industry, export oriented Light industry, assembly industry, 25-40 meter draft import substitution 300,000 DWT (planned) Dawei 9 meter draft Close to Bangkok 20,000 DWT Gateway to Indian Ocean Close to Yangon Connections to major Economic Corridors Infrastructure built from scratch Supported by Japan River port: cannot handle large ships Nine infrastructure items nearly completed Zone A is 95% occupied in March 2017 A port for vessels with maximum capacity Zone B being initiated; infrastructures 13,000 DWT is ready. to be completed in mid-2018 A 15 megawatt power plant is running. 56 Non-Tax Incentives & Trade Privileges
Non-Tax Incentives Trade Privileges
• The new FIL provides an explicit guarantee that an enterprise with MIC permit cannot be nationalized during . ASEAN the term of the contract or during any extended term . WTO
• Upon the expiry of the contract, the government . GSP guarantees that an investor may remit its investment and profits in the foreign currency in which such investment Bilateral trade agreements: was made o Australia o Malaysia o Bangladesh o New Zealand • Investment businesses in the SEZ are guaranteed against o China o Pakistan nationalization under the Myanmar SEZ Law. Under the o EU o Philippines Myanmar SEZ Law, the price of goods manufactured, o India o Russian Federation services rendered and goods exported from exempted o Korea DPR o Thailand zones and promoted zones within the SEZ are not to be o Kuwait o Vietnam controlled o Laos
57 Data Source : Ministry of National Planning and Economic Development, Myanmar Business Etiquette in Myanmar
Do’s Don'ts Other Tips
Use tiles such as U/Mr. or 1. 1. Daw/Ma’am Always have a business card Touch someone’s head or face Greet with a handshake, but for women, only when the hand is 2. 2. offered first Dress smartly, though suits Given something to more Greeting others with a smile is a aren’t always required senior people with one hand customarily accepted cultural norm Use both hands to exchange cards 3. 3. You may need to remove your shoes Bring gifts to exchange at Ask about another person’s before entering an office room meetings income 4. 4. Start conversations with small Call a person by their name talk – don’t dive straight in without their title 5. 5. Stay connected using social Criticize someone in front of media strangers
58 Table of Contents
Country & Economy Overview
Key Industries & Opportunities
Doing Business in Myanmar
KASIKORNBANK’s Support
59 Yangon Representative Office
Our Services
• Advisory & Information on: - Economy & Market - Law & Regulation - Doing Business
• Business Matching & Partnership Sourcing • Financial and Banking Facilitation • Networking and Referral Program
Contact Us
KASIKORNBANK Chief Representative Yangon Representative Office Mr. Nuttaphong Visitkitchakarn 313/315 U Wisara Road, [email protected] Sanchaung Township +959 421074478 Yangon, Republic of the Union of Myanmar Tel: +95 (0) 1 524285, 1 514868 Fax: +95 (0) 1 516713 60 61