Date November 2014 File No. 65. Myanmar.15.YNG. Our ref. Asbjørn O. Christansen Dear Reader, The Trade Council at the Royal Danish Embassy has produced this market report to give you an insight into the Myanmar market and how to do business in the country. The report contains useful information regarding Myanmar´s historical, political and economic development and we consider it a must-read prior to visiting the country. Numbers show that upwards of USD 12 billion has been invested in Myanmar during the reign of President Thein Sein, and it does not seem that investment flow will run out in the near future. More than 5000 domestic and foreign companies have been registered since the new government took over 3 years ago. Changes in Myanmar are happening at an accelerated speed! Myanmar is now the darling not only of the hospitality industry, but also of the foreign investment community. It is important to understand and appreciate that the “business landscape” in Myanmar is changing rapidly. It is an inevitable process, which means that constant changes in laws and new initiatives for foreign investors make yesterday´s information, news and perceptions outdated and obsolete. And that is of course also true for this report, so please, note that some information may already be outdated. You, as new potential investors in Myanmar, can benefit from the fact that Myanmar is currently an open and positive place for investments, but keep in mind that it is a challenging and constantly moving target. As of August 1, 2014 the Ministry of Foreign Affairs opened a Danish Embassy in Yangon, Myanmar. Minister for Trade & Development Cooperation, Mogens Jensen states: “The opening of a Danish Embassy in Myanmar underlines Danish support for the Burmese Spring and the country’s giant leap towards democracy and human rights. We sharpen the focus on helping the country’s poorest to benefit from the positive development. And we strengthen Danish interests, and not least the opportunities of Danish companies to set up in business in Myanmar with a population of 51 million people.” In conclusion, it is good to keep in mind that we are currently witnessing paradigm shifts in Myanmar and what was unthinkable less than 3 years ago is now today’s reality. Asbjørn Overgaard Christiansen Commercial Counsellor Head of Trade Department Thailand, Myanmar and Cambodia Royal Danish Embassy Bangkok 1. Introduction ................................................................................................................. 1 1.1. Economicforecast................................. ............................................................ 2 1.1.1. Tax rates and labor cost ............................................................................. 4 1.1.2. Education ..................................................................................................... 4 1.1.3. The legislative system ................................................................................. 4 1.1.4. The political system .................................................................................... 5 1.1.5. Stages of the reform process in Myanmar ............................................... 5 1.2. Geography ........................................................................................................13 1.3. Demographics ..................................................................................................13 2. Ministry of Foreign Affairs of Denmark ...............................................................15 2.1 DANIDA..........................................................................................................17 2.1.1 Danida Business Finance .........................................................................18 2.1.2 Danida Business Partnerships .................................................................18 3. EKF .............................................................................................................................18 4. IFU .............................................................................................................................19 5. Danish companies in Myanmar...............................................................................19 6. Myanmar and the European Union ........................................................................20 7. Doing Business in Myanmar....................................................................................21 8. Tourism ......................................................................................................................22 8.1 Language ...........................................................................................................23 8.2 Greetings ...........................................................................................................23 8.3 Body gestures ...................................................................................................24 8.4. What to wear ....................................................................................................25 8.5. Food and drinks ...............................................................................................27 8.6. Marriage in Myanmar ......................................................................................27 8.7. Business culture ................................................................................................28 9. References ..................................................................................................................31 10. Appendix 1 – Political map of Myanmar ............................................................34 11. Appendix 2 – Public Holidays in Myanmar........................................................35 Myanmar (or “Burma” as the country was called previously) has approximately 51 million inhabitants, according to the first official population census in 30 years. In 2005 the capital city was moved from Yangon (Rangoon) to Naypyidaw, with the official explanation that Yangon had become too congested with little room for future expansion of government offices. Foreigners see the move as a military strategic move away from the coast, thereby reducing the risk of foreign intrusion. Map of Myanmar (Burma) Myanmar, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, corruption (see Corruption Index), and rural poverty. Despite Myanmar's emergence as a natural gas exporter, socio-economic conditions have deteriorated under the mismanagement of the previous regime. Approximately 32% of the population lives in poverty and Myanmar is the poorest country in Southeast Asia. 1 The business climate is widely Myanmar in Figures perceived as corrupt and inefficient. GDP (PPP): $111.1bn (2013) GDP (official ex.rate): $55.8bn (2013) Wealth from Myanmar's ample GDP growth rate: 7.8% (FY2014-FY2015) natural resources is concentrated in Population: 51.4mn (2014, 1st census in 30 the hands of an elite group of years) military leaders and business Inflation: 5.8 % (FY2013-2014) associates - or least was before the Foreign trade: $25bn (2013-2014 (P)) reforms took place over the last year FDI: $45.3bn (31/01/2014) since 1988 and a half. Over the past years a International reserves: $8.3bn (Dec 2013) wide range of new legislation has Kyat/$ = 971K/1$ (21/08/14) Source: IMF, (F) = Forecast, (P) = Projection been introduced, strongly improving the investment climate in the country. It is still yet to be seen how the implementation of these laws and regulations will take place and be enforced. In 2010-2011, the transfer of state assets to military families under the guise of a privatization policy further widened the gap between the economic elite and the public. The economy suffers from serious macroeconomic imbalances - including fiscal deficits and the lack of commercial credit further distorted by a non-market interest rate regime, unpredictable inflation, and unreliable economic data. Myanmar’s investment climate - including weak rules of law - hampers the inflow of foreign investment. In recent years though, foreign investors have increased especially within natural gas, power generation, timber and mining. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter two causing significant environmental degradation. Other areas, such as manufacturing, tourism, and services, struggle in the face of poor infrastructure, unpredictable enforcement of trade policies, undeveloped human resources and inadequate access to capital for investment. Private international banks have recently been granted licenses for operation, but they still operate under tight domestic restrictions, limiting the private sector's access to credit. Table 1: GDP and inflation forecast Year GDP growth 5-year moving average Inflation (%) 2009 5.1 7.7 2.2 2010 5.3 7.8 8.2 2011 5.9 6.4 2.8 2012 7.3 5.5 2.8 2013 7.5 6.2 5.8 2014 (F) 7.8 6.8 6.6 2015 (F) 7.8 7.3 6.9 Note: Years are fiscal years, ending 31 March of the following calendar year. Sources: International Monetary Fund; ADB estimates. 2 Table 2: GDP & GDP Per Capita forecast 2010/11 2011/12 2012/13 2013/14 (P) 2014/15 (P) 2015/16 (P) GDP (billions of kyats) 39,847 43,368 47,851 54,434 62,572 72,075 GDP (billions of US$) 49.6 56.2 55.8 56.4 60.3 64.8 GDP per capita (US$)* 742 900 876 869 910 959 Source: Asian Development Bank & IMF (P)=Projections *Current prices GDP Per Capita (PPP) for Myanmar