June - July 2013 - Association of Dutch Businessmen

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Events Doing Business in Myanmar text Nynke Kinderman photos Ay Wen Lie After almost half a century of isolation, Myanmar is now emerging as the hottest investment destination in the region, maybe even the world. Business opportunities in Myanmar are plentiful. However, to be successful, it is crucial to understand the cultural, regulatory, political, tax and financial challenges one faces when doing business in Myanmar. To support its members in understanding this business potential, as well as the challenges, ADB hosted the panel discussion on ‘Doing Business in Myanmar’, moderated by Nico Derksen, on 20 May 2013. The Myanmar insider panel shared their experiences and insights on working and doing business in Myanmar in an informal and open setting. With around a 100 participants, including representatives from DutchCham and the Dutch Embassy, it was a very successful event! Introducing Myanmar Myanmar has a strategic seaside location and borders India, China and Thailand, as well as other countries. It is a relatively young country, as it only gained independence in 1948. Here are some numbers to illustrate its current situation: Introducing the panel members His Excellency, Mr Joan A. Boer, the Netherlands Ambassador to Thailand, with additional responsibility for Myanmar. Best Myanmar experience: standing outside at the by-elections and watching the NLD (National League for Democracy) win. Worst Myanmar experience: trying to confirm an appointment with a specific minister and ending up with three different appointments. Mr Gert-Jan (GJ) van den Akker, Platform Leader of Energy, Transportation and Metals (ETM) and a member of the Cargill Corporate Center. Based in Singapore, GJ is an Executive Vice President of Cargill Asia Pacific. Best Myanmar experience: personally, it was visiting Bagan, a very special and spiritual place, definitely a mustsee. Businesswise, it was listening to the people on the street and hearing their hope in spite of all the pain and difficulties they have been through. Worst Myanmar experience: the bureaucracy and large number of officials one has to meet. Mr. Fernando Erazo, the Senior Director ASEAN & Pacific, Country Manager Myanmar, at Royal Philips Electronics. Best Myanmar experience: the people you meet and work with. As a healthcare company, Philips focuses on a primary need, and I was impressed by the hunger of the local doctors to receive support and work together. Worst Myanmar experience: that is actually within Philips itself, to help management understand the flexibility required. It is difficult to communicate the opportunities you see when you visit Myanmar to people who have not been there. Mr. Edwin van der Bruggen, founding partner VBD-Loi, a regional legal and tax firm, lives full-time in Yangon (Myanmar). Best Myanmar experience: encounter with a member of the cabinet. When discussing a project on the list of restricted activities (up to 80% foreign investment allowed), the cabinet member asked whether they would invest more if they could invest on a 100% foreign basis. This was indeed the case due to financial considerations. The minister reacted, “I can put it (the specific project) 8
Events on the list, so I can take it off the list.” The interest of the country goes before all. Worst Myanmar experience: the number of power cuts. We had a small office in a condo, which the owner said had a generator. When a one-hour meeting got interrupted by fifteen power cuts, I asked him about the generator. His reply, “Yes, we do have a generator, but we do not switch it on!” Discussing the financial, political, regulatory and tax landscape After the panel member introductions, the different key challenges to consider in Myanmar were discussed. As the panel unanimously agreed, Myanmar offers enormous possibilities, with all the signals pointing in the right direction. Now is the time to start doing business in Myanmar in order to gain an early mover advantage, or at least stay on par with competitors. However, as put forward by Mr van den Akker, “Everything still needs to happen”. The infrastructure is lacking, with only one main road, no mobile network coverage, and it is a real cash economy where you have to pay with brand new US dollars. Furthermore, the 2015 elections provide an overarching uncertainty on Myanmar’s way forward. As summarized by Mr van den Akker, “We will go in, but with our eyes open”. “As business people, it is very important to understand the barriers and issues before going in, for example, regulatory versus logistical,” mentioned Mr. Erazo. He is very positive and believes change is irreversible due to the access to and dissemination of information. A key concern, however, is brand exposure. For Philips, its brand is a major asset, which is especially sensitive in the healthcare industry. So Philips needs to understand the exposure. On the political side, his Excellency Mr. Boer emphasizes the positive developments, like more freedom of the press, which is actually overtaking the current system. There is no government fabric yet. The only institutional structure is the military. The West needs to understand these dynamics, and that demobilizing the army, for example, would not be the way to go. The elections in 2015 will shape Myanmar’s future political landscape. However, at this stage there is a lot of room for real transition. From personal discussions with opposition leader Aung San Suu Kyi, his Excellency has learned that a strong sense of “Realpolitik” exists. Concerning the regulatory landscape, Mr van der Bruggen points out that even for restricted activities you can own up to 80%, which is high compared to countries like Vietnam and Thailand. However, the current regulatory situation is not perfect, and will not be perfect soon. Some laws and contract acts stem back as far as 1872, which often leads to interpretation difficulties. On the other hand, the new laws have never been applied, including the Foreign Investment Law, which means nobody knows how they will be interpreted. But, as Mr van der Bruggen shares about his clients, “About a year ago our clients were very uncertain about Myanmar, not sure about the risks and whether to enter. They now say, they cannot consider not getting in there. They need to go, almost at any price, right now.” For tax regulations specifically, there are a lot of problems and misunderstanding due to the enormous gap between theory and practice. 80% of any deal is based on your relationship with the government, 20% is having a good lawyer. (In)formal business etiquette, culture and partner selection Moving from the key challenges within the formal landscape to the more social context, the panel discussed the culture, style of negotiating and selection of potential partners. As experienced by His Excellency, you can have very straightforward discussions with the people in Myanmar, provided you are not complaining. Be prepared for the conversation, as questions asked will get answered. Mr van den Akker further highlights the huge sense of learning and business savvy, both of government and business people. An example is an issue for Cargill with the FIL, as trading is not allowed. This would make it impossible for Cargill to manage supply chains in Myanmar. The solution: don’t use the word trading, just say buying and selling! Regarding cooperation with local partners, Mr Erazo stresses the effort required for the channel partner selection. An important consideration is the kind of market Myanmar is for your business. Is it an export market in the long term or do you want to establish a local presence? As partner due diligence is very expensive and time consuming, Mr Erazo shares a key lesson learned by Philips when selecting partners. Get your market insights locally by installing local risk assessors on the ground. Also, the exclusive designer tailors Great Tailor - Excellent Fit The custom tailor is an artist in the truest sense. Using a gentleman’s imperfect body as inspiration, the tailor fashions a garment that captures every subtlety and caters to its owner’s individual strengths. Whether you begin with a custom dress shirt or mens’ suit, the experience promises to be among the most rewarding you will encounter. A custom shirt shop such as TJ Tailor is an excellent place to embark on your journey. TJ Custom Tailors 24 Raffles Place #01-23 Clifford Centre (right opp Guardian Pharmacy) Singapore 048621 Tel: (65) 6534 0301 Hp: (65) 9663 1207 Email: tjdes@singnet.com.sg Website: www.tjtailor.com 9
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