Title Financing Small and Medium Enterprises in Myanmar Author(s ...

The business environment of SMEs is affected by the greater economic
integration among countries in the region and increasing liberalization of trade among
neighboring countries. Common preferential tariff scheme exercised in the ASEAN
countries lead to the inflow to Myanmar of cheaper and better commodities from
ASEAN countries. This certainly poses a future threat to SMEs in Myanmar. At present,
the competition generated by imports from neighboring countries through border trade
have pushed down prices of products from local SMEs. Domestic products, especially
household appliances and consumer electronic products (watches, clocks, radio,
television, motorcycle, garment, shoes, and umbrellas) are reeling from the price
competition brought about by cheaper products imported from China. Other products,
such as canned foods, snack foods, garments, plastic products, and toys, are competing
with products from Thailand 47 .
Imported products greatly damage the market share of local industries, because
local industries cannot compete with these products and consequently, most of them are
confined in the resource-based and labor-intensive products. Over 60 percent of local
manufacturing firms are in the food and beverage sector that heavily rely on agro
resources.
As to infrastructure, the most challenging problem is power supply. Frequent
breakdowns and low-voltage power supply are major disturbances in the production
processes. This leads to increase in wastage, especially in power-sensitive industries
like cold-storage factories. To avoid interruptions in production during power failures,
almost all factories in the industrial zones have reserved generators. But the cost of
generators and associated fuel costs lead to increased cost of production. Approximately,
the cost of production when generators are being used is five times more than the
normal cost of production.
In most cases, customer orders cannot be fulfilled on time due to unreliable power
supply during peak periods in production. So they are forced to use generators because
they want to fulfill customer orders. This prevents industries from becoming
competitive because of high cost of production caused by using generator.
This problem gets more serious during summer season when water level in rivers
is lower (majority of power supply is generated from hydropower in Myanmar) and
power usage in urban areas become more intensive due to hot weather. To cope up with
this situation, companies in industrial zones have to reduce production shifts, since
47 When visiting to Mingalar bazaar located in Yangon, the largest wholesale bazaar for household
appliance products in Myanmar, one can easily notice the fact that most of the products in the bazaar are
imported. Products from indigenous SMEs can be more available in Theingyi bazaar.