The end of US sanctions on Myanmar is forcing local businesses to take a hard look at their operations and consider how they will compete when international firms have gained a significant foothold in the country’s major industries, local economists and entrepreneurs have said.
“People have said the reason Myanmar produces lower quality goods is because of US sanctions and insufficient financial support,” said Dr Maung Maung Lay, vice chairman of UMFCCI, Myanmar’s chamber of commerce. “Now, they can’t give that excuse.”
He added: “In comparison with international companies, Myanmar companies are tiny. They have to try harder [to compete at the same level].”
President Obama officially terminated an emergency order on Oct 7th that deemed the policies of Myanmar’s former military regime a threat to US national security, an act that nullified economic sanctions against Myanmar.
The move has been anticipated for some time, though many have criticized it as premature given ongoing human rights abuses by the military, and ethnic conflicts in several regions including Kachin and Rakhine states.
The sanctions are unlikely to have much immediate impact, but longer term they are expected to be a boon for large enterprises that were previously considered untouchable because of their associations with members of the much-maligned military regime.
As local companies aren’t yet in a position to compete with sophisticated foreign enterprises, Dr Maung Maung Lay said, they should pursue joint ventures with incoming firms to tap their resources and expertise.
But he emphasized the important role of local knowledge and expertise in Myanmar’s economic expansion.
“The country’s economy isn’t going to immediately become developed because sanctions have ended. It is important to have the visions of local entrepreneurs to decide how best to develop,” Dr Maung Maung Lay said.
Local entrepreneurs will have to double or treble the size of their businesses to hold their own against international firms, he said, adding that the government should encourage academics and experts who have moved abroad to return to Myanmar to support national development.
A key part of bolstering local companies will be ensuring their books are in order after years with little transparency and little incentive to improve inefficient record keeping. So businesses should be looking to prepare clear financial data to improve their chances of receiving loans.
“Companies have to be responsible for their financial flows and tax payments,” said Dr Aung Thura, CEO of Thura Swiss, a research and consulting company.
He added that regarding the influx of foreign firms that is expected as competitors is wrongheaded. “It will be an opportunity rather than competition,” he said, adding that all companies would benefit from being part of a “profitable emerging market.”
Besides the end of US sanctions, Myanmar now has a new investment law and is constantly seeking to liberalize its policies to spur investment. On the other hand, the government faces a long struggle to improve infrastructure and make Myanmar’s frontier market appealing to foreign investors.
“Now sanctions are lifted we can directly communicate with partners to operate the business instead of going through Thailand and Singapore,” said U Than Lwin, a senior consultant at Kanbawza Bank.
“Communication among companies will now be automatic. Cooperation is important to accelerate ties between local banks and international ones that make for smoother investment,” he said.
Source: Myanmar Business Today
