Businesses positive of reform, policy change in post-election Myanmar

Myanmar’s incoming government was urged to consult and work more closely with the private sector and scale up COVID-19 support for small businesses, corporate figures said at a forum on January 12.

Speakers at the virtual panel discussion “Myanmar in 2021: Navigating Reform, Recovery and RCEP” organised by the Myanmar-Hong Kong Chamber of Commerce and Industry highlighted the opportunities for a strong business recovery this year and argued that upcoming reforms and policy changes, such as stopping the internet ban in Rakhine and reforming land regulations, are crucial for efforts to draw responsible investments.

The discussion took place with an aim of examining the market outlook in the context of recent liberalisation efforts, COVID-19 and the post-election political landscape. The National League for Democracy (NLD) party is set to form a new administration in April, with business people hoping for a cabinet reshuffle replacing ministers and deputy ministers in charge of energy, commerce, environment and other portfolios.

One issue investors will still be watching closely post-pandemic is the risk of sanctions. Since the northern Rakhine humanitarian crisis in 2017, Myanmar businesses have been under pressure to
demonstrate that they are not involved in human rights violations.

This has increased the importance of due diligence, corporate governance and accountability for firms seeking to operate responsibly, and the need for further legal and policy reforms.

On that front, U Joshua Set Paing Htet of Allen and Overy said the NLD government has modernised and enhanced the regulatory environment governing companies and information disclosure.

“In terms of legal due diligence on companies, the relatively new Myanmar Companies Law 2017 has significantly improved the country’s corporate legal framework. Legal due diligence on
companies has also been made easier in particular by Myanmar’s online registry which now allows you to search basic but important corporate details,” he explained, referring to the Directorate of Investment and Company Administration (DICA).

But there is a need to link up with the courts so that full insolvency searches can be done and to iron out inconsistencies, including how DICA’s records are treated as evidence in courts.
The legal foundation for corporate governance has also improved much over the last two years, U Joshua Set Paing Htet said, pointing out that Myanmar law includes a set of director duties along
with protections for minority shareholders.

“Companies including joint ventures established in Myanmar, at the very least, now have a legal framework to build their corporate governance on confidently,” the lawyer observed.

Support for small business

While 36pc of businesses reported being closed in September-October 2020, up from 28pc in April-May 2020, it is not all doom and gloom in the micro, small and medium-sized enterprise (MSME)

In comparison with last April-May, when around a quarter of businesses reported being fully operational, around 34pc were in business in September and October 2020, according to surveys
conducted by the DaNa Facility, a UK aid-funded programme tasked with supporting the development of the Myanmar private sector.

“In addition, businesses here see their future as brighter, with 30pc believing that COVID-19 poses no risk to their survival. In April-May [2020] only 12pc considered this to be the case,” said Peter Brimble of DaNa Facility. He added though, that political issues such as the ongoing lawsuit at the International Court of Justice will cast a shadow over the business community.
The government’s economic response to the pandemic takes the forms of the COVID-19 Economic Relief Plan,, announced in April, and the upcoming Myanmar Economic Resilience and Recovery Plan (MERRP).

The draft MERRP, as seen by The Myanmar Times, covers a range of business-supporting measures such as expanding the emergency fund for struggling businesses and tax incentives. But the draft
document, expected to be modified before being announced, was criticised for falling short of providing sufficient and immediate help for those worst hit by the pandemic.

Mr Brimble said government efforts to mitigate COVID-19’s economic impact have to include support for small businesses to stay afloat, especially for those small enterprises in garment
manufacturing, tourism, urban and rural services and agro-processing, areas which have been most affected by the pandemic.

“These businesses are largely unbanked, rely on microfinance institutions and informal sources to raise investment and working capital, and do not have the resources to access existing government
support programmes.”

He argued that the survival of small businesses is crucial for the health of conglomerates and big business, because the latter depend on the former for goods and services.

“Protecting MSMEs from the worst effects of the COVID-19 crisis and assisting them in recovering will help preserve capital, production capacity, employment, poverty reduction gains, and support
other segments of the economy. This should be among the top priorities for the new government.”
Myanmar’s digital ambitions also hinge upon the government’s policy on internet freedom, which took a dive last year.

“Given the critical importance of the ongoing digitisation of the global and Myanmar economy, it is important to press ahead to free up the internet and carefully manage censorship and cyber
security,” he told The Myanmar Times after the event.

Unlocking trade potential

Takaaki Yabe, deputy managing director of Daizen Myanmar, the country’s first bonded warehouse operator, also felt optimistic about Myanmar’s outlook, although he said the lockdown measures
were difficult for businesses.

Based on Mr Yabe’s involvement in key government policies, including the National Export Strategy spearheaded by the commerce ministry and the Thailand-Myanmar cross border initiative led by
the transport ministry, he said Myanmar’s ongoing efforts to reform the logistics industry are making a big difference for traders.

He also applauded the digitisation of customs and other government services.
“One of the main improvements came from the automated customs clearance system, which was introduced in 2016 and donated by the Japanese government,” he said. “This has really shortened the customs clearance time from four to five days to about two days and changed the customs procedure from the tedious paper-based manual declaration to a simpler paperless online declaration.”

The alcohol market liberalisation is an area that could potentially draw in more investments, he added. In particular, Daizen’s bonded warehousing services would be essential to local importers as it allows them to defer the payment of duties, in turn protecting their cash flow.
“With the recent reform in the liquor industry, which now allows foreign liquor to be imported, bonded warehouses would play a key role in supporting this industry,” he added.

Opportunity for change

Despite the COVID-19 difficulties facing his start-up, British serial entrepreneur Sam Glatman stressed that he remains positive about putting his money in Myanmar.

Mr Glatman founded Ko Shwe Ventures in 2016, a social enterprise behind the oral healthcare product Zingo Myanmar launched in 2018. Zingo is an oral healthcare product designed to address
problems faced by quid/betel nut chewers.

In 2019, Ko Shwe Ventures raised US$350,000 of initial seed financing from international investors to launch the product across the country, reflecting the investment appetite for start-ups in the
Myanmar market. Zingo products are high quality, low cost and made for daily use. It will quickly reduce sensitivity and the staining issues betel chewers face.

But, the global COVID-19 pandemic forced betel shops in Yangon to shut down in October, causing challenges for his business. Most of the stores have reopened and Ko Shwe Ventures supported
existing retailers with flexible payment terms and retailer and consumer education, Mr Glatman said.

“We used the opportunity to really focus on what our customers needed, and conducted a full review of our product formulations and pricing, in addition to launching sales through multiple new
channels, which are going well,” he continued. “We’re optimistic about the coming months.”

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Source : Myanmar Times

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