Myanmar, a promising investment destination

Rahul Mazumdar | Updated on December 26, 2019 Published on December 26, 2019

Myanmar market has great potential   -  YE AUNG THU

As the Myanmar economy opens up, it offers access to various sectors wherein India can boost trade and investment

Myanmar recently saw the entry of foreign private insurance companies into the country, along with Singapore-based transport services company Grab. India, which has expressed its desire to have greater integration under its new ‘Neighbourhood First’ policy, should literally have Myanmar as its first port of call. Myanmar today is one of the last frontier markets in Asia.

Though both countries have been in engagement for several years, the results have not been significant in terms of cooperation in trade and investment. Despite having a common border of more than 1,600 km, Myanmar imports a mere 5-6 per cent of its overall import requirements from India, whilst importing more than 30 per cent from China alone. Regarding exports from Myanmar to India, the country can actively explore opportunities under India’s DFTP (Duty Free Tariff Preference) scheme.

Given that there is not always strong competition across sectors, local knowledge and market positioning can be gained by early movers and can provide a significant competitive advantage to India.

Socio-economic infrastructure

The headroom for infrastructure growth in Myanmar is very high. However, India’s share in the total envisaged investments into Myanmar from 2011 to September 2019 stands abysmally low at 3.7 per cent. India’s highest investments have been in Myanmar’s coal, oil and gas sector, which again is just 6 per cent of the total envisaged investment.

Given Myanmar’s LDC (least developed country) status, it benefits from the WTO’s zero tariffs on exports, as well as the EU’s ‘Everything but Arms’ scheme, which grants unilateral duty-free, quota-free access for all exports to the EU. Indian investors can use this — apart from its engagements with ASEAN partners — to set up a base in Myanmar to explore other destinations.

In sectors such as renewable energy, hotels and communication, India has ample scope to contribute but does not find mention in the list of Myanmar’s FDI sources. With less than 40 per cent of Myanmar’s population having access to electricity, Indian solar manufacturers and power suppliers can explore this market, especially in the off-grid solar arena.

After Myanmar opened its economy, telcos Telenor and Ooredoo from Norway and Qatar, respectively, entered the virgin market — previously monopolised by MPT — and slashed tariffs. As the Indian telecom market gradually saturates, there is scope for participation in Myanmar.

Healthcare and education are two other sectors where India can make long-term contributions, thereby creating goodwill amongst the neighbour. The present dispensation in Myanmar plans to provide universal health coverage by 2030, allocating 5.2 per cent of its total budget to the healthcare sector. Education too has been a focus area, with the government allocating 8.5 per cent of its spending.

Tourism is another area that India can explore, by providing quality yet affordable services utilising the soft skills of the locals.

FMCG opportunity

An estimated 30 million people will be in the middle-class category by 2030. This opens a plethora of opportunities in the consumer goods market. According to Nielson, the value of the retail sector in Myanmar stood at around $10-12 billion in 2018. This has prompted many foreign consumer brands to enter the country.

But unfortunately, the presence of Indian products is dwarfed by those imported from far-off economies. With increasing consumerism, especially in Yangon and Mandalay, the Indian consumer goods industry should increasingly explore this market with affordable products. For example, home-grown MNCs could set up base or supply across the border. Well-recognised brands like Amul and Mother Dairy can easily make inroads into the market for processed milk products, which the people of Myanmar in general are fond of.

Entry in the consumer goods market is a low hanging fruit, but dividends in terms of public perception and good-will is multi-fold

Beyond rhetoric

For long, India and Myanmar have been going overboard over cultural ties. However, such ties need to give fillip to real business as well.

Myanmar is the gateway to the Mekong region and is the only ASEAN nation linked through land and sea to India. It is also amongst the few in the region, like India, which does not support China’s Belt and Road Initiative. The governments of both the countries should work towards removing the hurdles so that the synergy drawn could be translated into businesses.

Investors should increasingly look at the benefits of the existing tax incentives/holidays, SEZ facilities, and LDC benefits available in Myanmar.

While India has decided to postpone signing the RCEP and is also looking to renegotiate its FTA with ASEAN, both India and Myanmar must work seriously towards enhancing trade and investment.

The author is Senior Economist with EXIM Bank, India. Views are personal

Published on December 26, 2019

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