Investors turn eyes to Myanmar
HCM CITY (VNS)— Vietnamese businesses and exporters gathered at a conference held on Thursday in HCM City that discussed current market conditions in Myanmar.
|Myanmar is being targeted by Vinappro Company for its diesel generators. The nation faces weak macro-economic management and lack of experience with market mechanisms. — VNA/VNS Photo Van Khanh
Organised by Irving Seminar&Training, the conference aimed to help Vietnamese businesses better approach the market.
Robert Easson, CEO of Imagino Group, said that Myanmar was the second-largest country in Southeast Asia with rich natural resources such as arable land, forestry, minerals, natural gas, freshwater and marine resources, and a leading source of gems and jade.
"The country is expected to attain GDP growth of 6 per cent this year and to experience sustained exponential growth within a few years. Economists project between 7-10 per cent GDP growth for the next few years," he said.
Myanmar's President Thein Sein wants to triple GDP by 2016.
Easson said that Viet Nam and Myanmar had agreed to boost cooperation in trade and investment, with two-way trade expected to reach $500 million in 2015.
Myanmar has many strengths and opportunities, including a large youth population that provides a low-cost labour force attractive to foreign investmen. It has huge tourism potential as well as a strategic location.
The country borders five countries, China, Thailand, India, Laos, and Bangladesh, all of which account for 40 per cent of the world population, making it a lucrative market for foreign businesses, including Vietnamese.
However, Easson said Myanmar still faced many constraints, including weak macroeconomic management and lack of experience with market mechanisms, underdeveloped financial sectors and inadequate infrastructure, particularly in transport and access to electricity and telecommunications.
Low levels of education and health achievement also hinder the development of the country.
Trading activities are made more difficult as well because of a weak banking system. Myanmar has a total of 19 private and three state-owned banks.
International banking is possible, but international ATM cards are not accepted in the country.
Office and apartment rentals are not plentiful and serviced apartments are rare and expensive because of the level of taxes. Renters are charged 12 months in advance.
Christopher Muessel, partner of VDB| Loi, said that, as of July, the top 10 foreign-investment sectors with the best potential in Mynamar were oil and gas, power, mining, hotel and tourism, manufacturing, real estate, industrial estates, agriculture, transport and communication, and livestock and fisheries.
According to the Directorate of Investment and Company Administration, more than $31 billion has been poured into 10 sectors as of July 2012.
New markets that have a great deal of potential for investors are information and communications technology, Fast-Moving Consumer Goods, pharmaceuticals, insurance and financial services.
Mobile penetration and internet usage, however, still remain low, with 1.5 per cent and 0.2 per cent, respectively.
At the conference, Andrew Langdon, senior vice-president Indochina (Thailand and Viet Nam) for Jones Lang LaSalle Hotels of Myanmar Hotel and Tourism market, said the tourism market was still in its infancy.
The Government is taking steps to foster long-term sustainable growth, including efforts to lower hotel rates for leisure visitors by implementing a rate cap.
Tourism websites have been vastly improved, and the Government is working towards introducing a formal hotel star-rating classification.
Two major events will be held in Myanmar in the next few years.
In 2013, the country will host the World Economic Forum and the Southeast Asian Games with events located in NayPyiTaw, Yangon and Mandalay.
If Yangon City visitors grow at the same CAGR (compound annual growth rate) as that of HCM City, which is 13 per cent per year, Yangon is expected to reach 3.5 million visitors in 14 years.
Speaking at the conference, Edwin Vanderbruggen, partner at VDB| Loi, discussed tax and investment issues as they have been related to investment structuring in Myanmar.
The Corporate Income Tax (CIT) is 25 per cent for Myanmar companies, foreign-owned resident companies, joint-ventures and non-resident foreign companies engaged in special State-sponsored projects.
Thirty-five per cent of CIT is for branch offices, except in cases when they re granted an investment permit by the Myanmar Investment Commission. In those cases, they receive 25 per cent CIT.
Tax exemptions under the Foreign Investment Law exist for three years, and they are expected to be extended to five years under the new Foreign Investment Law.
Malika Bhumivarn, regional director of Bryan Cave International Trade Pte Ltd's Customs&Trade, who also spoke at the conference, discussed export and import matters.
Imports of material, machinery and equipment in Export Processing Zones in Myanmar are exempted from customs duties and other tariffs.
Imports of machinery and motor vehicles to be used in businesses are exempted from customs duties and other tariffs for a five-year period, commencing from the year of operation. They also have 50-per-cent relief of customs duty and other tariffs for a five-year period. — VNS