PH businesses approach Myanmar with caution

Since Myanmar opened itself up, there has been mad rush of foreign investors looking to take advantage

Aya Lowe
Published 2:36 PM, April 13, 2014
Updated 12:03 PM, May 08, 2014
HELPING NEW INVESTORS: Noberto Ong, president of Waterstone, a Burmese based company that offers legal advice to new investors

HELPING NEW INVESTORS: Noberto Ong, president of Waterstone, a Burmese based company that offers legal advice to new investors

MYANMAR – It’s been just over two years since Myanmar opened itself up to foreign investment and there has been a mad rush of investors looking to take advantage of this almost virgin country.

For Philippine companies, however, the approach has been a slow and cautious one.

According to Noberto Ong, a Filipino, and president of Waterstone, a Burmese company that offers legal advice to new investors, it has been hard for Philippine companies to take the leap and invest in Myanmar as they are not familiar with its business landscape.

“Being a Filipino, we are an outcast. We are the only ASEAN country that is an island. The Thais and the Chinese for example know the Burmese very well. They’re just on the border and because of that they’re willing to take more risks than us because they know the market better,” said Ong

The Philippines is also one of the few ASEAN countries that do not have direct flights to Myanmar making the transition a lot harder.

“A direct flight between the two countries would definitely improve our relationship with the Myanmar. Most Filipinos don’t understand Myanmar so that’s the disadvantage,” said Ong.

Because of this, Philippine business representation in the country is minimal compared to its other ASEAN counterparts. In 2012, Myanmar ranked 3rd lowest among the Philippines’ trading partners in ASEAN. Only Cambodia and Laos fared worse. During the same year, bilateral trade between Myanmar and the Philippines amounted to only $47.07 million, which is a measly amount in comparison to the $9.27 billion total trade between the Philippines and its biggest ASEAN trading partner, Singapore.

Remittances coming from Myanmar are also tiny. According to the Bangko Sentral ng Pilipinas, Philippine workers based there remitted US$150,000 to the Philippines in 2013, a miniscule amount out of the $22.8 billion total cash remittances seen in the same year, with the majority coming from the US, Saudi Arabia, United Kingdom, United Arab Emirates, Singapore, Canada and Japan.

Forming partnerships

Despite this initial lack of knowledge and caution from the Philippines, both countries have shown their interest in fostering a good business relationship. In December last year, Myanmar President Thein Sein and a delegation of 10 representatives visited Manila for the first time to cement business and diplomatic ties between the two countries.

The meeting culminated in the signing of 6 new agreements: a 14-day visa free entry into Burma for Filipino passport holders; 4 cooperation accords for food security, renewable energy development, information sharing, increased trade and investment; and a business contact-sharing agreement between their respective chambers of commerce.

“I am convinced that this growing cooperation contributes to the progress and prosperity of the peoples of our two countries and of the region as a whole. As such, we are endeavoring to achieve peace, stability and economic development as they are the two main wishes of our people,” said President Sein during an address to the Filipino delegation.

Trade groups from both countries also signed similar agreements to strengthen cooperation between the Philippine Chambers of Commerce and the Union of Myanmar Federation of Chambers of Commerce. Both chambers expressed an interest in holding joint trade fairs and study tours to facilitate bilateral cooperation between businesses operating in Myanmar and the Philippines.

On the back of these agreements, there has also been a slow but steady inflow of Filipino workers coming to work in the country. “We have noticed an increasing number of migrant workers into Myanmar, mostly in the telecoms sector, as well as engineers hired by the companies in the oil and gas sector,” Maria Lourdes Salcedo, the deputy ambassador of the Philippines in Myanmar, told local magazine The Irrawaddy. She estimated that about 600 Filipinos are working there at the moment.

According to Ong, the major opportunities are in the service, tourism and energy sectors. “Our advantage among our neighbors is that Myanmar people see the Philippines as a friendly country we should utilize that,” said Ong.

Philippine companies in Myanmar

A number of Filipino businesses have also been visiting the country looking for possible investment and expansion opportunities. According to Salcedo several business delegations from the Philippines have been visiting Myanmar in recent months. They include companies like the much-loved Jollibee and others in the food and water sectors.

Richard Francisco of Cherry Mobile

Richard Francisco of Cherry Mobile

Last year saw a number of major firms indicate their interest in Myanmar, including DMCI Holdings Inc., Universal Robina Corporation (URC), First Pacific Company Ltd and Lucio Tan’s Asia Brewery Inc. (ABI) with its energy drink Cobra.

URC, which manufactures the popular Jack ‘n Jill-branded snacks and C2 iced tea, plans to invest $20 million to $30 million in Myanmar within the year to set up a facility and start selling various products. (READ: Gokongwei-led URC plans Myanmar venture)

Ayala Corporation has also sent a number of teams to Myanmar looking particularly at opportunities in real estate and banking. (READ: Myanmar is last piece of ASEAN puzzle – Ayala)

Ong started Waterstone in Myanmar a year and a half ago, helping new entrants with the Burmese judicial system. They currently cater to the whole ASEAN region with 25% of their clients coming from the Philippines.

“We help companies looking to set up shops in Myanmar. We can offer what it is like to live here. What the rewards are, how to live here from finding housing to getting enrolled in schools,” said Ong. Since its launch he said the business has been growing steadily.

His wife, Wynn Wynn Ong, also recently opened up a bespoke recruitment firm Wynn Ward Howell, which hires Filipino workers according to the specific needs of the company. “When a client seeks an employee they set the parameters. The employee must speak a certain language, etc. Filipino workers are a good fit because culturally we are so similar and flexible,” said Ong

“In Myanmar, the pay scale is much more competitive and the lifestyle is similar to the Philippines. The people are relaxed, it’s a friendly place and the cost of living is very manageable,” she added.

In the telco industry, Cherry mobile has been trying to penetrate the Burmese market. “We started looking into Myanmar as early as 2012. There was already potential in the emerging economy of Myanmar. Once the opportunity came up and we found someone we could work with that’s the time we entered,” said Richard Francisco, business developer at Cherry Mobile Myanmar.

However, entering the market has not been easy for them. “Competition is very tough. We are struggling but as with anything I believe we can succeed provided we play our cards well,” he said.

According to Francisco, Myanmar’s neighbors, India and China, which both have very large domestic handset markets, can easily push them out. To maintain their competitive edge, they have to innovate. “We’ve been able to do something no one has - get the Burmese language onto phone. They’ve been able to do it on Androids but not on normal handsets. It was hard we spent a little over a year and a half developing it but it will truly benefit the locals,” said Francisco.

Right now Cherry mobile is only in Yangon, but soon they are looking to venture into other cities. “Setting up service stations is also very important. Owning a mobile phone is something new to them they might whack it on the table and break it so service is something that is really important. Before we venture to another city we need to make sure it can be serviced there as well. We have to set up our own infrastructure and expand it,” said Francisco.

The challenges

According to Ong, there are a number of major challenges potential investors in the country face.

The first is the judicial framework. “The infrastructure is not yet in place. They are currently reviewing the Companies Act and they are waiting for the final version that will be approved by the market which means until it is approved, as a company, you are working on something that may change tomorrow,” said Ong.

Another challenge is the cost of doing business in the country. “If you invest in Myanmar you need equity in the beginning. You have to be patient and understand the bureaucracy and you need a local counterpart or representative who can buffer up the share,” advises Ong.

“Land prices, property for factories and housing for your executives and expats are all very high. Because of the large injection of cash needed at the beginning, investment is better left to multi-national companies,” he added.

The 3rd challenge is finding the manpower. “After 40 plus years of being closed to the world Myanmar suffers from a lack of trained man power from executive level down to the technical level,” said Ong, who brought in trainers from the Philippines, and English-speaking Burmese to train a new workforce.

The last challenge is the mindset of the people. “The Burmese are looking at their own country now as an opportunity but they need to understand that if they want to be part of the global community they have to accept some changes. Sometimes there is inflexibility or hard headedness that may test your patience so you have to work around that and find a way to change the system,” said Ong.

According to Francisco, his major challenge is the distribution and the nascent banking system. “Getting goods from here to there is hard. Flying there is not easy because you have to transfer to another country. Distribution around the country is also hard because of the infrastructure,” he said.

“Banking between the two is also difficult because Myanmar doesn’t deal with the Philippine directly. We have to be creative and deal with it on an ad hoc basis,” he added.

However despite these initial hurdles, Ong said for those looking to invest, the time is now. “Myanmar is the flavor of the century. You realize to that if you don’t do it now our neighbors will be ahead of us. They have been watching the country for so long. It will be too late in two years. If you want market share you start today,” said Ong. – Rappler.com