Myanmar not seeing an economic ‘boom’ – German expert

Monika Staerk, delegate of German Industry and Commerce in Myanmar.

German businessmen and investors are growing increasingly though cautiously interested in Myanmar as a emerging frontier opportunity.

In the following interview with Monika Staerk, delegate of German Industry and Commerce in Myanmar, Mizzima’s Eva Casper asks about German interests in the Golden Land.

You have been in Myanmar for two and a half years now. How would you describe the development of the country during this time?

The development is impressive. In Yangon you see construction projects everywhere, the traffic has increased so much. But as well regarding legislative processes a lot has happened. We see institutions developing and maturing. But let us be realistic: there is still a long way to go. The country is in an uphill marathon, as I call it.  I don't know how Europeans would deal with such a situation: facing a long and tiring ascent, not knowing when there will be time to rest.

What about the business relations between Germany and Myanmar? How have things developed there?

In 2012 and 2013 there has been a lot of buzz about a boom in Myanmar. I never shared this view.  The country is not booming and in my opinion it also shouldn't. It should build up a proper and sustainable development. But that is not the only misunderstanding. Among the visitors, we had two groups of companies: some thought Myanmar would be a virgin market for them to access, not knowing that the Asian competitors had established strong business ties during the years of sanctions. Others expected the country to be much more developed, similar to the state of Vietnam. So there has been a lot of expectation management for us to do.

How many German companies are in Myanmar at the moment?

If you count established legal entities and representative offices, about 40. But a lot more companies don't have a representation in the country but closely work together with local distributors and suppliers. As imports and distribution in Myanmar are in the hands of local companies, I many cases it does not make sense to establish one’s own structures right from the start. This evolves step by step. But there are a lot of companies who visit regularly and assess new project activities. So, we are quite busy here.

What kind of sectors are the German companies from?

Machines and equipment for manufacturing and power are the strong hold of the German economy, with a strong bases in Myanmar as well. Furthermore we have suppliers of processed pre materials, mostly chemicals, but also of consumer goods. As of now, we do not have big investments on the ground, but good projects with local manufacturers working under license agreements.  This is a sound approach, bringing business to local companies and sharing knowledge about standards and efficiency in production.

So the companies are also investing in the education of the local workforce?

Absolutely, and this is a very fundamental aspect of cooperation. Even German companies that come to Myanmar just to sell their products are working very closely and intensively with their distributors. And this goes beyond just technical know-how. For example, experts in investment goods companies have a very profound knowledge about regional and international markets they  can share with Myanmar companies. With this background they can give advice on market opportunities. This is in the spirit of being a reliable business partner, interested in the development of local companies, German partners have been known for years.

What is the image of German products in Myanmar?

We understand that companies in Myanmar highly appreciate German products. Of course, we can't just rely on that, we have to deliver results. But it is a good base to start from. Germany has been a long standing partner for Myanmar’s development until the 1980s, supporting to  build up infrastructure and industries. We have to tie in there.

In comparison to other countries the investments of German companies is quite low. Why?

Of course German companies are known to be rather cautious, making thorough assessments. But the currently still low level of investment is related as well to  Germany’s industrial structure. If you take a look at sectors mature for investment, oil and gas are on top of the list. And there just is hardly any German player in this sector. German companies are active in downstream activities, but this segment is not yet mature. Or take the beverages sector: Coca Cola, the big breweries. In Germany we do not have multinationals in this sector, but just medium-sized enterprises. For them it is much more challenging to invest in Myanmar seeing the tight competition with global players. And they do not raise money on the stock market. But I want to emphasize: Although the number of German companies may not be overwhelming, one should not conclude that Germany lacks interest in the Myanmar market. We have a lot of DAX-companies present for long years, others having started business here. Bayer, BASF, DHL, Henkel, Siemens, ThyssenKrupp. It is the quality of business that matters, not the quantity, and we have to take a midterm view. The projects will come, some of them already in the pipeline.

Concerning the German companies that want to come to Myanmar: What are the biggest obstacles?

Myanmar is a very price sensitive market. German companies are mostly offering high tech equipment and for their clientele of medium-sized Myanmar manufacturing enterprises, the investment is not self understood. Now we have a classical chicken-or-the-egg-problem. In order to meet standards of international markets and to export there, Myanmar companies in fact need such equipment. But they lack access to finance to cover the upfront investment before reaping the rewards in exports and recovering their cost.  German suppliers are aware of that and will work on a step by step development.

What is the solution?

Another group of German companies may help: importers, who are very interested in sourcing Myanmar products. I am thinking not just of garment, but also of agricultural goods like processed vegetables. I use to say, it would be good if Myanmar becomes the rice bowl of Asia again. But it would be even better if Myanmar would become the fruit and vegetable basket of Europe. There are more processing steps involved and that means more jobs and more income. Myanmar has to develop such value chains and we also have German projects dealing with that. Once there is sizeable demand of Myanmar products on the international markets, it will be much easier for the companies to invest in new machines.

Are there still laws in Myanmar that hinder foreign companies in their business?

The foreign investment law already is quite liberal. Of course, there are always things that can be improved. We are all waiting for the new investment law, and we hope that the processes for standard projects will accelerate. Furthermore, we understand that Myanmar wants to keep the trade and distribution in the hands of local companies. But we think there might be advantages for Myanmar if step by step, cautiously and smartly import and wholesale distribution were opened to foreign companies. Foreign suppliers would bear the financial risks, they would take over the prefinancing, the warehousing– allowing smaller Myanmar partners who don't have the financial potential to get involved into retail distribution. Furthermore,  infrastructure, power supply and education are of course in need of improvement. But foreign companies fully understand that they have to get involved and cannot leave the huge task of education with the government. A new system has to be built up and this takes time. The government has just started with improving the education at the kindergarten. This absolutely makes sense, but companies need to tie in to improve technical skills of the current work force.

Is education a big problem for the cooperation between German and Myanmar companies?

I think the biggest problem is that the country had been isolated from the rest of the world for such a long time. Certain standards in accounting or documentation are just not existing yet and have to be developed. And of course - from a Western perspective - the ability to criticize and to make suggestions in spite of the hierarchy is rather uncommon. Without this feedback from their local employees sometimes foreign companies have difficulties to find out about problems and solutions. This as well is part of the training and education of local staff, German companies as other foreign companies are engaging in.

How would you describe the people of Myanmar?

Many foreign entrepreneurs with a long track record in Myanmar say: Myanmar people are the most friendly people all over Asia - and this is exactly how I feel. There is a very specific mix of pride and kindness, a great welcoming culture – we just can hope the people will preserve this character despite all the changes, the many foreigners coming in  and the environment in daily life and  business changing so fast. I think we should put ourselves in the position of the local people more often and try to imagine how they feel with their world put upside down and so many new requirements they have to adapt to.

How do you look into the future of Myanmar?

It will not be an easy path and for sure tough times lie ahead, challenging and demanding a lot of stamina. One should have no illusions about that. But I am confident that the country will succeed. And I am sure German companies can support to achieve sustainable development in a number of sectors.

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