Myanmar’s actual situation and foreign investment issues

May 18, 2012 12:00 AM

by Chris Devonshire-Ellis

As the United States has just eased its financial sanctions against Myanmar, now seems an appropriate time to take a look at the actual situation on the ground there and the opportunities for foreign investment.
Myanmar – sandwiched right between these two Asian giants – seems an appropriate place to target.

However, having visited the country and taken soundings, much remains to be done before Myanmar is even suitable for foreign investors to enter without either huge resources or strong doses of entrepreneurial commitment.
It is not, as others have suggested, a destination that foreign investors should be running to. Such talk is hopelessly naive.

Myanmar (Burma) fast facts:

  • Head of State: President Thein Sein
  • Capital: Naypyitaw
  • Largest City: Yangon (Rangoon)
  • Land Area: 676,577 sq km
  • Population: 60,280,000
  • Language: Myanmar (Burmese)
  • Currency: Myanmar Kyat
  • GDP (2011 estimate, PPP): $ 81.55 bn

Firstly, let’s deal with the practical issues.
Number one, forget about relying on internet, email or mobile phone communications. The service just simply isn’t there to support ease of doing business. Communications remain sporadic at best, and disappear completely at worst. The one exception is the new capital Naypyitaw, which has good fibre optics, however it is not a commercial base and people rarely visit other than local officials. To indicate that, the US Embassy and most others are based in Yangon (Rangoon), hundreds of km away from Naypyitaw and still the national commercial centre.

Yet communications in Yangon remain poor and, as a consequence, business is conducted on a person to person basis, face-to-face.
The majority of Burmese do not even possess email addresses. Phone communication also remains difficult – land lines are in short supply while mobile coverage is highly erratic, often cuts out, and is non-existent in most areas. No one, for example, sends text messages, and certainly not when the price of a basic SIM card is pegged at $ 250. Arranging meetings then can take time and patience.

To hammer the point home, no research on the country has taken place since the 1920s when the British surveyed large parts of the country, and the local government since then has done very little in undertaking any investigative exploration. So much so that no one really knows how many people live in the country.
The last census took place in 1983, and was regarded as being spotty at best. That means that estimates even of the population of the country may be off by as much as 10 mm people, with best guesses putting it somewhere between 50-60 mm.

There have been no market research surveys or any form of statistical analysis for close to 100 years. The lack of email addresses or any meaningful consumer or wealth data are just two indicators as to how difficult the business terrain is.
Couple that with the most recent geological data being from the 1920s, and one begins to grasp the magnitude of the problem when attempting to assess the market.

Money is also an issue. Credit cards usage is rare, as are ATM machines. For foreigners, that means either staying at the few high-end hotels that do permit payment via MasterCard and so on, or the more common method of simply arriving with large bundles of fresh dollar bills.
Wire transfers into and out of the country (see have only just been permitted, and even then the mechanism to do so is erratic. The act of just buying or selling goods in Myanmar then is fraught with difficulties. Using LCs, for example, or transferring money in is not a viable option – which is why, at present, it is only the entrepreneurs that have time to spend flitting between borders that can make trade with and in Myanmar a viable proposition.

That is not to suggest that some infrastructure is not in place, however, because it is – yet even laws and tax collection remain in a permanent state of “negotiation.” Myanmar does have a revised Foreign Investment Law, which caters for a variety of investment structures and rules. For example, 100 % foreign ownership is allowed in many basic businesses, however not in the most basic of all, a trading company, where local partners have been required and in any event are almost a necessity to have to work with.
There are also understandable restrictions levied on key trade and development sectors such as oil and gas, gemstones, timber and mining industries.

The Chinese have been active in Myanmar for some time, and these legal structures exist to support investment. However, even these can be open to interpretation, making certainty of business behaviour and treatment an issue.
The same is true of tax. Myanmar has a tax code, however it too is hopelessly enforced, with the tax bureau making assessments on amounts due by inspecting your place of work and how busy it appears rather than following any particular code. Corporate income tax is apparently set to be reduced to 25 % shortly, but even getting the message out given the communication issue ensures that inconsistencies remain.

Interestingly, despite the lack of supporting legal and tax structures, corruption is not much of an issue in Myanmar to date. This may be to do with the isolation the country has undergone, and it is certainly a reflection of the high moral principles laid down by the country’s reverence towards Buddhism.
I have been told, many times, that the Burmese are among the most honest people in Asia, and I see little to doubt that. Given the chaotic state of the supporting regulatory structures, it seems that a higher degree of ethics is all that has kept the country from disintegrating entirely.

Human resources is a huge issue, with most Burmese possessing a rudimentary education. Burmese and English are the two most common languages, the latter (rather like India’s example) being a hangover from the days of the British Empire, however usage of English has tended to drop off at the younger end of the population.
Accordingly, English-language-speaking, well-educated Burmese are a hot commodity right now and can command premium salaries. That being said, there is a Burmese Diaspora, especially in Thailand, where an estimated 3 mm reside. Other than that, a few hundred thousand are scattered globally, with the majority in the United Kingdom or the United States. At present, there has not been much of a trickle back of ethnic Burmese to their country, although it is probable that may increase over time as opportunities begin to develop.

Most trade is conducted through Yangon, with its port facilities, and the wealthier Burmese will pay a premium for items such as iPads and Apple gear which are seen as status symbols. Products also come in from Thailand via Mandalay, although this is also a smuggling route – meaning many Burmese do not trust products brought in from Mandalay.
Otherwise, basic commodities remain a constant requirement, but here Chinese traders have cornered the market in cheap goods and products.

The truth about Myanmar for foreign investors then is simple: it requires huge resources and stamina, and plenty of time and patience. It is a country that one needs to be committed to.
No one is going to be able to sit in an office in the United States or Europe and just be able to trade with Myanmar in the same way as one can in China or India. Trade with Myanmar requires a permanent presence, on the ground, and plenty of patience.

There are many entrepreneurs who will try of course, and good luck to them. But this sector aside, foreign investment in Myanmar will be infrastructure-driven and requires MNCs with deep pockets as well as the time, resources and experience in dealing with nations where just a mobile phone is a luxury.
Investors accustomed to operations in Africa, Latin America or the wilder parts of Asia may be tempted, but for now Myanmar is not a market for the inexperienced, and certainly not for those unfamiliar with Asia or operating in emerging markets.

However, Americans that do make the trip may well find themselves feeling surprisingly at home. Among all of the usual Toyota pick-ups that are ubiquitous across Asia, the Burmese appear to have adopted the Cadillac as their top-of-the-range vehicle of choice, and they are a common sight around Yangon.
It is possible that Myanmar could develop as a source for cheap manufacturing and for local sales in addition to exporting to ASEAN. Manufacturing opportunities exist for companies involved, almost literally, in making nuts and bolts as the country will be undergoing a huge amount of infrastructure upgrading. Component parts will need to be sourced, and ideally from within the country to reduce costs.

In addition, Myanmar has double tax treaties with Singapore, Malaysia, Vietnam, India, Indonesia, South Korea, Bangladesh, Laos, Thailand and the United Kingdom. As a member of ASEAN, it also enjoys the organization’s trade benefits between members and the DTA agreements ASEAN has elsewhere, and especially those with China.
We highlighted ASEAN and its DTAs with China and India ( and recently held a webinar on the subject which can be downloaded at .

In terms of economic development, Myanmar has always withheld information on the basis that such data constituted state secrets. However, that has just changed, with the IMF being given permission for the first time to publicly release a report on the economic situation in the country on May 7 this year.
That report, which details economic data from 2011 and looking forward into 2012, can be accessed in full from the IMF website at .

All that said, it is always the committed entrepreneurs who have the time, motivation and patience to develop emerging markets who are the front runners in all such situations (just as I was in China 20 years ago).
For those that try, I am sure Myanmar will prove a fascinating and rewarding experience. Evolution, though, will take time for those of us geared towards business environments that can support mobile phones, email, internet access and a workable, internationally-connected banking and regulatory system.

As always with emerging markets, it pays to be prudent, and to do your research and take advice from people familiar with the region. There are plenty of cowboys out there recommending “running” into such markets, but the foolish die young and Myanmar remains both a market of considerable interest, yet one requiring a huge amount of stamina and commitment in order to succeed within its current operational environment.
It pays in such circumstances to tread carefully. Only fools rush in, however we will keep readers updated with the regulatory and operational situation as these develop.

Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. The firm provides foreign direct investment legal, tax, regulatory advice to foreign investors throughout Asia and maintains 20 offices across China, Hong Kong, India, Singapore and Vietnam. The practice is well-connected with the US Commercial Service and the Embassy in Yangon, in addition to other commercial, embassy and legal institutions, and can make introductions on behalf of businesses interested in Myanmar to appropriate contacts in the country. Please email the firm at or visit the practice at

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