acumen business magazine april 2013
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Editors Note2012 was a year of profound change in Myanmar, and this momentum
looks set to continue into 2013. As the editor of the English-language edition of
Myanmar B2B Management magazine, ACUMEN, Id like to take this opportunity to
welcome you to this sample edition, and to thank you for your interest in our
publication.
In the past year, Myanmar has made impressive strides towards re-joining
the international community after decades of isolation. This countrys rapidly changing
political and economic landscape has brought with it an unprecedented amount of
international interest. While the international spotlight has shone uncomfortably on
Myanmar on a few occasions over the past decade, this time the rush of attention is
at least in part because of everything that is going right.
The changes Ive seen to Yangon, compared to my last stint here five years
ago, are remarkable. Portraits of Daw Aung San Suu Kyi, cloistered and unmentionable
in her University Avenue residence until not too long ago, are now ubiquitous. It
seems that every significant event in the city nowadays is a first. Jason Mraz concert
at Peoples Square and Park in mid-December marked the first major appearance by
a Western recording artist in Myanmar, and Yangons first public New Years celebrationsattracted thousands of revellers.
Whats most exciting about being in Yangon is the new sense of optimism
that people here seem to feel about the future. With the yoke of authoritarianism
being lifted, Myanmars citizens are keen to forge links with the rest of the world.
Yangons chattering classes talk of investor protection, transparency and the rule of
law, bringing institutions up to international standards and launching joint ventures
with foreign companies. Small-and-medium enterprises, long denied opportunities to
grow under the weight of corruption and economic mismanagement, are waiting in
the wings to bring their products and services to the world.
For all of its potential, foreign firms still perceive doing business in Myanmar
to be risky. While this fear is not unjustified, there is a lot of misinformation circulating
about this countrys investment climate. Much of this can be chalked up to history; the
media in Myanmar is still developing an identity and voice after decades of censorshipand repression, so accurate and engaging content about business issues is not as
readily available as it perhaps should be.
As Myanmar opens up, Myanmar B2B seeks to be a source of high-quality
information about this countrys business environment, and act as a link between
local companies and their foreign counterparts. The press is a crucial tool for promoting
transparent and ethical business practices in Myanmar, and we at Myanmar B2B are
honoured to have the opportunity to try to help build a more just and prosperous
future for this country and its citizens.
CEO / Chief EditorDr. Htet Zan Linn
DirectorDr. Hein Thu Aung, Tin Tun Kyaw
Executive EditorPhyo Wai
Editor English EditionAlex Bookbinder
EditorsHein Zaw, Khin Win, Su Le`Nandar
ReportersTha Toe Aung, Nang Aye Chan Moe
DesignersAung Aung (AN Computer), Thaw Tar Oo
Computer OperatorZin Wai Wai Shein
Marketing DepartmentJanuary Khine Mon, Naw Keziah, Yadanar
PhotographersBait Thar, Aung Kyaw Moe (New Image),
Thu Yein, Alex Bookbinder
Publisher and CopyrightDr. Htet Zan Linn
Printer
Editorial Board
ACUMEN
myanmarb2b@gmail.com
ceo@myanmarb2bmagazine.com, management@myanmarb2bmagazine.com,
editor@myanmarb2bmagazine.com, marketing@myanmarb2bmagazine.com,
AdvisorsProf. Dr. Aung Tun Thet (Senior Advisor, UN Resident Coordinator's Office)Dr. Mg Mg Thein(Ph.D. (Law), LL.M., LL.B., B.A.(Law), ANZIIF (Australia), Pg. Dip in Applied Psychology)Prof. Maw Than(Rector (Ret), Yangon Institute of Economics Yangon)Soe Tint Aung(Special Consultant for Advocacy, PSI Myanmar)Dr. Tun Lwin(Consultant, Myanmar Climate Change Watch,Tun Lwin Foundation)Than Lwin(Deputy Governer (Ret), Central Bank of Myanmar)Tin Zan Kyaw (Principal, Device Business Management Academy)Grace Swe Zin Htaik (Media Advocacy Advisor, PSI Myanmar)
OfficeNo. 24/26, 4B-C, Race Course Condo, South Race Course Street, TAMWE TOWNSHIP, YANGON
Tel : (+959) 420033355~ 66~ 77 (Hot Line), (+959) 73045140, 49317457, 73143313, (+951) 8603886, 8603887
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ACUMEN 5
We must behave
maturely and act
flexibly in order to take
advantage of the
current environment of
reform that is allowing
our country to open
up. There will be
profound challenges
in the future, and
people must be
realistic in their expec-
tations of politicians,
not reactionary and
extremist when politi-
cal problems arise.
U Thein Sein
President
Republic of the Union ofMyanmar
Biweekly Eleven Journal (VOL-5,
No 40), January 4, 2013.
(]]vlYtzGJUtpnf;twGuf ta&;tBuD;qHk;onf vuf&dSazmfaqmifaeonfhjyKjyifajymif;vJrsm;rSwpfqifhaocsmonfhtem*wfjzpfatmifwnfaqmufa&;yifjzpfaMumif;orwOD;odef;pdefajymMum;}})
The essence of a nation is its people. This country will
develop and perform well if people are competent and
well educated. Therefore, I wish that all of our peoplewill be well educated and competent. May all of our
people be free from fear when carrying out their national
duties, and may they be able to enjoy their rights.
Daw Aung San Suu Kyi
President
National League for Democracy
7 Days News Journal (VOL-11, No-43),January 3, 2013. (]]jynfolrsm; t&nftcsif;wdk;wuf&efa':atmifqef;pkMunfESpfopfqkrGefawmif;}})
Businessmen need to prioritiselong-term growth over short-termprofits. Thinking long-term is theonly way to bring about sustainedeconomic growth. If not, businesses
will not be able to survive in the longrun.
Dr. Maung Maung Lay
Vice-President
UMFCCI
Pyi Myanmar News Journal (No.852), January 3, 2013. (]]'DZifbmvukefrSpwifum w&m;r0ifukefoG,frIudkw&m;pGJqdkta&;,lrnf}})
Everyone must be protected under the law in a transparent man-ner. Foreign investments that are beneficial for this countrys devel-
opment are welcome, and locals must be granted the same legal
protections that foreign investors are.Daw Khin Sann Hlaing
Letpadaung Copper Mine Project Commission
ENVOY Journal (VOL-3, No.33), January 3, 2013.(]]EdkifiHjcm;&if;ESD;jrKyfESHonfhukrPDrSyk*dKvfrsm;tm; umuG,fapmifha&SmufouJhodkYjynfolrsm;tay: umuG,fapmifha&Smufr,fhOya'vnf;&dS&r,f}})
oicesV
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News in Brief
Aung Gyi Group to import Chinese vehicles
to Myanmar
With private citizens now able to im-port vehicles privately from foreign
countries, local companies have begun
to ramp up the importation of foreign-
made cars to Myanmar.
While markedly less popular than
second-hand Japanese models, new Chi-
nese-made cars are gaining a foothold
in the Myanmar market due to their
competitive pricing, costing far less than
new cars from other countries. JAC
(Jianghui Automobile Co., Ltd), Chinas
tenth-largest automobile manufacturer,has found a local distribution partner
in the Yangon-based Aung Gyi Group,
which held an exhibition and sale of
JAC-brand trucks, tippers, buses and
passenger cars at Shwe Lin Ban Indus-
trial Zone in Yangon on New Years day.
JAC products were sold at the exhibi-
tion at heavily discounted promotional
prices in honour of the New Year.
Mr. Yang Lixin, a representative
from JAC that attended the ceremony,was optimistic about the brands pros-
pects in Myanmar. I came from China
to attend this ceremony. This occasion
is very meaningful, as marks the launch
of a formal relationship between Aung
Gyi and JAC. We are proud to be al-
lowed to work in cooperation with Trad-
ers Company in the New Year.
JAC prides itself on its products
technological sophistication, and are par-
ticularly proud of the engine technol-
ogy at their disposal, acquired from theirAmerican joint -venture partner
Cummins, said Yang. Service centres for
JAC products are set to open in Yangon,
Mandalay, Naypyitaw and Mu-se. U
Aung Thu, CEO of Aung Gyi Group,
explained that servicing and accesso-
ries will be made available free of
charge under the terms of JACs one-
year manufacturers warranty. A
A workshop on developing printing andrelated industries in Myanmar, jointly
held by the Union of Myanmar Federa-
tion of Chambers of Commerce and In-
dustry (UMFCCI) and the Association
of Myanmar Printing and Publishing En-
trepreneurs, was held at UMFCCIs of-
fices on November 22, 2013. At the
workshop, entrepreneurs in the print-
ing industries presented papers on the
development of the publishing sector in
Myanmar and how it can be promoted.
Matters relating to printing industrywere also discussed in the presentations.
U Tin Sein, a prominent industri-
alist in the printing sector, made pre-
sentations on lending practices that
would benefit small and medium enter-
prises, and suggested that waiving cus-
toms duties and business taxes for lo-
cal printers would allow the Myanmars
domestic printing and publishing sec-
tor to grow by favouring domestic pro-
ducers. In our locally produced exer-
cise books, companies which import raw
materials - paper and cardboard boxes
- have to pay 3 percent tax on imports,
5 percent tax on trade and 25 percent
tax on income," explained U Thuya Lin
from Icon Exercise Books, another
Myanmar-based printer. This puts lo-
cal companies at a disadvantage com-
pared to foreign firms." A
Printing industry
entrepreneurs sug-
gest changes to taxa-tion regime
8 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
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Garment Makers go high tech
The first exhibition in Myanmar of high-
tech garment manufacturing equipment
from abroad was held at the Tatmadaw
Hall in Yangon between 14-17 Decem-
ber, 2012.
More than 100 entrepreneurs and
companies from 17 countries participated
in the exhibition, part of a new wave of
international interest in Myanmar follow-
ing significant political and economic re-
forms. Garment manufacturing in
Myanmar was largely unsuccessful in the
past for a number of reasons, including
economic sanctions imposed by western
countries, a lack of skilled workers, and
an inability to produce high-quality prod-
ucts.
This is likely to change, according
to government sources, as companies from
Japan, South Korea, and Europe have all
expressed interest in purchasing made
in Myanmar garments. The United States
was also a large purchaser of manufac-
tured goods from Myanmar before the
imposition of sanctions, and may resume
large scale importation in the future.
Myanmar-manufactured garments have
also been exported recently as far a field
as South America and Africa, according
to government sources.
Myanmars garment sector is likely
to flourish with the suspension of West-
ern sanctions, new policies to facilitate
international trade, and the improvement
of transport links with the outside world.
There are more than two hundred gar-
ment factories now in Myanmar, and more
than thirty of those are foreign-owned.
The garment manufacturing sector
provides employment for more than
20,000 people, a small number by regional
standards. However, Myanmar slack of
infrastructure, high real estate prices and
political instability has served to keep
away many foreign investors for the time
being.
This exhibition was intended to es-
tablish links between local and foreign
firms in the interests of promoting
Myanmar as an investment and sourcing
destination. To that end, various trade or-
ganizations and chambers of commerce,
both foreign and domestic, sponsored the
exhibition, including the Myanmar Trad-
ers Association, Yorkers Trade and Mar-
keting Service from Hong Kong, and the
Association of Myanmar Garment Manu-
facturing entrepreneurs. A
On December 19th, Yatanarpon
Teleport Company held a launch
ceremony for two new products,
Ytune and Ytalk, at the MICT
Park in Kamayut Township,
Yangon.
U Aung Myat, the head of
product development at Yatanar-
pon, elaborated on the value his
company provides to consumers.
We always strive to offer ser-
vices which are really beneficial
to the public," he said.
Ytune gives customers the
option of using songs of their
choosing as ringtones on their
cellphones, which can be pur-
chased through a new online
portal Yatanarpon has established
for this purpose. Ytalk is a call-
ing card that allows for Internet(VOIP) calling any where in the
world.
Unlike other VOIP solutions,
Ytune can also be used on
landlines and cellphones without
Internet access. Ytalk can also be
used on internet-enabled devices,
such as laptops, smartphones and
tablets, and calling cards are
available in various denomina-
tions in both Kyats and FECs. A
Yatanarpon
Teleport
launchestwo new products
ACUMEN 9
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News in Brief
10 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
To mark its re-entry into the Myanmar
market, Western Union held an event at
the Parkroyal Hotel in Yangon on 12th
January, 2013.
Money transfers with foreign coun-
tries, prohibited in the past due to finan-
cial sanctions, will now be possible us-
ing Western Union. Local banks includ-
ing Cooperative Bank, First Private Bank,
and Myanmar Apex Bank will now be
able to process remittances from any of
the five hundred thousand Western Union
agents around the world. Kanbawza
Bank, in particular, intends to partner
with Western Union in a big way by of-fering money transfer services at 250
branches across Myanmar within the
next year.
Myanmar nationals working all over
the world will be able to send money
home within minutes. The receiver on
this side must know the code number
with which money was sent from the
other side. The recipients citizenship
card must be shown before the money
to be handed over," explained U Pe
Myint , the managing director of
Kanbawza Bank. Western Union is the
first American financial services com-
Western Union marks re-entry to Myanmar
pany to have returned to Myanmar after
most financial sanctions were scrapped
earlier in 2012. We are glad to be able
to facilitate easy, quick and smooth re-
mittances services for people in
Myanmar," said Drina Yue, Western
Unions Managing Director and Vice-
President for Asia-Pacific operations.
We intend to provide current ac-
count services and offer loans. Extend-
ing credit should serve to accelerate
Myanmars economic development," he
continued. We promise to make con-
certed efforts hand in hand with our sup-
porting agent banks in order to estab-
lish remittance services for Myanmar
people living and working in various
parts of the world."
Standard Chartered Bank, a lead-
ing British bank, and Thailands Kasikorn
Bank have also opened branch offices
in Myanmar in conjunction with West-
ern Union. Other foreign banks are look-
ing into establishing links with local part-
ners in order to provide remittance ser-
vices. A
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ACUMEN 11
Seminar on
Myanmar-Vietnam
intellectual propertyinvestment and
business opportuni-
ties heldOn November 20th, 2011, a seminar on
Vietnamese investment in Myanmar, with
a special focus on intellectual property, was
jointly held by the Union of Myanmar
Federation of Chambers of Commerce and
Industry (UMFCCI), the Myanmar branch
of the Asian Patent Attorneys Associa-tion (APAA), the Embassy of Vietnam and
the Intellectual Property Association of
Ho Chi Minh City (IPA-HCMC).
Daw Tin Ohnmar Tun, a leading
Myanmar expert in intellectual property
law, gave a presentation on the prospects
and pitfalls of investment in Myanmar as
they relate to intellectual property pro-
tections. Dr. Daw Moe Moe Htwe, from
the Ministry of Science and Technology,
discussed the role of intellectual property
protection in promoting development, and
U Thein Aung from the APAA discussed
the potential for business-to-business links
between Myanmar and Vietnamese com-
panies.
As the notion of intellectual property
protection in Myanmar is quite new, Dr.
Nguyen Van Vien, chairman of the Intel-
lectual Property Association of Ho Chi
Minh City, Vietnam (IPA HCMC) explained
how his countrys intellectual property
regime protection works, and the poten-
tial lessons for Myanmar to be learned
from Vietnams experiences. A
Despite reforms granting em-
ployees the right to unionize
signed into law in March 2012,
employer-employee relations
in Myanmar remain strained.
More needs to be done to en-
sure that unionized employeesdo not live in fear of domi-
neering employers, says Ko Ye
Naing Win, a spoke-sperson for
the Formation of Dispute
Settlement Arbitration Coun-
cil, a Yangon-based NGO that
conducts dispute resolution for
labour issues. After labour re-
forms were passed, the num-
ber of unionized workers in
Myanmar swelled to some
70,000 individuals. But due toemployer intimidation, some
20,000 have already left the
unions. It is widely perceived
among workers that unions
are inefficient, and are unable
to protect [workers] rights.
Unionized employees gener-
ally live in fear of their em-
Union members
under pressure from employers
ployers," he said. Members of
the unions are routinely
singled for harassment and
abuse, with union leaders re-
ceiving especially harsh treat-
ment. In such cases," Ko Ye
Naing Win explained, wemake formal appeals on the
behalf of workers. We have
also spoken with the govern-
ment departments that should
be responsible for protecting
workers. But the government
has thus far been unwilling to
intervene." There is a popular
perception that, to solve prob-
lems between employers and
employees, employers need to
recognize and respect therights of workers to organize,
and that the government
needs to educate employers
on the right of workers to form
unions. At present, there are
roughly 300 unions represent-
ing approximately 50,000
workers across Myanmar. A
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Feature
12 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
Feature
The vast network of rivers that courses through Myanmar has
the potential to generate the electricity needed to improve liv-
ing standards and attract investment. However, if Naypyidaw
allows dozens of dams to be built without taking into accountecological and humanitarian considerations, and exports most
of the electricity generated to Myanmars neighbours, prospects
for political reform in ethnic areas and economic development
across the board may be jeopardised.By Alex BookbinderPhotography by Thu Yein, Aung Kyaw Moe (New Image)
12 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
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ACUMEN 13
Myanmar is a land of saints and spirits.
Out of the diverse array of figures wor-
shipped here, Shin Upagutta- the saint of
all waters - summarises the relationship
between Myanmars people and its geog-
raphy perhaps better than all others. Be-
lieved to prevent storms and natural di-
sasters, and to safeguard those travelling
by sea or river, the reverence accorded
to Shin Upagutta serves to underscore the
important position Myanmars rivers play
in the countrys collective consciousness,
and their significance as a resource.
Myanmars other rivers pale in stat-
ure next to the mighty Ayeyarwaddy, by
far the countrys most important water
way. From its origin at the confluence of
the NMai and Mali rivers in Kachin State,
the Ayeyarwaddy flows south for some
2,000 kilometres to the Bay of Bengal,passing through former seats of royal
power - Mandalay, Innwa, Sagaing, Bagan
- along the way. More than a simple con-
duit for information and trade, the
Ayeyarwaddy lies at the core of Bamar-
culture and identity.
Today, the most sought-af ter re-
source provided by Myanmars rivers is
electricity, both for export to neighbouring
countries and to improve Myanmars own
skeletal power grid. While its difficult to
argue that Myanmar isnt in massive needof basic infrastructure, the sheer scale of
these projects, their likely environmen-
tal, social, and cultural costs, and their
questionable benefits for Myanmar itself
have caused their appropriateness to
come into question. Myanmars govern-
ment has pencilled in the construction of
at least 75 new power projects, 67 of
which are slated to be hydropower, ac-
cording to a report by Eleven News in
November 2012. But precious few of these
will meaningfully improve infrastructurein Myanmar, as much of this capacity will
be built primarily to provide power for
export to Myanmars neighbours China,
India, and Thailand.
Even in the case of dams that will
produce electricity largely for domestic
consumption, power will be mostly gen-
erated in peripheral, underdeveloped
areas, and will be transported from there
to central Myanmar. Although rural resi-
dents of Myanmars restive minority ar-
eas will bear the brunt of the negative
effects of these hydropower develop-
ments, they unlikely to see many - if any
- of their benefits if reforms are not made.
If the Myanmar governments past poli-
cies are any indication, rural areas will
most likely not be granted easy access to
the electricity generated in their own
backyards.
Hydropower - in and of itself - is less
problematic than many other types of
power generation. It is renewable, cre-
ates no emissions, and can be imple-
mented in ways that respect the environ-
ment and the rights of people living in
areas affected by dams. But the sheernumber of projects set to go online in com-
ing years, and a pervasive lack of due
diligence throughout the construction and
development processes, bodes poorly for
the sustainability of Myanmars develop-
ment agenda. The mismanagement of
hydropower projects in Myanmar poses
a number of serious risks, including the
relapse of armed conflict, which may
serve to undermine investor confidence
and the international goodwill accorded
to President U Thein Seins governmentin recent months.
The furore surrounding the Myitsone
dam, a massive Chinese-funded project
on the Ayeyarwaddy just south of the
confluence, exemplifies the pitfalls of hy-
dropower development in Myanmar to-
day. If and when it is completed, the dam
will flood an area the size of Singapore,
and displace an estimated 15,000 people.
The geography of the confluence, the
Kachin peoples most sacred site, will be
permanently altered, and the dams en-vironmental impact will be felt all the way
downriver into Lower Myanmar. Given
the centrality of rivers - especially the
Ayeyarwaddy - in Myanmar li fe , the
Myitsone project is, unsurprisingly, highly
unpopular.
If the dam were to offer clear - cut
benefits to the people affected by it or, for
that matter, to people in other parts of
Myanmar, it might have managed to gain
more public support. But under the terms
of a secretive deal signed in 2006 be-
tween the former military junta and the
dams Chinese backers, 90% of the power
generated by the Myitsone dam would go
directly to China for a period of 50 years.
The fact that Myanmars people would
scarcely benefit from such an invasive
project was seen by the public as insult
piled on top of injury, prompting President
U Thein Sein, in September 2011, to an
ACUMEN 13
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Feature
14 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
nounce that construction would be sus-
pended until 2015.
The Presidents announcement was
hailed as a victory by prominent mem-
bers of civil society and opposition poli-ticians, including Daw Aung San Suu Kyi.
But although the suspension was widely
lauded at the time, the projects detrac-
tors may have rejoiced too soon. Whether
or not the dams principal backer, the
state-owned China Power Investment
Corp (CPI), ever actually stopped work
at the dam site is not clear. According to a
recent report by activist group Burma Riv-
ers Network, a group of Chinese work-
ers remain at the construction site, and an-
ecdotal reports from the region suggestthat limited construction is still going on.
In a leaked note from March 2012
reported on in the national media, local
authorities requested supplies from
Naypyidaw in anticipation of an influx of
new workers and equipment from China
arriving onsite to restart work, via a sup-
ply road - still under construction - lead-
ing from the Chinese border to the dam
site. In June 2012, the International Com-
mission on Large Dams (ICOLD) issued
a statement confirming that the plannersof the Myitsone dam formally requested
an assessment on the project from inter-
national dam experts. Both pieces of evi-
dence suggest that CPI intends to resume
full-scale construction well before the
2015 moratorium expires.
China has long been an important in-
vestor in Myanmar. When Western com-
panies were forced to leave due to the
imposition of sanctions in the 1990s, Chi-
nese companies swept in quickly to fill the
void. Most major Chinese-backed, capi-tal-intensive projects in Myanmar today,
either in progress or planned,were ap-
proved by the previous government be-
fore the November 2010 elections were
held. Given the historical indifference
shown to public opinion by previous mili-
tary regimes, President U Thein Seins
spurning of China, with the announcement
that dam project would be suspended, took
international observers by surprise. His
willingness go against the wishes of
Myanmars largest trading partner, many
claimed, was evidence that the new ci-
vilian-led government had become, for
the first time, responsive to the desires ofthe countrys people, and saw taking stock
of public opinion in their policymaking
as necessary to maintain their own legiti-
macy.
Public opinion certainly factored into
the Presidents decision to suspend the
dam - evidence that construction has re-
sumed not with standing. But the peoples
desire alone was not enough to make him
change his tune. With sanctions having
essentially closed Myanmar off to West-
ern investment, the former military gov-ernment had been forced into an uneasy
marriage of convenience with Myanmars
much larger neighbour to the North. In
2012, China surpassed Thailand to be-
come Myanmars largest foreign investor,
which, at 14 billion dollars worth of FDI
in 2011, amounted to 35% of all foreign
investment that year. While Chinas eco-
nomic footprint during the sanctions era
was comparable to that of other states, the
spectre of Chinese investment has come
to be considered particularly perniciousby some elements within President U
Thein Seins government. The nature of
the investments China intends to make in
Myanmar, and its strategic aims in the
region, have prompted many in Myan-
mar to treat Beijings aims with suspicion.
The ostensible suspension of the dam
project was intended to realise two stra-
tegic goals at once: to placate an increas-
ingly outraged population, as well as
improve relations with the West. By up-
holding a democratic value Western gov-ernments hold to be important - respon-
siveness to popular opinion - the Presi-
dent has sought to bring about a greater
level of engagement and interaction with
the West, in the eventual hopes of woo-
ing new Western investment and reduc-
ing Chinese economic dominance.
Companies from high-wage coun-
tries, both in the West and in Asia, have
expressed interest in investing Myan-
Given the historical
indifference shown to
public opinion by previous
military regimes,
President U Thein Seins
spurning of China,
with the announcement
that dam project would be
suspended, took
international observers
by surprise.
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ACUMEN 15
mars manufacturing sector, as the coun-
try has the potential to develop into a
competitive, low-wage manufacturer.
Chinese companies, by contrast, are fo-
cused almost exclusively on exploiting
Myanmars natural resources. While 30-
odd years of economic openness have
brought hundreds of millions out of pov-
erty in China, the Peoples Republic re-
mains highly economically stratified, with
a wide gap between the manufacturing
powerhouses of the East Coast and the
relatively underdeveloped provinces to
the West. Beijing, keen to further devel-
opment at home, has no desire to see
Chinese manufacturing jobs go to Myanmar.
What Myanmar does offer China,
however, is abundant natural resources
right on its doorstep, especially conve-
nient for its development plans in Yunnan,
with which Myanmar shares a 2000-
kilometre border. Myanmars largely
undammed rivers are seen by Beijing as
important for the development of West-
ern China, and state-linked Chinese firms
have moved to develop similar hydropower
projects in neighbouring Laos as well.
The scale of Chinas planned in-
volvement in Myanmars hydropower
sector extends well beyond the Myitsone
project itself. On the NMai and Mali riv-
ers alone, China plans to build a total of
six dams upstream of the Myitsone
project, and has already completed one
dam to generate power for the construc-
tion of the Myitsone dam itself. Chinese
companies are also helping develop dams
underwritten by Thai interests elsewhere
in Myanmar, primarily along the also as-
yet- undammed Thanlwin (Salween) river.
Much like China, Thailand is keen
to exploit the power resources of its less-
developed neighbours in order to provide
cheap power for its own manufacturing
sector, centred along the Eastern Sea-
board near Bangkok. A Thai company,
MDX Group, along with a consortium of
four Chinese contractors and investors,
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16 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
began construction of the TaSang dam,
designed by a British firm, in central Shan
State in mid-2007, although not much
construction activity has taken place at the
dam site since 2008. If and when it is fin-
ished, the TaSang dam will be the tallest
in Southeast Asia, producing over7,000mW of electricity per day. Around
85% of its output is slated to go to Thai-
land.
Plans for at least five dams along the
Thanlwin were drafted under the former
military regime, and, if built, the vast
majority of the electricity generated by
them will go to China and Thailand. As
with the planned dams in Kachin State,
the proposed Thanlwin dams in Shan and
Kayah states lie in the middle of areas
long afflicted by civil war. While tradi-
tional wisdom has often equated devel-
opment in war zones with promoting
peace, dam building for distant clients at
the expense of local populations - as has
happened in the past in Myanmar - might
only serve to catalyse civil war to a greater
degree.
Despite a serious lack of infrastruc-
ture in rural areas, the government has
not announced plans to share the planned
hydroelectric bounty with communities
that will be directly affected by the dams
being built; hydropower developments in
Myanmars underdeveloped periphery
have a long history of not serving the
needs of the people most affected by them.
Dating back to the 1960s, the Lawpita damin Kayah State is Myanmars oldest, and
serves as a useful case study for the prob-
lems that irresponsible dam construction
can cause.
As with the latest round of proposed
dams, the power from Lawpita is trans-
mitted far away, directly to Yangon and
Mandalay, leaving Kayah State with se-
vere power shortages. Over four decades
of expansions, more than 12,000 people
have been displaced without proper com-
pensation, according to a 2006 report by
activist group Salween Watch. The flood-
ing of the reservoir swallowed thousands
of square acres of arable land and exac-
erbated water shortages, causing fish
stocks to dwindle. To date, 80% of Kayah
States population has no access to
Myanmars national electricity grid.
The previous military governments
lack of regard for dam-affected commu-
nities in Kayah State has ensured that the
April 2013
current administration enjoys little popu-
lar support there. Over the years, perva-
sive human rights violations perpetrated
by government forces, and a fundamen-
tal absence of the rule of law, have driven
local people to support ethnic opposition
groups, most notably the Karenni NationalProgressive Party and its armed wing, the
Karenni Army. Instead of treating the
ethnic peoples of Myanmars frontiers as
equal partners in development, previous
military regimes focus on national unity
at all costs allowed them to justify extract-
ing the resources they wanted through
summary subjugation, with no concern for
the human cost involved. In Kayah State,
the military has been accused of confis-
cating land by force without compensat-
ing its inhabitants, laying landmines, and
drafting local people to provide forced
labour.
President U Thein Seins govern-
ment has expressed an interest in end-
ing Myanmars myriad ethnic insurgen-
cies, a legacy that would be commendable
to leave if it is done by engaging ethnic
armed groups in good-faith dialogue. The
government has recently signed cease-
fires with a number of ethnic armed
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ACUMEN 17
groups - most notably, the Karen National
Union in January 2012 - but ending open
hostilities without addressing the under-
lying dynamics of conflict will not be
enough to bring about lasting peace.
Naypyidaw will need to negotiate settle-
ments with ethnic parties to normalisetheir political status in government, and
allow them to establish a role in state-
level and/or national politics. Without
binding commitments from the govern-
ment, however, getting non-state armed
groups to disarm will be difficult.
Although poor rela tions between
Myanmars central government and eth-
nic minorities have defined ethnic poli-
tics in the country for decades, irrespon-
sible development practices have exac-
erbated tensions that might have other-
wise been lessened through dialogue and
collaboration. Despite the fact that most
of the non-state armed groups operating
in Myanmar today started out as armed
independence movements, the vast ma-
jority have now expressed a desire to
remain part of an inclusive and demo-
cratic Union of Myanmar, so long as a
modicum of political power is devolved
to the state level.
The military has had a longstanding
fear of federalism, based on a belief that
devolving political power to ethnic minor-
ity regions will lead to the dissolution of
the Union. To ensure long-term stability
and economic growth, however, ethnic
minorities will need to be meaningfullyincorporated into the development pro-
cess. This will only occur if ethnic minori-
ties are treated as equal stakeholders in
the central governments development
agenda.
Accountabi li ty, transparency and
thorough impact assessments need to be
of principal concern when it comes to
hydropower development in Myanmar.
Contracts for the export of hydroelectric-
ity signed under the former military re-
gime, subject as they are to no account-
ability or oversight, will need to be re-
examined, despite the inevitable politi-
cal fallout with Myanmars neighbours
that is likely to ensue. Ensuring that
planned projects in remote and underde-
veloped areas move forward in ways that
will benefit local populations is crucial for
political stability, and are prerequisite for
lasting economic growth to occur.
17
The flooding
of the reservoir
swallowed thousands of
square acres of
arable land and
exacerbated water
shortages, causing fish
stocks to dwindle.
To date, 80% of Kayah
States population
has no access to
Myanmars national
electricity grid.
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18 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
Activist groups, such as the Burma
Rivers Network and Salween Watch,
have taken an absolutist stance against
hydropower development in Myanmar,
claiming that the environmental and so-cial costs associated with dams outweigh
the benefits under all circumstances.
While many of their criticisms are legiti-
mate, blanket demonization of hydro-
power is counterproductive, as dams are
a relatively environmentally friendly way
of generating the power Myanmar will
need to improve its citizens standard of
living, at least when compared to viable
alternatives, like burning coal.
The way in which hydropower de-
velopment in Myanmar is slated to pro-gress, however, is highly problematic.
While environmental degradation is an
inevitable result of dam building, the eco-
logical impact of these projects will be
devastating due to the sheer number of
projects set to be built. An unacceptably
high number of people will be displaced
by these projects, and the inadequacy of
property and compensation laws currently
in place - let alone mechanisms to enforce
them - leaves companies with little incen-
tive to ensure that those displaced bythese projects will be properly compen-
sated for their losses.
The pending hydropower export
deals signed with Chinese, Thai and In-
dian firms are a hangover from the former
military regimes policy of selling off
Myanmars natural resources at fire sale
prices at the expense of developing the
economy at home. Internationally isolated
and starved for foreign currency, the
former government likely felt that giving
foreign interests rights over Myanmarsrivers was a pragmatic way to get cash
fast. But in the wake of recent economic
reforms, and new interest in Myanmar
from western investors, exporting the
resources necessary to develop Myan-
mars inadequate infrastructure will only
damage the countrys growth prospects
in the long run.
Despite a general feeling of optimism
about Myanmars future prospects among
those familiar with the countrys economy,
the expected rush of would-be foreign
investors has amounted to little more than
a trickle thus far. While the red tape as-
sociated with going into business has
diminished considerably, and recently
passed foreign direct investment laws
should serve to protect investors interests,
a lack of basic infrastructure makes
Myanmar a less attractive investment des-
tination than it might otherwise be.For all its natural endowments,
Myanmar should not be an energy-starved
country. Although the reliability of
Myanmars electrical grid has improved
steadily over the past few years, black-
outs are still unacceptably common, even
in major urban areas. Manufacturing
wages in Myanmar are the lowest in
Southeast Asia, but low wages alone will
not be enough to attract foreign invest-
ment; the savings to potential investors
in the manufacturing sector are offset bythe cost of dealing with the countrys poor
infrastructure. Additional capital costs
need to be incurred - buying diesel
generators and fuel, for example - in or-
der to guarantee factories a steady supply
of electricity.
If Myanmars current government re-
mains willing to send the lions share of
the countrys potential hydroelectric pro-
As Myanmar opens
to the world, the current
administration must
demonstrate the strong
leadership required to undo
the damage of the previous
governments mismanage-
ment, even if that means
straining relations
with Myanmars neighbours
in the short-term.
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ACUMEN 19
duction abroad, foreign investors will
likely continue to ply money into other
countries in the region with better infra-
structure - such as Indonesia or Cambo-
dia - even if labour costs in those coun-
tries are higher. Attracting foreign invest-ment, however, is not the only reason to
use Myanmars resources for domestic de-
velopment first. Responsible hydropower
development that respects the rights of
individuals and communities in dam-af-
fected areas, combined with good-faith
negotiations with non-state armed groups,
may help prevent new bouts of civil war
from breaking out.
Decades of neglect and oppression
throughout Myanmars frontier areas
have left the present administration witha serious legitimacy problem. Harnessing
Myanmars natural resources to improve
standards of living for rural people and
ethnic minorities should be a priority, and
would serve to legitimate the govern-
ments development agenda in areas
where the benefits of Myanmars new-
found economic openness have not been
felt. Dams are invariably invasive, and can
have serious negative effects on the en-
vironment. While some hydroelectric
projects will be necessary to modernize
Myanmars infrastructure, the sheer num-
ber of projects currently on the books
would result in an ecological and eco-nomic catastrophe - profoundly affecting
forestry, agriculture and fisheries - if all
of them were to be built.
President U Thein Sein has shown
a willingness to break with many of the
excesses, inefficiencies and absurdities of
Myanmars former governments.
Myanmars rivers are an important re-
source that can help facilitate his
governments reformist agenda, but the
hydropower sector must be developed
cautiously if these reformsare to be du-rable and sustainable. Rather than per-
petuate the patron-client relationships
that have come to define Myanmars re-
lations with its neighbours, sustainable
hydropower development can allow
Naypyidaw to develop the countrys
economy with more diversified sources
of investment and serve to increase liv-
ing standards, as better infrastructure will
attract more foreign investment and pro-
vide greater opportunities for domestic
businesses to grow and prosper. An inclu-
sive, sustainable and comprehensive de-
velopment agenda - in tandem with po-
litical reforms that give ethnic minorityareas more control over their own affairs
- will be especially beneficial for the his-
torically neglected and marginalized ar-
eas where most hydropower develop-
ment would occur.
As Myanmar opens to the world, the
current administration must demonstrate
the strong leadership required to undo the
damage of the previous governments
mismanagement, even if that means
straining relations with Myanmars
neighbours in the short-term. Respon-sible hydropower development, in tan-
dem with political reforms and initiatives
to make ethnic minorities equal stake-
holders in the development agenda, must
replace the rampant, unchecked dam de-
velopment that looks set to export one of
Myanmars most crucial resources to
neighbouring countries against the
countrys best interests.A
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20 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
ecades of mismanagement and
economic stagnation have resulted
in a serious unemployment prob-
lem in Myanmar. Accurate figures are hardto come by as the last nationwide census
was conduced in 1983, but a survey on
employment and poverty, released by Par-
liament in January 2013, found that some
40% of the country's labour force is unem-
ployed and that roughly 60% of the popu-
lation lives under the poverty line. To tackle
joblessness and poverty, concerned orga-
nizations and entrepreneurs have begun
to undertake job creation initiatives focused
on providing work opportunities for young
people.
Increasing personal income and cre-
ating jobs, especially for young people, is
critical for alleviating poverty and raising
standards of living, claims Myanmar Brew-
ery Ltd.s commercial director, U Myint Zaw.
If four members of a five-member house-
hold were to work, rather than two, the
additional productive members of the
workforce would add substantially to that
households total income. Indirectly, fami-
lies with greater income are able to con-
sume more food, clothing, etc. With greater
buying power comes greater spending,
which - if incomes rise significantly - should
allow Myanmars economic pie to grow
across the board," he said.
Despite the fact that foreign compa-
nies have begun to invest in Myanmar, it
is important that local firms continue to
expand, despite the challenges - real or
imagined - they might face. To compete
with foreign firms, local companies need
to overhaul their organizational structures,
work to optimize their costs and find quali-
fied workers with the ability to thrive in
the competitive pressure of a globalized
economy. Given Myanmars attractiveness
as a low-wage producer, the manufactur-
ing sector is set to expand considerably. If
the manufacturing sector is promoted prop-
erly, new jobs will be created for millions
of workers, which should serve to sub-
stantially reduce unemployment.
But how should potential employers
best contact qualified potential employees?
U Aung San, a consultant with the Naing
group, a construction company in Yangon,
thinks that employers need to make a con-
certed effort to find workers. Events ca-
tering to job seeking are in order. If the
state were to hold job fairs in conjunction
with big companies, new job creation- and
the consequential alleviation of poverty that
would result - would receive a big boost,"
he explained.
Myanmars unemployed include many
fresh graduates. Despite their high levels
of education, they remain jobless as em-
ployers are unwilling to hire them due a
perceived lack of work experience. Daw
Khin Lapyayt Wun, a manager at PKK
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ACUMEN 21
Employment Agency, elaborates. The main
weakness of todays job seekers is that they
want to work as soon as they have fin-
ished their schooling or university educa-
tion. Those with work experience are eas-
ily employed. While opportunities abound
for qualified persons, the situation is more
difficult for fresh graduates."
Nevertheless, companies should start
employing eager and motivated youths,
taking into consideration their level of aca-
demic achievement alone, she explained.
If employers fail to overlook recent gradu-
ates level of motivation, despite their lack
of formal experience, and continue to
prioritise those with more experience, ca-
pable young people may be left in a lurch.
Although people are struggling worldwide
in these times of economic uncertainty, they
have a lot to offer if given opportunities to
work.
U Linn Htun of Yangon-based Devel-
opment Consultancy Co., Ltd. recognises the
need to incorporate recent grads into the
workforce as soon as possible. Most com-
panies usually look at the years of work
experience in would-be employees, which
constitutes great hindrance at job inter-
views. Thus, young people drift into pro-
longed unemployment. It would be ben-
eficial for youths if companies were to of-
fer training programs, with the eventual
goal of regular employment. Otherwise,
young people will be trapped in an end-
less cycle - joblessness leading to jobless-
ness for lack of experience. Its a classic
catch-22," he said.
Recent grads may also forego employ-
ment they consider to be less than ideal,
as they would prefer to find work related
to their field of study. Ma Yamin Shwe Sin,
an educational consultant based in
Kamaryut Township, Yangon, remarked:
Most people would prefer a job related to
their studies, and turning down unrelated
jobs might be a reason for the voluntary
unemployment of so many. But this doesnt
need to be the case. As more job opportu-
nities become available, unemployment will
go down. At present, applicants for scarce
positions greatly exceed the number of jobs
on offer, so creating more job opportuni-
ties overall is crucial," she said.
Myanmar has plenty of educated
people, but low salaries have prompted
many of the countrys best and brightest to
seek out opportunities abroad. While it is
unrealistic to expect either domestic or for-
eign companies to offer salaries commen-
surate to those on offer in more developed
economies, skilled workers might be
tempted to stay in the country if better re-
muneration was offered. To prevent the
outflow of the skilled labour force crucial
for Myanmars development, firms have
an obligation to provide salary levels high
enough to stop this brain drain of skilled
workers from the country.
Ultimately, the conundrum of unem-
ployment in Myanmar will only be solved
if all stakeholders act in a transparent
manner - job seekers, the government and
would-be employers alike. If the
governments policy is effective and indus-
try is receptive to the demands of the
workforce and international markets,
Myanmar will be able to decrease its un-
employment rate while increasing its citi-
zens purchasing power and living stan-
dards. A
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ACUMEN 23
Coca-Cola and Pepsi the towering giants of
the global soft drink industry havent had
an official presence in Myanmar for de-
cades. While their products have been available
for years as unofficial imports, the easing of Ameri-
can sanctions has brought with it a full-on cola war
to Myanmar, as Coke and Pepsi jostle for space inan increasingly crowded domestic beverage mar-
ket. Aside from each other, the beverage titans will
have a host of domestic producers to compete with
for market share.
Dr. Sai Sam Htuns Loi Heng group is a major
player in Myanmars beverage industry. Our Prof.
Dr. Aung Tun Thet sat down with him to discuss
Coca-Colas official reappearance in the country, and
what it means for the future of Myanmars bever-
age industry.
Prof. Dr. Aung Tun Thet :As Myanmars transition towards
democracy has progressed, foreign investors have found
doing business in Myanmar to be an increasingly attrac-
tive proposition. As you know, Coca-Cola intends to ex-
pand its footprint in Myanmar in a big way. What are yourthoughts on that?
Dr. Sai Sam Htun : There are many pros and cons for our
country and economy associated with Coca-Cola making a re-
appearance in Myanmar. For the better part of the 20thcentury,
there were three countries where Coca-Cola didnt do business
North Korea, Cuba and Myanmar. So wed like to welcome
Coca-Cola back. Their presence will benefit Myanmar, either
directly or indirectly. While many countries and foreign inves-
tors are wary of making their way back to Myanmar, Coca-
Cola has been among the first multinationals to invest, setting a
strong precedent and example for others to follow.
Pepsi went on sale in the Soviet Union just as Khrushchevs
reforms got underway. You think theres a precedent there
for Myanmar?
That might be the case. Theres no way Coca-Cola would
have reinvested in Myanmar without the lifting of sanctions
and the express blessing of the US government. So its a good
thing that Coca-Cola has announced that its coming back. If the
United States didnt want investment in Myanmar, Coca-Cola
wouldnt be coming. I think both the US government and Coca-
Cola feel that theyve seen good progress in Myanmar, so theyve
chosen to come back.
Given their absence for so many years, it may be difficult
for them to compete against local producers on their own.
How will they go about making their investment?
There are two potential business models that Coca-Cola or
other companies operating in this sector could follow. The first
is where their entire operation is one-hundred-percent owned
and operated by them directly straight foreign direct invest-
ment, if you will. But under the current legal regime, they will
only be able to do this gradually. At this point, theyre only able
to hold a 49% ownership stake at most the majority partner
in joint ventures must be a local company. But over time, this is
likely to change: the government has expressed an interest inallowing foreign companies to own a greater share of joint
ventures than they are permitted to own now. Over time, Coke
may try to become the exclusive owner of their distribution
and/or bottling operations in Myanmar.
Do you think they would establish their own 100-percent
foreign-owned manufacturing and distribution facilities if
the government were to allow them to?
Theyre playing it cool for now, and havent made any
mention of their plans publically. At this point, theyre willing to
ACUMEN 23
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24 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
collaborate with local
businesspeople and share
the wealth. Youre right that
they arent the majority
shareholder yet, but with alegal framework in place
that allows it I expect they
would establish their own,
bespoke bottling plants
distribution networks with-
out local partners involved.
Theyre already here, so
theyll probably be interested
in making a long-term in-
vestment.
Establishing their ownfacilities without local partners would be the first model,
then. I can assume that the second model youre going to
mention involves retaining a local partner?
Exactly, yes. The second model Coca-Cola could follow would
be to retain a partnership with a local counterpart, even if
theyre allowed by the government to set up a one-hundred-
percent foreign-owned subsidiary. This relationship would pri-
marily be retained to minimize their operational risks. For bet-
ter or for worse, doing business in this country is widely con-
sidered to be a risky proposition, so, instead of rushing into the
Myanmar market, theyll take it slow, make cautious moves.
Theyre well positioned because what they do is relatively niche,at least compared to an operation like my own: theyre in the
cold drink business, but arent involved in producing beer or
liquor. Aside from the risk management factor, foreign inves-
tors in the beverage industry might acknowledge that there is
an advantage to partnering with a local bottler or distributor
without marginalizing it in the marketplace or taking it over
directly. This is because established local companies often have
greater distributional reach than a new entrant would be able
to develop, not to mention specific know-how on how to do
business in this country that new entrants invariably lack.
How about management?As far as I know, the management will be 90 percent local.
Senior management some of whom will come from abroad
will be there primarily for oversight. Coca-Cola tends to man-
age its operations well wherever it goes in the world.
Do they need product specialists? Management that is spe-
cifically familiar with the intricacies of the food and bev-
erage sector in Myanmar?
No, they dont. The business model is pretty straightforward.
Their main job is managing retail distribution and especially
marketing. Coke is the kind of product that the company
wants to position as something you pick up automatically when
you enter the store.
What do you think of their advertising?When Coca-Cola enters the Myanmar market, youll see
red signs everywhere! On football fields, on TV, etc. Domestic
producers simply wont be able to compete. For now, foreign
brands like Coke and Pepsi will take charge of branding and
marketing while local companies will be responsible for distri-
bution and sales a relationship that may change if these com-
panies choose to establish their own bottling plants and distri-
bution networks in the future.
So their responsibility is marketing and advertising, and
they will outsource everything else to us (Myanmar na-
tionals)?
Our responsibility is to manufacture the product, and to
distribute it. For now, at least, were going to have to operate
like franchisees, if you will.
If and when they establish their own manufacturing facili-
ties, what do you think their production capacity is going
to be like?
Prof. Dr. Aung Tun Thet
When Coca-Cola
enters the Myanmar
market, youll see
red signs every-
where! On football
fields, on TV, etc.
Domestic producers
simply wont be able
to compete.
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ACUMEN 25
That is going to be an important factor. The sheer amount
of capital at their disposal means theyd be able to establish
something quickly that would outstrip the capacity of our facili-
ties. Coca-Cola has an extremely strong brand, which should
work in their favour over domestic brands. In developing coun-tries, people tend to prefer foreign brands. Id imagine that in
this country people will prefer to drink Coca-Cola over our
brands - not that thats a reflection on the quality of their prod-
uct relative to ours, just that their brand is such a force to be
reckoned with.
So do you think you can keep your brands viable by com-
peting on price?
They wont make it easy for us! Coca-Cola is such a large
company that it can afford to run its operations with minimal
profits or even at a loss for a few years in order to build mar-
ket share.
Now that Coca-Cola has signaled its intention to invest, do
you think other foreign firms are going to follow suit?
Well, Pepsi is on its way. F&N (Fraser and Neave, from
Singapore) is also likely to get in on the action. The competition
should be stiff, and if domestic producers are unable to inno-
vate, theyll get lost in the shuffle.
So domestic producers dont have a choice? To stay alive,
will domestic companies need to cooperate with the largeinternational brands?
If they choose to cooperate with us, wed be happy to
cooperate with them. As I mentioned, domestic firms will be
producing their products for them, at least at first. If we (Loi
Hein Group) cooperate with foreign beverage companies, other
companies will, too. I think its pretty well understood in the
industry in Myanmar that trying to compete directly with the
foreign giants is futile. The only way were going to be able to
survive is to collaborate.
Do you think youre going to be able to retain your inde-
pendence?
I should clarify: Im referring to the soft drink market only.
There, it will be difficult for us to compete, but we (Loi Hein)
should still be very competitive to when it comes to purified
water. And our energy drink brand Shark is strong enough
to compete directly with the big boys. In Thailand, Shark and
Red Bull provide stiff competition for each other; in the energy
drink sector, the majors are going to be forced to play catch-up
with us. In Vietnam, for example, Coca-Cola just bought the
rights to Samurai, which isnt the number one brand. Shark
and Red Bull are.
In Myanmar, the Shark brand is very strong, and has
international cachet that our soft drink brands do not. When it
comes to energy drinks, were incumbents that will be much
harder to dethrone. Ultimately, soft drinks are trendy. People
in America accept that drinking Coke isnt good for your health.
But most people drink Coke every day because its fashionable
to do so. So domestic producers dont need to be afraid. Be-
tween our purified water business, the energy drinks and the
joint ventures, well be alright. But were going to need to be
flexible and bring our operations up to international standards.
We will need to improve the efficiency of our staff.
It sounds like we have to be ready!
Of course! I dont know much about other sectors. But as
far as the soft drink industry is concerned, I have to be ready.Coca-Cola has thrown down the gauntlet and offered us a real
challenge. If they ultimately decide to manufacture domestically,
it will be very challenging for us.
Did you hear that (Mayor) Michael Bloomberg has banned
sales of soft drinks with sugar to children in New York
City?
That goes back to what I was saying before. Coca-Colas
brand is extremely strong. Its common knowledge that drink-
Dr. Sai Sam Htun
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Cover Story
26 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
ing the stuff is bad for you. Everyone knows it, but people keep
drinking it.
So Coca-Cola is now going to be employing Myanmar staff.
Your business is in the same sector, therefore Id imagine
youre about as expert as it gets on the state of the bever-
age industry in Myanmar. But is Coca-Cola going to able
to find the local expertise it needs? Is there a shortage of
knowledgeable professionals in Myanmars beverage in-
dustry?
The beverage industry really doesnt need experts because
its so low-tech. A girl with high school education would know
how to sell the product if we were to train her. The only in-
stance where experts are really needed is when it comes to
strategic planning and designing business models.
So Coca-Cola et al. dont need to worry about finding
market experts?
Not at all. And they wont be able to steal away our ex-
perts either. Theyll train their own. Local companies wont
provide the management expertise theyre going to need
thatll all come from their side.
If you were to be able to experience their management
process, do you think that their strategies would be some-
thing youd find it useful to replicate?
Sure, we can imitate them. Its proven beneficial in other
industries, so why not in ours? It might not be a bad idea to
copy foreign companies management styles - how Chinese
companies manage to be so efficient, for example. After a while,well be able to transition from copying foreign companies man-
agement styles to developing to our own innovative and locally
appropriate style.
The ASEAN Economic Community is set to become a re-
ality in 2015, which will result in a much greater func-
tional integration of all of Southeast Asias economies. So,
technically, if we in Myanmar are able to produce bever-
ages at a sufficiently low cost, wed be able to sell our prod-
uct in Thailand without trade barriers. Do you think there
are opportunities here for Myanmar?
Absolutely, there will be. Here, the electricity and wagesare cheaper; Myanmar products will also be able to be ex-
ported to neighbouring markets outside of ASEAN, such as In-
dia and China.
So do people in Myanmar have a good opinion of Coca-
Cola, all things considered?
Yes, most certainly. I think people view Coca-Colas arrival
as a tangible symbol of just how far this country has come and
how things are changing substantially for the better. This coun-
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ACUMEN 27
try still faces serious problems, but Coca-Colas re-entry is noth-
ing if not a positive sign.
When Coca-Cola invests in Myanmar, how much do you
think their initial capital investment is going to be?
Not too much. Given the perceived risks associated with
large-scale capital investments in Myanmar, its unlikely Coca-
Cola will establish operations straight away. Their domestic
partner will act as a sort of franchisee, a share of whose profits
Coca-Cola will be entitled to. Later on, once the company pur-
chases property and builds facilities, their dollars will flow to-
wards us.
How many billions of dollars will they invest?
In Southeast Asia, we cant talk billions. Economies here
are just too small. But in Thailand, Coca-Colas investment was
worth US$450 million, so that number may be an indication of
the numbers well be seeing for Myanmar.
In order to compete with Coca-Cola et al. in the long run,
what will Myanmar companies need to change about their
operations?
Well, weve already hired a foreign CEO to get our opera-
tion up to speed with international standards. We pay him
US$15,000 per month. He has lots of experience in the bever-
age industry. Hes been working with us since September 2011.
That, in my mind, is preparation. If we cant find a professional
in the field domestically, well employ foreigners. One day,
Myanmar people will become experts in this field. Paying a
foreigner a salary of US$15,000 is too much, you know. But wewould be happy to hire Myanmar-national experts who have
gone abroad and learned from their experiences. Its crucial
that we, as a country, work to get our operations up to interna-
tional standards.
What about the capacity of the staff to deal with all of this
change?
Well, thats where we as employers step in. Its imperative
that our people are trained properly. Its difficult to blame their
poor capabilities on them individually, because our education
system is woefully inadequate. For example, if I were to ask a
student with a distance education degree, How many dayshave you gone to university? a common response might be 30
days within a three-year period or 10 days within the span of
a year. Its deplorable. So what can we do to solve this prob-
lem? Much of it comes down to government budgets, which
are completely inadequate for both education and health.
Thank you very much for your time. A
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28 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
B2B Talk
28 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
B2B Talk
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ACUMEN 29ACUMEN 29
On October 12th, 2012,
Myanmar B2B Management
Magazine (ACUMEN) held
a panel discussion between
various executives in the
airline and travel industry. Led
by Dr. Aung Htun Thet, the
panel discussed Myanmars
airline industry, its prospects
for growth and the challenges
the sector faces heading into
2013. Panelists included U Kyi
Win, the CEO of Asian Wings
Airlines; U Htoo Thet Htwe,
the Managing Director of Air
Bagan; U Moe San Aung, the
Managing Director of Air KBZ;
and U Phone Paing Oo, the
Managing Director of
Ayarwaddy Legend Travels
and Tours.
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30 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
B2B Talk
Dr. Aung Tun Thet :Mingalaba to all present. Today, were
going to discuss the state of Myanmars airline industry, and
the changes the sector is likely to experience as the travel and
tourism sector expands. Myanmars poor road infrastructure
makes developing the airline industry important for the countryseconomic, political and social well-being. Id like to start the
discussion by asking U Kyi Win about Asian Wings history
and future business plans.
U Kyi Win :Asian Wings Airways was established on Sep-
tember 17, 2010, although we only obtained a business license
from the Myanmar Investment Commission (MIC) on January
12, 2011. We are licensed to fly both domestically and interna-
tionally, although weve chosen to focus on domestic opera-
tions only for the moment. We intend to offer international
flights in the future.The Directorate of Civil Aviation (DCA) is
the regulatory body that governs the airline sector in Myanmar.
For an airline to be allowed to operate, it must obtain two
certificates: a Permit to Operate, as well as an Operator Cer-
tificate, both of which are issued by the DCA. We received
both on January 24, 2010. Flight operations commenced a few
days later on January 27th, starting with a daily Yangon Nyaung
Oo Mandalay Heho Yangon route. We now service a total
of 13 destinations, with flights originating in both Yangon and
Mandalay.
Dr. Aung Tun Thet :Thank you for sharing information about
your company. Now, U Htoo Thet Htwe, please give us some
information about Air Bagan.
U Htoo Thet Htwe :Air Bagan started flying in November
2004, and was the first wholly private airline in Myanmar; in
the past, all airlines were required to enter into joint ventures
with the state carrier, Myanma Airways. At present, we oper-
ate flights to 19 destinations, including Chiang Mai two times
per week. In conjunction with MAHA tours, we operate char-
ter flights to Bodhgaya once per week.
Dr. Aung Tun Thet :U Moe San Aung, please give us some
information about Air KBZ.
U Moe San Aung :Air KBZ has operated with a fleet of two
ATR-72 500s since April 2011, and we expect to add two more
ATRs to our fleet soon. We fly to 13 destinations, and expect to
add Putao and Bhamo to the list in the near future.
Dr. Aung Tun Thet :How are relations between your airline
and MAI (Myanmar Airways International)?
U Moe San Aung :MAI is 20 percent owned by KBZ and 80
percent by the government. We are responsible for taking some
international passengers to domestic destinations connecting
to MAIs international flights. We do have a permit to fly inter-
nationally, but only operate on domestic routes at this time.
Dr. Aung Tun Thet :Lets hear what U Phone Paing Oo has to
say about his tourism business.
U Phone Paing Oo :Ayarwaddy Legend Travels & Tours wasestablished in July 2007. So were in our sixth year of exist-
ence, and have established a branch office in Mandalay. We
are involved in both domestic and international tourism, and
offer services to a wide variety of domestic and international
clients. We also arrange conferences and exhibitions, and deal
with the logistics associated with these events for our clients.
Dr. Aung Tun Thet :What are your plans for 2015, when
AFTA (the ASEAN Free Trade Area) and AEC (ASEAN Eco-
nomic Community)go into effect?
U Kyi Win :As ASEAN is set to introduce an open-skies
policy between member states, Myanmar will be obliged toallow international airlines unrestricted access to our airports.
Seven international airlines are currently allowed to fly here,
but domestic airlines are not in a position to compete with
them. I have learned that two new domestic airlines will be
granted operating licenses in the near future, two of which
intend to launch international services. If Myanmars aviation
industry can get its act together and pool resources instead of
maintaining the status quo of smaller airlines competing with
each other Myanmar-based airlines will be much better
equipped to compete with international airlines. The govern-
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ACUMEN 31
ment should protect domestic airlines, because we havent been
profitable. For as long as weve been around, Asia Wings has
operated at a loss. In spite of our unprofitability, we still oper-
ate because the authorities have requested our help to meetMyanmars air transport needs. Im not saying that theres any-
thing wrong with international airlines flying to Mandalay or
Yangon, for example, but domestic airlines need to be allowed
to maintain a monopoly over domestic flights. If this sort of
protection is maintained, I believe that Myanmars airlines
should see sustained growth and be able to compete with for-
eign carriers in the long run.
Dr. Aung Tun Thet :Id like to know what preparations, if
any, Ayarwaddy Legend is making to provide services for the
Western tourists expected to arrive in Myanmar in unprec-
edented numbers in the near future.U Phone Paing Oo :As far as promoting our tourism business
is concerned, we need to obtain internationally recognized
qualifications ISO certification, for example. Without such
standards in place, its difficult to compete with foreign compa-
nies. Were working on capacity-building in-house to raise our
standards.
Dr. Aung Tun Thet :U Kyi Win, what challenges does your
business face as the aviation industry in Myanmar changes?
U Kyi Win :The single biggest problem
we have to contend with is the price of
fuel, which now accounts for 70 to 80 per-
cent of the airlines operating expenses.
Airplane fuel used to be roughly 2,500 kyatsto the gallon, but as of April prices have
increased to roughly US$4.5, or 4,000 kyats.
Our ATR planes consume fuel at a rate of
210 gallons per hour; we clocked 5093
flight hours last year, and as business has
increased, we have seen a substantial in-
crease in our fuel costs. Another challenge
we face is what is called fuel ride, in avia-
tion parlance. On our flight from Myeik to
Kawthaung, for example, it would be theo-
retically possible to take on a minimal
amount of fuel while carrying a full pas-senger load, so long as the plane would
be able to refuel at its destination. But as
is often the case in Myanmar, there might
not be enough fuel available in Kawthaung,
so our planes have to carry all the fuel
they will need to make the return trip,
adding weight and thus cost. Its also diffi-
cult for us to acquire spare parts for our
aircraft. In most countries, such parts are
not subject to import duties, but in Myanmar, we pay import
duties that increase based on the value of the pieces we wish
to import. To bring Myanmar in line with international avia-tion norms, aircraft parts must be exempted from import du-
ties.
Dr. Aung Tun Thet :In terms of foreign competition, I agree
with U Kyi Win in general, but I think that protectionism might
be perceived as corrupt in light of ASEANs moves toward
regional economic integration. If possible, Myanmars aviation
industry should try to promote itself rather than insulate itself
from foreign competition. Does Air Bagan have any plans to
expand, U Htoo Thet Htwe?
U Htoo Thet Htwe : Yes, we are currently in the process of
expanding our fleet; we intend to acquire another ATR-72 bythe end of the year. As U Kyi Win noted, we run Air Bagan at
a loss just to promote tourism development, and its true that
the government should protect domestic airlines from foreign
competition. When we enter the open-skies agreement in 2015,
we will likely face tremendous difficulties competing with gi-
ant foreign airlines.
Dr. Aung Tun Thet :Does Asian Wings have any expansion
plans, U Kyi Win?
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32 ACUMEN www.myanmarb2bmaga z i n e . c om April 2013
B2B Talk
U Kyi Win :When the open-skies agreement is put in place,
we will be allowed to penetrate foreign markets, just as for-eign airlines will be allowed to do here. JetStar already has a
codesharing agreement with MAI for international flights, and
Air Bagan has experience flying to other regional markets.
Were not as experienced in this regard, but have an operating
license that allows us to expand internationally if we want to.
Well start by servicing regional markets first, and if that goes
well, well broaden our horizons to destinations further afield.
U Moe San Aung :Although KBZ has focused on the domes-
tic market for now, were keen to go further. When we receive
our new ATR-72 600, which we anticipate will occur in De-
cember, we will be the first airline in the region to operate this
aircraft variant. The 600 variant of the ATR 72 is a substantialimprovement over the 500, boasting a glass cockpit and touch-
screen instrumentation. As our domestic destinations tend to
be fairly close to one another, we are unlikely to purchase
aircraft better suited to servicing long-haul routes. ATR prod-
ucts suit our needs perfectly, because of their fuel efficiency on
short-haul routes.
Dr. Aung Tun Thet :What is demand for air travel like among
locals? One might imagine that consumers would prefer to fly
rather than travel by bus or train. Yet air travel remains out of
the financial reach of the majority of people in this country,
and so the cost of flying must go down for the sector to grow.
Do you intend to introduce flights at more reasonable price
points?
U Kyi Win :You raise a really important point. Lets use the
Chinese mindset as an example. Even as recently as four years
ago, trains were the dominant mode of long-haul travel in
China. People were afraid of flying, and cars were unaffordable.
Old Chinese trains covered long distances, but could take days
to reach some destinations. Trains were crowded to the point
where even going to the toilet became an arduous task. But
despite the discomforts of train travel, it took air travel a long
time to catch on. Over the past few years, flying has becomemuch more common in China, as ticket prices have gone down
and the media has promoted flying as being safe, affordable
and convenient.
There is still a perception among the Chinese public
that flying is unsafe, but thats a myth that can be debunked by
looking at the statistics. According to research conducted by
the ICAO (International Civil Aviation Organization), for every
thousand car trips, one person is killed in the United Kingdom.
Its even worse in America, where four people are killed for
every thousand car trips that are made. But the global fatality
rate for airline travel is one person killed for every million
passengers carried. It should be abundantly clear that air travel
is far safer than travelling by car or bus. I must say, though, I
personally prefer to drive instead of flying; because I used to
be a pilot, and I dont really enjoy being on flights that Im not
in command of. Sure, call me conservative; Im happy to take
the bus, which is usually how I travel unless its unfeasible to
do so.
Consumers in Myanmar will need to change their
attitudes towards flying. When some of those statistics I men-
tioned were published in a story that ran in a Wuhan, China-
based local paper, the local airline reported a spike in demand
perhaps not surprising, given that people were made aware
that driving is 250 times more dangerous than flying! Every-
day, new airlines are emerging throughout the Asia-Pacific
region. As of 2012, there are six airlines based in Myanmar,
which carried a total of 120,000 passengers this past summer.
I think thats far too few. In China, people have come to aspire
to fly at least once in their lives. We need to introduce similar
notions in Myanmar to make the airline industry here sustain-
able.
Dr. Aung Tun Thet :What growth opportunities do you see in
the travel and tourism sector, U Phone Paing Oo?
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ACUMEN 33
companies that want to export high-end vehicles to Myanmar,
for example, might choose to fly them over. Given how under-developed the market for air cargo is, that might be another
line of business for us to consider, but we should wait and see
if there will be any favorable changes to customs rules and
commercial taxation.
Dr. Aung Tun Thet : If you have anything else to discuss,
please do so.
U Htoo Thet Htwe : In Myanmar, qualified workers in the
airline business are hard to come by. Granting operating li-
cences to new operators will only exacerbate this problem;
the government should put a reasonable limit on the number
of new airlines that are allowed to operate.U Kyi Win :Another recent ICAO study claims that there will
be a global crew and cockpit staff shortage in coming years.
We, as the leaders of Myanmars aviation industry, should at-
tempt to fill this need, and should be in the business of training
skilled employees and technicians. Myanmar would benefit
greatly from the establishment of a civil aviation academy,
whose goal should be to produce aviation workers with the
kinds of skills and expertise needed to work internationally.
Dr. Aung Tun Thet :In conclusion, I would like to express my
thanks to all of you for taking part in this discussion. I duly
note your su
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