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Bangkok, October 2014

Michele Boario Senior MSME Development Expert

Myanmar, a new tiger? Strategies and opportunities for foreign companies

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Outline

1. Economic and industrial context

2. FDI trends

3. Myanmar potential, challanges and risks

4. Promising sectors

5. Strategies for foreign investors

6. Italian support for the creation of JVs and PPPs

7. UNIDO's initiatives to encourage building partnerships

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Economic brief as of 2012

GDP 55.8 $Bl

GDP per capita 876 $

Agriculture (%GDP)

44.6%

Services (%GDP)

35.6%

Industry (%GDP)

19.8%

Export 10.3 $Bl

Imports 12.5 $Bl

Top export Natural gas and petroleum, wood products, and legumes

Top import Vehicles, iron. Steel and other metal products

Top trading partner

China, Thailand, and Japan

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Registered companies by sector 31.7.2014

1 Food & Beverages 2660 4393 19601 26654 61.90

2 Clothing apparel & Wearing 468 525 1061 2054 4.77

3 Construction materials 676 851 2042 3569 8.29

4 Personal goods 486 419 344 1249 2.90

5 Household goods 136 81 67 284 0.66

6 Printing and Publishing 39 137 153 329 0.76

7 Industrial raw materials 174 184 141 499 1.16

8 Mineral & Petroleum Products 310 443 1343 2096 4.87

9 Agricultural equipment 13 20 31 64 0.15

10 Machinery & equipment 19 36 38 93 0.22

11 Transport Vehicles 122 34 14 170 0.39

12 Electrical goods 53 18 22 93 0.22

13 Miscellaneous 227 818 4863 5908 13.72

Total 5383 7959 29720 43062 100

% 12.50 18.48 69.02 100.00 0.23

%

No. Of Industrial EnterprisesCommodity Group

Large Medium Small Total

Sr

No.

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Economic and Industrial assessment

The agriculture is still the key sector of the economy

43,000 registered companies, small and medium 88%, SMEs are not growing significantly

Significant reforms and new laws are in progress, but there are still many weakness (low ranking in IFC “doing business”)

Low productivity and weak enterprise culture

IZs underutilized, affected by a number of serious problems (infrastructure, management, land, availability of skilled labor). Ongoing development of SEZs.

More from the business survey (overall weak investment climate, corruption, lack of skilled labor and infrastructure).

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Trend of registered enterprises

7.30 7.63 7.94 8.20 8.24 9.30 11.02 11.56

14.50 14.68 14.84 15.35 15.40 16.01 16.83 17.26

78.2 77.69 77.22 76.45 76.36 74.69 72.15 71.18

-

20.00

40.00

60.00

80.00

100.00

120.00

2004 2005 2006 2008 2009 2010 2012 2013

Large (%) Medium (%) Small (%)

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Large 7%

Medium 15%

Small 78%

Registered enterprises in 2004

Large 12%

Medium 17%

Small 71%

Registered enterprises in 2013

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FESR Myanmar Industrial Agenda: goals and principles Industrialization identified as a key driver

for growth and poverty reduction

Industrial contribution to GDP from the current 26% up to 32% by 2020

SME development, FDIs, agro-processing, sustainable heavy industry, PPPs, sustainable use of resources

FESR: 42, 47, 62, 63, 69, 70, 108, 109, 110

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NCDP: 4 Strategies for industrialization

1. Private sector-led industrialization

2. SOE Restructuring and privatization

3. Access to regional and global supply chain (FDI, export-oriented commodities)

4. Establishment of SEZs and development of IZs (upgrading and new)

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Need for structural change

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Products space

CA Hidalgo, B Klinger, A-L Barabasi, R Hausmann. Science (2007)

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Diversification of the economy

Myanmar 2010 Tailandia 2010

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Export structure

2000 2009

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FDI trend

281 668 218

158

6066

719 206 985 330

19999

41091

42119

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1990-91 1995- 96 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Total investment registered under the FDI law (US$ Million)

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FDI trend

22 39 28

15 5 11 8 5 7 24

488

561

0

100

200

300

400

500

600

1990-91 1995- 96 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

No. of Enterprise registered as Myanmar FDI

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FDI by origin and by sector

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Myanmar 2030 according to McKinsey

GDP $ 200 billion (x4)

Consumption 100 billion (x3)

10 million new jobs in industry and services

Potential market of 500 million Asians (bordering areas of China and India)

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Myanmar 2030 according to ADB

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Challenges and risks

Myanmar risk rating by OECD: 7 (max)(no SACE )

Ensure economic and political stability

Structural change and diversification of the economy

The development of the private sector, improving the investment climate

The international integration

Take advantage of new technologies

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Promising sectors

1. Manufacture

2. Agro-processing

3. Infrastructure

4. Energy and mining

5. Tourism

6. Financing services

7. Business development services (including training and consultancy)

8. Telecom

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Strategies for foreign investors

Gain a competitive advantage as a first comer

Long-term commitments that promote the improvement of the investment climate (training of manpower and infrastructure)

Flexibility and readiness to seize opportunities in a fragmented market

Local Partnerships (rapid growth, access to local resources)

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Italian support to JVs and PPPs in developing countries

Art. 7 L. 49/87 emended by law 98/13

Development goals : jobs and local value added, no delocalization

Italian Ministry of Foreign Affairs http://www.cooperazioneallosviluppo.esteri.it/pdgcs/italiano/LeggiProcedure/Strumenti/intro.html

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Eligible Sectors

Industry, agriculture, livestock, fishing and processing activities;

Handicrafts;

Local services of public interest in the energy, communications, water, transport and waste;

Micro finance services to small businesses, local trade, fair trade;

Sustainable tourism;

Protection and enhancement of the cultural and environmental heritage;

Provision of medical services in the public interest and production of medicines;

Vocational training and education.

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Financial scheme

Rotation fund: over € 100 ml

Maximum amount of credit financed: € 10 ml up to 70% of the investment

Subsidized interest rate: 15% of 3.98% = 0.59% (February 2014)

Grace period: from 1 to 5 years

Reimbursement period: min 3, max 10 years

Share capital of the Italian company (including international agencies) : min 20%, max 75%

Share capital of the local company or government: min 25%

Contributions in kind: maximum 20% of the funding

Bank agent: Artigiancassa

Myanmar is one of the eligible country

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How it works

MAE DGCS Italian company

Local partner

Share capital of JV or PPP

75% 25%

up to 70% of the investment

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How to apply

Ufficio 10 DGCS Ministero Affari Esteri

http://www.cooperazioneallosviluppo.esteri.it/pdgcs/italiano/LeggiProcedure/Strumenti/intro.html

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UNIDO's initiatives for an inclusive and sustainable development UNIDO is working on green industry, energy efficiency, quality

standards, MSMEs, business partnerships, cluster development, value chains, institutional capacity building, policies, laws, rules and regulations.

UNIDO is ready to support the formulation of a private sector-led, inclusive and sustainable industrial policy targeted to agro-business and light manufacturing to promote structural change from agriculture to industry.

UNIDO will continue the promotion of cluster development as a systematic, inclusive and sustainable approach to increase the competitiveness of micro small and medium enterprises which will play a critical role in the structural change.

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UNIDO support for building partnerships

Policy dialogue to create a conducive environment for both local and foreign companies

An IT platform to link local SMEs with foreign investors

Study tours, international fairs (Marmomac), business missions, country presentations, twinning arrangements

Cluster development

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Contacts

Michele Boario, UNIDO Yangon, m.boario@unido.org

UNIDO, ITPO Rome, www.unido.it