omass afla myanmar vs vietnam (1008)
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New Battles in Southeast Asia for Foreign Investment: Myanmar v. Vietnam
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Agenda:
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Myanmar at Glance
Vietnam at Glance
Myanmar v. Vietnam: A Comparative Snapshot
Myanmar v. Vietnam: Same same but different
Myanmar v. Vietnam in the Battle for Foreign Investment: Who wins? Why loses?
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Myanmar at Glance
• Official Name: Republic of the Union of Myanmar
• Location: South East Asia
• Neighbors: Bangladesh, China, Laos, India and Thailand
• Area: 676,578 Km2
• Capital: Naypyidaw
• Largest city: Yangon (Rangoon)
• Currency: Kyat (MMK) (01 USD = 968 MMK)
• Language: Burmese
• Population: 61 million 3
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Vietnam at Glance
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• Official Name: Socialist Republic of Vietnam
• Location: South East Asia
• Neighbors: China, Cambodia and Laos
• Area: 331,688 Km2
• Coastline: 3,260 Km
• Capital: Hanoi
• Largest city: Ho Chi Minh City (Saigon)
• Currency: Vietnamese Dong (VND) (01 USD = 21075 VND)
• Language: Vietnamese
• Population: 88.78 million
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Myanmar v. Vietnam: A Comparative Snapshot
2012 Myanmar Vietnam
GDP US$ 53.1 billion US$141.7 billion
GDP per capita US$ 835 US$1,596
2012 GDP Growth 6.3 % 5.0%
Inflation 6.1 % 9.0%
FDI US$ billion ( % increase) US$16.3 billion
Import turnover US$ 17,670 million US$ 139,207 million
Export turnover US$ 9,203 million US$ 122,157 million
Labor force 31.8 million 51.69 million
Minimum wage No general minimum wagePublic sector: S$56.8Laborer: About US$2.3/day
US$ 55 per month ((June 2013)
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Myanmar v. Vietnam: A Comparative Snapshot
Infrastructure Myanmar Vietnam
Port Poor Fair
Train Fair Fair
Airway Poor Fair
Road Poor Fair
General Poor Fair
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Level of Education Myanmar Vietnam
Average of Schooling (in years) 4 10.4
Public Spending on Education (% of GDP) 1.26% 1.8%
College level Education (% of population) 11.5% 18.67%
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Myanmar v. Vietnam: Same same but different
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Myanmar v. Vietnam: Same same • Both are located in South East Asia and have a strategic location:
A bridge between South and South East Asia
• Myanmar’s current economic situation is similar to that of Vietnam 18 years ago: In abundant and outdated legal system and bureaucratic administration
• Myanmar and Vietnam has the same internal problem, e.g highrate of corruption, underground economy that makes up most of transactions and is out of control
• Both have young population and mostly at working age
• Both have abundant natural resources, especially oil and gas and huge potential in development of agricultural economy
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Myanmar v. Vietnam: What’s different?
• Myanmar is a real Buddhist country with 89% population while 81.69% of Vietnamese are non-religious
• Different legislation: Myanmar’s system based on Common Law while Vietnam’s system similar to a civil law jurisdiction
• NOTABLY, Confucius never arrived in Myanmar!!!
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Myanmar v. Vietnam in the Battle for Foreign Investment
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Why choose Myanmar?
• Can Myanmar become a next Asia tiger? Recent democratic reform with new Union Government
headed by President Thein Sein in March 2011
International sanctions are lifted and foreign firms eye on Myanmar
Myanmar has all the elements required to create another Asian economic miracle
GDP growth rate is projected to average around 6 per cent per year until 2020, with GDP doubling to $124 billion by 2020
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Why choose Myanmar?
• The challenges of Myanmar: US$1,500 : Average productivity of a worker in Myanmar
today, about 70% below that of benchmark Asian countries
4 years of average schooling in Myanmar
10 million additional people to absorb in Myanmar large cities by 2030
US$650 billion: Total investment needed by 2030 to support growth potential, US$320 billion in infrastructure alone
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Source: McKinsey&Company
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Why choose Myanmar?
• The Opportunities in Myanmar: Potential to achieve US$ 200 billion+ GDP in 2020, over four
times as high as today
With spending potentially tripling from US$ 35 billion to US$ 100 billion, an estimated 10 million member of the consuming in 2030 from 2.5 million in 2010
Potential to create more than 10 million additional non-agricultural jobs by 2030
500 million people living in countries bordering Myanmar and the closest parts of China and India, a huge potential market
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Source: McKinsey&Company
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Why choose Myanmar?
• Issuance of new Foreign Investment Law (FIL): In Nov 2012, New FIL took effective with detailed
guidelines issued in Jan 2013
Eases the investment procedures and gives more investment incentives
New FIL brings more FDI to Myanmar: US$731 million FDI in August, 2013
More than $1.8 billion from the start of the fiscal year on April 1 to the end of August, compared with $1.4 billion in the whole previous fiscal year
Foreign capital can own 100% equity in some business areas
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Why choose Myanmar?• Regulation on foreign investment under new FIL:
Foreign investor may establish: 100% foreign owned company
Branch of offshore company
A sole proprietor
100% foreign owned partnership
Banking and financial services, wholesale and retail trading are available to 100% foreign capital
Type of foreign investment eligible to obtain privileges: A 100% foreign owned company
A joint venture with a Myanmar investor
A foreign investor operating in a contractual relationship with a local investor
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Why choose Vietnam?
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Why choose Vietnam?
• Vietnam: From a new emerging Asian country Average annual GDP growth: 7.2 %
No. 1 attractive emerging market destination for retail investment in 2008
Sharp increase in FDI: Almost US$72 billion in 2008
• To an economy in crisis: GDP in 2012: 5.0%
Sovereign debt: 56.7% GDP and Bad debt: 8.8%
Out of top 30 most attractive emerging retail market
• Did Vietnam’s economy get off the track?17
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Why choose Vietnam?
• What is hindering Vietnam?
Slow process of institutional reform: What is a socialist-oriented market economy?
State Owned Enterprises:
Too much incentives BUT not efficient
Major impediment for Vietnam development BUT main cause of corruption
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Why choose Vietnam?
• Will Vietnam Still be a FDI good destination?
Even though sharply dropped FDI and current cautious economy
BUT Japanese investors keep coming to Vietnam
And emerging wave of M&A from ASEAN investors
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Why choose Vietnam?• New investment wave coming?
Expected after signing Free Trade Agreement (FTA) with the EU and Trans Pacific Partnership (TPP) with the US
FTA and TPP are a big chance for Vietnam to attract more FDI and to engage globally
• Vietnam hopes to conclude TPP in first half of 2014
• Why Vietnam needs TPP?
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Why Vietnam needs to sign TPP?
• US important role in Vietnam economy: In 2012, US exported $1.7 billion’s worth of agricultural
products to Vietnam, making Vietnam US’ 16th largest agricultural export market.
By 2015, the bilateral trade exchange could reach more than US$ 33 billion
In 2020, Vietnam-U.S. trade may reach about US$ 44 billion a year, Vietnam’s exports to the U.S. about US$ 34 billion, and U.S. exports to Vietnam about US$ 10 billion
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Why Vietnam needs to sign TPP?• Middle income trap:
Vietnam’s advantage in international trade is cheap labor
Competition with neighboring countries
“Everything but arms” status (EBA) granted to leased-developed countries (LDCs)
TPP would level the playing field with LDCs
• Generalized system of preference (GSP) Maximum average annual income per capita to obtain GSP: US$4000
Vietnam’s GDP per capita is estimated US$1,900 this year and will reach US$ 2,300 by 2015
Example of Thailand: Permanently excluded from the GSP => the chance for Vietnam
Vietnam needs “joker” called TPP
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Myanmar v. Vietnam:Who wins? Why loses?
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Myanmar v. Vietnam: Who wins? Why loses?
• Advantages of Vietnam: Vietnam’s economy has developed earlier 20 years than
Myanmar’s one
Current situation of infrastructure and human resources of Vietnam is better than those of Myanmar
• Advantages of Myanmar: Myanmar: Last untapped market in Asia
Myanmar can take opportunities when FDI enterprises losing faith in Vietnam economy to become new FDI hub
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Myanmar v. Vietnam: Who wins? Why loses?
• WTO analysis of liberation of market access: Vietnam ties in first place with Singapore
• *Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement
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Country Limitation of market access*
Country Limitation of market access*
Malaysia medium Myanmar high
Indonesia medium Cambodia medium
Philippines medium Laos medium
Singapore low India high
Thailand medium China medium
Brunei high Vietnam low
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Myanmar v. Vietnam: Who wins? Why loses?
• Remember: Myanmar is the founding member of WTO that means
WTO service sector commitment : Unbound
Vietnam is 150th WTO member and other 149 members demand high level commitments: Better and higher market access and service sector commitments
Myanmar must move fast on concluding free trade agreements
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Myanmar v. Vietnam: Who wins?
• DEPENDS ON COMMITMENTS ON INSTITUTIONAL REFORMS OF BOTH MYANMAR AND VIETNAM!!!!
• OPEN OR ISOLATED?
• MODERN OR CONSERVATIVE?
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