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Investors remain
confident about
Myanmar's long-term
opportunities.
However, short-term business sentiment drops
drastically from 73% a year ago to 49% now.
NOTE
The survey was conducted before the latest developments in Rakhine state,
which are likely to have further reduced investor confidence in Myanmar
Myanmar Business Survey #2 – Roland Berger Focus 3
In December 2016, Roland Berger published the first To assess how this business sentiment has evolved since
Myanmar business survey. The results showed an then, Roland Berger launched the second Roland Berger
enormous sense of optimism among both local and Myanmar Business Confidence Survey, conducted in
international investors: 73% of business people ex- June-August 2017, this time in cooperation with the
pected the business landscape to (rapidly) improve. Union of Myanmar Federation of Chambers of Com-
This optimism, which was arguably unparalleled merce and Industry (UMFCCI), the leading chamber of
worldwide, resulted from the political and economic commerce in the country.
changes the country had recently undergone, includ- This second survey captures the latest business senti-
ing economic reforms particularly in the telecom sec- ment of almost 500 owners and senior executives from
tor, democratic elections and a peaceful transition to companies of all sizes (compared to 179 responses in the
a new government led by Nobel Prize winner Aung 2016 survey). In the latest survey, 61% of the respondents
San Suu Kyi, as well as the subsequent lifting of US are local companies (compared to 38% in 2016) and 39%
sanctions. are international firms (compared to 62% in 2016).
0% 76%
1% 23% 68% 8%
2016
Local
0% 15% 35% 47% 3%
companies
2017
50%
0% 71%
7% 22% 62% 9%
2016
International
1% 15% 35% 45% 4%
companies
2017
Cover photo: iStockphoto / SeanPavonePhoto
49%
0% 73%
5% 22% 65% 8%
2016
All
1% 15% 35% 46% 3%
companies
2017
49%
Deteriorate rapidly Deteriorate slowly Remain the same Improve Improve rapidly
Source: Roland Berger Myanmar Business Confidence Survey 2016 and 2017
4 Roland Berger Focus – Myanmar Business Survey #2
A DRASTIC DECLINE IN SHORT-TERM OPTIMISM icant or very significant issue), no clear government eco-
The survey results show a drastic decline in short-term nomic policy (77%), unpredictable legislative environ-
business sentiment, with only 49% of executives expect- ment (72%) and selective and unpredictable enforce-
ing the business landscape to (rapidly) improve within ment of regulations (72%). D
the next 12 months, compared to 73% in 2016. The drop The lack of trained staff is a well-known problem for
is consistent across local companies (from 76% to 50%) companies and is nothing new – in fact, the issue has
and international firms (from 71% to 49%). It should be decreased in importance compared to last year (-3 per-
noted that the survey was conducted before the latest centage points for international firms). In contrast, the
developments in Rakhine state in August and Septem- lack of a clear government economic policy has be-
ber 2017, which is likely to have further reduced investor come an increasing bottleneck for both local and espe-
confidence in Myanmar. A cially international firms (+11 percentage points). It is
The decline in business confidence cuts across all sec- now found to be a significant challenge by 86% of the
tors, with every industry reporting a drop in confi- international firms (of whom 53% find it a very signif-
dence of between 14 percentage points (professional icant challenge), and the number 1 challenge overall.
services) and 32 percentage points (tourism). Given Hence, this is likely to be a root cause of the failure of
the immense need for electric power, international FDI to grow significantly.
firms are most optimistic in the utilities and energy
sector (71%) and least optimistic in the retail & distri- THE GOVERNMENT HAS TAKEN POSITIVE STEPS
bution sector (43%), a market that is still mostly dom- IN THE LAST 12 MONTHS, BUT COMPANIES
inated by local firms. Local firms on the other hand are EXPECT MUCH MORE
least optimistic in the construction and real estate It is not that companies do not appreciate the positive
market, likely driven by Yangon's real estate market economic steps the government has taken in the last 12
slowdown and a lack of approvals of large infrastruc- months. For example, the new Investment Law and
ture construction projects. B rules are found to have had a positive impact on the
The drop in investor confidence also goes hand in hand business landscape by 64% of local companies and 62%
with the stagnation of foreign direct investment (FDI) in of international companies. Also, the further develop-
the country. FDI has only averaged USD 739 million per ment of the special economic zones (in particular Thila-
month in the period April-August 2017, in line with 2016 wa SEZ) is seen as a positive development. Improving
but below levels recorded in 2015 and early 2016 and the rule of law is found to have positively impacted the
down on the investments that were expected to flow in business landscape by 41% of international firms.
after US sanctions were lifted. C Naturally, the removal of US sanctions is also seen as a
very positive development for economic growth. E
DROP IN INVESTOR CONFIDENCE DRIVEN BY In addition, companies believe that the government
LACK OF COMPREHENSIVE AND CLEAR ECO- has started to address the long-term fundamentals of
NOMIC POLICY AND FRAMEWORK a sound economy. For example, 45% of companies
All companies in Myanmar face a long list of issues and consider that corruption has reduced in the last 12
difficulties. The four most significant ones are lack of months. F
trained staff (found by 77% of companies to be a signif-
Myanmar Business Survey #2 – Roland Berger Focus 5
2,296
2,230
2,025
1,038
973 1,029
656 706
614 586
534 552
427 379
268 317 320
228 229 266
146
70 82 2
0 0 0 15
04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08
15 15 15 15 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17
F: Perception of corruption.
How do you think corruption has evolved in the last 12 months?
3% 7% 43% 43% 4%
Local
companies
47%
1% 8% 49% 40% 2%
International
companies
42%
2% 8% 45% 42% 3%
All
companies
45%
Deteriorate rapidly Deteriorate slowly Remain the same Improve Improve rapidly
Source: Roland Berger Myanmar Business Confidence Survey 2016 and 2017
Myanmar Business Survey #2 – Roland Berger Focus 9
60% 35%
Transparent policy making and implementation 95% -2
60% 34%
Rule of law 94% -2
61% 33%
Transportation infrastructure construction 94% +2
47% 45%
Simplification of licensing and regulatory procedures 92% -2
47% 43%
Regulatory capacity building 90% -1
57% 33%
Financial sector reform 90% -1
47% 41%
Education reform and training 88% +3
47% 41%
Broadband infrastructure development 88% -6
36% 48%
Promoting fair competition 84% -7
40% 43%
Land reform 83% +6
32% 46%
Reform of state-owned enterprises and further liberalization 78% -1
37% 40%
Peace agreement 77% +4
27% 47%
Environmental policies and enforcement 74% +9
27% 44%
Healthcare reform 71% +6
Very pessimistic Pessimistic Optimistic Very optimistic New question in 2017 survey – no comparison possible with 2016
61%
0%
6% 33% 44% 17%
2016
Local
companies 4% 10% 50% 30% 6%
2017
36%
56%
2%
11% 31% 43% 13%
2016
International
companies 5% 19% 38% 29% 9%
2017
38%
58%
1%
9% 32% 43% 15%
2016
All
companies 4% 14% 45% 30% 7%
2017
37%
90%
2% 8% 70% 20%
2016
Local
companies 1% 20% 62% 17%
2017
79%
94%
1%
5% 82% 12%
2016
International
companies 4% 22% 61% 13%
2017
74%
93%
1%
6% 78% 15%
2016
All
companies 2% 21% 62% 15%
2017
77%
Will scale back operations Will not expand Some expansion Aggressive expansion
Source: Roland Berger Myanmar Business Confidence Survey 2016 and 2017
Myanmar Business Survey #2 – Roland Berger Focus 15
M: Threat of competition.
How much of a threat is competition to your business?
Source: Roland Berger Myanmar Business Confidence Survey 2016 and 2017
16 Roland Berger Focus – Myanmar Business Survey #2
WHAT DOES THIS MEAN FOR There is one other aspect that may favor entering sooner
INTERNATIONAL FIRMS? rather than later, despite all the obstacles. This is the
Overall, there has been a significant deterioration in fact that local competition is not yet well prepared to
business confidence in Myanmar, among both local and face players operating on an international level. 59% of
international investors. international firms believe that local firms are not com-
For international investors, this means that Myanmar peting successfully and a further 19% believe that local
may not yet be the investment opportunity it appeared firms are not yet competitive enough. M
to be in 2015-2016. Myanmar is now one among many This notion is reinforced by the current belief of about
investment destinations for international investors, 70% of international firms that they can enter and oper-
competing with other markets in Southeast Asia, such ate by themselves rather than working with local part-
as Vietnam and Indonesia. ners/JVs.
International companies wishing to enter Myanmar Overall, multinationals in Myanmar should be in it for
need to be aware of the many challenges they will be the long run, with a well-defined strategy. However, giv-
facing. One of the key issues multinationals will en- en the rapidly changing environment, any multination-
counter is the difficulty of finding experienced employ- al must be flexible along the way and look to tap into any
ees. Indeed, only 13% of Myanmar's working population opportunities that may arise.
has a high school education or university degree.
The only short-term solution to address the lack of expe- WHAT DOES IT MEAN FOR LOCAL
rienced employees is to invest in targeted training. Al- CONGLOMERATES?
though many companies are reluctant to do so, citing Local large conglomerates are clearly in a tough spot.
the high turnover rate in Myanmar (~80% of employees Traditional sources of revenue have dried up, new mar-
in Myanmar stay with a company less than 3 years), kets are developing only slowly, and they will be working
there is simply no alternative to training. Moreover, under new and more competitive rules.
training is a mechanism to retain good employees. In- In addition, the local conglomerates are faced with in-
ternational firms should not be frustrated by the lack of creasing international competitors and liberalization of
experienced people. Rather, they should invest in train- key sectors. 68% of local firms believe that competition
ing and tap into the Myanmar people's motivation. from foreign companies is threatening their business,
The lack of a clear government economic policy is of whom 19% even believe it is threatening their busi-
more difficult for multinationals to address and is ness "greatly". And about 60% of local companies would
more critical in sectors like infrastructure than in sec- like to partner with foreign firms, though their interest
tors such as light manufacturing. Multinationals is not yet reciprocated.
should therefore engage with the government directly Some local conglomerates may not survive this challenge.
rather than waiting for policies or projects to be com- The ones that do will have successfully shifted from their
municated to them. The lack of economic policy also traditional businesses of trading and public sector con-
presents an opportunity to influence policy and share tracts. Such a strategic shift in business activities needs
investment proposals directly with the government. to be accompanied by a transformation in terms of cul-
Maintaining an impeccable reputation is critical for ture, customer focus, skills, corporate governance, re-
this to be successful. porting, speed of decision making and execution, etc.
Myanmar Business Survey #2 – Roland Berger Focus 17
AUTHORS
Thomas Klotz
Managing Partner, Southeast Asia
+65 6597-4550
thomas.klotz@rolandberger.com
Damien Dujacquier
Senior Partner
+65 6597-4532
damien.dujacquier@rolandberger.com
Dieter Billen
Principal
+60 3 2203-8615
dieter.billen@rolandberger.com
This publication has been prepared for general guidance only. The reader should not act according to any
information provided in this publication without receiving specific professional advice. Roland Berger GmbH
shall not be liable for any damages resulting from any use of the information contained in the publication.
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