Monday, 24 February 2014

Here Come the Germans

Business forum builds interest in Myanmar among German investors

The first Myanmar-German business forum in Yangon in more than 30 years has paved the way for closer economic ties but investors from Germany say a stronger legal framework is essential.

The forum, held at the Union of Myanmar Federation of Chambers of Commerce and Industry in Yangon on February 11 during the visit by German President Joachim Gauck, was attended by more than 100 potential investors from Germany.

Emphasising the need for laws that provide greater security for foreign investors, the State Secretary of Germany’s Ministry for Economic Affairs and Energy, Brigitte Zypries, told Mizzima Business Weekly, it was essential for Nay Pyi Taw to provide “the legal framework” for German companies keen to invest in Myanmar.

“We have to make Myanmar attractive to German investors,” Ms Zypries said, adding that she hoped the opening of a German Chamber of Commerce in Myanmar announced at the forum would help to attract more investment from Germany.

“A lot of German investors are interested to invest here,” Ms Zypries said, in an interview after the chamber was opened by Mr Gauck, whose attendance at the forum came on the last day of his visit to Myanmar.

“And a lot of German companies are already doing business here, like Bosch, and others. Everybody is just trying to figure out how we can work because German companies need security to invest,” she said, adding that the European Union and Myanmar needed to have a legal framework that provided security for investors.

Ms Zypries said the Myanmar-German business forum was the first of its kind in more than 30 years.

The visit by Mr Gauck was also the first by a German president in nearly 30 years and as well as strengthening bilateral economic relations would also be important for cultural relations, she said. Ms Zypries was speaking only hours after Mr Gauck re-opened a branch of the German cultural organization, the Goethe Institute, which had been closed in 1962 at the start of the Ne Win dictatorship.

Preparations for opening the German Chamber of Commerce began last November, Dr Monika Stark from the Delegation of German Industry and Commerce, told Mizzima Business Weekly in an email on February 13.

The chamber is part of the German Network of Foreign Chambers Abroad, which is funded jointly by the Association of German Chambers of Industry and Commerce and the German Ministry of Economic Affairs, said Dr Stark.

“We are advising German companies which contact us with inquiries and help them identify Myanmar partners, distributors and suppliers. At the same time, we will work on inquiries from Myanmar companies looking for German partners,” Dr Stark said.

“More importantly we will proactively work on informing German companies about business opportunities in Myanmar and will mobilize them to look into the country. The strong linkage to the German Chambers of Industry and Commerce and Industry Associations is very helpful in this respect. At the beginning of March I will make a tour in Germany, speaking at conferences and seminars and making individual company visits,” she said.

Dr Stark said many German companies had a presence in Myanmar without a legal identity and were working through distributors or sourcing agents. The companies included Fritz Werner Ferrostaal, Siemens, Uniteam, B Braun, C. Melchers, DHL and Schenke.

Dr Stark expressed delight at the number of German businesses represented at the forum, saying it was a “very good kick-start”.

“We’ve big corporations; we’ve many important SMEs specializing in really high tech products. We’ve quite a number of companies which are active in the country for quite a while,” she said.
The homepage of the German embassy said economic relations had stagnated, because of an unfavourable economic and political situation, from the 1990s until 2012, when there was marked increase in bilateral trade, which grew by 50 percent over the previous year.

In 2012, the value of German exports doubled to about 99 million euros (about K133.5 billion), while the value of imports from Myanmar declined to about 44 million euros over the previous year, the homepage said.

Myanmar’s main export to Germany is garments while its main imports are machinery, paints and lacquers, pharmaceuticals and plastics.

Tim Scheffman, a German advisor at the Myanmar Business Development Consulting company, said the forum was a first step towards generating more interest in Myanmar among companies from Germany.

German businesses will rely heavily on benefit-cost calculations before deciding to invest in Myanmar, said Mr Scheffmann.

“The benefits are obviously here; people who want to work, who want to learn, but then you have to calculate the costs: high real estate prices, no real enforcement of the law, which means costs for a company because they cannot have [investment] security, or maybe they have to pay for a court case, which increases costs,” he said.

“They will make a cost-benefit analysis, and after this they will decide if they should invest in Myanmar, if they should invest in Thailand, Laos, and Cambodia … then they’ll go for the best options.”

Mr Scheffmann said German investors would adopt a cautious approach.

“Germans like a step-by-step approach,” he said. “They would want to start first with a representation office, then later grow the business and find a local partner they can trust,” he said.
In terms of where they invested, German investors were open-minded but a country must have the right legal framework to protect investors.

Another concern involved the repatriation of profits, Mr Scheffman said.

“If I am a German company and I make a profit can I repatriate it to Germany? It’s unclear. And if I can repatriate profits, will it be taxed or not? This is a question the Myanmar Investment Commission needs to answer,” he said.

The Myanmar government should ensure that foreign investors can repatriate their profits, said Mr Scheffmann, who also said there should be low taxation on real estate.

Myanmar businesspeople at the forum included U Myint Soe, the chairman of the Myanmar Garment Exporters Association.

U Myint Soe said Germany was the second biggest market for Myanmar garments after the United States.

Germany had become the biggest market for Myanmar garments among European Union countries after the EU granted trade privileges under its Generalized System of Preferences in June last year, U Myint Soe said.

He said most garments were exported to Japan and South Korea, but the industry was hopeful that exports to the EU and the US would continue to rise.

source: Mizzima News
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