Thursday, 8 May 2014

Burma: Open for business

Since Myanmar, formerly known as Burma, invited overseas investment into the country, international brands are eager to get a foothold. Maida Pineda reports

I headed to Myanmar for the first time in June 2012. But unlike my visit to other Asian countries, this one required special preparation. Before departing for Yangon (the country’s biggest city and commercial centre), I was advised to bring pristine US dollars as there were no ATMs or foreign banks. Only flawless, unblemished, fold-free US notes were acceptable for exchanging for local currency.


Exiting the airport, I felt like I had stepped back in time. Men wore longyi, traditional plaid long skirts instead of trousers. Vehicles dated back to the 1980s and both left- and right-hand drive cars were on the road. When it rained, the taxi driver handed me a knob from his door to close my window. It was the rainy season when I visited Myanmar; the rains usually meant low occupancy for hotels and flights, but they were fully booked with businessmen visiting the country to explore investment opportunities.

Since the reformist government of President Thein Sein sent out the message of Myanmar opening its doors in 2011, investors have been responding well. After decades of isolating sanctions, it remained one of the few places in the world untouched by Western brands. Yes, a country devoid of McDonald’s, Starbucks and Coca-Cola still exists – but not for long. This once isolated Burmese market is changing at a staggering pace. Investors are keen to get their share of the pie, with opportunities in the manufacturing, energy, transportation, hotels, tourism, construction, mining, oil and gas sectors.

For many foreign companies, it pays to capitalise on being first. MasterCard immediately saw the potential of the growing hospitality industry in Myanmar. After it set up ATMs and point-of-sale terminals at hotels and high-end restaurants, MasterCard boldly promoted itself as the first international payment card accepted in Myanmar.

Following its years of isolation, Myanmar could grow as much as 8% a year, according to a McKinsey & Company report, as it diversifies from agriculture to manufacturing, mining, tourism and telecom. The per capita GDP could rise from US$1,300 in 2010 to US$5,100 by 2030, creating a potential consumer class of 19 million.


It’s the real thing

In September 2012, Coca-Cola was one of the first American businesses to re-enter Myanmar, making its first delivery to local customers. On June 4, 2013, for the first time in over 60 years, Coca-Cola was bottled in Myanmar. The beverage giant’s lead boosted investor confidence in Myanmar. But their commitment to Myanmar does not end there.

Rehan Khan, General Manager of Coca-Cola Myanmar tells us: “Earlier last year, Coca-Cola announced the planned investment of US$200m over the next five years. This investment will not only stimulate job creation, as we estimate that we will create more than 22,000 job opportunities across the chain, including 2,500 direct jobs, it will also increase production capacity, grow logistics, including sales and distribution operations, and improve marketing.”

Partnering with local bottling firm, Pinya Beverages Myanmar, it looks as though Coca-Cola is staying for the long haul. Khan confirms this: “Today, we have two plants producing Coca-Cola products and Myanmar consumers can enjoy Sprite and Coca-Cola in the iconic glass bottle. Coca-Cola has acted on its public commitment to hire and develop local people.”

Six months on from its plant opening, Coca-Cola now reaches more than 100,000 retail outlets nationwide. But beyond the economic growth, Coke aims to make a difference with the local communities. Khan explains: “Our work in Myanmar isn’t just about expanding our business. It’s about lifting communities and creating opportunity for businesses and entrepreneurs. Coca-Cola Myanmar’s flagship community initiative, Swan Yi, has empowered more than 15,000 economically disadvantaged Myanmar women since the programme’s inception in July 2012. Swan Yi is being implemented in partnership with respected international NGO Pact and aims to positively impact the lives of 25,000 Myanmar women by next year.”

After Coke’s 60-year absence from Myanmar, they want to make a good new impression. They cannot assume local consumers know this globally famous beverage, so there is product sampling, provision of fridges to shops and education for consumers. A soft drinks war may be in the offing as South Korea’s Lotte Chilsung Beverage Co Ltd and Myanmar Golden Beverage Co Ltd announced in January that they will team up to produce and distribute PepsiCo in the country. Fast food giant KFC also wants a piece of the action, with 
a tasting event last year in Yangon for local media and government officials. Yum!, the company’s parent brand, is exploring opening KFC, Pizza Hut and Taco Bell in Myanmar.

A beer war is brewing as well, with Carlsberg, Chang Beer and Heineken currently building their plants. Meanwhile, giant food processing company Nestlé has formed a Myanmar branch, and a production factory is in 
the works too.

Tourism on trend

Foreign hotel operators are hustling to build new facilities to keep up with growing tourist numbers – 3 million by 2015, triple the 2012 figure. Myanmar’s US$500m tourism plan, unveiled last year, projected 7.5 million arrivals in 2020. Yangon now has five five-star hotels, six state-owned hotels and 762 privately-owned hotels operating around the country, according to the official data from the Ministry of Hotels & Tourism. As of January, the Ministry reported that the Myanmar Investment Commission has so far granted permission for up to US$2 billion worth of investment in hotels and tourism-related businesses since 2011.

Leading hotel operator Accor aims to open six hotels in Yangon over the next three years. The company prides itself on being the first major international group to announce confirmed developments since the reforms in 2011. Pan Pacific signed a joint venture to open a 348-room Yangon hotel. Instead of building a new hotel, Best Western took over the management of a local hotel in Yangon, allowing the American brand to quickly open its 189-room hotel in December 2013. The Hong Kong-based Peninsula Group is taking a different approach, building its hotel at the Railways building, one of the colonial structures preserved in downtown Yangon.

While these foreign companies bravely pave the way, other investors cautiously watch from the sidelines. Myanmar has been referred to as the final frontier in Asia. Many investors still worry about the risks of doing business in this new market. As Rehan Khan observes: “The challenges in Myanmar are no different from those in any other emerging or developing markets. It’s a journey with the people of Myanmar, as the country continues to evolve and develop.”

Ultimately, entering a new market is a matter of perspective. For Khan, Myanmar presents great opportunities, “The Coca-Cola Company is privileged to grow alongside Myanmar and we are optimistic about the bright future ahead. Myanmar presents a unique opportunity for us to make a positive difference in the communities we serve and we take this responsibility very seriously. Also, we are always delighted to be able to offer choices to consumers.”

For both local consumers and the growing number of visitors to the country, being open for business in Myanmar means one thing – more choices.

source: Food Service Consultant
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