Newsletter February 2013

A very Happy New Year to you from Innovare!

In 2012, emerging countries in Asia (eg Indonesia, Philippines, Thailand) continued to chalk impressive growth. However, the emerging star that must have occupied newsworthy slots globally is Myanmar. The reclusive country is probably one of the last in Asia to begin to open its doors. Since the ascension of President Thien Sein and the formal recognition of Nobel Peace laureate Aung San Suu Kyi, the country has made many strides towards fulfilling its potential.

Personally, I have been visiting Myanmar since 2007, in support of Rainbow Children’s Home (an orphanage based in Yangon). The recent changes took even the locals by surprise as previous progress had been false starts. Nevertheless, we believe that change is imminent and so as to continue to deliver and support our contractors, Innovare has taken the additional step to set up an office in Yangon.

In this update, it is our pleasure to present to you this raw but rare gem… Myanmar.

With Best Regards

Harry Loh


Myanmar

Taking a walk down the streets of Yangon brings one back to the 50’s in Singapore. The many colonial buildings date back to its British past. These lie almost in its original state with small entrepreneurs plying their trade. Along the streets, one takes a break by sitting on squat level stools and drinking Myanmar tea.

The city, which is the business heartbeat of Myanmar, has been beating at a slow and idyllic pace until recently. On 29 January 2013, Myanmar has obtained 5.925 billion U.S. dollar debt relief from Paris Club creditor countries, announcing that the government will use the resources made available by the debt relief in schools, hospitals and poverty reduction programs and pledging to step up a vigorous reform process under the Framework of Economic and Social Reform.

Myanmar is on the verge of a massive facelift with the aims to leave least-developed status.

Infrastructure Projects

  1. In Myanmar, it takes 3 to 6 months to get a landline. Mobile networks are out-dated and communications cost are amongst the highest in the region. The infrastructure needs serious upgrading.

    Myanmar has just announced plans for a dramatic increase in telephone and internet access as it opens the door for foreign firms to enter one of Asia’s last untapped markets with the Communications and Information Technology Ministry about to launch tenders for two nationwide telecommunications service licences to be awarded in the first half of 2013. Bharti Airtel has bid for a telecom licence in Myanmar, as India's biggest private telecom company looks to expand its foreign operations. A host of other global players, including Norway's Telenor and Malaysia's Axiata, have also given bids in for a licence to provide mobile telephony services in Myanmar.

  2. Myanmar is accepting bids for 18 onshore oil blocks. The country’s proven natural gas reserves have doubled in the last 10 years to 570 billion cubic meters and it has over 50 million barrels of crude oil reserves. This creates a huge investment opportunity for energy giants to tap into the resource rich nation.

  3. The Mudajaya Group Bhd is making a foray into the independent power business in Myanmar. In the last few days, Mudajaya announced it had signed a memorandum of understanding with the government of Mandalay and IJM Corp Bhd co-founder Datuk Koon Yin for the proposed power plants – the first of which will be coal-fired and the second, a solar-powered plant.

  4. Phol Dhanya plc is expanding its water-treatment business in Myanmar this year after its first project is completed in March.

  5. Various companies from different countries had held discussions on investment prospects with the Directorate of Myanmar Investment and Companies Administration. The firms include Komatsu from Japan and Cargotec from the UK. Furthermore, Ammita Tammakun Co. Ltd. a Thailand company has submitted a proposal to operate a high-speed magnetic levitation rail service between Yangon and the state capital of Mawlamyaing.

Contracting In Myanmar

As in most of Asia Pacific, contracting is confined mainly to project work undertaken by multinationals. Locals are normally engaged via the permanent model. Hence, the concept of contracting is not readily understood in Myanmar, with the authorities making little distinction between the permanent and contracting models.

Contracting Facts

Immigration
Presently, working visas are issued for 6 months, normally renewable. It has to be applied for in advance of travel. Due to the extreme shortage of skills in Myanmar, we envisage that the initial requirements for manpower will be in favour of expatriates and hence, the government will eventually relax the rules governing the entry of expatriates. Again, this is an evolving process… so, watch this space.

Statutory deductions
Tax is 35% flat for non-resident. Although the law states the consultant will become a ‘Resident’ once he has been in Myanmar for at least 183 days in an income year, in practice, this ruling can be subject to local tax office interpretation. Resident tax is based on a progressive rate subject to income earned with maximum at 20%.

Social Securities
2.5% and 1.5% of total salary from Employer and Employee respectively with a cap on the contributions.

Other on-the-ground Facts

Exchange Rates
The Myanmar Kyat is a controlled currency that is not readily convertible. Until recently, it used to be operated on two exchange rates, the expensive official one and the blackmarket. This has recently been rectified into a single official rate (about US$1 to 850 kyat).

Currency Controls
Nevertheless, it is still difficult remitting monies out of Myanmar in foreign currency. The banks are not fully trusted and locals tend to store up cash in the “traditional mattresses”. The situation, however, is rapidly changing.

Unduly High Infrastructure Costs in Cities
In the business centre, Yangon, there is a shortage of reasonable class office space and accommodation. Hence, the prices for business ready offices tend to reflect that of more developed countries such as Malaysia.

Power supply is unreliable as is communications efficiency (eg internet). Ironically, it costs more to install and maintain a reasonable office support costs.

Local Wage levels are extremely Low
A teacher earns about US$300 although wage inflation is setting in even as foreign investors step in. Nevertheless, the local spending power remains muted for the moment.

Innovare in Myanmar

Our entity, Innovare Management Myanmar Co Ltd, is incorporated in January 2013. We are thus licensed to conduct consultancy and workforce management projects.


Contact

Should you need assistance in Myanmar or Asia Pacific, we would be pleased to hear from you. Please contact :

Belinda.Yu@innovare-group.com
Karen.Ferrer@innovare-group.com
Tel : +65 6336 7966

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