CHAPTER 1. Business environment portion of Japanese firms trading with Myanmar find the environment appealing in only two out of 15 issues: (a) market scale and growth potential; and (b) low labour cost and abundant workforce (JETRO, 2014). In fact, many Japanese firms remain concerned about business risks in Myanmar such as inadequate infrastructure, the weak legal system and enforcement, and political instability (JETRO, 2014).
also limited in different ways. The three JETRO surveys were conducted mainly with Japanese companies whose experience or perception is expectedly quite different from local companies or those of other nationalities. The World Bank’s Enterprise Survey was limited to the manufacturing and service sectors in five cities, mainly focusing on medium and large-sized enterprises. This survey excluded: agriculture (which remains the largest sector in the economy); industries in the countryside; and micro and small enterprises (which account for the majority of businesses in Myanmar). The Executive Opinion Survey of the WEF Global Competitiveness Index comprised a small sample of only 165 respondents and therefore was unlikely to give a comprehensive picture. The Heritage Foundation’s Index of Economic Freedom shared little information on survey methodology, and the detailed sample data are not available to researchers. For all of these reasons, ESCAP and OECD decided to conduct the comprehensive survey of businesses in Myanmar spanning more than 3 000 firms in all sizes and industries, and in all geographic regions.14
JETRO (2009 and 2012) also conducted two business surveys in 2009 and 2012 in the Greater Mekong Subregion, which comprises Cambodia, the Lao PDR, Myanmar, Thailand and Viet Nam, in 2009 and 2012. Both surveys interviewed Japanese investors and local enterprises, operating mainly in Myanmar’s manufacturing sectors, to identify corporate strategies and challenges in their cross-border operations, including the quality of infrastructure, and related policies and regulations (JETRO, 2009 and 2012). Although the two surveys adopted the semi-structured interview method some informants participated in the surveys through telephone interviews and questionnaires. The major findings from the two surveys are summarized below:
Endnotes Abe and others (2012) also proposed that entrepreneurship and business development services be considered as two of other important elements of business environment, although they are not fully covered by this survey.
1
(a) A number of surveyed firms have expanded or intend to expand their operations to Myanmar through, for example, investment in new factories and upgrading of existing facilities; (b) The motives for Japanese investment to Myanmar are to: (i) seek greater access to the market; (ii) secure key factor inputs such as labour; and (iii) reduce operational costs through the pro-business policy framework in the host country; (c) Investors tried to reap benefits from various free trade agreements, such as AFTA and ASEAN+6, by sourcing parts and components from other ASEAN members and ASEAN+6 partners; (d) A number of obstacles to the growth of business in Myanmar were also highlighted. Those obstacles can be categorized into six groups: (i) the policy and regulatory framework; (ii) infrastructure; (iii) labour market; (iv) entrepreneurship; (v) trade liberalization; and (vi) logistics services.
Myanmar developed the definitions of micro and SME manufacturers in the early 1990s with a minor modification on the definition of micro firms in 2011 (see OECD, 2013). The new SME law, which is currently under the final enforcement process, will define Myanmar SMEs in all industrial sectors, including services. The draft definition, which is available at www.smedevelopmentcenter.gov.mm/?q=en/def_sme, more or less meets international standards (cf. Abe and others, 2012).
2
By definition Myanmar enterprises are business entities wholly owned or controlled by Myanmar citizens. By regulation, however, they are those registered under Myanmar Citizens Investment Laws (1994 and 2013) (cf. OECD, 2013).
3
They are either wholly or partially owned or controlled by foreigners or branches of foreign enterprises.
4
Military enterprises were initially established to supply necessary goods and services for military operations under the control of the Ministry of Defence. Over the years they grew into major conglomerates in Myanmar, covering almost all industries, such as extraction, rubber products, fisheries, food and beverages, garment and apparel, industrial materials and manufacturing, real estate and construction, trade, tourism, transportation, banking and telecommunications (OECD, 2013).
5
All the abovementioned business surveys took a horizontal approach, using standardized questionnaires across a large number of countries to enable comparisons. While immensely useful, this approach necessarily comes at the cost of the depth and detail required for a thorough analysis of the unique characteristics of Myanmar. The individual surveys were
As shown in figure 1.1, there are several patterns of establishing joint ventures among different types of enterprises, such as joint ventures between SOEs and foreign
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