“You have to kiss a lot of frogs, before you kiss a prince.”
Am I suddenly talking about dating? No. This quote describes doing business in Myanmar. At least, according to one of the speakers at last week’s seminar in Den Haag on doing business in Thailand and Myanmar.
It confirms what I’ve heard before: there is a lot of opportunity in Myanmar for foreign businesses – but it’s tough, very tough, to do business successfully in this newly opening country.
The World Bank concludes this in its first Myanmar Investment Climate Assessment published last month, where the top barriers for foreign and domestic businesses are listed. They include lack of access to finance, difficulty in getting land-use rights, power outages and inadequate workforce skills. In the World Bank’s ‘Ease of Doing Business’ ranking Myanmar is listed at #177 in 2015 – only one place up from #178 last year. There is also still a lot of internal conflict across the country aimed at some of the many ethnic groups that make up the population of Myanmar.
These barriers aren’t surprising: Myanmar is a country in transition – or ‘at a crossroads’ as writer Benedict Rogers puts it. From being a military dictatorship it is slowly, with many difficulties, trying to become a more open economy and society and trying to democratize.
That also means that the country needs a lot of investment for this development: in Tuesday’s seminar Oliver Massmann of Duane Morris quoted that US$650 billion is needed by 2030 to support the growth potential in Myanmar.
Infrastructure, energy, water, telecommunications, industrial development, financial services, tourism – these are just some of the areas in which investment is needed and which provide opportunities for foreign businesses to enter the market.
Examples of how this is happening are the Norwegian company Telenor which is setting up countrywide telecom infrastructure and Dutch engineering firm Royal Haskoning DHV which is active in Myanmar in for example water management.
But many of these industries – where the opportunities loom largest – are also the segments of the economy with high potential for environmental and social impact. Oil & gas and other extractive industries can have severe negative environmental impact and displace communities. The rush to develop the tourism industry is creating environmental and social pressure for communities, e.g. developing hotel zones in environmentally sensitive areas. The quickly expanding garment industry is prone to negative social impact, just as in many other Asian countries, where in Myanmar there’s a risk of unpaid wages, excessive overtime and workers being prevented to strike.
How do you tackle these challenges and risks when starting operations in Myanmar’s promising market?
One of the most important points that Oliver Massmann last week made on tackling the challenges of doing business in Myanmar was: do your due diligence! This referred to knowing who you are doing business with: what are their connections (the influence of previous members of the military junta is still strong in the economy), what is their financial position and so on. But having a thorough due diligence process in place is also important for all those other aspects of regulatory, social and environmental risk.
Key questions to answer are:
- knowing what types of risk your operations are exposed to;
- how you can tackle these challenges in a way that minimizes their negative impact;
- and, ideally, how you can do business in Myanmar in such a way that it provides a positive contribution to an inclusive and sustainable economy in Myanmar.
Luckily, there are signs that the government of Myanmar also strongly values the development of a responsible business environment. Myanmar joined the Extractive Industries Transparency Initiative as a candidate country in July 2014, committing itself to a policy of transparency and accountability in the extractives industry. The garment industry is taking steps to standardize ethical and responsible business practices across the industry, adopting a sector-wide Code of Conduct in January this year.
What can you as a business do when working in Myanmar?
Below are some resources that will help your business to identify the risks (as part of your due diligence process) you may be confronted with when operating in Myanmar, and how to deal with them:
- the CSR Risk Checker, developed by CSR Netherlands with support of the Dutch government, gives an overview of risks worldwide, which you can specify to product and/or country. For Myanmar, it lists 55 risks, with most falling into the categories of labour rights and human rights & ethics. Which of these apply to your business operations of course depends on your activities, industry and location.
- read about specific topics and what this means for selected industries in the Business and Human Rights Country Guide Myanmar, which was newly published last week by the Myanmar Centre for Responsible Business and the Danish Institute for Human Rights. This extensive report offers a detailed overview of the situation in Myanmar on e.g. labour standards (including child labour, forced labour, etc) and community impacts (including environment and revenue transparency & management), and profiles several sectors (including apparel, extractives, agriculture and tourism) and regions.
- an older report by CSR Asia (2013), Responsible and Inclusive Business in Myanmar, offers background content on several challenges that businesses face in Myanmar, focuses on how to be an inclusive business and offers a useful chapter on strategy development. This last chapter includes a checklist with questions that will help a business define its focus in developing a CSR strategy for its Myanmar activities.
- get in touch with organizations, companies or networks who are already working in the country to share knowledge and experiences. In the Netherlands (to name a few initiatives):
- the CBI (Centre for the Promotion of Imports from developing countries) runs programmes focused on the fisheries, garments and tourism industries;
- the Netherlands Water Partnership connects business and government from the Netherlands to explore opportunities in Myanmar;
- the online platform Ondernemen in Ontwikkelingslanden provides a way of getting your questions answered by experts. Additional business information is also available on the website of the Rijksdienst voor Ondernemend Nederland.
- contact the local representation of your country in Myanmar: for example, the Netherlands has set up a local diplomatic office in Yangon to support Dutch entrepreneurs.
Myanmar is an exciting new market, where businesses are able to build a new market and also contribute positively to the sustainable development of this country. But that requires time, research and network.
Looking at opportunities at how to make your business activities more responsible in Myanmar? Why not get in touch to discuss how MACHI can help you with the development of an sustainable business strategy for your projects.
Photography by Guillén Pérez