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Investors Need to Rethink Their Strategies in Myanmar

Today, one of the toughest challenges facing many expatriates and investors coming to Myanmar is the mounting price of property and access to standard accommodation. Since government reforms took place in 2010, a flurry of foreign investors has been seeking business opportunities in Myanmar and many multinationals dove head-first into the last emerging market eyeing expansion, profit and growth. But it became clear that the reality was otherwise.

The majority of entrepreneurs coming to Myanmar have an acute awareness of how high property rents have become, especially with regards to commercial operations in cities like Yangon and Mandalay. According to Consult Myanmar, price per square feet (sqft) of land in downtown Yangon has risen from K240,000 ($249) to K250,000 ($259), meaning an increase of $10,000 for every thousand sqft. Office rental has also gone up to about $78 per square metre (sqm), which exceeded downtown Manhattan’s $49 per sqm, according to property research firm Colliers International. One big factor behind this jump is simply high demand over incremental supply. This poses an incredible obstacle for many investors who come to Myanmar with lofty expectations – the bad news is the prices are expected to increase further.

There have been a series of top level talks among government officials, business communities and international experts on enacting a solid property and commercial renting law that could be positive for foreigners. But the land reform procedures require time while new businesses expect speedy results. Which begs the question: How can then investors successfully profit from the so called “untapped” market with sound business models and sustainable strategies?

Out in the fields

The economy in Myanmar is agriculture-based while much of the land remains untouched and the sector badly needs mechanisation. Mckinsey Institute in its 2013 report analysed that the country needs to tackle four major sectors to pull off momentous economic growth. This includes transformation of digital infrastructure, sectoral shift from agricultural to manufacturing, expansion of well-planned urbanisation and a globally-connected economy. These roadmaps are crucial elements to Myanmar’s future development.

About 80 percent of Myanmar’s population, which remains at the bottom of the pyramid, needs to become integrated in the aforementioned markets; a new business model that identifies 4 billion people in the world with no access to higher luxury goods but able to consume re-engineered products and services that meet their basic demands such as affordable electronics and health care. Majority of Myanmar’s population is part of this market and to reach out to this segment companies need to reinvent their business models and execute them in the deepest corners of Myanmar, excluding densely populated cities like Yangon and Mandalay. More than sixty percent of the rural population in Myanmar needs better agriculturally-related businesses such as efficient production of crops, farming and poultry production. A prime example of local corporate success seen in Myanmar is the local winery, Myanmar Vineyard, in Taunggyi in southern Shan state. Established in 1998 by a group of European wine experts, Myanmar Vineyard is now planning to enter the international wine market. The firm provides wine production training and is creating job opportunities for locals in the region, making it a social business as well.

The second area to focus on is the service industry. Everyone knows the urgent needs for educational services in the rural areas of Myanmar. Despite the country’s literacy rate of 92.7 percent, according to Index Mundi 2013, there is still a need for quality educational services such as English learning centres or even prep schools. The education sector in Myanmar has a real business potential and it would surely contribute to the overall developments of the economy as a whole. For instance, education centres like Total and S.A.G (Taunggyi) are making significant impacts in the lives of the students around the regions. Students graduating from these learning centres have proficiency in English as well as adequate qualifications to start working. It is time that multinational education companies remodel their strategies and services to reach this market.

For greater productivity

The current price of property for rent and unstable commercial laws are hindering the establishments of multinational corporations and medium-sized enterprises. However agro-production, health care, telecommunication, tourism and educational industries would surely reap the benefits and it would make significant differences in the lives of the people as well as enforce changes with regards to urban development in rural areas.

Land acquisition for commercial use through a proper legal procedure would be more efficient in rural areas rather than heavily-regulated central cities like Yangon or Mandalay. Any entrepreneurs or expatriates coming to Myanmar now will need in-depth information on property regulations or investment guides. However, several investment guides, consultation services or even online property markets such as House (house.com.mm) and Myanmar Housing are providing first-class consultations and can show viable opportunities for growth in this market. It is time multinationals strategise and startups innovate their business models locally with a corporate standard to suit rural markets, reap exponential growth and enjoy sustainable win-win returns.

Stephen Seng is an MBA (international management) student at Nürtingen University of Applied Science. He is currently based in Berlin, Germany, and can be reached at sengyuan0508@gmail.com.

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