“If you look on the banks of the Irrawaddy, you can see the combination of land, labor, and capital that developed from the time the British empire took control of Burma and transformed it to the largest rice exporter in the world by the beginning of the 20th century,” Sean Turnell says as he points to several British colonial buildings in Yangon’s commercial sector. You can clearly see what he means as taller buildings sprouting up across Yangon have dominated the skyline shared with cranes peppered in every direction as more infrastructure development looms.
Sean Turnell is an Australian economist that has worked in Myanmar for the better part of his life. His path was not straightforward, but through a series of different economic roles, he finds himself in a seemingly important position. While simultaneously working for the Myanmar Development Institute (MDI) as a senior adviser, he also holds the position of Special Economic Consultant to the State Counselor (essentially the Prime Minister of Myanmar), a role created specifically for Aung San Suu Kyi.
Sean painted a picture of colonial Myanmar under British rule as one of the major cities of the empire, appropriately dubbed the “rice bowl of the British empire.” It thrived under British rule and created a dominant player in Southeast Asia.
However, after receiving independence, the country transformed into an authoritative military regime. Sean described what followed: “when the military took power, they destroyed all the universities. After the 1988 demonstrations, they dispersed the faculty. They never wanted students to congregate together. They reduced the standards across the board and corrupted the system.”
The fight between reformers and the military regime has been going on for decades, only recently seeing an opening of the country to the rest of the world with the election of the National League for Democracy (NLD) led by Suu Kyi. Because of these policies, Myanmar has seen an influx of foreign direct investment and tremendous growth. Last year, the country experienced 6.2% GDP growth, putting it at the 10th fastest growing economy in the world and 2nd in Asia. “Basic fundamentals are in place, which makes Myanmar a very promising market,” says Nevcan Gungor, a CBS alum who holds the position of Chief Investment Officer for an infrastructure conglomerate Shwe Taung Group. She goes on to explain the recent laws benefiting privately-owned companies: “The 2016 Arbitration law was crucial to the opening of the country. Having a basic rule of law and contract enforcement has really helped the business climate and contractual systems.”
Nevcan continued to say that the current government is trying to find the right balance between economic development versus social and sustainability development. The NLD feels that in a lot of other developing countries, economic development came at the expense of social development. So, the Myanmar government’s focus is to balance these two and enable growth while taking these considerations into account.
Last year in 2018, the NLD released the Myanmar Sustainable Development Plan (MSDP) which lays out the framework of where the government sees the development of the country. This has largely been received with positive reviews, but there still remains a number of challenges to accomplish this plan. Among those are political stability, lack of institutional infrastructure to support investment, economic policy uncertainty, and access to sustainable/long-term finance.
Particularly within the financing component, there is significant foreign exchange risk. Most of the financing is done in USD, but businesses operate using the Myanmar Kyat. Any fluctuations in the exchange rate can greatly expose companies.
For example, a recent drop in exchange rates hurt JJ-PUN when they purchased a stockpile of working capital thinking they would expand rapidly, but lost over $1 million and nearly all their profit from 2018 within that sector.
A joint venture between Jebsen & Jessen and Serge Pun Associates, JJ-PUN is a conglomerate that operates primarily in Myanmar within the agriculture space. Alex Spitzy, a managing director with the group, spoke to us about these challenges that Myanmar still faces.
When explaining the process of bringing new products to Myanmar, he said the government is still a big hindrance to companies trying to compete in Southeast Asia. In order to get products approved, like safer chemicals for farming, companies have to wait 2 years for experimental registration and 10 years for full registration. He has proposed to the government that if the US, Thailand, and other countries have an approved product, why not expedite the registration process for that product? They seem to disagree.
“I think the current government is too afraid to fail. They are micromanaging and analyzing everything…If you want to get a country from the bottom and raise it up, you have to be daring,” Alex says with passion as he speaks to our group.
He goes on to speak about their mission, “our vision as a company is building a better country for the Myanmar people. We want to upgrade Myanmar…as Serge Pun says, if you do something good for the country, the money will come.”
Although there seems like many obstacles are in the way for a complete rebirth of Myanmar as a significant player in Asia, one cannot help but feel optimistic for where the country is headed. The Burmese people have proven to be genuine, kind, empathetic and loving.
Many companies like Proximity Designs also believe in the future of Myanmar and its people. They are a quasi-NGO focused on providing products and services to the rural communities of Myanmar. They work closely with farmers with a hands-on approach of teaching them efficient farming methods.
“We saw a massive market that was terribly underserved. It’s been neglected by private companies, the government, public services, and even the aid sector which left farmers on their own,” Jim Taylor, co-founder of Proximity Designs, says to our group during the company visit. “If you look at the neighboring countries in Southeast Asia and their transformation, Taiwan, South Korea, Indonesia, Vietnam, and even Bangladesh…the key to rebuilding a country is a strong rural sector.”
The future is bright for Myanmar, as long as the current political trajectory does not falter. People like Sean, Nevcan, Alex and Jim have faith in what this country can and will become. After our first two days of company visits, we are beginning to see the light on the horizon as well.
Oliver Salman (’19) is an MBA Candidate at Columbia Business School