Thai-Norwegian Business Review, 2/2012

Thai-Norwegian Business Review 2012 – 2

Thai-Norwegian Chamber of Commerce

Behind the saffron curtain: An inside view Special Issue:

Myanmar open for business

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Contents Special issue: Myanmar Myanmar is changing—new opportunities for business?

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Fact finding mission to Myanmar: First steps for Norwegian business

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Myanmar sets sail to new trading horizons

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Against all odds: running a business in Myanmar

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Behind the saffron curtain: An inside view from a former diplomat

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Starting up from zero in a new market

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Postcards from the golden land

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Myanmar: A brief economic review

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Funny money

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Show me the money: Progress report on the Dawei mega-project

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Myanmar open for business

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Asian women show the way forward at the World Economic Forum East Asia 2012

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Letter from Chiang Mai

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Logistic services in Thailand under the AEC

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Thailand’s economy at a glance

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Members directory

49 Editor: Kristine Hasle Journalists: Eric Baker, Colin Jarvis, Nadia Willan Artwork: Andrew Spaulding Advertising: Elisabeth Bashari

Front page picture: Meeting Myanmar’s president U Thein Sein Photographer: Kristine Hasle

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President’s foreword Myanmar Norway has been actively involved in the peace, reconciliation and democratisation processes in Myanmar since 2008. Much of the work behind the scene has been carried out by the skilful team at the Royal Norwegian Embassy in Bangkok. This work has contributed to the opening up of Myanmar. As such Norway has attained a unique position as the first western country to lift trade sanctions and to encourage business relations to start up Following the diplomatic initiatives, Norwegian businesses are starting to engage in Myanmar. The ThaiNorwegian Chamber of Commerce is very much part of this non-political work. It is our hope that the foundation the Chamber as well as other organisations lay will bring much needed job opportunities to Myanmar’s population of some 60-70 million inhabitants.

A dynamic, vibrant private sector is critical for long-term, sustainable poverty eradication through creating value and broadly based wealth, tax revenues and productive jobs. Better standards of living will also help to propel further democratisation. Trade and foreign investments will have both immediate and long-term benefits. The transfer of knowledge and technology will contribute to strengthening local capacity. In addition, sound and long term investments are known to foster strong local competition.

Norwegian companies who will be doing business in Myanmar have, as ambassadors for Norway, a duty to act with the highest standards of corporate social responsibility. Representatives should recognise their unique opportunity to act as role models for successful and competitive, yet socially and environmentally sustainable investments. In their privileged position as contributors to a historic phase of Myanmar’s development, they have the potential to set the standard for future investors.

The magazine you have in your hand is a result on the Thai-Norwegian Chamber of Commerce’s focus on Myanmar. We hope you will find it both interesting and inspiring and thereby get you to start thinking about how your business can find a role in Myanmar.

Happy reading!

Sincerely, Axel Blom President Thai-Norwegian Chamber of Commerce

Thai-Norwegian Business Review

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Myanmar is changing—new oppo

by Eric Baker photo by Kristine Hasle

and the leadership really does want to lift its people out of poverty.

orway’s Ambassador to Thailand, Cambodia and Myanmar Katja Nordgaard has regular contact with businesses in Norway concerning Myanmar, and recently led a joint business delegation with Innovation Norway and the Norwegian Chambers of Commerce in Singapore and Thailand on a trip there. The Business Review caught up with her after one of her sojourns.

“Some people say there is a euphoria surrounding Myanmar, and if you look around at the moment, you certainly can see it,” said Ms Nordgaard. “But at the same time you have to have realistic expectations about the level and time frame in which you can improve the economy, because it was in tatters.

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Norway was one of the first countries to lift economic sanctions on Myanmar back in April. Norwegian Ambassador to Thailand, Cambodia and Myanmar Katja Nordgaard has visited the country during her posting here, and she sees an urgent need for jobs and development.

“Norway has always underlined that our investments there need to be sustainable,” said Ms Nordgaard.

“We need to follow best practices for both labour and environmental standards. In many ways, Myanmar is a greenfield country.”

“Though laws regarding investment, land, the judiciary and currency are still in flux, meaning there are risks associated with investing, we also feel there is a risk in holding off because if you wait too long you could miss the boat.”

Ms Nordgaard’s advice for potential Myanmar investors was to do their due diligence in researching their sector of interest, be patient, prepare for a longterm investment and find a good local partner.

In her visits to Myanmar and assessments of the current regime, she thinks the reforms are legitimate

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“From my visits there, it’s clear that every sector needs reform, from education to agriculture to the way the bureaucracy works” “One has to separate the current regime from previous ones. We haven’t seen anything to suggest President U Thein Sein is insincere. He is obviously seriously concerned about poverty reduction and the environment. But this process is going to take a lot of time. We like that his message has been consistent.”

She sees Myanmar as one of the largest untapped resources left in the world, which means it will require a lot of willpower for the Myanmar government to hold out until it gets the development it really wants rather than letting unregulated companies set up shop.

“From my visits there, it’s clear that every sector needs reform, from education to agriculture to the way the bureaucracy works,” said Ms Nordgaard. “The people are hard-working and keen to learn and there is potential in the farming, energy, infrastructure, consumer goods, fisheries and tourism sectors.

Though the embassy has been approached by several companies interested in investing in Myanmar,

ortunities for business?

Katja Nordgaard

she noted the climate now is not recommended for beginners to Southeast Asia.

“It would be quite tough to jump straight from Norway to Myanmar at the moment,” she said. “Investors likely need experience and connections in Asia to be able to find a trustworthy local partner and complete the appropriate research.

“I would advise companies to think about their long-term reputation and not fixate on the cheap wages in Myanmar.

If lower costs is their only focus, these companies probably won’t be successful over the long term.”

As much of this opening process is new to Myanmar’s government, it is critically important that institutions such as the World Bank, IMF and ADB provide technical assistance as soon as possible and as much as possible, said Ms Nordgaard. When the International Labour Organization engaged Myanmar’s Ministry of Labour in its efforts to write a new labour law, the ministry was very receptive to advice and input with the result a law that is among the most progressive in Asia, she said.

In addition, the country really needs an oversight body for corruption.

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Fact finding mission to Myanma First steps for Norwegian busine text and photos by Thai-Norwegian Chamber of Commerce

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n January 2012, the Norwegian Government decided that it would no longer urge Norwegian companies to refrain from trade and investment in Myanmar. As a response to requests from the Norwegian business community in Thailand and Singapore, a Fact-Finding Mission was organised for a Norwegian business delegation.

A delegation of about 30 people headed to Myanmar 2-5 May. The visit was organised by the Norwegian Business Association Singapore and Thai-Norwegian Chamber of Commerce in collaboration with the Norwegian Embassy in Thailand and Myanmar and Innovation Norway. The delegation represented some of the largest Norwegian businesses situated in Asia, amongst others, Det Norske Veritas, DNB, Jotun, Telenor, Wilhelmsen Ships Service, and Yara.

role as a key player in the peace and democratisation process in Myanmar and also thanked Norway together with Australia for having lifted all sanctions against Myanmar. He highlighted Ambassador Katja Nordgaard’s contribution and her efforts in particular.

Myanmar looks forward to cooperation with Norway on the business side. The country needs help with capacity building in several areas, including better education, to ensure a sustainable development and to create jobs for the country’s population.

The Ambassador stated that Norway was ready for a partnership with Myanmar. She highlighted predictability, transparency, due process and equal conditions of competition as important factors for to Norwegian companies for doing business in Myanmar.

In addition, she stressed the importance of Corporate Social Responsibility.

The meeting with the President was followed by group discussions with relevant government officials, within industries which had been identified as interesting.

The purpose of this mission was to study the Myanmar market at an early stage. The delegation had meetings with potential partners, with ministers and politicians, with lawyers and bankers who shared their information about laws and regulatory issues and representatives from the expat community who shared their experiences about life in Myanmar.

A definite Highlight – meeting the President In Nay Pyi Taw, the new capital of Myanmar, the delegation met the President and several ministers, and leading officials from the state apparatus.

President U Thein Sein took a full hour out of his busy schedule to emphasise his appreciation for Norway’s

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Erik Borgen and Katja Nordgaard with President U Thein Sein

ar: ess Predictability, transparency, due process and equal conditions of competition as important factors for to Norwegian companies for doing business in Myanmar.

Opportunities in Myanmar for Norwegian industry Norway can play a leading role in several sectors, including telecommunications (both regulatory and operational), power supply, with emphasis on hydropower (both regulatory and operational), maritime (both the regulatory and staffing) oil and gas (both regulatory and operational), infrastructure (energy, ports, roads), agriculture (fertilisers).

Regulatory issues The authorities in Myanmar are actively working to update an outdated legal framework to accommodate foreign investors. The legal foundation is based on the British system and is thoroughly and consistent, even if it needs renewal. Norway can work with advice on regulatory as well as operational aspects.

Timeframe Things are moving very fast and the Norwegian companies should at least create “listening posts� to monitor the market. Certain sectors are ripe for the establishment of representative offices to start with, others require more background work.

Several of the participating companies have already established presence in Myanmar and look at interactions with companies and organisations we met on the trip. Examples are Yara which is already cooperating with AWBA and the maritime industry which is looking into co-operation manning ships with Myanmar officers.

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The delegation

In several industries, Norway can contribute in regulatory affairs, where there is great need for capacity building (telecom, power, including hydropower and oil and gas, maritime). International Centre of Hydro Power works with capacity building in hydropower and has already helped several countries in the region (Bhutan, Nepal, Laos, Vietnam, etc.). Norad can long term play a major role in the development and Norfund can help with micro-financing. Innovation Norway, as the Norwegian Government’s instrument for Innovation and Development of Norwegian industry can help Norwegian companies with feasibility studies to get started in the country and with practical assistance.

Which criteria are Norwegian companies considering?

The first thing companies look at is the legal framework (company establishment, ownership, financial control, etc. Financial matters are another (money transfers, taxation, etc.) Finally, predictability, corporate responsibility, transparency and long-term interaction are other key factors.

Final considerations Although Myanmar is very rich in resources, things do not happen overnight and will take time. The lack of

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infrastructure and in particular the energy shortage is a concern. Corruption is a challenge as well as a lack of expertise in all aspects of society.

Both Yangon and the rest of the country face power outages and brownouts. In addition, internet access is poor. Due to the renewed interest in the country it is also hard to find office space and housing for expatriates. The infrastructure is poor (ports, roads) although we saw examples of the opposite. Prices in Yangon for hotel rooms, offices, etc. have both been doubled and tripled since the sanctions were lifted.

At the same time there are many business delegations visiting the country (South Korea was there at the same time as our delegation). The interest is very high and it is good to see that Norway shows interest so early. We believe companies must be present to monitor developments which can move very fast.

There are many questions about Myanmar. Is it still too early to enter this market? What about the sanctions? Is it political acceptable? Thai-Norwegian Business Review has interviewed Norwegians who have been living in Myanmar for more than 20 years and people who have just started up a business there.

This magazine might give you an impression of how it is to run business in a country, which is just about to open up for the rest of the world after 50 years.

Opening presents

Entrance to Nay Pyi Taw

Nay Pyi Taw – a constructed Capital The capital of Myanmar, Nay Pyi Taw, is situated approximately 320 kilometres north of Yangon.

The administrative capital was officially moved from Yangon on the 6 November 2005. The city is one of the world’s ten fastest growing cities. Nay Pyi Taw was the first stop on the Norwegian delegation’s Fact Finding Mission.

Nay Pyi Taw is prepared to receive many people. The delegation arrived at the new airport, on a chartered flight - there are still very few scheduled flights. The airport was one of the most modern, with absolutely no queues. The airport was empty, there were no people, except from a few staff. Nay Pyi Taw is the only capital in the world without international flight connections.

This is of course a matter of time, things are changing almost by the hour.

Nay Pyi Taw’s infrastructure is amazing. The bus taking us the hotel drove on a four-lane motorway.

From the bus, we counted up to 16 lane roads close to the parliament. Still, the cars were absent and the highways were deserted.

The governmental inhabitants of Nay Pyi Taw live in residential zones. In addition, there are military zone, ministry zones and a hotel zone. When moving the capital in 2005, the ministries were expected to be in place by the end of February 2006. However, the hasty move of the capital led to a lack of schools and

other amenities. The government originally prohibited families of government workers from moving to the new capital. Today, the residential areas are carefully organised. The apartments are allotted according to rank and marital status, and families are encouraged to live there. Hospitals, cinemas and modern shopping centres are available for the people living there.

From a tourist’s perspective, the replica of the Shwedagon Pagoda in Yangon is interesting. The Pagoda is called Uppatasanti, and is only 30 cm lower than the original in Yangon. Next to it, you can watch beautiful white elephants (for good luck), a very interesting gem museum and a busy market. Further on, there is an impressive parliament and a professional congress centre.

It’s hard to believe that Nay Pyi Taw has a population of more than 950,000. That is almost the twice the size of Oslo. The capital is ready to take off. It will be interesting is to see how a constructed capital is getting ready to be, hopefully, a vibrant city.

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Myanmar sets sail to new trading

by Nadia Willan photos from Uniteam Marine Training Centre

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he opening up of Myanmar to more international trading affects not just local companies and workers in Myamar but all businesses operating in this part of Southeast Asia too. As exports and imports increase there will undoubtedly be an impact on developments within the shipping industry. One company ready to say ‘ship ahoy’ is Uniteam Marine, a ship management company that offers crew management services to a large fleet of vessels such as container ships and bulk carriers that sail under various European flags. The company has been training crew and managing ships for over 30 years, and in 2005, the Uniteam Marine Training Centre opened in Myanmar.

“Due to the opening of the country to the rest of the world, exports but also imports will grow steadily, leading to more shipping lines progressively calling at Myanmar ports with the consequent result of improvement of port facilities, local infrastructure and services.”

The majority of Uniteam Marine’s seafarer trainees are from Myanmar and the company offers over 100 courses for deck, engine and catering personnel.

The courses also includes workshops and simulators such as steering and engine control room simulators, electronic chart display and information systems,

Training Director in Yangon, Captain Win Zaw, has worked for the company for several decades and admits these are challenging and changing times.

With Myanmar’s long coastline and the various islands, as well as the opening up of the country to international trading and the effect of globalization, there will be opportunities but also challenges to the shipping industry. Ship owning in Myanmar is in its swaddling stage, however ship owners in this part of the world are undoubtedly suffering as well in the same manner as the shipping industry suffers internationally, going through a cycle of over tonnage and a depressing economic and fiscal crisis, says Captain Zaw. However, with over 7,500 trainees passing through the doors of the training centre each year, he expects shipping activity to increase.

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and an automatic radar plotting aid. Whilst many of the trainees are new to the industry, the company offers a multitude of refresher courses and training in specialised areas as well as for specific rank upgrading for those already onboard. On successfully completing Uniteam’s compulsory training matrix, which is based on regulations and best industry practice, all the Uniteam Marine seafarers are offered employment on the company’s managed vessels, most of which are owned by prominent European companies. The Uniteam seafarers operate on foreign owned ships sailing all over the world. Ship owners can also take advantage of the Uniteam training too with fees in line with the guidelines of the Department of Marine Administration.

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Bridge Simulator at Uniteam Marine Training Centre in Yangon

Training at Uniteam Marine Training Centre

In recent years, like many industries in Myanmar, changes have been slow and steady. However, as the worldwide economy picks up, the newly opened channels to the country will mean that developments in shipping will gather speed. With this Captain Win Zaw sees lots more opportunities for young people looking for stable careers on the horizon. “It is the same as in other developing countries; young people see seafaring as an opportunity to enhance their education and knowledge and improve their academic credentials, earning a good amount of money which helps them and their families to upgrade their living standard.� Certainly as Myanmar sets sail to a more open relationship with the rest of the world and the people who live in the country, having solid training and crew experienced in international waters is going to help keep the managed ship services buoyant.

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Against all odds: Running a busi text and photo by Kristine Hasle

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lmost 20 years ago, entrepreneur and adventurer Bjørn Burchard arrived Myanmar to start his work with a Norwegian owned furniture manufacturer.

A few years later, he decided to settle down in the country, to find a local partner and open his own factory. Today, Mr. Burchard runs United Wood Industries Co Ltd., a company which makes high-end outdoor furniture, mostly for the export market.

Mr. Burchard is one of the expat veterans in Myanmar.

When he started his business in the 1990s, the military regime did still not have the full grip on Myanmar, and sanctions from the rest of the world were not an issue. Up until 2003, United Wooden Industry was a successful company, but tougher times were to come.

Running a business in a country like Myanmar, when the rest of the world sees what you are doing as wrong, is hard. From the mid-1990s, United Wood Industries was growing steadily, and had almost 400 employees by the time the sanctions were introduced in 2003.

After the sanctions, it has been almost impossible to run a business in Myanmar. There was still the Asian market to sell to, e.g. China and India, and the local market in Myanmar and as a consequence it was possible to keep the factory running. However after 2003, Mr.Burchard had to reduce his staff to less than half of what it had been before the sanctions. Despite all the adversity, he never considered closing down his business. Too many people were relying on the income from his business.

Today, United Woods is situated a good half hour outside of Yangon. It’s impressive to enter the

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Bjørn Burchard

factory. A chair leg here, an armrest there, all made at different work stations and cut with millimetre precision. The woodwork takes time to learn.

To keep up with the superior level of quality, the requirements of the employees are high and all the employees need to be trained well. The working situation for the 150 employees is good, their salaries are above the average wage in Myanmar and their hours are regulated.

The furniture made at Mr. Burchard’s factory is primarily made of teak and mahogany. Since the timber is a living material, is has to be handled gently.

The humidity and the temperatures inside the kiln drying rooms where they season the wood needs to be controlled, otherwise the wood will change its form and crack at a later time and damage the furniture.

An additional challenge is that the factory is only provided with electricity for about five hours daily.

The rest of the day, electricity must be generated by generators run by diesel fuel, which again is a scarce resource in Myanmar.

iness in Myanmar country. The timber has been processed in the neighbouring countries which have gained from this arrangement. Just recently, the government of Myanmar added an export tax on unprocessed timber to encourage more industry in Myanmar.

What Myanmar needs today is an industry that creates employment and skilled workers, says Mr. Burchard. Creating furniture for export will create value to the country. By refining raw materials, he helps providing the people of Myanmar with work, and to better the economy.

Sustainable development Myanmar is heading in the right direction. Myanmar is, like Norway, rich in natural resources. The country has oil, gas, gems, minerals, seafood and wood. Unlike many other natural resources, timber is a renewable resource, if it is taken care of. United Wood Industries have tree planting projects. Planting teak trees is a long time commitment. It takes around 30 to 40 years to grow good size teak trees, but five years after planting the trees, 50% of the earlier planted trees has to be cut down to make enough space for the remaining trees to keep growing. Another weeding of 50% of the Trees has to be made after ten years, all this to make enough space for the remaining trees to grow big and healthy. The five and ten years teak logs has a commercial value as these logs can be used for the local construction market etc. These projects have a long-term perspective, but are an important investment for the future. Like other developing countries, Myanmar has traditionally exported unprocessed timber, which creates little value for the

A man of many projects and ideas Bjørn Burchard is involved in three factories in South East Asia making high end furniture; one in the Phillipines, a 25 per cent ownership in a factory in Thailand and one in factory in Myanmar. In addition, he is running Moby Dick Tours, a tourist business that opened in 2003. Moby Dick was established in Thailand with its office in Karon, Phuket from where

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Behind the saf An inside view

they operate a fleet of vessels for diving and adventure tours in Thailand and Myanmar territorial waters of the Andaman Sea. The potential in Myanmar is enormous, says Burchard.

While optimism abounds among the pioneering tourism industry investors, they acknowledge that infrastructure needs to be upgraded to allow for rapid development. -The lack of facilities for the tourist market is a big bottleneck. Myanmar should grow slowly; there are not enough hotels and restaurants to welcome all the tourists and investors that are interested in a country opening up after such a long time. When it comes to the furniture business, we definitely see a very bright future, ends an optimistic Burchard.

by Eric Baker photo by Caroline Vamnes

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he word corruption didn’t exist under the harsh military junta in Myanmar for some 50 years. Unfortunately, neither did the word poverty, says Horst Rudolf, an economist and career diplomat for Germany who now works in consulting.

But that does not mean those conditions were absent during that period, as anyone visiting Myanmar could see. Myanmar is clearly the poorest country in ASEAN, and one of the few in the world that spends more on the military than health and education combined.

As Chargé d’affaires and deputy head of mission for Myanmar starting in 1998, Mr Rudolf has unique insight into both what the country was like and how it is likely to change as Myanmar opens up.

For potential foreign investors in Myanmar, Mr Rudolf has several bits of advice. The first is that the Burmese are not stupid, and should not simply be viewed as a low wage country to be exploited. The people there are very street-smart, and the young workforce, especially in the IT industry, know what workers in other countries are making. Industrial strike actions are possible if workers are treated unfairly, he said.

“Burmese workers are very interesting,” said Mr Rudolf. “If you pay them properly, they are some of the best workers in Asia. And they are fed up with the Chinese treating them like ants.”

Another important factor is that the kyat has been the most successful currency in the world over the past two years, meaning exports from the country are likely to become more expensive if the trend continues.

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ffron curtain: w from a former diplomat Mr Rudolf believes this transition is real and the country will not slide back into junta rule because it was the leaders themselves who pushed for the change.

“The old generals were very savvy,” said Mr Rudolf. “They know the people hated them but they wanted to be able to relax and enjoy a nice retirement, so they opted for this openness plan.”

Khin Nyunt, the former No.3 in command, the secret service boss and a technocrat, apparently drafted the plan because he realised Myanmar couldn’t stay the same any more. The idea was a democracy enmeshed with discipline, loosely based on the Indonesia model where civilian power will be balanced by military power, said Mr Rudolf.

Horst Rudolf

“I believe there is a very limited chance the military will reverse course,” he said. “It’s already opened up a lot, and I believe more real progress is on the way.

These generals want to retire and play golf.”

Even so, as this issue was going to press, there were reports of a possible constitutional crisis in the country as the parliament examined ways to impeach the nine-member constitutional court after it made a ruling that reinforces the executive branch’s power over the legislature. Some in parliament see this is the old guard trying to re-exert their authority, and an overwhelming majority of MPs voted in favour of presenting an ultimatum to the court that it must retract its ruling or face impeachment.

There are three massive industrial estate and infrastructure projects already planned for Myanmar.

“I believe there is a very limited chance the military will reverse course. It’s already opened up a lot, and I believe more real progress is on the way. These generals want to retire and play golf.”

The Dawei deep-sea port and industrial estate is the one we hear about the most in Thailand, as it is supposed to be connected all the way through to Vietnam by either road or rail, allowing shippers to bypass the Strait of Malacca. The project has been in the planning stages for a number of years, but Mr Rudolf still expects it to be a success as long as the financing allows construction to continue.

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The Thilawa port and special economic zone just south of Yangon should feed future business in that area and give the lumber business an outlet. But he believes the Kyaukpyu project will be the most important strategic development of the three.

Rich oil fields were discovered in this western state of Rakhine, where much of the recent ethnic violence has occurred. The state-owned India gas company and Daewoo from South Korea were going to develop the project with technical support from Halliburton, but then China swooped in and said “we’ll take over”, noted Mr Rudolf. China is building a pipeline from Kyaukpyu 1000 kilometres to Yunnan in southern China, from which point it will join the mainland’s supply lines. This allows China full access to the Middle East and Europe without traversing the Strait of Malacca, and there are plans to build a highway from China to the Indian Ocean and eventually, a high-speed railway from Kyaukpyu to Beijing in 24 hours.

“Kyaukpyu doesn’t have a problem with financing and much of the railway is over old lines that were already built,” said Mr Rudolf. “The line would go through Mandalay and it would help develop the center of Myanmar. Of course it’s expected to generate a lot of jobs and industry.”

These are pretty grand plans for a meager town, but it offers some insight into the potential with which Myanmar is viewed by both foreign investors and governments.

Environmental protests in Myanmar made international headlines last year when a $3.6-billion dam financed by China on the country’s main Irrawaddy River was shelved by the government after a rare outcry. But Mr Rudolf is keen to point out not to believe everything you read.

“The people in that area weren’t even worried about the environment before the dam work began,” he said.

“People all throughout the country want the same thing: food to eat, education and work. But nobody ever gives the Burmese any of the good jobs. So now people all over Myanmar have gotten wise. They

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realise the generals are going to get theirs, but they are demanding their cut now too.

“This is happening with the Dawei project too, as many thought they could just shift the Map Ta Phut environmental mess and other unwanted projects to Myanmar. But as the locals started to understand this, the Karen started to shoot at Thai engineers and throw grenades when they were trying to build infrastructure for Dawei. If these countries would include them and pay them, then the protests would go away.

“Two different dams on the Salween River are slated to produce 8,000 megawatts, but the whole country only averages 1,000 MW of usage per day. If the Chinese would just include and pay the Kachin people for the Myitsone Dam on the Irrawaddy, it would be built regardless of its environmental impact.”

Myanmar has a bad reputation regarding corruption, but Mr Rudolf noted it’s hard to accurately judge the country because its economy has been in tatters for so long.

“Even though Thailand ranked #80 in bribery and Myanmar ranked #176, there’s a difference between spending a little tea money and having absolute corruption at the top levels,” he said. “I want to defend Myanmar a little based on what I’ve seen there and what I see in Thailand.”

So even though the leadership in Myanmar has an appalling record—during Cyclone Nargis in 2008 when hundreds of thousands died, the generals reportedly said “This is God’s will; he hates [the Karen] more than he hates us,” noted Mr Rudolf—and resistance has been beaten out of many of them—“The Saffron Revolution was initially about gas prices, and the monks didn’t come out until the protestors needed protection,” he said—the economist is still sanguine about Myanmar’s future.

He left with one final rejoinder for potential investors keen to jump in now: “Let the dummies burn their fingers; waiting is not automatically losing.”

Starting up from zero in a new market

by Kristine Hasle photos from Interactive Thailand

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uch is written about the current opportunities for investment in Myanmar, but not as much is written about the practicalities of setting up a company there. Christoffer Falchenberg, Director for business development for Interactive Thailand, is already active in Myanmar. The company is a one stop service provider for foreign corporations and individuals that need assistance in setting up companies, accounting and corporate law. Falchenberg is sharing some of their experiences when setting up a consultancy firm in Myanmar.

Advertising for staff Even before Interactive Thailand decided to invest in Myanmar, the company knew that they had to weigh the need for a native or expat manager. Since the company is in the business of helping foreigners establish their own companies they decided to first see if it was possible to find capable staff and then have them process the company’s own incorporation.

It didn’t take long for Interactive to conclude that they needed a native citizen high up in their corporate hierarchy who could provide the practical know how of how to handle business in Myanmar. In addition, the company needed someone who could provide the kind of connections needed for Interactive to be able to offer our corporate clients ‘smooth sailing’ during their ventures in Myanmar without getting bogged down in a quagmire of bureaucracy and possibly corruption, says Falchenberg. “If we couldn’t find a person of that caliber we would reconsider investing in Myanmar.”

From left: Thet Lwin Toh (client), Sten Ture Jensen, Christoffer Falchenberg, Cho Cho Myint, Saw Yu Mar Nyo

Falchenberg engaged a local contact person to help gather advertising rates for the most popular journals and subsequently placed half page ads for Senior Lawyers and a Managing Director in three of them (7Day News, Weekly Eleven, The Voice).

Unfortunately the first ad draft was censored because it stated that “Burmese language proficiency” was needed instead of “Myanmar language proficiency” and this resulted in a one week delay.

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The half page ads cost between Baht 15,000 to Baht 40,000 and the money was transferred from Thailand to Myanmar by means of “Hondy”. Hondy is a form of transaction where you provide a local contact in i.e. Bangkok with Thai baht and then another person in Myanmar will issue the corresponding amount in local currency to whomever you appoint in Myanmar.

This was particularly useful before the Kyat’s official exchange rate was adjusted to acceptable levels, because ‘Hondy’ transfers would be conducted at the unofficial market rate. Hondy transfers are still a popular means of transfer for small amounts of money to Myanmar.

First impressions No-one from Interactive had set foot in Myanmar at the time the company advertised for staff and Falchenberg was worried that they would not find many people who were able to understand the company’s English language advertisement or that the applicants would not have digital versions of their resumes ready to be sent by email. Falchenberg states “In fact, we were not very sure that we would be able to find any capable staff at all. Our initial concerns were quickly alleviated when we received an overwhelming number of applications from capable candidates by email. English language abilities were also far better than what we had hoped for, especially among the older applicants.”

Falchenberg and his team checked into the Trader’s hotel in downtown Yangon at the whopping price of USD 280/night to conduct interviews. Trader’s had a small meeting room which they were able to book for three full days of interviews.

Most of the interviewees, both men and women, arrived in the traditional Myanmar garment called a “longyi”, which most Norwegian’s would call a sarong.

Apart from this cultural distinction Falchenberg was impressed by how the Myanmar candidates seemed to behave similarly to what the company would have expected in Norway. The candidate’s professional demeanor and eagerness to work seemed closer to home than what one often encounters in Thailand. Falchenberg says he became more and

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Thai-Norwegian Chamber of Commerce

more convinced that Myanmar’s greatest asset was its people, and that it was a great asset indeed.

During the course of Interactive’s first three days in Myanmar the team had the pleasure of interviewing a very talented woman with overseas working experience, a large local business network and a long tenure with Pricewaterhouse Coopers in Myanmar.

After some deliberation it was eventually concluded that Interactive would take her on as the Managing Director of their operation in Yangon.

Company registration Interactive considered buying a small local firm to reduce the incorporation time. But until new reforms are implemented it is still an accepted practice to deny share transfers from locals to foreigners. This meant that the acquisition of a business would not entitle Interactive to take over their corporate structure and the company would not save any time. Finally, Interactive settled on incorporating a new company.

Generally speaking there are two avenues to choose from when deciding on what kind of company to register. The first of these avenues can be likened to starting a company licensed under the Thai Board of Investment; the Myanmar corollary is the Myanmar Investment Council (MIC). The MIC handles applications for relatively large investments and can offer companies a mix of tax and non-tax incentives. The second avenue is a registration under the Myanmar Companies Act (MCA) which requires a lower amount of required capital and a faster registration process.

At the moment the minimum required capital to form a foreign owned company through the MCA is USD 50,000, but only half of it needs to be invested upon the approval of the incorporation application.

The other half can be invested within a year from incorporation.

One of the questions Interactive often encounters relate to money transactions, not least when funding the company with the minimum amount of required capital. Business people still find that ‘cash is king’ in Myanmar and that flying in with a large amount of

hard currency is the easiest way of bringing capital into the country. However, during the registration process of the company you will be able to remit funds through normal international bank transfer to one of the national banks. Once the incorporation process is completed the money will be released to your company’s local bank account and can be used in any way the company deems fit.

At the moment, InteractiveThailand (in Myanmar) has 8 employees assigned to the Yangon operation.

Interactive’s office villa is located in the compound next to Air Mandalay on the trendy Dhamma Zedi Road. Since incorporating, Interactive has had clients from all part of world seek their advice. Many of those clients are foreign owned companies with regional offices in Thailand or Singapore.

Another hurdle that had to be overcome by Interactive was the soaring price of commercial real estate in Yangon. It is not uncommon to be quoted rental prices as high as what one would expect in downtown Oslo, and for many companies it is not financially feasible to pay such high rates. It is common practice these days to pay the full rental amount upfront for a whole year, and what is more is that in Myanmar real estate broker’s take their fees from the ‘buyer’, not the seller.

All of this combined can make for a costly experience.

Would you consider starting up a business in Myanmar is more problematic that setting up a business in Thailand?

Depending on the nature of your business you may find it easier to register a foreign owned company in Myanmar than in Thailand. The Myanmar list of businesses restricted from foreign ownership is much shorter than the corresponding list in Thailand, concludes Falchenberg.

Postcards from the golden land

by Nadia Willan photos by Kristine Hasle and Signature Myanmar

A

beautiful, mysterious country isolated from the rest of the world.

Myanmar has since before the writings of Rudyard Kipling and The Road to Mandalay, been a country set apart and a somewhat secret world of pagodas, breathtaking vistas and intriguing ethnicity.

In the late ‘90s Aung San Suu Kyi, leader of the National League for Democracy, urged tourists not to visit the country. Visas were difficult to get, and tourism was mostly limited to a small but hardy bunch of travellers.

Myanmar’s moves towards democracy, with visa procedures more relaxed, and the blessing of muchadored Suu Kyi for Myanmar to open up to responsible tourism, has paved the way for visitors. Myanmar is now on the top of many people’s travel wish-list, and waiting in Yangon to greet them and open up the wonders of Myanmar is Astri Hole Fredriksen. She is

Myanmar is now on the top of many people’s travel wish-list, and waiting in Yangon to greet them and open up the wonders of Myanmar is Astri Hole Fredriksen.

the Norwegian owner of SignatureMyanmar, a bespoke travel and tour company for individual travellers and groups. It is really a boutique tour agency and most of Astri’s customers come from either Norway or Denmark. She agrees with the idea of tourism developing in the right way.

She tells us that of the about 600 licensed tour companies in Myanmar, only one is foreign owned, a few are joint ventures, and the rest are locally owned. The current investment policy favors the domestic tourist businesses.

-For the moment I think this is a sound policy, says Astri.

-I find many of the local tour operators to be very concerned about responsible tourism.

Most tourists to Myanmar are from other Asian countries,

particularly Thailand and China, and the numbers are rising.

According to statistics, over 300,000 tourists came through the airport last year and each year sees a rise in tourism by over 20%.

Scandinavians only account for a few thousand visitors but with recent strong connections between Norway and Myanmar this figure will likely increase too.

Operating since 2008, Astri says there is a real need for expert travel services to deal with the practicalities of travel in the country. -Myanmar is not yet developed for visitors who only have a fixed number

of days to spend and would like to get as much out of them as possible. Even seasoned travellers may find it frustrating at times trying to arrange formalities and practical details by themselves. It can also prove difficult to find necessary and up-to-date information on your own.

It is a valid point, as recent reports suggest that whilst Myanmar might be inviting tourists with open arms the country is still in tourism infancy and has just enough facilities to cater for around 300,000 visitors.

This information is coming from the Chairman of the Tourism Board. Compared to Thailand, a relatively similar sized country, which attracts millions of

Thai-Norwegian Business Review

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Continued from page 23

tourists every year, Myanmar is, as Astri points out, a ‘virgin tourist destination’. -Myanmar is yet not prepared to receive this high number of visitors. But the fact that it will take some years before enough hotel rooms and other facilities are in place, will in itself limit the numbers of arrivals for the time being and give the country some time to prepare itself for the large tourist masses, says Astri.

Astri first visited and fell in love with Myanmar in 1983 after a stop-off on her way home from a two year UN assignment in Asia. When her Danish husband was offered a job in Yangon in 1990 they moved to an old colonial villa. At that time they made up just about the entire Scandinavian community. Tourists numbered less than 10,000 a year. After working in Vietnam and Cambodia for a Danish travel company, it was only when she moved back to Myanmar that she joined forces with a local Burmese travel company and used her Danish and Norwegian travel connections to set up SignatureMyanmar.

Unlike much of Southeast Asia, Myanmar is not a typical country that attracts a lot of backpackers. It might have always been kept off the beaten track as it is, but it nowadays is not a cheap place to travel.

The typical Western tourist is a person above 50 years old who is a seasoned and well-off traveler, explains Astri about the average tourist. However, as tourism expands there is no doubt that Myanmar is already a must-visit destination, renowned for being set-apart and unsullied by the trappings of tourism. Whilst the mainstream media might rejoice the recent political changes, there are still the many years of sanctions, military rule and moral objections to visiting Myanmar which might stand in the way when it comes to the image of Myanmar as a safe, idyllic holiday destination.

The unrest and fighting on the Thai border has been going on and off for the last 60 years. These areas haven’t been accessible to foreigners so tourists have never actually been in any danger when visiting

Myanmar. This has been difficult to explain this to the outside world, as Myanmar previously only appeared in the foreign news if they could report about fighting or civil unrest somewhere in the country. So it is natural that some people were afraid to come here, she continues.

Myanmar has an Asian flavor all of its own and is home to over 135 ethnic groups. The country spans from snow-capped mountains to sunny islands in the South and the Irrawaddy River runs through the country. The highlands border India, China, and Laos, as well as Thailand. According to Astri the five top destinations to visit are Yangon, Bagan, Mandalay, Inle Lake, and Ngapali Beach.

You can go mountain climbing in the Himalayas, do island safari in the Mergui Archipelago and trekking among ethnic minorities in the Golden Triangle: This was unheard of just 10 years ago. The potential of Myanmar as a great tourist destination is endless, but

for several years to come you will still be able to find new places to explore, says Astri.

Whilst the full impact of Myanmar’s past has in no way dissipated, and struggles remain, Myanmar is now not only an acceptable tourist destination, but because of its previous segregation from the world, a desirable one too. Astri emphasizes that the real challenge will be whether Myanmar can cater to the rising number of tourists without losing its identity and its newly granted freedom. With open doors come both good and bad influences. There is probably no turning back, so one can only hope that the positive impact will be stronger than the negative, and that the Myanmar people will go on giving priority to the spiritual before the material values in life. Myanmar has yet to experience what a large number of tourists can do to a country and the mentality of its people. For the moment, however, the smiles and friendliness that meet you are genuine, she ends enthusiastically.

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Myanmar: A brief economic revi

by Colin Jarvis

S

ince Myanmar took the first faltering steps towards democracy there has been a dramatic interest in the country as a potential target for investment. In this brief summary we will provide some basic information about the economy and comment briefly on the potential future of the country as a profitable and secure country in which to invest.

Let us first look at the basic statistics relating to the country’s economy. In putting together this brief report we have discovered that reports and commentators often use the same, government produced, figures which are considered unreliable for three reasons. The first is that the government has often wished to provide a more positive picture of them may actually be the case. The second is that the methods used and the ability to collect accurate figures are severely limited. The third is that many figures, especially those relating to the value of imports and exports are often grossly underestimated due to the large volume of smuggling that takes place, particularly into and from Thailand.

Let us first look at some general figures: Population: No truly reliable census has been able to be implemented since independence. This is partly due to parts of the country being controlled by military groups, not allied to the government and therefore covering areas to which the government has no access and also the administrative and financial resources needed for conducting a detailed and accurate survey are not available.

26

Thai-Norwegian Chamber of Commerce

The CIA World Factbook estimates the population to be 54,584,650, a surprisingly detailed figure given the circumstances. Apparently there was a census in 2007 which indicated that the population was 92 million people and growing at about 2% and some agencies estimate the population to be as high as 70 million but the general consensus is that 60 million people is most probably correct.

Of these it was estimated that the labour force was 32.5 million strong in 2011 (CIA), of which 5.5 per cent were unemployed. The majority, 70%, are involved in agriculture, only 7% in industry and the balance, 23%, in service industries. These figures were estimated in 2001 but it is thought there has been little change since. Sadly it is also reported that over 30% of the people in 2007 were living below the poverty line and this partly accounts for the relatively low birth-rate of just over 2%.

Literacy, that is people over 15 who can read and write, is fairly high at 94 percent of males and 86% of females.

Although these figures may be suspect they do indicate that there is a large potential workforce having a reasonable education and the need to earn more than they currently do. Consequently anyone wishing to set up a business in Myanmar should find it relatively easy to find an enthusiastic workforce, though training would probably be required.

Let us now take a broader look at the economy: In 2011 the GDP was estimated to be between USD 51.9 billion (ADB) and USD 82.7 billion (CIA). The generally accepted annual growth rate is 5.5% in 2011 and a 6% rise in 2012. However, these figures do not take into account the value of smuggled products, in particular gemstones, timber, rice and, of course,

iew

Myanmar In Transition: Opportunities and Challenges

Figure 20. Major International Road Links Passing through Myanmar o

o

94 00’E

= 1,665 km = 807 km 93 km = = 453 km = 239 km = 1,145 km = 141 km = 257 km = 175 km = 660 km = 700 km

AH1 AH2 AH3 AH14 AH111 AH112 AH123 R3 R4 R7 ICD(1)-C.Y.

100 00’E

Puta-O

MYANMAR Lahe

KACHIN STATE

MAJOR INTERNATIONAL ROAD LINKS

INDIA Hkamti Myitkyina

Dali narcotics. It is believed that Homalin Tengchong Baoshan AH1 the GDP would be far higher Ruili 24 00’N Tamu if these exports were included Muse R7 SAGAING PEOPLE'S REPUBLIC DIVISION but by how much, is not known.

AH14 OF CHINA BANGLADESH Lashio The estimated figure, for the Thibaw AH14 Challenges value of legitimate exports, Myanmar In Transition: Opportunities andHakha Jinghong AH111 Sagaing SHAN STATE C.Y. AH1 was 9.5 billion USD in 2011. Figure 20. Major InternationalGangaw Mong La Mandalay Road Links Passing through Myanmar Kanibiketi

o

o

24 00’N

CHIN STATE

R4 o

AH3 Kengtung

AH2

AH2 AH1 AH2 AH3 AH14 AH111 AH112 AH123 R3 R4 R7 ICD(1)-C.Y.

Tachileik = 1,665 km AH2 807 km = Lahe RAKHINE Magway KACHIN STATE 93 km Sittwe = AH1 STATE 453 km = INDIA 239 km = Pyinmana NAY PYI TAW Chiang Rai Hkamti = 1,145 km Myitkyina Loikaw MAGWAY 141 km = Kanibiketi DIVISION Dali 257 km = KAYA H 175 km = Ramree Island STATE Tengchong Baoshan Homalin Taungoo 660 km = AH1 700 km Man-Aung Island =

REPUBLIC MAJOR INTERNATIONAL ROAD LINKS

AH1 Tamu

of

BAGO DIVISION

SAGAING DIVISION

Bengal

AH14

BANGLADESH

24 00’N

Asian/Asean Highway Lashio

AH1

Asean Highway

AH1

Bago Thibaw Hpa-an Thaton AH111 Myawaddy Yangon ICD-1 Mottama SHAN STA Mae TESot

Hakha

AH14

Pathein Sagaing Gangaw

C.Y. AH1 AYEYARWADDY DIVISION

CHIN STATE

Mandalay

YANGON DIVISION

River AH3

AH2 KAYIN STATE

Division/State Boundary R3

International Boundary LAO PEOPLE'S Boundaries are not necessarily authoritative.

DEM OCRATIC REPUBLIC AH2

MON Taunggyi

Tachileik

AH2

Ye

AH1 Pyinmana

NAY PYI TAW

Trilateral Highway Mong La

Kengtung

MANDALAY Gulf of Martaban Loilen DIVISION Meiktila

RAKHINE STAT E

Greater Mekong Subregion Highway Jinghong

Mawlamyine R4

STATE

Chiang Rai Loikaw

MAGWAY DIVISION

THAILAND AH112 KAYA H STAT E

Ramree Island Taungoo

o

Maosameepass

14 00’N

Dawei

Man-Aung Island

o

National Capital

14 00’N

AH123 AH1 Division/State Capital

BAGO DIVISION

Bay

of

City/Town Border Trade Post

Bengal

Asian/Asean Highway

AH1

N 0

100

Asean Highway

AH1

Pathein

200 AYEYARWADDY DIVISION

Bago Hpa-an Thaton TANINTHARYI Myawaddy STATE Yangon ICD-1 Mottama Mae Sot

YANGON DIVISION

Greater Mekong Subregion Highway Trilateral Highway

Myeik

River

Mawlamyine Division/State Boundary

KAYIN STAT E

Gulf of Martaban

Kilometers

AH14 International Boundary

MON STAT E

Boundaries are not necessarily authoritative.

Ye

o

14 00’N

This map was produced by the cartography unit of the Asian Development Bank.

The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

94o00'E

30

Myeik (Mergui) Archipelago

AH112 THAILAND

AH112 Maosameepass

o

14 00’N

Dawei

AH123 o

Kawthoung

100 00’E

N AH = Asian Highway/ASEAN Highway, R = GMS Highway.

TANINTHARYI STAT E Note: The map shows existing and future links.

0 100 200 Myeik Source: ADB. Roads on the map are based on information provided by the Myanmar Port Authority, Ministry of Transport.

Myanmar Facts

AH14

Kilometers

›› Population in millions: 60.62 (2011)

This map was produced by the cartography unit of the Asian Development Bank.

The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

›› Annual population growth rate (%): 1.3 (2009-2011) 94o 00'E

Agriculture accounts for between 36% and 43% of 30 GDP. Most of this is rice which takes about 60% of cultivated land. Myanmar used to be the largest exporter of rice in the world but now is not even in

o

Division/State Capital City/Town PEOPLE'S REPUBLIC Border Trade O FPost CHINA

R7

Magway

Agriculture:

National Capital

Ruili Muse

o

24 00’N

Bay

LAO PEOPLE'S MDEMOCRATIC YANMAR

Taunggyi

Sittwe

However, these figures may be of interest to academics and politicians but are not particularly relevant to those thinking of setting up a business in this developing country. What matters to such people are the industries in which they are themselves involved. Let us look at some of these.

o

R3 00’E 100

Puta-O Loilen

Maps: Asian Development Bank, Wikipedia Commons

It is much the same with imports which were estimated to be almost 5½ billion USD in 2011. These figures are again believed to be grossly underestimated due to the value of consumer goods, diesel fuel and other products smuggled in from Thailand, China, Malaysia and India.

MANDALAY DIVISION Meiktila

94 00’E

Myeik (Mergui) Archipelago

AH112

Kawthoung

o

100 00’E

AH = Asian Highway/ASEAN Highway, R = 92.0 GMS (2009) Highway. ›› Adult literacy rate (%): Note: The map shows existing and future links.

Source: ADB. Roads on the map are based on information provided by the Myanmar Port Authority, Ministry of Transport.

›› Population in urban areas (%): 33.9 (2010) ›› Population living below the national poverty line (%): 25.6 (2010) ›› Under-5 mortality rate per 1,000 live births: 66 (2010) ›› Population using an improved drinking water source (%): 83 (2010)

Thai-Norwegian Business Review

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Continued from page 27

the top 10. Since independence there has been very little capital investment in this industry and the quality of the product has declined. The government has indicated that it recognizes the need for investment in upgrading the industry by building new rice mills, enabling the farmers to acquire machinery and for the need to improve the quality of rice grown. Virtually all the agricultural infrastructure is old and coming to the end of its life. Nevertheless, 19,000,000 tonnes were produced in 1996 and the potential appears to be huge.

Anyone wishing to set up a business in Myanmar should find it relatively easy to find an enthusiastic workforce, though training would probably be required.

One of the major problems is that it is extremely difficult for farmers to obtain credit, mainly due to the underdevelopment of the financial sector, and whilst there is an undoubted investment opportunity in supplying agricultural equipment, consumables and expertise it is likely that the provision of credit to the farmers would need to be part of the mix.

about 750,000 tourists visiting Myanmar each year.

This is substantially less than the number of tourists who visit Chiang Mai, in northern Thailand.

Industrial production: Industry provides some 20.5% of GDP. The majority of this is provided by the extraction industries, timber, oil and gas, ores and gemstones. Foreign companies are already involved in the extraction of oil and gas but there is still great scope for investment in the extraction industries and the government appears to see these as being the key, short-term deliverers of increased wealth. One problem with these industries is that they employ proportionally lower numbers of people and the profits are often exported or benefit a relatively small number of people in the country.

Longer term growth will undoubtedly come from companies utilising the benefits of Myanmar’s relatively inexpensive labour force. Already many manufacturing companies in Thailand have moved their operations to Myanmar for this reason.

Service Industries: The service industries account for some 36% of GDP. There appears to be a huge opportunity for expansion, particularly in the area of tourism. Currently there are

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Thai-Norwegian Chamber of Commerce

With its cultural heritage, unspoilt scenery and coastline there is obviously a real opportunity for the development of a much larger and more profitable tourist based industry.

The potential for developing complete tourist resorts is greater than almost anywhere in the region and such development could provide benefits for the local people, as well as the economy as a whole, providing the developments are sensible and socially responsible.

The Financial Sector: The whole financial system has been controlled by the government for so many years that now there is a great lack of expertise and financial infrastructure.

Inflation is relatively high at about 10% per annum. Loans for farmers and individual business entrepreneurs are very difficult to obtain and are often provided by private individuals. Therefore the interest rates are usually very high.

Until recently the exchange rate was fixed by the government, usually at totally unrealistic levels.

Traditionally there were six official exchange rates ranging from 6 MMK (Myanmar Kyat) to 1 USD the market rate of 820 MMK to 1 USD. The multitude of exchange rates has resulted in totally unreliable

government statistics. This has been tackled to some extent but the currency cannot be said to be floating in the way most other currencies do.

Even simple services that we all take for granted such as the ability to use Master and Visa cards are not available at present, though it is hoped that these services will be available later in 2012.

Construction: The infrastructure in Myanmar is far less developed than it is in neighbouring countries. Roads, railways, bridges, factories, schools, airports, hotels, and private accommodation and just about anything else you can think of needs to be built. It is not surprising that 5% of the value of the country’s imports is heavy construction equipment. The country does not have the resources to build this infrastructure by itself and therefore this, too, offers potential for investment.

Education and Health Services: The investment in education and the health services has, quite naturally, been extremely limited and therefore the infrastructure and expertise needs improvement and offers investment opportunities.

Retail and Telecommunications:

law has just been passed by the parliament and investors are eagerly awaiting details.

Recent actions by the government have greatly improved the potential for investment and its security.

The government’s grip on business in general is loosening and the political climate enables the country to trade with the West with greater ease.

All these are positive signs and seem to indicate an improving climate for investment.

However, it is possible that the recent steps towards democracy and liberalisation could be reversed.

The Economist Intelligence Unit estimates that the chances of the reforms continuing, but with limited structural change, to be about 60%. They also feel that there is a 25% chance of reforms becoming more rapid but this will depend upon the confidence of the current leaders increasing over time. However they also believe that there is a 15% probability, possibly due to a coup, that the government might retrench and return to their old ways.

To summarise, there are huge potential opportunities for investing in Myanmar to the benefit of the investors, the country and its people. However, despite the current enthusiasm there are dangers and any investor would be wise to follow the old adage that one should not risk what one cannot afford to lose.

As the economy grows and the middle-class develops there will be undoubted opportunities for the development of retail and telecommunications services.

The Investment Environment: The government recognizes the need for foreign investment and has introduced a ten year tax free period for companies setting up in the country.

They seem to be doing what they can to encourage investment and there is no doubt that new docks, airports and other developments will greatly improve access and therefore the economy. A new investment

Main Sources: Economist Intelligence Unit – Myanmar: White Elephant or Tiger Economy Central Intelligence Agency – World Factbook Asian Development Bank – Myanmar in Transition

Thai-Norwegian Business Review

29

Funny money

by Kristine Hasle

O

ne of the strange souvenirs you can find in Myanmar’s markets today is the 15-, 35-, 45-, 75 or the 90-kyat notes. Where do they come from?

In September 1988, Ne Win, the former strongman, ordered the Burmese currency, Kyat, to be demonetised in some larger denominations while issuing new denominations of 15, 35, 45, 75 and 90 kyats. Overnight, the Burmese money was worth nothing and this was crippling the Burmese economy. Ne Win reportedly changed the currency to add up to 90 because an astrologer said he would live to 90 if he did this. Ne Win was well known for his penchant for numerology and yadaya (cabalistic rituals and spells performed in order to ward off misfortune).

The deeply superstitious Ne Win announced that the nation’s normal currency was suddenly worthless, with no compensation, and there was no way for people to change the money into something else. This led to that most Burmese were immediately bankrupt. People lost their money overnight. The blackmarketeers, who were supposed to punished, conducted most deals in US dollars and were rarely affected.

What a nightmare for shopkeepers and restaurant owners, when they had to do the maths with these of 15-, 35-, 45-, 75- and 90-notes. Their solution would be to price their goods and services in numbers divisible by 90, such as 180 for an item, or else round off the price to the nearest 35 or 15. That would give the shop keepers a chance to give back the correct change.

30

Thai-Norwegian Chamber of Commerce

Even the military junta knew Ne Win's lucky money was bad luck for Burma. In 1994, the military regime quietly introduced a 500 kyat note along with a 100, 50, 20 and other normal denominations.

They apparently felt emboldened after successfully introducing a 200-kyat note, and others numbers, and a few years ago. The junta had realised they could not attract investment because foreign businessmen found out they were using money based on the whims of one individual.

Myanmar’s banking system is one of the most antiquated systems in the world due to many socialist policies. Before, it was impossible to transfer money from one person to another and it required underground money transfer agents. Recently, private banks in Myanmar finally introduced ATM machines.

People no longer have to haul suitcases of money to banks anymore. However, bring crisp new dollars to be safe. Most hotels and ATMs still don’t accept your Visa card.

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7/2/55 BE 8:09 PM

Show me the money: Progress report on the Dawei m

by Eric Baker photo from Bangkok Post photo/Pornprom Satarbhaya

I

t is hard to visualize a project as massive as the 205-square-kilometre Dawei deep-sea port and industrial estate, so Somchet Thinaphong, managing director of Dawei Development Company (DDC), prefers to tell people the project will be onequarter the size of Singapore. Or twice the size of Manhattan.

Let that sink in. Then consider that none of the buildings or infrastructure have been built. The industrial estate is going to displace forest and a few villages.

“Take in everything you can see,” said Dr. Somchet from his office on the top floor of the Ital-Thai tower (DDC is a branch of Ital-Thai Development). “For as far as you can see in Bangkok on a clear day, this still will not encompass the size of the Dawei project.”

In that context, it’s not unusual that such a large project would progress in fits and starts. Though the Dawei project is repeatedly in the news and was conceived 15 years ago, none of what is being billed as the largest industrial estate and port in the world has begun construction. At this point, DDC is relocating villagers from the area where the industrial estate is going to be located, building new houses and schools.

The Dawei industrial estate and port will be located due west of Kanchanaburi province in Thailand. Both roads and rail are meant to link the site to Thailand, Cambodia and Vietnam, creating a southern corridor of the Greater Mekong Subregion (GMS). Either road or rail will connect Dawei through Bangkok to Sisophon, Cambodia, branching off to Vung Tau in southern Vietnam via both Phnom Penh and Ho Chi Minh City and Quy Nhon in central Vietnam via Siem Reap.

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Thai-Norwegian Chamber of Commerce

Mr. Somchet Thinaphong, managing director of Dawei Development Company

The Thai Highways Department has already started work on a planned 45.9-billion-baht 98-kilometre motorway from Bang Yai to Kanchanaburi city.

Another 70-km stretch running to the Phu Nam Ron border checkpoint is undergoing a feasibility study, while design work has begun on the final 160-km route from Phu Nam Ron to Dawei.

The first phase of the project, which covers the port, road and rail links, and power, water and waste water treatment systems, is slated for completion in 2016 and Dr. Somchet claims they are still on schedule.

“People can forget this is literally like building a city from scratch,” he said. “We are planning a superinfrastructure, because if you don’t have power or water, the city can’t operate.”

The industrial estate will comprise heavy, medium and light industries plus a town. Thailand doesn’t have many heavy industries, or upstream facilities, and has no steel-making industry.

Of particular interest to Norwegian companies will be the fertiliser plant in the upstream estate, said

mega-project Dr. Somchet, since it is a major export for the country.

Steel will be handy for Thailand just as its auto production is skyrocketing, and a petrochemical plant, oil refinery and gas separation plant will all feed regional demand. Myanmar has over 48 million people, so DDC expects prospective tenants at the industrial estate will be eager to market to that domestic sector as well.

Medium industries such as auto assembly, gypsum and auto tyre plants will slot in an adjacent area of the estate to light industries, which will computer parts, garments, cosmetics, pharmaceuticals, and food processing and packaging.

A proposed coal-fired power plant will offer capacity of up to 10,000 megawatts.

But those grand plans are still a long way from reality, as DDC is finding acquiring financing for such a large project a challenge. The entire project has an estimated price tag of US$50 billion, and DDC needs $8 billion to complete phase 1 development. The Japan Bank for International Cooperation was expected to provide the bulk of that amount in soft loans back in July, but that agreement fell through just as one of DDC’s local partners—Max Myanmar—decided to dilute its ownership in the project.

The Asian Development Bank recently urged the Thai government to invest in transport and infrastructure in Myanmar to make international investors and financiers more comfortable about Dawei. The Thai Finance Ministry responded by saying it will support the Dawei project but did not provide any specifics or money.

Dr. Somchet described the development process as vertical integration because a working committee organised by the Myanmar government meets regularly with the locals who will be affected by the project.

“Sometimes the locals want something different from what the central government wants,” he said. “But it is usually a question of time, money and quality. Right now we are relocating the locals and compensating them with money and one new house for every seven people living in a house. We’re also building a school and a temple.”

Dr. Somchet agreed that locals would have jobs at the new project because you want them to have a stake in it as well, but first they needed to receive training.

As for advice for investors, Dr. Somchet started with the caveat that Dawei is such a large project some of his tips might not be applicable.

“First, when doing business overseas, you always need a local partner,” he said. “And you need a government connection as well. One must take the long view for a project this big. You don’t need customers at this point, just bankers, lenders and trusts. Usually these people all want to see something tangible before they provide financing, but you can’t show them something until you get financing, so a little game begins.

“You have to be patient, but once you get the ball rolling other investors are going to want to join, so many you won’t need to advertise.

“Sure some expats will be brought in during the initial stages, but technology transfer should enable locals to take over many of the positions.”

The Dawei project is expected to create 5,000 jobs for Myanmar.

Thai-Norwegian Business Review

35

Myanmar open for business

by Nadia Willan

F

or the first time in 50 years Myanmar has pushed open its doors to business.

Rich in natural resources and nestled between important trade countries, China and India, Myanmar is an inviting opportunity. According to Luc de Waegh, Senior Partner at West Indochina, Myanmar is now a rich and fertile business land for foreign investors who want to establish a presence in this part of Asia, despite its recent history with boycotts, sanctions and human rights violations.

With 13 countries under his belt, Luc de Waegh arrived in Myanmar in 1993 to set up an office for British American Tobacco which would soon be the market leader. By the end of the decade he was Advisor for Foreign Trade for Belgium in Myanmar and in Thailand, and Director of the Belgian-Luxembourg Thai Chamber of Commerce. British American Tobacco left Myanmar in 2003 after being handed over to Rothmans, following political pressure from the UK, despite the fact that the company was breaching no sanctions.

After relocating to Thailand for a few years, he believed he had an insider view of how the boycotts were affecting local trading and was motivated to do something to help change a political picture that wasn’t, in his mind, entirely in focus.

Luc believes that although the human rights issues were very real that the sanctions adversely affected the people living in Myanmar. “Western countries were trying to teach lessons to generals by holding the people hostage. Our company wanted to do something for the people of Myanmar. Everyone has the right to prosperity. Prosperity often comes from

36

Thai-Norwegian Chamber of Commerce

multinational companies who offer a fair reward based on who is best at their job, with a focus on personal development.”

The 1996 Massachusetts Burma Law in the US meant that state entities could not purchase services from companies doing business with Myanmar, and this effectively clipped the wings of many big companies in the US. However, following the recent opening up of democracy Hilary Clinton has urged a fast track approach to expanding business and investment opportunities. This has been backed by President Obama who has just recently given the go-ahead for investments. The sectors which are believed to be top of the list for investors include tourism, mining of gemstones, and the oil and gas industries in which Thailand has already invested heavily.

The situation for foreigners doing business in Myanmar is improving and changing all the time. According to the draft of a recent new investment law, foreigners will not need a local partner to set up business in the country which has always been the case. Other changes could well be a tax break for five years for foreigners setting up operations in the country.

De Waegh accepts that despite the feel-good business changes in Myanmar the country is not yet there.

“When I was in Thailand I used to meet CEOs who came back from Myanmar and were skeptical about changes, believing that they would be only cosmetic.

You don’t hear that anymore. It will take a long time before Myanmar will be anywhere near Singapore or Switzerland where you can run a business to a global standard, but the potential here is enormous.”

One of the main pieces of advice de Waegh offers businesses wanting to dig deep into the natural resources and unspoilt business pastures of Myanmar, is to be patient. There is a general feeling in Asia that

Myanmar is open for business and that it is a case of rushing in with outside money and making quick and easy profits. “Businesses need to have a long-term plan and give Myanmar a chance to develop and reach the level of being able to deal with its new entrepreneurial investments. Anyone coming in expecting to make profits in the first year might be disappointed. Businesses need a longer-term strategy based on several years.”

According to Luc de Waegh, the main challenges facing entrepreneurs and investors plugging resources into Myanmar are the need to rebuild the infrastructure, improve the legal framework and the capacity of the people. With growth expected to be in double figures in the next decade there are perhaps fears about Myanmar’s ability to rise to the challenge.

Luc de Waegh

“We have helped our local clients for more than five years; they are ready for the opening up of Myanmar and ready to compete with foreign companies,” says de Waegh. “The need for change is not a recent revelation for businesses inside Myanmar and this can only be good news for those coming into the country.”

An official Norwegian trade delegation visited Myanmar in May this year, and Luc de Waegh believes that their strong support of business in Myanmar demonstrates the pragmatic approach of the Norwegians who are no-nonsense and direct.

Certainly, businesses are now seeing Myanmar not just as a rich resource but the ultimate CSR project where they can make money whilst helping others.

West Indochina supports foreigners wanting to set up business in Myanmar. This is done by looking at the market and quantifying it, finding a local partner, studying the legal and fiscal situation, as well as

West Indochina www.westindochina.com A Myanmar based company that supports, advises, and facilitates companies looking to establish a presence in this part of Asia.

setting up a business plan and finding the right people.

The company offers advice and support, executive searches, as well as training.

After nearly 20 years’ experience in Myanmar, Luc de Waegh has a good network of contacts and believes that Myanmar rates number one when it comes to potential employees.

“If you give the people from Myanmar a chance, they will take it. Not only are they receptive to learning but they have an inner pride and want to prove themselves with their can-do attitude.” The doors to successful business in Myanmar might be open, but foreign investors and entrepreneurs might be wise to step through with some support from someone who knows what is waiting for them on the other side in terms of business success.

Thai-Norwegian Business Review

37

Asian women show the way for World Economic Forum East Asia

by Eric Baker photo from World Economic Forum

M

issed opportunities in employing women across Asia Pacific costs US$90 billion a year in lost GDP, according to Manpower, the employment group. Such stark statistics framed the discussion at the forum in Bangkok, which was also the first time Aung San Suu Kyi held a major address outside Myanmar in more than 20 years.

“Women can contribute in every way but we are not allowed to do so,” said Aung San Suu Kyi, chairwoman of the National League for Democracy and winner of the Nobel peace prize. “In Myanmar women are certainly discriminated against. There were only 15 female MPs before the recent by-elections, and women’s only representation in the cabinet was two deputy minister positions. In my country, women have to get better marks than men just to get accepted into medical school.

“But Japan and South Korea are among the most developed in East Asia, yet they have some of the highest gender gaps in the region, meaning development does not equal inclusion. In fact in those two countries the girls on average receive better marks than the boys on entrance exams. So this is both a cultural and economic problem.”

The notion that economic development alone is not enough to improve gender equality was one of the themes of the session, along with educating boys and men about the benefits of reducing gender discrimination, and how “jumpstart” programs can help via education incentives and political quotas.

38

Thai-Norwegian Chamber of Commerce

Rokia Afzal Rahman, chairwoman of the Bangladesh Federation of Women Entrepreneurs, talked about the enormous strides her country has made in gender equality. Bangladesh now offers free education up to 12th grade for girls, though for boys it is only to fifth grade because traditionally a family spends more on boys. As a result, women now have access to jobs and, in a country that is 80 per cent rural, micro financing has provided women a say in how the family money is spent. As a result, health, infant mortality and education benchmarks have all vastly improved, she said.

“Today when a daughter doesn’t work, the father has to explain why, which is a large attitude shift,” said Ms Rahman. “Banks and international organisations now actively look for women, and banks consider them better borrowers because they are more likely to repay their debt.”

Jon Fredrik Baksaas, CEO of Telenor Group of Norway, agreed attitude plays a massive role in gender inclusion and participation, noting Norway was the first country to legislate the inclusion of women in corporate boards.

“The Scandinavian countries have arrived at a rather sustainable economic model, and many – including the World Economic Forum – have aimed to explain why it is so,” said Mr Baksaas. “Egalitarianism is deeply ingrained in these societies with the aim of redistributing wealth and ensuring equal opportunities for all. Gender equality is an obvious and natural part of this. This is not to say we have solved this, but we have taken some steps in the right direction.”

Mr Baksaas pointed to education, mindset and affirmative action as the drivers of gender balance in

ward at the a 2012

Thai-Norwegian Business Review

39

Continued from page 39

Scandinavia, which has the four smallest gender gaps in the world.

“Equality is an enabler for competitiveness,” he said.

“Companies and societies depend on top talent to succeed – regardless of gender, nationality or religion.

A key here is education. When women and men have equal access to education, you get a crop of highly skilled potential female leaders. You cannot exclude 50% of talents when looking to fill a position. Equality simply makes good business sense.”

Indeed, Helene D. Gayle, president and chief executive of CARE USA, a humanitarian organisation fighting global poverty, noted simply by focusing on and empowering women, you can reduce global poverty.

“Numerous studies have shown that empowering women can have a multiplier effect on communities – improving health, raising literacy rates and reducing extreme poverty to a greater extent that conventional development initiatives.”

Helene D. Gayle, president and chief executive of CARE USA

“Numerous studies have shown that empowering women can have a multiplier effect on communities – improving health, raising literacy rates and reducing extreme poverty to a greater extent that conventional development initiatives,” said Ms Gayle.

“For example, CARE worked with the government of Bangladesh on decreasing malnutrition, and by focusing on women our success rate doubled.

“Some 70% of those living in poverty around the world are women. If you invest in the life of a girl to make sure she’s healthy and educated, then when she gets married down the road she’ll have fewer children and they’ll be more likely to be healthy and educated as well.

While Mr Baksaas said secondary education needs to be improved for women to achieve better positions, Aung San Suu Kyi said she hoped more girls could be educated just so they could improve their lives.

“The Myanmar government is thinking in terms of prestige and the number of PhDs it can produce,” she said. “I’m more concerned with workability. At least the government provides incentives in Eastern

40

Thai-Norwegian Chamber of Commerce

Myanmar for sending girls to school, providing rice to Muslims.”

The democracy leader is in favor of incentives and quotas, pointing out that women need a head start in some of these categories because of past discrimination.

“There should be quotas. Women are capable, they just haven’t been given the chance,” said Aung San Suu Kyi. “A lot of data shows when you reach about 30% inclusion of women in the legislature, corporate boards, and the like this is the tipping point, and you start to have conversations that you normally wouldn’t have, which is a good thing,” said Ms Gayle.

She added that female role models are key in what are traditionally seen as male fields, such as math, science and technology, in order to send the message

to families and girls that it is acceptable and desirable to study in these fields.

(70%), India’s GDP would increase by 4.2% per year.

Malaysia’s would grow another 3% per year.

Ms Gayle noted that in Japan, one of the most developed economies in Asia Pacific, 75% of women leave the workforce after their first child. Surely some of that is by choice, but with such an ageing population it is a perfect example of a country that could benefit from more inclusion of women in its economy, she added.

“Telenor has worked with the famed Grameen Fund doing micro financing in Bangladesh, and we went to a small village where there were only three phones run by ‘mobile ladies’ who rent them out to other villagers,” said Mr Baksaas. “One of the mobile ladies came up to me and said ‘I want to make sure my kids go through school. Make sure you don’t allow any more phones into the village.’ I laughed but these phones actually allow villagers to access microcredit, and Telenor is proud to make gender inclusion a part of our corporate practices.

In the World Economic Forum’s global gender gap study, only two countries in Asia Pacific fared well— New Zealand and the Philippines—meaning they had a small gender gap. China, Bangladesh, Indonesia, Japan, South Korea, India and Pakistan all fared poorly in the survey that measured education, economic participation, political empowerment and health and survival. According to the study, if India’s participation rate of women in the economy was the same as the US

“Here in Thailand, where we own the dtac mobile provider, 50% of our employees are females.”

Thai-Norwegian Business Review

41

Letter from Chiang Mai

by Colin Jarvis

C

hiang Mai is only a two-hour drive from Myanmar. This has caused many people who are examining the possibility doing business in Myanmar to use Chiang Mai as a base. Sometimes the lobbies and bars of the better hotels have the atmosphere of a gold rush town in the Old West. People sit in small groups intently discussing the possibility of making fortunes from the opening up of this once great country. We wish them luck.

There is no doubt that Chiang Mai is a good place to dip one’s toe into the water of Myanmar. Flights to Bangkok and the main cities of Myanmar are very short and there are several organisations and many people who can advise and assist those wishing to examine the business opportunities.

Chiang Mai is beginning to see itself as the hub of the ASEAN community. Geographically it is pretty central and there is plenty of scope for improving local and international transport and this is indeed happening.

Chiang Mai airport has been re-modernised over the last 18 months and whilst there is plenty of scope for increasing the traffic at present, studies are underway to examine how the airport may be expanded in the future as it is expected that air-traffic will increase dramatically, particularly now that Myanmar has opened up and the ASEAN community is about to become even better integrated.

Communication by road is also very good by normal Thai standards. The road to Mae Sai, on the Myanmar border, is excellent, the roads around Chiang Mai and

42

Thai-Norwegian Chamber of Commerce

the cities in the North are also very good and the road to Bangkok seems to be improving all the time.

The Chinese are intending to build a high-speed rail link from China down through Thailand and Malaysia to Singapore. It looks as though there will be a spur heading into Myanmar. Unfortunately, due to the local terrain it is not intended to run this railway into Chiang Mai itself. No matter, the Thai government is currently undertaking a feasibility study to examine the possibility of a high-speed train network within the country, linking all the main centres of business and population.

Whether there will be shared lines it is too early to tell but surely there would be the ability to link these two different projects, assuming, of course, they’re actually come to fruition. Personally I would be delighted for there to be a high-speed train between Chiang Mai and Bangkok as it is intended that the travel time would be less than the time taken for air travel.

However, good transport infrastructure will not make Chiang Mai an ASEAN hub. It will need to become a very proper, grown-up, city of an international standard rather than a regional capital. It has the potential to do this. There are several universities and an ever increasing number of high-quality cultural centres. Perhaps most important is the determination to become recognized as a “Creative City”. An application has already been made to UNESCO for recognition and there is a huge outflow of creative activity due to this “Creative City” movement. The creativity it embraces does not cover just the arts but also innovation, new technologies and Information Technology. Every week there is another initiative starting up or another international conference taking place. If you are interested in the TEDx movement you might like to know that Chiang Mai has already hosted two TEDx conferences. The will to succeed is there, the determination is there, it remains to be seen whether the stamina is there.

On a local basis, Chiang Mai is beginning to suffer from the reduction of cheap unskilled labour emanating from Myanmar. It appears there are a number of immigrant workers returning Myanmar now that the political situation appears to be stabilising. This will cause some problems for a few organisations as immigrants do not have to be paid the 300 Baht minimum wage.

Other problems have also been caused by the recent changes in Myanmar. There are many hill tribes that live on either side of the Myanmar-Thailand border.

These people are often neglected by governments on both sides and over the years a number of charities have been offering assistance. A charity organiser recently told me that that many of these charities have moved further into Myanmar now that it has opened up. No doubt they can see many opportunities for their good work but it appears that the support given to the hill tribes has diminished over the last year. It is to be hoped that as Myanmar opens up and becomes more integrated into the ASEAN region that it will be

possible to provide a more satisfactory and secure life for these border dwellers.

There is no doubt that the opening up of Myanmar will provide Chiang Mai with another great opportunity to grow. Already, some local Thai companies are examining the possibility of opening up production facilities in Myanmar. These are not necessarily huge companies but locally owned and managed businesses which, I believe, have the right mindset to be able to succeed in Myanmar due to their cultural similarity.

Another area for joint Thai-Myanmar cooperation is that of tourism. Chiang Mai itself often receives almost twice as many tourists as the whole of Myanmar. Most tourists only stay in Chiang Mai for a few days and it would be a simple opportunity for their stay to be extended by a trip into Myanmar.

The future is bright in Chiang Mai. People are optimistic and confident about the future, but the future is not just linked to Myanmar.

Thai-Norwegian Business Review

43

Logistic services in Thailand und

by Chinachart Vatanasuchart Partner, Tilleke & Gibbins

I

talian-Thai Development Plc, a major Thai construction company, has been making headlines in the region due to its major investment in building the Dawei Deep-Sea Port and Infrastructure Project in Myanmar. Located roughly 300 kilometers from the Thai border, this USD 8.6 billion project will open the gate for import and export of goods from countries to the east of Thailand, like Cambodia, and those to the north, like Laos and China, through Thailand to Myanmar via Kanchanaburi province.

This new shipping route—and other major projects that will move forward under the ASEAN Economic Community—will depend on a thriving regional logistics industry. To help drive this growth, Thailand is now moving to strengthen its local logistics operators and amend the legislative framework to allow for greater foreign investment in the sector as the AEC approaches.

44

Given the variety of logistics services—ranging from maritime cargo handling services to warehousing to customs clearance and more—the development of competitive logistics businesses in Thailand will require not only financial capability, but also technological know-how. As other ASEAN member states increase their equity participation in Thai businesses to up to 70%, local players will need to develop their capacity in order to compete effectively.

The logistics industry is one of the services in which equity participation in ASEAN countries is set to change under the AEC. The AEC Blueprint currently allows equity participation of 51%, which will increase to 70% by 2013.

Increasing Regional Competition

Developing Local Capacity

In Thailand, domestic transportation and other services businesses are among the activities restricted by the Foreign Business Act B.E. 2542 (1999) (FBA), under which foreign shareholding cannot exceed 49% of the total shareholding in an entity. The logistics industry is one of the services in which equity participation in ASEAN countries is set to change under the AEC. The AEC Blueprint currently allows equity participation of 51%, which will increase to 70% by 2013.

The Office of the National Economic and Social Development Board is aware of the need to develop the local industry. To take action, it has divided Thailand’s logistics sector into a business framework across five types of activities: (1) cargo transportation inside and outside the country, by road, rail, sea, or air; (2) cargo storage, warehousing, packaging, and cargo distribution; (3) customs formalities; (4) other auxiliary logistics works; and (5) postal and parcel services.

Thai-Norwegian Chamber of Commerce

der the AEC According to company registration statistics, more than 70% of Thai logistics businesses involved in these activities are small and medium enterprises (SMEs) with less than THB 5 million capital. For these operators to compete with global firms, the government agencies involved in these activities will open a dialogue with the private sector in order to form a master plan to implement laws and regulations or procedures.

To develop local logistic businesses, several weaknesses need to be remedied. These weaknesses include lack of basic data and technical information,

lack of capital investment, lack of manpower in the field, and inefficient connection among transportation modes. The Thai government has laid out plans to remedy these weaknesses, one of which is to draft new legislation to promote and develop the Thai logistics industry. This legislation has not yet been enacted, but the provisions of the draft bill express methods to tackle the key issues.

Possible Legislative Changes Under the draft bill, the definition of ‘Thai logistic business’ is a company not less than 50% owned by

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Continued from page 45

Thai individuals with the majority of its directors Thai nationals. Once the law is enacted, a special committee will be set up with the duty to set policies suitable for logistics business operators, improve laws and regulations to enhance efficiency, etc.

Privileges will also be granted such as exempting or reducing corporate income tax or value added tax, and allowing shippers of goods from Thailand to other countries a deduction of 50% of the service provided by promoted logistics business operators from net income. Also under the bill, government agencies and state enterprises will be encouraged to use services from promoted logistics operators; training for personnel in administration, marketing, and technology will be developed; logistics businesses will be expanded outside Thailand; and new rules and procedures will be implemented.

Other local laws relating to the logistics industry, such as the Thai Vessels Act, Air Navigation Act, Land Transportation Act, Automobile Act, State Railway of Thailand Act, Multimodal Transport Act, and Merchant Marine Promotion Act, also need to be taken into consideration. In this respect, it is essential for the Thai government to consider whether these laws will require amendment, so that local logistics operators will be able to compete with investors from other ASEAN member states.

Due to Thailand’s location in the center of the ASEAN region, with a long coastal area, deepsea ports, and modern infrastructure, the Thai government is aware of the necessity to set up a government agency to assist local logistics business operators, such as by providing information of logistics business operators of other ASEAN countries and updating laws and regulations affecting the logistics sector.

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Thai-Norwegian Chamber of Commerce

Under the draft bill, the definition of ‘Thai logistic business’ is a company not less than 50% owned by Thai individuals with the majority of its directors Thai nationals.

Implications for Foreign Business Act These actions intended to develop local capacity are likely to provide a good first step toward strengthening Thailand’s logistics industry. At the same time, it will be interesting to monitor the next steps of the Ministry of Commerce, which is the government organization responsible for company registration and Foreign Business Act compliance.

As discussed above, the AEC Blueprint allows for 70% equity participation, whereas the FBA restricts foreign shareholding. Logistics businesses cover domestic land, waterway, and air transport, which is classified under List Two of the FBA, and other services such as packaging, which is classified under List Three of the FBA. Each list provides certain restrictions on equity participation by foreigners.

With the new equity participation percentage under the AEC Blueprint, it is likely that, in practice, the officials of the Department of Business Development at the Ministry of Commerce may rely on exceptions available under the FBA for granting licenses to ASEAN investors to operate logistics business in Thailand. This would allow them to adhere to the AEC Blueprint without the need to amend current, or implement new, legislation.

Thailand’s economy Thailand’s Economy at a Glance at a glance

Basic Figures Thailand (2011)

6

60

4

40

2

-

0

MY CN TH ID PH IN VN LA KH MM

20

2

4

4 3 2 1

-2

Stock Exchange Index (SET)

Exchange Rates

5.00

400

4.50 0501 0507 0601 0607 0701 0707 0801 0807 0901 0907 1001 1007 1101 1107 1201

Manufacturing Index

1207

600

1201

5.50

1107

800

THB/NOK

1101

6.00

1007

1,000

1001

6.50

0907

1,200

0807

7.00

0801

1,400

0901

-10.0

Mar12 Apr12 May12 Jun12 Jul12 Aug12

0 2007 2008 2009 2010 2011p 2012p

Q2/12

Q1/12

Q4/11

Q3/11

2013p

2011

-5.0

2012p

0.0

Bilateral trade 2011

2000=100

Import 1,394 (1,175) MNOK Export 2,382 (2,284) MNOK

600

200 180

400

160

200

140

Thai-Norwegian Chamber of Commerce

Thai-Norwegian Business Review

Computers

Clothing

Cars

Machinery

Electronics

Food

Other

Pulp

Fish

Engineering

Jun12

May12

Apr12

Mar12

2008

2007

100 Basic Figures: BOI. Comparisons: Wikipedia.

GDP/Capita and Thai Population: Wikipedia/IMF. Thai GDP and CPI: Bank of Thailand. Quarterly GDP: NESDB. SET: Stock Exchange of Thailand. Exchange Rate THB/NOK: OANDA. Manufacturing Production Index: Thailand’s Ministry of Commerce. Bilateral Trade: Statistics Norway. Petrol and BigMac prices as of 27 September 2012

Chemicals

0

120 Feb12

6.99 14.89 13.00 40.00

0

5 5.0

69.9 mill 5.0 mill 10,300,000 875,000 71/76 79/83

Other bits and pieces Petrol/litre (95 E10) NOK: TH Petrol/litre (95 Octane) NOK: NO McDonald BigMac price NOK: TH McDonald BigMac price NOK: NO

-2

6

2011

2

Female

Thai Consumer Price Index

10.0

2010

2

Male

-4

Mill

Thai GDP Growth (%)

2009

Geography Geographic Area: TH 514,000 sq. km Geographic Area NO: 385,199 sq. km Highest peak TH: Doi Inthanon 2,565 m Highest peak NO: Galdhøpiggen 2,469 m Inland water areas TH: 2,230 km Inland water areas NO: 16,360 km Coastline TH: 3,219 km Coastline NO: 25,148 km

Sources:

8

80

80+ 70-74 60-64 50-54 40-44 30-34 20-24 10-14 0-4

-1

Some comparisons

Demographics Population TH: Population NO: Population Bangkok: Population Oslo: Life expectancy M/F TH: Life expectancy M/F NO:

100

2010

Top 10 Exp. Jan-May12 %/value USD bill Cars and automotive 9.1%/8.4 EDP equipment 8.6%/8.0 Refined fuels 6.0%/5.6 Precious stones/jewellery 5.0%/4.6 Rubber 4.4%/4.0 Rubber products 3.8%/3.5 Chemical products 3.8%/3.5 Polymers etc.

3.7%/3.4 Electronic integrated circuits 2.9%/2.7 Machinery 2.8%/2.6

10

2009

10-30% 10-15% 7% 0-37%

Thai Population 2010

120

NO US SG KE TW

Corporate income Tax Withholding Tax Value Added Tax Personal income Tax

GDP/Capita 2011 (TUSD)

2008

Export Growth 2011 16.4% Export Growth 2012 projected 15.1% Trade Balance USD 23.5 bill Current Account Balance USD 11.9 bill International Reserves USD 175.1 bill Minimum wage (Bangkok) Baht 300/day

47

With the compliments of

Attorneys at Law

Kamthorn, Surachet & Somsak 31st Floor, Sinn Sathorn Tower 77/131-132 Krungthonburi Road Klongtonsai, Klongsarn Bangkok 10600 Telephone: +66 (0) 2440 0288-97 Fax: +66 (0) 2440 0298-00 E-mail: kss@kss.co.th www.kss.co.th

Honorary member H.E. Mrs Katja Nordgaard New Ambassador Royal Norwegian Embassy Tel: +66 (0) 2204 6500 Fax: +66 (0) 2262 0218 Email: emb.bangkok@mfa.no

Honorary member and Senior Advisor to the Board Tove Bjerkan House 101/20 Na Jomtien Soi 38, Ban Amphoe, Sattahip, Chonburi 20250 Tel: +66 (0) 3823 7683 Fax: +66 (0) 3823 7683 Email: bjerkan@loxinfo.co.th

Senior Advisor to the Board Dr. Kristian Bø 234/237 Discovery Place, Soi 23 Khlong 7, Pathun Thani, 12110 Thanyaburi Tel: +66 (0) 2957 0111 Fax: +66 (0) 2957 0222 Mob:+66 (0) 8 9129 9993 E-mail: kristbo@truemail.co.th

Board of Governors President Mr. Axel Blom Blue Business Solutions Ltd. Tel: +66 (0) 2627 3040 Fax: +66 (0) 2627 3042 Email: axel.blom @blue.in.th

Vice President Major Choakdee Dhamasaroj Nera (Thailand) Ltd. Tel: +66 (0) 2664 1464 Fax: +66 (0) 2664 4002 Email: choakdee@neratel.com.sg

Mr. Gunnar Thoresen Jotun Thailand Ltd Tel: +66 (0) 2664 1464 Fax: +66 (0) 2664 4002 Email:gunnar.thoresen@jotun.com

Ms. Piyanuj Ratpratsatporn Tilleke & Gibbins International Ltd. Tel: +66 (0) 2653 5555 Fax: +66 (0) 2653 5678 Email: lui@tillekeandgibbins.com

Dr. Paisan Etitum, Ph.D Thai Transmission Industry Co., Ltd. Tel: +66 (0) 2678 6640 Fax: +66 (0) 2678 6649 Email: paisan@tti-mail.com

Mr. Gunnar Bertelsen Telenor Asia (ROH) Ltd. Tel: +66 (0) 2637 4700 Fax: +66 (0) 2637 4726 Email:gunnar.bertelsen@telenor.com

Bent Axelsen Yara Thailand Tel.: +66 (0) 2664 9498 Fax: +66 (0) 2664 7488 Email: jan.egil.amundsen@yara.com

Mr. Torpong Thongcharoen Norske Skog (Thailand) Company Limited Tel.: +66 (0) 2661 3486 Fax: +66 (0) 2661 3485 Email: torpong-t@papcothai.com

Ms. Aina Eidsvik Aibel Tel.: +66 (0) 3300 4040 Fax: +66 (0) 3300 4041 Email: aina.eidsvik@aibel.com

Vice President Ms. Vibeke Lyssand Leirvåg Felicia (Thailand) Ltd. Tel: +66 (0) 2637 6998 Fax: +66 (0) 2637 6997 Email: sales@felicia.co.th

Mr. Niels Henrik Hansen Scandinavian Airlines Tel.: +66 (0) 2645 8210 ext. 8830 Fax: +66 (0) 3665 2900 Email: niels-henrik.hansem@sas.dk

Vice President,

Mr. Jon Anders Aas-Haug WebOn Tel.: +66 (0) 2207 2414 Fax: +66 (0) 2207 2525 Email: post@webon.no

Mr. Petter Børre Furberg Total Access Communications PLC Tel: +66 (0) 2202 8000 Fax: +66 (0) 2202 8828 Email:petterf@dtac.co.th

Thai-Norwegian Business Review

49

Melvær&Lien The Idea Entrepreneur Photo: Tom Haga

SMARTER LABELLING SOLUTIONS Skanem is a leading producer of self adhesive labels with 12 labelling plants in 8 countries in Europe and Asia. Skanem Bangkok opened June 2007 and is Skanem’s first establishment in South-East Asia.

Skanem Bangkok Co. Ltd. Amata Nakorn Industrial Estate 700/247 Moo 1 Bankao, Panthong Chonburi 20160 Thailand Tel.: +66 (0) 38 465 315-19 Fax.: +66 (0) 38 465 320-21 www.skanem.com

Bridging Societies is our business Nera Networks provides wireless transmission solutions to communication network owners in most market segments including: • Mobile • Broadcast • Enterprises and Internet Service Providers • Government and Educational institutes • Defence • Offshore and Utilities • Retail Payment Solutions Nera (Thailand) Ltd. 26th Floor, 253 Asoke Tower 253 Sukhumvit 21 (Asoke) Road Klongtoeynua, Wattana Bangkok 10110 Tel: +66 (0) 2664 1464, Fax: +66 (0) 2664 4002 www.nera.no

24/7 Assistance

Bangkok Office: 10th Floor Vibulthani Tower 1, 3195/15 Rama 4 Road, Klongton, Klongtoey, Bangkok 10110 Thailand Tel: +66 2 661 3486 Fax: +66 2 661 4385

torpong-t@papcothai.com www.norskeskog.com

Mill Location: 64/3 Moo 3, Asian Highway, Phokruam Amphur Muang, Singburi 16000 Thailand Tel: + 66 3 653 111 Fax: +66 3 653 1100

Knowledge Building knowledge for future yields The use of mineral fertilizer is essential for sustainable agriculture. It stimulates plant growth, increases CO2 uptake in the soil, and helps to preserve natural land from being converted into cropland.

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