THINK

ACT
BEYOND MAINSTREAM

December 2016

Myanmar: the
Mastering
Transformation
A
wave of optimism
Journey
will it last?
Exclusive:
A
comprehensive
Resultsguide
and analysis
to reinventing
of our comprehensive
companies
business
confidence survey of the country

2 THINK ACT
Myanmar: A wave of optimism will it last?

3
THE BIG

RESU
L
F R O M TS
T
HE
FIRST
BU
CONF SINESS
IDE
S U RV N C E
EY
MYA N I N
MAR

P. 6

73%

expect the business landscape to improve.

Page 7

83%

of the firms are ready to contribute to overcoming

bottlenecks, e.g. by training and developing staff.
Page 9

97%

of the firms see clarification of a transparent

government economic policy as a key measure to
unleash the optimism and investment interest.
Page 10

THINK ACT 3
Myanmar: A wave of optimism will it last?

Myanmar is ready for

global business.
Investors need to act
quickly to take
advantage of the
opportunities ahead.
Myanmar is experiencing a unique moment in history.
An extraordinary series of events, including the transition to a new and democratically elected government,
has created the need for a massive and swift transformation in the formerly closed off country. The new political and economic openness has led to opportunities
in nearly every sector for those firms that have their
finger on the pulse of fast moving developments in the
emerging country and can act quickly.
With its rapid transformation and large and young
population, as well as its strategic location and abundant natural resources, Myanmar offers tremendous
potential to investors. Since detailed policies and regulations are still lacking for many sectors, deep on-theground insights will be key to be able to take advantage
of these opportunities.
Roland Berger gauged both local and international
senior-level executives in Myanmar to create more
transparency on how firms are thinking about current

opportunities and challenges. The survey, which builds

on Roland Berger's deep expertise working in Myanmar, is the first of its kind in the country.

WHY MYANMAR? WHY NOW?

After decades of lying dormant, Myanmar is quickly
awakening to global business. The pace of change from
an isolated, closed off economy to one that is open for
business around the world has been staggering. As one
of Asia's least developed countries, Myanmar is experiencing a transformation unlike any other today and
provides a rare opportunity for international firms to
be a part of one of the last frontier markets.
Economic reforms began in 2011, leading to Myanmar's reintegration with the international community.
The democratically elected government, which came to
power in 2016, issued 12 point economic guidelines designed to attract investment, ensure sustainability, increase employment and raise competition in Myanmar.

4 THINK ACT
Myanmar: A wave of optimism will it last?

The guidelines, which include promoting measures

such as a fairer tax system, infrastructure development, intellectual property legislation, increased investments in education and job training, reveal the
country's commitment to liberalizing markets and
opening up to the rest of the world.
Now, thanks to those leadership reforms and the
removal of sanctions, Myanmar has become a rare
global spot for sustainable development. The country is again open for business, but those seeking to
help the country reach its potential need to have
their ear to the ground. They need to understand local markets and the nuances of doing business in the
country.

WINDOW OF OPPORTUNITY
These changes present a rare window of opportunity
for both local and international firms to help people in
Myanmar be part of global progress. Since the country's economy is developing from a low level, opportunities exist in nearly every sector from energy and power, to transport, agri-business, manufacturing and
retailing.

As one of the least developed countries in Asia, Myanmar is also the fastest growing. The World Bank expects Myanmar's gross domestic product to increase
8.4 percent in 2017 that's a higher growth forecast
than other regional economies including Laos, Cambodia and Vietnam.
With continued reforms, the country has unique potential to catch up quickly. Roland Berger looked at how
long it took other countries to boost per capita gross domestic product from $1,500 to $5,000 a year. While the
United Kingdom took about 200 years to make that leap,
the United States took 90 years and Germany took 80
years. Emerging markets today are making the leap far
more quickly Japan, Singapore, Taiwan, South Korea
and China all took 20 years to grow to that level. Myanmar
now has the chance to join their ranks at a similar or even
faster pace, leapfrogging by adopting new technologies.
For international players, preparing for these new
opportunities is crucial for growth in the coming decade. Agility to take advantage of emerging market opportunities, especially in Myanmar, is a key part of how
companies must respond today in order to achieve sustainable growth.

EXAMPLE:
THE MOBILE TELECOMMUNICATIONS MARKET
The mobile market is one example of how quickly the situation can change in the country with the proper policies.
Roland Berger worked with Myanmar's government to liberalize the telecommunications market and issue operating licenses to private players. The tendering process was transparent and highly competitive. In early 2014, Norway-based
Telenor and Qatar-based Ooredoo received two new telecom
licenses and launched operations within months.
At the same time, state-owned operator MPT entered into a
partnership with Sumitomo and KDDI to transform itself
into a modern operator and fight off competition. Commercial capabilities such as branding, product development,
marketing, distribution, and promotion have been built, and
technical and organizational capabilities have been upgraded. As a result, MPT has held its own against the new entrants.

This economic liberalization in the mobile market led to a

rapid increase in the number of mobile subscribers. Within
just a few years, mobile penetration rates skyrocketed from
7 percent of the population to more than 90 percent and
prices dropped dramatically. By the end of 2016, penetration
is expected to reach 100 percent. It has been one of the fastest mobile subscriber growth rates ever recorded globally,
showcasing the ability of Myanmar's economy to achieve
leapfrog-style growth.
In addition, the liberalization had a strong spillover effect,
boosting overall business confidence in the country and
spurring the development of an entire industry, including
tower companies and distributors. While many challenges
still exist in the country, the story of mobile market growth
serves to what's possible with the right strategy and approach in Myanmar.

THINK ACT 5
Myanmar: A wave of optimism will it last?

MYANMAR OFFERS ENORMOUS POTENTIAL

TO INVESTORS AS A FRONTIER MARKET
Myanmar is strategically located between China, India
and Southeast Asia.

MYANMAR HAS A BRIGHT ECONOMIC

OUTLOOK
Some key statistics and pointers.

KEY FACTS

Average annual GDP growth forecast for 2017

676,000 square km

Myanmar

in total

Lao PDR

2,170 km
longest river
(Irrawaddy)

1,930 km
coastline

8.4%
7.0%

Cambodia

6.9%

Vietnam

6.3%

Philippines

6.2%

Indonesia

5.3%

Malaysia

KEY COMPETITIVE
ADVANTAGES
1
Myanmar has a relatively large population (~53 m),
potentially serving as a cost-efficient manufacturing and
lucrative consumption base

2
Myanmar is a resource rich nation endowed with natural
gas reserves and other natural resources

3
Myanmar has a strategic geographical location connecting
overland trade routes and bordering two of the world's
largest economies (India and China)

4
Myanmar is also among the last few economies that
had not opened up its economy to the world until recently,
providing abundant growth opportunities now
Source: Roland Berger

4.3%

Thailand

3.1%

Age structure (% of population)

65+
50-64
35-49
20-34

6%
12%
19%
25%

0-19

63% of the
population is
under 35
38%

Key drivers of economic growth

> Lifting of sanctions
> Political reforms
> Liberalization of key industries
> Abundance of natural resources
> Strategic geographical location between China and India
Source: World Bank East Asia and Pacific Economic Update October 2016

6 THINK ACT
Myanmar: A wave of optimism will it last?

TAKING THE PULSE OF CHANGE

To help firms take advantage of this rare window of opportunity, Roland Berger has conducted a survey to
provide valuable guidance for businesses investing in
Myanmar. The survey combines the local and international perspectives of senior-level executives to provide
a unique and up-to-date snapshot of the business climate in the country. It reveals the confidence that people well acquainted with Myanmar have about doing
business in the country.
In August and September 2016 Roland Berger surveyed nearly two hundred senior executives from companies of all sizes to get their take on opportunities
and challenges ahead. 90 percent of respondents are
owners, directors, executive officers or managers at
their firms. The survey includes the perspectives of executives from a range of companies including those
operating in telecommunications, media, technology,
construction, real estate, utilities, chemicals, retail,
banking and tourism.

These executives believe that Myanmar's potential is

genuine and that government reforms are here to stay.
They are enthusiastic about Myanmar's outlook and they
believe that conditions are ripe for firms to grow and expand. They see Myanmar as one of the last few frontier
markets, where firms can get in on the ground floor and
build presence in a country with a large population and
where many companies are starting from scratch.
In addition to the removal of sanctions, Myanmar
has many other advantages that make it attractive to
investors today. A B The country is strategically
located between India and China and is abundant with
natural resources such as natural gas reserves. Furthermore, over 60 percent of the country's 53 million residents are under the age of 35. Nearly 80 percent of survey respondents cited the country's status as a frontier
market with a large and growing population as a prime
reason for investing in Myanmar. 67 percent of respondents think that the government's commitment to reform is a key reason to get in now. C

C
MYANMAR PRESENTS A BIG OPPORTUNITY AND THE OUTLOOK IS POSITIVE
International firms should take a closer look with regard to their industry.

Myanmar is a large frontier market with government committed to reform, key reasons to enter:

Conditions are ideal for international firms

to expand in Myanmar

80% Myanmar's status as a frontier market

78% large growing population
67% Myanmar government's commitment

67% of international firms prefer organic growth

55% of local firms prefer international partnerships
Lifting of sanctions is expected to boost

to reforms

international investments further

The business outlook is extremely

positive

Larger companies and those that have been in the

country longer are more satisfied; latecomers may
have a challenge

73% expect the business landscape to improve

83% expect to increase spending on training and employee

83%

development in Myanmar over the next year

of firms with annual revenues > USD 50 m are

satisfied with their performance vs. 60% for smaller firms
(annual revenues <USD 50 m)

91% expect to expand their operations in Myanmar

70% of firms that have been in Myanmar for over 5 years

over the next year

Source: Roland Berger Myanmar business survey (2016)

are satisfied with their performance vs. 52% of newer firms

THINK ACT 7
Myanmar: A wave of optimism will it last?

D
EXPECTATIONS ARE HIGH
How do you think Myanmar's economy and business landscape will fare in the next 12 months?

73%
Overall

5% 22%

7%

Hotels & tourism

Utilities, oil & gas, chemicals

70%

Construction & real estate

8%

10%

62%

15%

58%

0% 28%

Professional services

Deteriorate slowly

0% 20%

13%

5% 21%

Telecom, media & tech

Remain the same

16%

66%

27%

13%

8%

73%

4% 19%

Financial services

Retail & distribution

7%

65%

6%
54%

25%

Improve

11%

31%

Improve rapidly

31%

n = 158

1 Only industries with 14 or more responses were analyzed; companies operating in multiple industries were counted once for each industry
Source: Roland Berger Myanmar business survey (2016)

Businesses also expect the situation to improve and

are planning accordingly. 73 percent expect the overall business landscape to get better. 91 percent expect
to expand their operations in the country over the
next year. Around two-thirds of those surveyed preferred organic growth while more than half of local
firms prefer international partnerships, providing a
platform of opportunity for international firms.
Succeeding in Myanmar also takes commitment
and patience. About 70 percent of firms that have
been in the country more than five years are satisfied
with their performance. By contrast, about half of
firms that have been in the country less than five years
are satisfied with how they are faring. Hence, it is imperative that businesses invest in Myanmar now and
go through the apprenticeship period early, thus be-

ing prepared for the exponential growth in the medium term. D E

THE ROAD WON'T BE SMOOTH

Like many emerging markets, Myanmar also presents
challenges to firms looking to grow. Firms surveyed
believe that labor issues and lack of legislative certainty are the main risks to doing business in the
country. About 41 percent of firms say that lack of
skilled staff is a very significant issue and for 85 percent it is the most significant one. F As a result,
much of the investment in the coming year will be on
G Higher
employee development and training.
skilled workers present the added challenge of rising
labor costs, which nearly 68 percent of firms say could
be an issue for growth.

8 THINK ACT
Myanmar: A wave of optimism will it last?

LOCAL AND INTERNATIONAL FIRMS ARE ABOUT

TO SPREAD THEIR WINGS AND EXPAND
Are you planning to expand your operations in
Myanmar in the next 12 months?

THE GOVERNMENT IS FACED WITH HIGH

EXPECTATIONS
Respondents indicate many areas for improvement.

2%

7%

How significant is this issue?

21%

Lack of staff with required skillset

41%
44%

Local Myanmar
companies

No clear government economic policy

34%
42%

76%

Unpredictable legislative environment

32%
43%

70%
If so, by which means do you plan to do so?

75%

Selective, unpredictable enforcement of regulations

30%
39%
69%

Organic growth
57%
Partnerships with multinational firms

Rising labor costs

17%
51%

55%
Partnerships with local firms
27%
Mergers & acquisitions
12%
8%

85%

68%

Too much administration/"red tape"

29%
37%

1%

66%

Market access barriers and investment restrictions

13%
45%
58%

11%

Restrictions on access to financing

23%
34%

International
firms

57%

Kyat volatility
12%
43%

55%

80%

Lack of intellectual property rights protection

17%
32%
49%

If so, by which means do you plan to do so?

Organic growth
67%
Partnerships with multinational firms
16%
Partnerships with local firms
34%
Mergers & acquisitions
8%
Yes, very aggressive expansion

Yes, some expansion planned

No, we will not expand

No, we will be scaling back

some of our operations

Source: Roland Berger Myanmar business survey (2016)

Too much corruption

10% 37%

47%

Administrative issues (e.g. visa, work permit, etc.)

9% 37%
46%
Discrimination against foreign companies
6% 26%
32%
Very significant

Significant

n = 153

Source: Roland Berger Myanmar business survey (2016)

THINK ACT 9
Myanmar: A wave of optimism will it last?

The biggest question mark for senior executives in

Myanmar, however, is over government policy. While
there is broad acknowledgement that important actions such as the new investment law have been taken,
the business community is missing a program that is
broad enough to cover the major parts of the economy,
specific enough to build business and investment
plans on, and quick enough to take advantage of the
goodwill created by the change in Goverment and lifting of sanctions, before it evaporates.
The clear majority of firms that Roland Berger
surveyed said that the lack of a clear economic policy,
an unpredictable legislative environment, selective
enforcement of regulations and lack of intellectual
property rights protection all present major obstacles to business growth and investment in the country. In addition, corruption and administrative red
tape created roadblocks for firms trying to do business in the country. Myanmar is among the lowest
ranked nations in the World Bank Group's ease of
doing business index, despite recent and significant
reforms. That said, it has gained ground and improved according to the World Bank's "Doing Business 2017" report.
These obstacles indicate the need for comprehensive public sector reform. Despite ongoing initiatives,
meaningful improvements to public services will be
inevitably challenging, reflecting urgent need for swift
implementation and quick wins. Firms in the survey
said that government reforms were crucial for achieving economic growth. The magnitude of the transformation challenge is illustrated by how many firms are
suggesting urgent Government action across a wide
range of issues. For example, more than 90 percent are
calling for transparent government policy, stable electricity supply, better transport infrastructure financial
sector reform and promotion of fair competition. H

CONCLUSION
Myanmar's potential is real, but so are the roadblocks. For firms seeking to take advantage of the
country's window of opportunity, as well as policymakers who want to boost employment and investment, both have roles to play in helping the country
develop rapidly.
For policymakers, Roland Berger's survey of executives working in Myanmar provides an important insight into how to attract foreign capital in the country.

G
COMPANIES ARE READY TO COME
AND SPEND MONEY
Firms planning to invest in spending on training
and employee hiring and development.

Firms expecting to increase [%]

83%
25%

80%
18%
74%
20%

62%
58%
54%

44%
10%

34%

89% of
Myanmar firms
expect to
increase spending on training
vs. 73% of
international
firms

86% of older
firms (> 5 yrs
in Myanmar)
expect to hire
more
vs. 71% of
newer firms
(<5 yrs in
Myanmar)

88% of large
firms expect
to increase
investments
vs. 67% of small
firms1

Spending on
training and
employee
development

Number of
employees

Investments
(buildings,
plant, equipment etc.)

Increase slightly

Increase rapidly

Export
volumes

n = 158

1 Small firms (<USD 1 m revenue p.a.), medium firms

(USD 1 - 25 m revenue p.a.), large firms (>USD 25 m revenue p.a.)
Source: Roland Berger Myanmar business survey (2016)

10 THINK ACT
Myanmar: A wave of optimism will it last?

H
GOVERNMENT CAN SIGNIFICANTLY
BOOST THE ECONOMY
Important government measures.
Transparent government policy
48%
54%

97%

Stable electricity supply

67%

29%

96%

Broadband development
45%
49%
Transport infrastructure
53%

94%

39%

Financial sector reform

58%

92%

34%

91%

Promoting fair competition

36%
55%

91%

Education reform and training

52%
33%

85%

Reform of state owned enterprises and liberalization

26%
53%
79%
Land reform
33%

44%

Peace agreement
27%
46%

77%

73%

Healthcare reform
26%
39%

65%

Environmental policies and enforcement

20%
45%
65%
1 S
 mall firms (< USD 1 m revenue p.a.), medium firms (USD 1 25 m
revenue p.a.), large firms (> USD 25 m revenue p.a.)
Very significant

Significant

n = 151

Source: Roland Berger Myanmar business survey (2016)

Both international and local firms want more regulatory and legislative certainty as well as transparency.
Knowing that business-friendly reforms are moving
forward and that economic liberalization won't be
rolled back gives companies the confidence to invest in
Myanmar over the long term. They will be more likely
to set up subsidiaries and build business in the country, creating jobs and boosting the economy if they
have reasons to believe that the business climate will
only improve. Further investments in infrastructure
like a stable electricity grid will only make Myanmar a
more attractive place to do business.
Companies, meanwhile, can also take away some
key lessons from Roland Berger's first business confidence survey in Myanmar. Myanmar presents tremendous opportunities for international firms that want
to expand into new and emerging markets. Companies in all sectors such as tourism, energy, infrastructure and construction, chemicals, consumer goods
and retail and many other all have strong prospects in
the country.
To start with, firms that want to take advantage of
the potential and minimize risks should move quickly,
establishing a presence in Myanmar while it is still a
frontier market. They also need to understand the nuances of doing business in the country. Partnering with
local firms and companies with deep insight may be
the key in certain sectors to navigating the challenging
and sometimes impenetrable market.
Finally, companies that want to invest in Myanmar
need to be prepared for volatility. The country is rapidly developing and changing, but still has a long way to
go to catch up. The prospects for Myanmar are bright
and those who are prepared to ride out the volatility are
likely to be rewarded with new opportunities.
Our conversations with Government officials indicate that there is awareness of the need and urgency to
clarify and detail economic policies, and determination to move from planning and deliberation to action
and quick wins. If this indeed happens, we will continue to see one of the fastest and most impactful transformations of a nation ever. The key question for you is:
Do you want to be part of it?

THINK ACT 11
Myanmar: A wave of optimism will it last?

ABOUT US
Roland Berger, founded in 1967, is the only leading global
consultancy of German heritage and European origin.
With 2,400 employees working from 34 countries, we have
successful operations in all major international markets. Our
50 offices are located in the key global business hubs. The
consultancy is an independent partnership owned exclusively
by 220 Partners.

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SOUTHEAST ASIA'S ECONOMIC

OUTLOOK
The Big Picture

MYANMAR BANKING SECTOR

2025
The Way Forward

As Southeast Asia with countries

such as Myanmar, Singapore and
Indonesia becomes an even more
important growth cluster, the region
will continue to be a magnet for
commercial activity, given its
growing population and above
world-average GDP growth.
This study by Roland Berger
highlights this conclusion and
illustrates that the region is set to
grow through intra-region
investments.

In any country, the financial services

sector occupies a unique place
among all business sectors. It plays a
vital role as a catalyst for overall
economic development, seeding
growth in other sectors by providing
the necessary funds to various
economic agents. We believe that
Myanmar's banking sector has a
bright future and we foresee
exponential growth for the industry,
slated to multiply its current asset
base by a factor of eight and create
over 120,000 jobs by 2025.

NEW!

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Senior Partner
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DAMIEN DUJACQUIER
Senior Partner
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Editors
DR. KATHERINE NLLING
[email protected]
JINKIEN TAN
[email protected]

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