Burma good market for investment activities: Experts

Burma is currently the potential market for promoting investment activities, according to experts’ evaluations in the seminar on Burma market penetration’s requirements and export solutions held in Hochiminh city. Stimulating business activities in Burma at this point is considered a perfect time.

Before the official travel of prime minister Nguyen Tan Dung to Burma in April 2010, total investment capital of Vietnam into Burma was meagre $30 million. However, to date, total registered investment capital of Vietnamese businesses in this market has reached $173 million with 20 investment projects.

Huge demand for goods

Burma economy is still closed; wholesale business activities are therefore very limited. The population of Burma is 58 million. Although per capita income is not high, demand and purchasing power of goods are very high.

Currently, local production meets only 10 percent of domestic demand for goods. Most items in the market are imported. Although having abundant resources, 40 percent of export turnover of Burma is from agricultural products. Thailand and Chinese goods strongly penetrate into this market but the quality of goods is generally not high. Therefore, Vietnam will have more opportunities to get into this market, said Vietnam Ambassador at large in Burma Chu Cong Phung.

According to Vietnam general Department of Customs, the two way trade turnover between Vietnam and Burma in 2009 reached $93 million, down by nearly 14.1 percent compared to 2008. Of that, Vietnam exports reached $33 million, up by 1.2 percent, while imports reached $60 million, down by 20.4 percent compared to the previous year. In 2009, Vietnam ranked the 14th among the exporting countries to Burma.

Currently, export items of Vietnam to Burma include steel of all kinds, garment materials, medicines and medical equipments, automobiles, industrial raw materials, tires, electrical and electronic equipments, chemicals, machinery components and spare parts, footwear materials, plastic products and plastic materials, cosmetics, computers and electronic components.

Vietnam ranked the 12th among the importing countries from Burma. Items that Vietnam imports mainly are timber, natural latex rubber, agricultural and fishery raw products, steel wires and copper raw materials.

In May 2010, the two way import-export turnover of the two countries doubled last year’s figure, reaching $70 million, of that, exports of Burma to Vietnam accounted for two third. In addition, there is a proportion of turnover Burma exporting to Vietnam via the third countries such as Singapore and India.

Phung stressed that doing business with Burma firms would be very safe. According to Burma’s regulations, export quota is needed when a country wants to import goods. Therefore, businesses would not be worried about the payment of goods. However, with those special provisions, exporters to Burma have to make careful considerations on both exporting and importing items. However, since Burma has subsistence economy, export prices are cheaper than the global prices.
Various business and investment opportunities

Export items of Vietnam to Burma include coffee, pepper, tea, cashew kernels, processed foods, confectionaries and materials for agricultural production, and fishery products. The investment cooperation could be in the field of agricultural techniques; cultivation development; offshore fishing; fish breeding; animal feeds production; veterinary medicine production; preliminary treatment process and preservation industry; agricultural product processing; wood and wooden products; icehouses; garment and textile production; shipbuilding industry; machinery industry; agricultural, medical and educational experts supports.

Burma currently exports timber. There is an opportunity for cooperation between Vietnam and Burma by creating wood material sources via forest planting and exploiting; wooden products and decorative handicraft objects processing joint ventures for export purposes.

Vinashin Vung Tau has been coordinating with Russian and Ukraine partners in implementing project for sturgeon raising farms in Burma.
Vinashin Vung Tau Chair and general director Le Minh Hai said, Vinashin has brought 50,000 sturgeons to Burma and they are growing very well.
The company will continue to invest in hatching and raising breeding lobsters at three leasehold islands in Burma. The total investment capital for this project is $65 million.

According to director of the Hochiminh city Investment and Trade Promotion centre (ITPC) Tu Minh Thien, raw materials for both agricultural and industrial processing are very abundant in Burma. Investment in production area in Burma thus is very promising.

Nevertheless, the current demand for goods is very huge; businesses hence could stimulate wholesale activities. For cement products for example, Burma currently needs over six million tonnes, but the domestic production is only capable of producing 1.5 million tonnes. In the future, the demand will rise up further due to big demand for infrastructure construction in Burma.

In order to have advantages for investment or wholesale activities in Burma, Vietnam businesses should link with a local partner, so that the process of establishment will be further speeded up. Labour cost is relatively low in Burma, at about $60 to 80 monthly for general workers and from $200 to $400 monthly for middle-level labour.

From this October, there will be direct flights between Hochiminh city and Burma.

There are certain difficulties in doing business in Burma market such as the centralised bureaucratic regime; prices for items such as water, electricity, telephone services, gasoline remain subsidised by the state. In addition, payment process with Burma firms has to go through some banks in Singapore. Nevertheless, in the near future, BIDV will set up a branch in Burma under the leadership of the prime minister.

Deputy general director of BIDV Hoang Huy Ha said the bank is completing the procedures to put into operation a BIDV’s development and investment company in Burma with chartered capital of $200 million. The company will give support to bank establishment; assist payment processing for transactions between Vietnam and Burma; and support capital for Vietnam firms to invest in Burma in form of a shareholder. Later, it will promote the establishment of a bank in Burma in form of a joint venture with a Burma bank or 100 percent capital from Vietnam like BIDV branches in Cambodia currently.

The economy of Burma is still closed, with similar conditions that Vietnam had in 1984. Therefore, the experts believe that businesses should take the opportunities to penetrate into the market to create a firm foundation. They then are able to welcome the new opportunities when Burma officially opens the market in the future. If they are not fleet-footed, when the market is opened, it will be difficult to enter the market due to the competition from other investors in the region and the world.

Tags: Burma

Posted by VBN on Jul 16 2010. Filed under Investment. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry