VF Franchise Consulting

Myanmar – Officially Open for Business

Jan 3, 2020

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The secret is out. As close as China and as far away as halfway around the world, people have been carefully observing Myanmar’s economic and political progress for years now.

With most sanctions now lifted, Myanmar is officially open for business. Franchisors and investors have been eyeing the nation as the next major emerging market in the Association of Southeast Asian Nations (ASEAN).  Myanmar has a consumer base of more than 50 million people and is expected to double its middle class from 2015 to 2020.  Its GDP growth has ranged from 7.5% to 9.0% in recent years, even as other emerging economies have slowed.  The first stock exchange opened in 2015.  Press freedom is at an all-time high.  The currency, the Kyat, is stable and in five years has only changed 15.0% against the US dollar.

All of the big F&B and QSR players have taken notice of the market.  McDonald’s, KFC, Starbucks, Pizza Hut, Burger King, and Krispy Kreme have opened or are in the process of doing so.  A host of lesser known regional brands populate the bourgeoning F&B and retail scene. These brands come from Singapore, Thailand, Taiwan, Korea, Japan, China, and a host of other nearby Asian countries.

But what is it like to do business there?

Myanmar improved its ranking on the World Bank’s Doing Business 2020 report by six positions, coming in 165th place out of 190 countries on the index compared to 171st in the previous rankings. In starting a business, Myanmar leapt to 70th place from 152nd the year before. Considering only 5 years ago it was the least favorable place in the world to do business, its progression is simply amazing.  Many things are now easy.  Starting a Limited Liability Company (LLC), paying taxes, construction permits, and registering property are all possible with some time and effort.

Let’s consider though, the lowest ranking areas for a moment.  Enforcing contracts, getting credit, and protecting minority investors.

  • Enforcing contracts is the time and cost to resolve a commercial dispute and the quality of the judicial process
  • Getting credit is the collateral laws and credit information systems
  • Protecting minority investors are shareholder rights in related party transactions and in corporate governance

What does this tell us?  Someone once told me that, “Myanmar is like the Wild West”, and I think in more ways than one that statement is true.  Getting there isn’t that difficult, staking your claim is getting easier, but protecting it requires quick hands and a sharp eye.  Perhaps more than anywhere else in the world, you need good people who have your back, know their way around, and who are interested in working with international standards.

It also means that franchises and brands wishing to enter the market won’t often meet a person, perhaps at a trade expo, who is willing to buy a brand for Myanmar.  Financial credit is limited to family, friends, and the black market lenders.  A proper introduction to the mid and large sized groups with both capital and operational ability is the only road to success.  Regionally experienced franchise brokers and consultants are an absolute necessity for making things happen.

Currently, there are not many legal alternatives when things go wrong. Be careful investing in anything that you can’t afford to walk away from.  Also, it might be wiser to make sure you hold full or majority legal ownership and/or rights in any company if your preference is to make a direct investment into the country. Franchising is one of the best alternatives should you not wish to make a direct investment.

Business etiquette is important and similar to Thailand in many ways.  The Burmese share the Thai’s warm, friendly, and understanding nature and are slow to take offence.  Business casual is the norm, handshakes are fine, at least for same sex business people, business cards are exchanged, and a smile goes a LONG way.  One small interesting detail is that most homes and offices are all shoe-free. Whenever you see a shoe rack, make sure you use it. Guess that also means your socks best be hole-free and matching!

Doing business in Myanmar requires an agent or consultant on the ground.  In general, patience and a willingness to take time and effort to build up friendships and foster trust are often required.  As in much of Asia, making the right connections is crucial to making deals and being successful. It is quite normal for a meeting or two to be scheduled just to get to know each other – before business is even discussed.  It is also still quite normal for things we consider basic necessities of doing business, such as electricity, internet, and mobile service, to not always be available.

The movers and shakers in the country are very segmented.  This means that making connections and friends with one segment might end up alienating another.  Due to political opinions, history, or even ethnicity, here more than anywhere, you need to pick your side and stick with it.  Trying to do things from outside of Southeast Asia is typically just a lesson in frustration and failure.  In country is best, but an office or people at least in nearby Thailand or Vietnam are crucial.

To outsiders, business often doesn’t make sense.  Perhaps, you need to be Burmese to understand.  I will share a story with you to illustrate.  I once looked at an empty building where I wanted to open a restaurant.  I was told it is not available.  “Oh, what’s going there?” I asked.  “Nothing” was the reply.  This happened over and over during the course of one of my visits until I finally broke down and asked why at least 30-40% of key buildings in prime real estate were empty.  I found out that it is a “thing” in the upper social echelons to own property and be able to leave it empty, like it is insignificant.  “Yeah it’s mine, maybe someday I will do something with it”.  When we finally found the perfect spot.  A US$15,000 per month rental wasn’t attractive enough and didn’t open the doors to me, but the right guy, who had the right friends, got it for us for US$5,000 with the concession that the landlord was allowed to say he was a partner.  It was all done over a handshake.

Corruption still remains, although that is steadily declining.  A high percentage of business is still being done through connections and relationships.  Foreign investment, in the right way, continues to be a positive aid to the country.

In summary, over 95% of Burmese feel positive about the future and are willing to openly embrace new brands entering the market.  Market expectations need to be reasonable though as discretionary spending is still creeping up slowly year by year.  Expansion remains limited to the larger cities, primarily focused on Yangon.  Check things carefully, partner up with people who know the market and have the right connections, and be patient, very patient.

About the author

Robert has over 25 year of F&B and franchise experience and has lived in ASEAN for more than 12 years.  He is currently the Director of Franchise Development & Operations at VF Franchise Consulting.

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