OBG talks to Dr Sai Sam Htun, Chairman, Loi Hein Company

Interview: Dr Sai Sam Htun

How much potential for growth do you foresee for fast-moving consumer goods (FMCG)?

DR SAI SAM HTUN: The size of Myanmar’s population, coupled with economic growth, is likely to spark an increase in demand for many products, and the number of companies within the FMCG sector should also grow. The beverage market will become more developed in the next three to five years and more brands will be introduced, increasing consumer choice. Of course, consumers’ purchasing power will also rise accordingly. Competing outside of Myanmar is not currently feasible for most local companies. However, it is important to note that the country is in a unique regional position, and does have considerable potential during the next decade to increase trade with China, India and the member states of ASEAN.

What kind of role will the manufacturing sector play in Myanmar’s economic development?

SAI SAM HTUN: Manufacturing has a very important part to play, with the potential to eventually contribute up to 60% of Myanmar’s GDP. Both small and medium-sized enterprises and large manufacturers will be able to play a significant role in contributing to the economy, and will assist a great deal in job creation and thus poverty alleviation. However, much like the agricultural sector, industry remains underdeveloped relative to the outside world, and would benefit greatly from more foreign investment in the coming years. For example, per capita income and labour costs remain low, with factory workers currently earning around MMK2000-3000 ($2-3) per day – just above the poverty line. The lack of human resources is a huge obstacle to foreign investment, pointing to the need for improvement in the education sector. Notwithstanding its potential, Myanmar still has a lot to learn. However, if we are able to follow the example of more developed countries in South-east Asia, I believe the manufacturing sector along with the rest of the economy will certainly flourish.

To what extent has industry been affected by the alleviation of sanctions from the West?

SAI SAM HTUN: The improved political environment and the decision by the EU and the US to lift many sanctions on Myanmar have completely changed the environment in which we operate. For example, local businesses must now prepare themselves for the entry of many multinational corporations, including Coca-Cola, Pepsi and many beer manufacturers, into the market. As a result, we have to find an economical way to compete. The business landscape is constantly changing and so are the costs of competing.

Another factor to bear in mind is the rise in trade with other countries in the region such as Thailand. Many more products are being imported into Myanmar. If a local company is not large or strong enough, they will suffer if they decide to compete directly with multinational companies. One potential option to consider is to join them and grow alongside them.

What kind of measures would you like the government to take to further assist local businesses?

SAI SAM HTUN: A major challenge for local businesses at the moment is the high cost of capital. Land can be very expensive, and this restricts potential for investment within the manufacturing sector. Another obstacle is the lack of good infrastructure, especially with regards to electricity supply. Industrial zones have to make do with limited power, constraining the production capabilities of manufacturing in Myanmar. Furthermore, the middle class remains small and has yet to approach the critical mass necessary to drive consumer spending in the country. Indeed, the government must embark on the difficult task of creating millions of jobs in order to create this middle class. These structural factors, as well as the legacy of Myanmar’s recent history of political isolation, mean that although investor confidence has increased in recent years, many would-be foreign investors are still waiting to see what will happen in the medium term.