OBG talks to Serge Pun, Chairman, Serge Pun & Associates (Myanmar)

Interview: Serge Pun

What were the most noticeable economic developments leading up to the country’s democracy?

SERGE PUN: In 1992, when Senior General Than Shwe took power, he opened the doors of the economy. From then until 2003 there was strong economic growth. People say that today we are opening up for the first time, but the first economic spring was in 1992. In 2005 we experienced mismanagement, bad decisions, cronyism and corruption, which destroyed the economy and plunged us into an economic recession. I refer to these as the five dark years. There was not a positive development except for the building of Nay Pyi Taw. Finally in 2010, to our great fortune, one of the most experienced generals with a reputation for being untainted by corruption became president. In the last two years he has demonstrated positive political and social reform. That has enabled us to start our economic reform. So yes it is a new dawn, but I call it a second spring.

Which sectors offer the most attractive returns for foreign investors? Do you think ASEAN countries have an advantage when entering the market?

PUN: All sectors will be profitable. The difference will be in whether it is a low hanging fruit or if it is a high hanging fruit. This means the thresholds of entry will be low in sectors such as hospitality – you come in, build your hotel, and get it up and running in three years. Then there are high hanging fruits, such as mining and energy, where investment will be substantially higher and the payback period significantly longer. Second is the tenure of your payback, but all sectors will be profitable. The spirit of the law and the intention of the government are to make it so that everyone is on a level playing field. Asian countries may possess advantages over Western countries in the understanding of doing business in emerging markets. Asian firms have been dealing with developing markets for longer, so they do not have as much hesitation to enter unchartered waters. They are more versatile and more adapted to navigate through the channels of an emerging market.

Western firms operate in an unambiguous environment with clear boundaries – everybody abides by the book. Therefore, these companies are used to acquiring very clear answers before embarking on a business venture. Unfortunately, emerging markets are not like that. That is more of a self-imposed disadvantage, rather than a natural phenomenon. Therefore you will find that, even from Western countries, the smaller, more agile companies move very quickly and they are all over the place. The big vehicles will need more time to digest, consider, analyse and debate before they can commit.

Having said that, I am quite impressed by a lot of the large US companies that have entered the market and set up offices such as Coca-Cola, HP and Pepsi.

How can foreign firms investing in Myanmar assist in developing its infrastructure and economy?

PUN: The conditions of the modern world dictate that, when you go abroad to do business, you cannot only think of making a profit. You have to leave something behind for the people. You have to think about the environmental impact and social responsibility – this has become the norm for businesses. Every company that comes to invest here should play an active role, in their own capacity, in developing our country. Perhaps the most important role that they should play is doing business with a conscience and in a responsible way.

What do you expect to be the major obstacles for new entrants into Myanmar’s market?

PUN: The main obstacles are perhaps heightened expectations on the part of new entrants and not being able to manage expectations. They over-simplify and come diving in, only to realise there are a lot of failings in terms of infrastructure and capacity, as even minimum standards fall short of what they expect. New arrivals then get frustrated. The most serious factors for new entrants are their own errors, because often their own calculations are short term. They need to commit to the long term in order for their rewards to be exponential.