new battles in southeast asia for foreign investment: myanmar v.vietnam

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Agenda:

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Myanmar at Glance

Vietnam at Glance

Myanmar v. Vietnam: A Comparative Snapshot

Myanmar v. Vietnam: Same same but different

Myanmar v. Vietnam in the Battle for Foreign Investment: Who wins? Why loses?

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Myanmar at Glance

• Official Name: Republic of the Union of Myanmar

• Location: South East Asia

• Neighbors: Bangladesh, China, Laos, India and Thailand

• Area: 676,578 Km2

• Capital: Naypyidaw

• Largest city: Yangon (Rangoon)

• Currency: Kyat (MMK) (01 USD = 968 MMK)

• Language: Burmese

• Population: 61 million 3

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Vietnam at Glance

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• Official Name: Socialist Republic of Vietnam

• Location: South East Asia

• Neighbors: China, Cambodia and Laos

• Area: 331,688 Km2

• Coastline: 3,260 Km

• Capital: Hanoi

• Largest city: Ho Chi Minh City (Saigon)

• Currency: Vietnamese Dong (VND) (01 USD = 21075 VND)

• Language: Vietnamese

• Population: 88.78 million

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2012 Myanmar Vietnam

GDP US$ 53.1 billion US$141.7 billion

GDP per capita US$ 835 US$1,596

2012 GDP Growth 6.3 % 5.0%

Inflation 6.1 % 9.0%

FDI US$ billion ( % increase) US$16.3 billion

Import turnover US$ 17,670 million US$ 139,207 million

Export turnover US$ 9,203 million US$ 122,157 million

Labor force 31.8 million 51.69 million

Minimum wage No general minimum wagePublic sector: S$56.8Laborer: About US$2.3/day

US$ 55 per month ((June 2013)

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Infrastructure Myanmar Vietnam

Port Poor Fair

Train Fair Fair

Airway Poor Fair

Road Poor Fair

General Poor Fair

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Level of Education Myanmar Vietnam

Average of Schooling (in years) 4 10.4

Public Spending on Education (% of GDP) 1.26% 1.8%

College level Education (% of population) 11.5% 18.67%

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Myanmar v. Vietnam: Same same but different

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Myanmar v. Vietnam: Same same • Both are located in South East Asia and have a strategic location:

A bridge between South and South East Asia

• Myanmar’s current economic situation is similar to that of Vietnam 18 years ago: In abundant and outdated legal system and bureaucratic administration

• Myanmar and Vietnam has the same internal problem, e.g highrate of corruption, underground economy that makes up most of transactions and is out of control

• Both have young population and mostly at working age

• Both have abundant natural resources, especially oil and gas and huge potential in development of agricultural economy

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Myanmar v. Vietnam: What’s different?

• Myanmar is a real Buddhist country with 89% population while 81.69% of Vietnamese are non-religious

• Different legislation: Myanmar’s system based on Common Law while Vietnam’s system similar to a civil law jurisdiction

• NOTABLY, Confucius never arrived in Myanmar!!!

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Myanmar v. Vietnam in the Battle for Foreign Investment

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Why choose Myanmar?

• Can Myanmar become a next Asia tiger? Recent democratic reform with new Union Government

headed by President Thein Sein in March 2011

International sanctions are lifted and foreign firms eye on Myanmar

Myanmar has all the elements required to create another Asian economic miracle

GDP growth rate is projected to average around 6 per cent per year until 2020, with GDP doubling to $124 billion by 2020

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Why choose Myanmar?

• The challenges of Myanmar: US$1,500 : Average productivity of a worker in Myanmar

today, about 70% below that of benchmark Asian countries

4 years of average schooling in Myanmar

10 million additional people to absorb in Myanmar large cities by 2030

US$650 billion: Total investment needed by 2030 to support growth potential, US$320 billion in infrastructure alone

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Source: McKinsey&Company

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Why choose Myanmar?

• The Opportunities in Myanmar: Potential to achieve US$ 200 billion+ GDP in 2020, over four

times as high as today

With spending potentially tripling from US$ 35 billion to US$ 100 billion, an estimated 10 million member of the consuming in 2030 from 2.5 million in 2010

Potential to create more than 10 million additional non-agricultural jobs by 2030

500 million people living in countries bordering Myanmar and the closest parts of China and India, a huge potential market

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Source: McKinsey&Company

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Why choose Myanmar?

• Issuance of new Foreign Investment Law (FIL): In Nov 2012, New FIL took effective with detailed

guidelines issued in Jan 2013

Eases the investment procedures and gives more investment incentives

New FIL brings more FDI to Myanmar: US$731 million FDI in August, 2013

More than $1.8 billion from the start of the fiscal year on April 1 to the end of August, compared with $1.4 billion in the whole previous fiscal year

Foreign capital can own 100% equity in some business areas

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Why choose Myanmar?• Regulation on foreign investment under new FIL:

Foreign investor may establish: 100% foreign owned company

Branch of offshore company

A sole proprietor

100% foreign owned partnership

Banking and financial services, wholesale and retail trading are available to 100% foreign capital

Type of foreign investment eligible to obtain privileges: A 100% foreign owned company

A joint venture with a Myanmar investor

A foreign investor operating in a contractual relationship with a local investor

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Why choose Vietnam?

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Why choose Vietnam?

• Vietnam: From a new emerging Asian country Average annual GDP growth: 7.2 %

No. 1 attractive emerging market destination for retail investment in 2008

Sharp increase in FDI: Almost US$72 billion in 2008

• To an economy in crisis: GDP in 2012: 5.0%

Sovereign debt: 56.7% GDP and Bad debt: 8.8%

Out of top 30 most attractive emerging retail market

• Did Vietnam’s economy get off the track?17

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Why choose Vietnam?

• What is hindering Vietnam?

Slow process of institutional reform: What is a socialist-oriented market economy?

State Owned Enterprises:

Too much incentives BUT not efficient

Major impediment for Vietnam development BUT main cause of corruption

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Why choose Vietnam?

• Will Vietnam Still be a FDI good destination?

Even though sharply dropped FDI and current cautious economy

BUT Japanese investors keep coming to Vietnam

And emerging wave of M&A from ASEAN investors

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Why choose Vietnam?• New investment wave coming?

Expected after signing Free Trade Agreement (FTA) with the EU and Trans Pacific Partnership (TPP) with the US

FTA and TPP are a big chance for Vietnam to attract more FDI and to engage globally

• Vietnam hopes to conclude TPP in first half of 2014

• Why Vietnam needs TPP?

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Why Vietnam needs to sign TPP?

• US important role in Vietnam economy: In 2012, US exported $1.7 billion’s worth of agricultural

products to Vietnam, making Vietnam US’ 16th largest agricultural export market.

By 2015, the bilateral trade exchange could reach more than US$ 33 billion

In 2020, Vietnam-U.S. trade may reach about US$ 44 billion a year, Vietnam’s exports to the U.S. about US$ 34 billion, and U.S. exports to Vietnam about US$ 10 billion

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Why Vietnam needs to sign TPP?• Middle income trap:

Vietnam’s advantage in international trade is cheap labor

Competition with neighboring countries

“Everything but arms” status (EBA) granted to leased-developed countries (LDCs)

TPP would level the playing field with LDCs

• Generalized system of preference (GSP) Maximum average annual income per capita to obtain GSP: US$4000

Vietnam’s GDP per capita is estimated US$1,900 this year and will reach US$ 2,300 by 2015

Example of Thailand: Permanently excluded from the GSP => the chance for Vietnam

Vietnam needs “joker” called TPP

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Myanmar v. Vietnam:Who wins? Why loses?

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Myanmar v. Vietnam: Who wins? Why loses?

• Advantages of Vietnam: Vietnam’s economy has developed earlier 20 years than

Myanmar’s one

Current situation of infrastructure and human resources of Vietnam is better than those of Myanmar

• Advantages of Myanmar: Myanmar: Last untapped market in Asia

Myanmar can take opportunities when FDI enterprises losing faith in Vietnam economy to become new FDI hub

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• WTO analysis of liberation of market access: Vietnam ties in first place with Singapore

• *Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement

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Country Limitation of market access*

Country Limitation of market access*

Malaysia medium Myanmar high

Indonesia medium Cambodia medium

Philippines medium Laos medium

Singapore low India high

Thailand medium China medium

Brunei high Vietnam low

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• Remember: Myanmar is the founding member of WTO that means

WTO service sector commitment : Unbound

Vietnam is 150th WTO member and other 149 members demand high level commitments: Better and higher market access and service sector commitments

Myanmar must move fast on concluding free trade agreements

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Myanmar v. Vietnam: Who wins?

• DEPENDS ON COMMITMENTS ON INSTITUTIONAL REFORMS OF BOTH MYANMAR AND VIETNAM!!!!

• OPEN OR ISOLATED?

• MODERN OR CONSERVATIVE?

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DUANE MORRIS VIETNAM LLC

Thank you very much!

Duane Morris Vietnam Duane Morris Myanmar

Pacific Place, Unit V1307/08, 13th Floor, No. 10 Phoyazar Street, 15 Ward,

83B Ly Thuong Kiet, Hoan Kiem Dist Baukhtaw Yankin Township

Hanoi, Vietnam Yangon Suite, Myanmar

Contact email:

[email protected]

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