New Battles in South East Asia for Foreign Investment: Myanmar v.Vietnam

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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
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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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Myanmar v. Vietnam: A Comparative Snapshot
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 wage
Public sector: S$56.8
Laborer: About US$2.3/day
US$ 55 per month ((June 2013)
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Myanmar v. Vietnam: A Comparative Snapshot
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 high
rate 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?
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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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Myanmar v. Vietnam: Who wins? Why loses?
• 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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Myanmar v. Vietnam: Who wins? Why loses?
• 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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