As a partner of the 2015 Mandalay Investment Fair, MMRD (Myanmar Marketing Research and Development Co. Ltd.) conducted the Mandalay Investment Opportunity Survey and interviewed 42 business owners and 20 government officials and associations. This article is largely based on the findings of this survey along with other desk research.

Why would I want to do business in Mandalay?

Myanmar’s booming potential for the upcoming years has been established. After years of military rule and international trade sanctions, the country is now ready to fully achieve its growth potential. The best example is the recent launch of international telecom operators Telenor and Ooredoo: the two of them have sold close to 15 million SIM cards in the 10 months that followed their commercial introduction. That is 28% market penetration in less than a year. CEO of Telenor Myanmar Petter Furberg said results outsped all forecasts by a quarter.

Yet with a lot of focus being drawn to economic capital Yangon, why would local and foreign investors chose to turn to Mandalay?

Mandalay is Myanmar’s second city and third most populated region. It has a 12.4% annual GDP growth and its contribution to Myanmar’s economy is 11.4% (Yangon is at 22%). Its central location make it a strategic business hub for Southeast Asia: it has highway border linkages with China, India and Thailand. Mandalay International Airport has the highest capacity in Myanmar (3 million passengers a year). 41% business owners who set shop in the Mandalay region actually elected to do so because of its central location. Others said they did so for the availability of raw materials (27%) and the overall easiness to do trade (22%).

The Mandalay region is currently transitioning away from its agricultural past to industry and services. Between 2001 et 2011, the share of agriculture in terms of GDP contribution diminished by 28% while the share of industry and services rose by 38% and 11% respectively. In 2011, the split was the following:

• Agriculture: 30%
• Industry: 28%
• Services: 42%.

A large majority of businesses surveyed (88%) have optimistic (Fair to Excellent) views on the future and think their business will strive and 56% said it will be Good to Excellent.

Is it easy to work with local labor?

As in many countries which have yet to build a more competitive education system, the recruitment of middle managers and qualified workers can prove tricky. The Easiness of recruitment, the cost of labor and the quality of skilled workers all obtained average rating (2/4). The quality of middle management was assessed more generously with a rating of 2.3/4. Overall, the quality of Labor relations obtained a rating of 2.7/4.

Middle managers and skilled workers have become more mobile in the previous years; the consequence is that in terms of salaries, firms not only need to compete with other local firms, but also with neighboring countries. 

How much do I have to pay for local labor?

Salaries, including allowances, remain low in Myanmar. The current minimum wage per day has been set at 3,600 MMK (about $2.8). Business owners declared paying the following monthly amounts:

• Semi-skilled workers: 110,000 to 165,000 MMK (average is about 130,000 MMK)
• Staff: 140,000 to 220,000 MMK (average is about 180,000 MMK)
• Supervisors: 180,000 to 260,000 MMK
• Mid-management: 325,000 to 440,000 MMK
• Engineers: 610,000 to 1,330,000 MMK

Is the local market ready?

Myanmar’s economic growth comes with a substantial increase in buying power for most Myanmar consumers. Domestic market size was deemed Fair to Good (2.8/4) by local businesses, and the Purchasing power of local consumers was rated 2.5/4.

The local network of suppliers is of satisfying quality and efficiency, with a 2.8/4 rating. However, difficulties arise when it comes to reaching out to international supplier (1.5/4).

A majority of respondents also actively support the creation of a Special Economic Zone (SEZ) as they believe it will effectively improve the investment environment with better infrastructure, faster procedures and more job opportunities.

Which sectors will expand the most?

According to our survey, the most promising sectors are Hotels and Tourism, Trading and Manufacturing.

What difficulties should I expect?

Poor infrastructures is the most often mentioned obstacle to doing business in Mandalay (39% say it is the biggest obstacle); when asked to rate the different infrastructures, business owners gave the most severe grades to Industrial estates (1.6/4), water (2/4) and internet (2.1/4). Other telecommunications (2.8/4) and electricity (2.7/4) fared better.

Another often ranked 1^st obstacle (22%) is Government regulations and procedures. Although Business licensing and Intellectual property right protection obtained above-average ratings (2.4/4 and 2.3/4), Tax administration and Land regulation obtained 1.7/4 and 1.8/4 respectively.

In terms of macro economy and governance, the businesses’ opinion was often harsh with under-average grades assigned to macroeconomic stability (1.3/4), crime control (1.4/4) and corruption control (1.5/4). Government services as a whole score a score of 2/4.