Myanmar: To Invest or Not to Invest, That is the Question

When we talk to executives who are thinking about expanding into Myanmar, many of their concerns seem to come down to the same thing: politics.  There is a round of elections coming up in late 2015 that has the potential to radically shift the country’s power structures, and the prospect of dramatic change in Myanmar’s leadership is giving companies pause because it adds to the uncertainty already inherent in the market. Many executives are waiting to invest until they see how things shake out.

The problem with this approach is that companies looking for political certainty in Myanmar will have to wait quite a while to get it.  After the new president, cabinet, and legislature take office at the beginning of 2016, it will take at least another 2–3 quarters for businesses to really assess the new government’s priorities and capabilities.  In other words, companies will not have significantly more political certainty in Myanmar until Q4 of 2016 at the earliest.  That’s a long time to wait, particularly if your competitors are already in the market.

This is not to say that all companies should be investing now; it is simply to say that companies should recognize that political uncertainty in Myanmar isn’t going away anytime soon.  And that’s not just true of the overarching governmental structures.  It’s also true of the operating environment.

To give an example, I met with one executive during a recent trip to Yangon who shared a story about his experience with Myanmar’s Internal Revenue Department (IRD).  Apparently, the government had lowered taxes for his company the year before, but he was still made to pay taxes at the original rate. It turns out that there was a communication breakdown within the government, and the IRD simply hadn’t inputted his company’s new rates into their system. (The authorities returned the money once the problem was identified several months later.)

The bottom line is that any company with a presence in Myanmar will have to navigate gray areas for the foreseeable future.  After decades of isolation and stagnation, the country’s institutions are immature and its legal frameworks are weak.  Myanmar’s officials are still learning the basics of government administration, and its legislators are rushing to fill gaps in its regulatory infrastructure.  They are moving quickly, but they have a lot of ground to cover.

With this in mind, executives who are thinking about expanding into Myanmar should not delay their decision on the hope that the situation will clear up sometime next year.  Instead, they should consider whether they would rather invest now with less political certainty or invest two-and-a-half years from now with more political certainty.  Comparing those two scenarios will give executives who are weighing their options a much better idea of the tradeoffs they face.

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