Industrial Development in Myanmar: Present and Future Opportunities

1. Myanmar's Industrial Development By U Win Khaing, PresidentMyanmar Engineering Society Tel. 0095-1-519673; 0095-1-519674; 0095-1-519675; 0095-1-519676 Mobile: 0095-95002596 Fax: 0095-1-519681 Email: uwkhaing@uegroup.com.mm Website: www.mes.org.mm 1 July 2011

2. About Myanmar Nay Pyi Taw

3. About Myanmar Name : Republic of the Union of Myanmar Capital: Naypyitaw Major cities: Yangon (Pop-7 m) and Mandalay (Pop-1 m) Area: 676,578 Sq Km Population:60 million Government: President elected by Bicameral assembly called Pyidaungsu Hluttaw Administrative States and Divisions: 7 states and 7 Divisions Main Export: Natural gas, beans, pulses, teak, minerals, gems and rice

4. About Myanmar GDP: MMK 36,146.72 Ban (2010) Literacy: about 95% in 2010

5. About Myanmar Infrastructure:Railway – 5,707 km Roads – 35,386 km 69 airports 25 ports & jetties (Foreign going) 3 container ports 321 microwave stations Phones about 1.5 m electricity – 3,344 MW (installed capacities) schools – 40,876/about 8.15 m students 154 universities & colleges/ about 0.68 m students, 898 hospitals

6. Part-1 Development of National Industries

7. Review of present industrial environment • State owned industries • Semi state owned (MEC,UMEHL) • MIC industries (under FDI) • Industrial zones (18) • Cooperatives • Medium scale industries (private) • Small scale industries (private) • Cottage industries (private) • Family type (private) • Workshops/machine shops (private)

8. Statistics on ownership of industrial establishments (2010) • State owned………………… (791) • Private owned……………… (101,000) • No of persons employed in industrial sector about 4.8 million

9. Industries by size Small 25 hp 50 workers Medium 50 hp 100 workers Large over 50 hp over 100 workers  Note : State owned enterprises are large scale and possess extensive technical and human resources.

10. Future industries • Dawei Special Economic Zone • Kyaukpyu Economic and Technology Zone • Thilawa SEZ • Others in domestic areas (Thargaya, Myingyan, etc)

11. Ministries and semi-government organizations, NGOs, private companies involved in industrial sector • Ministry of Industry No.1 • Ministry of Industry No.2 • Ministry of Myanma Industrial Development (formed April 2011) • Ministry of Mines (Iron and steel, copper, nickel, tin, coal production) • Ministry of Energy (Petrochemical Industries, refining, fertilizer production) • Ministry of Commerce (Rice Mills) • Ministry of Livestock and Fisheries (Animal and marine products processing)

12. Ministry of Forestry (Timber products processing) • Ministry of Agriculture and Irrigation (Sugar and rubber cultivation & processing. cotton and jute) • Ministry of Cooperatives (Producer CoOps) • Ministry of Information (newspapers, magazines and printing presses) • Ministry of Defence (Defence Industries) • Myanma Economic Corporation (MEC)-(Steel production) • Union of Myanmar Economic Holdings Ltd. (UMEHL) • RUMFCCI (Agriculture, Trade and Industry) • Myanmar Industries Association (MIA)-Industrial Zones • Private companies (Cement production)

13. Ministries involved in Infrastructure Sector • Ministry of Electric Power No.1 ( Generation from Hydropower) • Ministry of Electric Power No.2 (Generation from gas, transmission and distribution) • Ministry of Energy (Natural gas production and transport, oil production) • Ministry of Construction (Roads and Bridges) • Ministry of Posts and Telecoms (Communications) • Ministry of Transport (Ports and air transport, airports) • Ministry of Rail Transportation (Road and Rail Transport)

14. Ministries and NGOs, private sector involved in human resources development • Ministry of Education • Ministry of Science and Technology • Ministry of Industry No.2 • Ministry of Labour • Ministry of Health • RUMFCCI/MIA • Myanmar Computer Federation • Myanmar Engineering Society • Technical Training Schools (private)

15. Industrial Development Committee (IDC ) • The IDC is headed by the Minister of Industry No.2 and comprise the following sub-committees headed by Deputy Ministers • Industrial Development Supporting and increasing Productivity • SME Development • Environmental and Renewable Energy • Import Substitution & Export Promotion • Human Resource Development • Automobile Production • Agricultural and Farm Machinery Production Development • Food Industry Development • Chemical Industry Development • Rubber Industry Development

16. Myanmar Work Force • about 35.5 million (60% of population) • about 5 m in industrial sector • about 7.5 m in services sector • about 23 m in agriculture sector

17. Foreign Investment by Sector  Approved Amount % Energy …………………………………….14,529.742 m 40.91 Oil and Gas………………………………13,815.375 m 38.90 3. Minging……………………………………2,395.386 m 6.74 4. Manufacturing…………………………1,668.126 m 4.70 5. Hotel and Tourism……………………1,064.811 m 3.00 6. Real Estate……………………………….1,056.453 m 2.97 7. Livestock and Fisheries…………….324.358 m 0.91 8. Transport and Communication…313.272 m 0.88 9. Industrial Estate……………………….193.113 m 0.54 10. Agriculture……………………………..96.351 m 0.27 11. Construction…………………………..37.767 m 0.11 12. Other Services………………………..23.686 m 0.07 Total……..USD 35,518.440 million 100.00 (USD 35.518 Bn) Note: FDI of USD 35.518 billion was recorded on 31 January 2011

18. FDI led export driven economy can be the engine of growth and will benefit the alleviation of poverty  • FDI led industrialization by MNCs can have some impacts due to supply chain disruptions (natural disaster, unrest, financial instability, etc)  • The MNC global factory concept of geographical locations for production and value adding and final assembly nearest end users by integrating local producers into global supply chains  • The global factory concept enables MNCs and different locations of developing countries to specialize in specific parts of global value chain to service different geographical markets  • Environmental concerns and Kyoto Protocol Annex-II (for developing countries) is taken as a plus side for FDI investing in developing countries

19. Industrial Clusters concept • Clusters are backbone of industrial development in developing countries • Resource based clusters: processed food, wood, leather, rubber, gem-stones, etc • Low tech industries clusters: textiles, garments, footwear, furniture, glassware, toys, etc • Medium tech industries: automobiles, chemicals, machinery, etc • High tech industries: electronics, pharmaceuticals, biotechnology, precision instruments, aerospace, etc

20. Types of industrial clusters • Large national firms and local suppliers. • Micro, small and medium enterprises (MSME) • MNCs and local suppliers,   • Myanmar still has comparative advantage in labour intensive industries and mineral extraction industries.  • Labour abundance is linked to “productivity vs. adjusted cost of labour”.

21. Vietnam Experience • Vietnam has made remarkable transition since 1989 from a centrally planned industrial sector to an industrial sector governed by market forces. • Much of the success in industrial development has been the result of government’s decisions to remove barriers to entrepreneur efforts in FDI and domestic private investors. • Macroeconomic stability was achieved within 5-6 years.

22. Vietnam Experience • Improving Business Climate by: • Political climate and international relations • Basic economic system • Banking system • Legal framework • Taxation system • Intellectual proprietary rights • Labour • Infrastructure

23. Vietnam Experience • Improving Foreign Investment Climate by: • Legal framework • Investment guarantees • Establish sectors with FDI encouragement • Taxation and tax incentives • Foreign exchange incentives • Land lease and rent • BOT,BT and BTO projects • Industrial zones

24. Vietnam Experience • Improving Trade Environment by: • Trade legislation • Trade liberalization • Export and import policy • Foreign trade contracts and Vietnam laws • Export processing contracts and Vietnam laws • International shipping and freight forwarding • Certificate of origin for exports • Resolution of disputes

25. Part-2  Development of Small Scale Rural Industries

26. Development of Small Scale Rural Industries • The GoM has recently announced the 8 point program for rural development and poverty alleviation • They are:- • Development of agricultural production sector • Development of rural productivity and cottage industries • Development of microwaving and credit enterprises • Development of rural cooperatives tasks • Development of rural socio-economy • Development of rural energy • Environmental conservation

27. The main objective is to develop the rural economies and create jobs  • The characteristics of agricultural economy is that it is seasonal  • Thus under employment situation exists in rural areas  • With 23 million working in the agriculture sector and forming 70% of the population the need arise to create jobs in the rural area and develop the rural industries  • Poverty alleviation can be reduced by introducing and promoting small scale industries in appropriate rural areas  • This will create additional jobs and income for farmers • It will mitigate rural-urban migration

28. Non-farming income can be generated by developing small scale rural industries  • They are in: • food processing • agro products processing • wood processing • textiles and garments production • construction materials production • handicrafts* • others  • These are 80% based on domestic natural resources  • * traditional handicrafts to be linked to domestic tourist sales outlets and for export

29. Incentives for success • simplify business registration procedures • simplify tax assessments • micro and mini financing • better roads and communications • extended electrification • improved access to social services i.e. education and health   • This is similar to the concepts in OVOP(One Village One Product) movement which is being implemented with considerable success in many neighbouring countries to improve rural economies and reduce poverty by creating small scale industries and providing jobs.

30. The potential OVOP group are in: • Agro-processing • Handicrafts • Laquerware • Wood carvings, bamboo products • Stoneware • Tourism related souvenirs • Clothes and silk weaving • Embroidery, bags, fine mat • Costume jewelries

31. The potential OVOP group are in: • Rattan furniture • Pottery and ceramics • Cooking oil (groundnut, sesame, sun flower) • Toddy palm products • Honey, preserved fruits, fruit juices • Preserved meats, sausages and dried fish • Concrete blocks, bricks, lime, late rite • Dairy and milk

32. OVOP group must be decided on natural resources, human resources, expertise, traditional, cultural aspects • To identify the best product suitable for each township and village within region/state. • With tourism on the rise, OVOP for tourism related products will greatly help rural people living near tourist areas. • The presence of many Myanmars abroad also increase OVOP market for packaged and preserve traditional food with quality control

33. Conclusion • To develop the national industries with own resources and FDI for import substitution and exports. • The national industries led by heavy industries and mechanical industry under taken with state support and the active promotion of SMEs with private participation and entrepreneurship. • To develop the small scale industries and micro-industries in rural areas to help develop the rural economies by creating employment and raising the income and gradually reduce poverty.

34. Thank You !