Myanmar: ready for inclusive business?

“We want to move out from the family own business to become a proper business. We want to get better technology to improve the quality of the product. When investment levels increase, production levels will also increase”.

This was what a business owner told me in December 2012 on a visit to Myanmar to assess the country’s inclusive business potential. It captures many important features of the private sector there.

The vast majority of businesses are small and family owned, as is this one. At the other end of the scale, there are a small number of very large companies. These are also mostly locally owned – the entry of multi-national companies from the region or further beyond has only really happened in some sectors, such as extractives.

There are very few middle sized, growing companies. Lack of easily available finance, for one, has stifled growth, which my respondent also refers to in his comments.

Lack of up to date technology is a major challenge, following the many years of limited access to much of the world. The business owner is not alone in linking this to the low quality of many products produced in the country. It also makes them uncompetitive with regional producers. In some sectors, the problem is also that export of raw materials is unconstrained, and value is not added locally.

The quote makes reference to the desire to become a ‘proper business’. Business skills and seasoned managers are in short supply. More generally a lack of know-how is damaging. In agriculture there is an over usage of fertilizer and pesticide, simply because farmers don’t know what to apply and when to be efficient and safe.

There are other constraints that businesses also face in Myanmar. Poor infrastructure is a challenge for many, such as lack of roads and electricity supply. Some laws important for trade laws are out of date and inconsistent. There is ongoing political uncertainty, and civil wars in some regions are only just coming to an end.

A lack of business ethics can also be a challenge. One person I spoke to noted that it is difficult to win projects unless you can “get near government circles.” The control of markets by large companies reduce competition and damages profitability for smaller companies. One person said that “many cronies handle many businesses”, crony being a term for those who are thought have been advantaged by being close to government.

The quote makes another important point: a desire for change and for business to grow and be able to compete.

Myanmar has already changed a lot since September 2012. I no longer have to carry a wad of clean and unfolded dollars when I enter the country, as there are cash machines in Yangon now. By the end of the year, I hope that the international roaming on my smart phone will work in Myanmar for the first time. The government is working hard to reform many of the laws that are restricting business, and sign up to international protocols that are important to the private sector.

Yet many problems still remain. I suspect that the company whose owner provided this insightful quote is still pretty much in the same situation as it was then. Most of the population is still yet to see any upturn in their incomes or opportunities. I have visited villages in the central heartland of the country – which is sometimes thought to be the advantaged area of the country – where all the young men are away working in Thailand and the housing, transportation and infrastructure are indicative of deep and ingrained poverty.

In this context, where many companies are small and trapped with outdated technology and low skills, and the few large companies seem unconcerned by the ethics of their role in society, is inclusive business able to flourish? Or is inclusive business what Myanmar needs most?