Myanmar's Industrial Development

By

U Win Khaing, President

Myanmar 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

Nay Pyi Taw

About Myanmar

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

GDP: MMK 36,146.72 Ban (2010)

Literacy: about 95% in 2010

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

About Myanmar

Part-1 Development of National Industries

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)

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

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.

Future industries

Dawei Special Economic Zone

Kyaukpyu Economic and Technology Zone

Thilawa SEZ

Others in domestic areas (Thargaya, Myingyan, etc)

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)

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)

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)

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)

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

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

Foreign Investment by Sector Approved Amount %

1. Energy …………………………………….14,529.742 m 40.91

2. 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 www.ttnn.com.vn/NewsAttachment.ashx?id=5829&type=ppt

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

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

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”.

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.

Improving Business Climate by:

Political climate and international relations

Basic economic system

Banking system

Legal framework

Taxation system

Intellectual proprietary rights

Labour

Infrastructure

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

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

Vietnam Experience

Part-2 Development of Small Scale Rural Industries

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

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

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

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.

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

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

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

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.