U Soe Thane in our interview with him said, “Myanmar’s moment is now, the last two years have been about the reform process, now we’re in the implementation stage”. So as a private businessperson, are you beginning to feel the implementation stage of this reform process? And if so, how is it going?
First of all, as a local company in the fast moving consumer goods sector, we can feel the changes. This sector is especially interesting to multinationals, even before they understand about politics, or whether the country is stable. What we have noticed is that they try to position themselves ahead of other businesses. For example, Unilever, Procter and Gamble, Coca-Cola, Heineken, Carlsberg, they are all trying to position themselves either by starting up manufacturing, partnering with a local company or bringing their products into the Myanmar market. So for us this is the actual change you see in the local business landscape.
You have said rather gracefully, considering that it’s your competition, that you welcome Coca-Cola because they are setting a precedent.
By allowing Coca-Cola to come into Myanmar, the country is sending a signal showing the freedom of the people. We want our people to feel that we are starting to have freedom in our country, because we have been closed off for 50 years. And by allowing Coca-Cola and other internationals to come into Myanmar, we are beginning to appreciate a feeling of democracy in my opinion.
My impression is that you can offer jobs to people who do not need as high a level of education as you might need in other industries. Much like U Soe Thane said, growth in manufacturing is a goal in order to get more people employed.
The current contribution to GDP by the manufacturing sector is still very small. What we need is to grow the manufacturing sector, employ more people, create the middle class – which is the consuming class – and thus move the economy of the country forward. That’s why we want to build the manufacturing sector, which can represent up to 60% of GDP in the future. A second point would be to decrease the importance of agriculture, and we need urbanization to happen in order to create jobs. For us, in the manufacturing sector, we already employ about 3,000 people, but we can employ more in the future. In fact, we plan to expand now in the beverage sector, then food and beverages, and later on other fields of business. Unlike previous times in our history, our market-oriented government policy now allows us to grow as big as we want.
You have been partnering for sometime with Thai companies, you have further partnerships on the horizon, and you are accustomed to being a bridge to Myanmar for foreign companies. Where are the challenges that still lie for a multinational trying to come into Myanmar?
I think that it is related to the “upstairs”; the power struggle at the top level of government is something to take note of and how they will lead is still one of the unclear aspects of the country for an investor to fully gain the whole picture. Fortunately, the minority issue they say will be solved very soon. Once everything is signed and in place, it will be one of the good points to attract the foreign investor. Downstairs, the foreign investors still care for the lack of infrastructure; electricity is a major issue.
What about the labor force?
It is also a big issue, even for me. If you look at unskilled labor, we can provide for those positions, Myanmar is currently full of people who just need a couple weeks of training and can operate those jobs. But for skilled labor, the professionals and white-collar workers, we are in shortage. This is because our educational system for the past 20-25 years has not been moving forward and we have been left behind by the rest of the world. We have a hard time finding middle managers and even our top management. I had to hire a CEO from the U.K. I had no choice. I need a lot of professional people around me in order to grow my business. My countrymen at the moment cannot do that. Therefore HR is a major issue for us as well as for the investors.
One of the things we were looking at in terms of the investment law is the upcoming reforms in the financial sector. Access to capital, loans, a stock market, all of these things are still to happen. From your perspective, are you encouraged? Do you feel like the financial system can catch up?
At the moment we are not catching up but we need to keep working at it. This is a must. Unless we create the financial system the country will not be able to grow optimally in the future. We need financing. Our financial cost from the Myanmar banking sector is also one of the most expensive in the world; it is scarce and expensive. Not a good mix. We don’t have venture capital, equity funds, and a stock market. Foreign investors will not come under these circumstances, they will need to bring their own financial instruments with them otherwise they cannot leverage the financial system of Myanmar.
I started the company in 1994. But in 1992 I came back to Myanmar with only 20,000 from my savings in the States. I started to look for business opportunities and I found that the government had weak management and low production in its factories. At the time most enterprises were government owned. I became involved with their cigarette brand, Thuya, because they were having trouble selling the product and it would eventually become spoiled as it had a limited lifespan. I initially became involved in marketing the brand and selling the product on behalf of the government. This was my first step. From there as I exhibited my achievements and that I got things done, the government began to have more confidence in me and they gave me a soft drinks factories to operate. I have gradually built it to the company that it is today and in November we will be celebrating our 20th anniversary. I am happy with the result and what I have done in these 20 years.
You have said, with relation to your soft drink industry, that the only way you are going to survive is to collaborate. Is that still true?
That is my belief. I have made a selection for my core businesses, water with multinationals, soft drinks with multinationals, my energy drinks to remain among the ASEAN countries. Our energy drink is a strong brand and by remaining in the ASEAN region we can own it. I have very few competitors, one of which is Red Bull, but we have a mutual understanding of our market strengths. It’s a win-win strategy so I don’t worry too much about it. I am still doing well but I recognize that I needed to partner with someone and am currently in discussions with a major multinational company.
Regarding those negotiations, where are some of the difficult moments in a negotiation in Myanmar today? What kind of questions do you get asked by potential partners about Myanmar?
Actually my recent partner did not raise a lot of questions about uncertainty of the country. But what is challenging for them is our system and our company lacking many of the international accounting standards necessary for conducting due diligence. This is because we grew under socialism, under the previous government. I feel very confident because my water beverage business is multinational, my soft drink company has partnered with a very big Japanese company, and my energy drink is partnered with one of the strongest players in the region, while my future business in dairy is already affiliated with a strong partner from Israel.
In terms of your future plans, we read something about taking the company public. Is that idea still being discussed?
Once I partner with all these international companies, my company might become a holding company. I would like to allow each of the individual companies to grow into the future to its fullest capability. Another possibility is that, with the profit, I decide to create a venture capital company to finance certain projects within Myanmar and help grow the business climate here.
Tell us what effect ASEAN opening up in 2015 is going to have on all of your businesses.
I am still doubtful about whether or not they can implement every aspect of it properly. However, once the AEC is applied Myanmar will suffer. Perhaps 30% of our businesses will enjoy opportunities, while 70% will face important challenges; we are not ready to compete in the region. Our manufacturing base is not competitive enough, infrastructure is still lacking, and technical know-how is still underdeveloped. So how can we stop along the border, especially from Thailand, the manufacturing base that’s going to move into our territory? They will increase production, they have all the facilities necessary, they have infrastructure, all the financial instruments needed. Therefore, we are anticipating that it will be a 70% challenge and 30% opportunity.
This is a company that you named in order to honor your father. You have 20 years of experience here in Myanmar. You are talking about future dreams and plans. Has this been a surprise?
I think as a human being it is not a surprise because it was my mindset. Whatever success I have enjoyed started from my drive and ambition. Now things are changing and the country has opened its doors. Luck may have played a small part but my desire has been the driving force to my achievements.