By Dr. Maung Aung
Impacts such as that of adversity, hardship and bad break are all there when COVID – 19 hit hard towards factories, mills and service industry on this planet being enveloped with chaos, confusion and mayhem.
As some countries came out of the grip of the pandemic, they stepped on inch by inch in pulling up the nation’s economy.
Today, many countries including Myanmar are swinging into top gear to pull the economy back to normal as fast as possible.
Expectation runs high in Myanmar to create a scenario with domestic integrated industries that are linked with global supply chains while creating massive job opportunities towards enhanced GDP of the country.
Based on the fast changing patterns of industries in conjunction with the upcoming global supply chains, Myanmar is poised with focus in building manufacturing industries compatible to post COVID – 19 scenarios.
Changes in world industries due to COVID – 19
Starting from mainland China, the pandemic spread across the planet, killing people in the United States, Europe and Latin America, pulling the economies down. Many countries, especially the United States, Japan and Europe, are thinking to pull out their industries from China.
China is known as “The World’s Factory”. Some may think the ubiquity of Chinese products is due to the abundance of cheap Chinese labour that brings down the production costs, but there is much more to it than that.
In addition to its low labour costs, China has become known as “the world’s factory” because of its strong business ecosystem, lack of regulatory compliance, low taxes and duties, and competitive currency practices.
Special economic zones have been opened up in the areas such as Shanghai, Shenzhen and Beijing creating the country as a growth pole.
China is the world’s second largest economy behind the United States. Gross Domestic Product (GDP) growth rate, consumer price index, purchasing managers’ indices, trade and industrial production are all key indicators. A quick look shows that China is equipped with economy of scope, economy of scale and economy of speed. Economy of scope and economy of scale are two different concepts used to help cut a company’s costs. In the wake of COVID – 19 pandemic, and in the midst of trade war, the United States and Japan are pulling their companies out of China. However, the EU countries would like to remain status quo. For many businesses, adjusting their supply chains in the wake of the coronavirus pandemic means expanding from China, not necessarily leaving, some analysts say. However, some countries are mulling to pull out from China.
Indicators in selecting a country
Factors influencing Foreign Direct Investment (FDI) in a country are as follow.
1. Stability of the Government;
2. Pro-active measures of the Government to promote investment (infrastructure);
3. Rule of law;
4. Return on investment.
Other factors are also considered such as that of the labour, the electricity, the transportation, the seaport, the investment climate, the investment law, the intellectual property law, the indicators for doing business, the index on corruption, and etc.
In the past, the investors paid focus on tax relief matters, but the time has changed as they look forward on existing basic structures such as that of the electricity, the transportation, and the availability of skilled workforce.
International investors tend to avoid the investment in their own countries as the labour costs are high, and that they select the countries where cheap labour force existed.
Choosing an area for investment
Next, the investors select the suitable area for investment, and that there are three indicators as options and choice.
• Low cost production area;
• Smooth connectivity with word trade and having seaport with low cost;
• Gaining access to adequate and accurate information.
Such areas in a country are seen with jammed packed industries and economies, centrefolds for the economies of a nation.
Obviously, Shanghai, Shenzhen and Beijing could be seen as the central pillars of development. Bangkok is the central pillar of developement in Thailand, while Hanoi is the centre of Vietnam.
Yangon is the central pillar of development of Myanmar
In the post COVID -19, the setting and scene are most likely that many economies and industries of the world would be pulling out of China, and that new investors might be looking for fresh territories for investment.
In such a new landscape, Myanmar should revamp, rebuild and refurbish all the existing drawbacks with regards to the economies and industries of the country, and at the same time the investment climate should be added with stimulus, spur and strength.
Advantage could be reckon in the labour domain of Myanmar that is much lower compared to other countries such as Vietnam, Cambodia and Bangladesh.
Looking into the latest census of the country, Myanmar has perfect reserved workforce with the highest statistics on (18 to 60) age bracket population.
Being located in the strategic place of Asian continent, the mega planned projects are in the pipeline such as that of the Asian Highway Network (AH), also known as the Great Asian Highway, and the East–West Economic Corridor, paving high credit and commendation for investment climate.
Over the years, the attainment and accomplishment are being witnessed in the basic infrastructure sector such as that of the road communications, the electricity and the transport, obviously the head start and trump card compared to the past.
International investors prefer Yangon and its surrounding for investment. Moreover, Yangon stands out as the main attraction since it enveloped all the factories, plants and mills that have connectivity with the whole wide world. Moreover, Yangon offers lower production cost and has fast communication system with the world, equipped with non-congested seaport, edging over other investment venues in the region. Standing in the centrefold, Yangon is the host for (29) industrial zones and Thilawa Special Economic Zone with (6,000) plants deploying (600,000) workers, enjoying with the reputation as industrial business centre.
Yangon based industrial hub is sure to be expanded in the coming year while that of the electricity would be supplied as needed, that of the Mandalay – Yangon Road and Myawady – Yangon Road would be functioning much better, that of the expansion of Thilawa Special Economic Zone, that of the revamp and renovation of jetties and bridges.
With the wisdom of the Union Government, all out efforts have been poured into the scheme of Yangon industrial development, and it is highly expected that enormous of job opportunities are on its way. The new Myanmar Companies Law, introduced on 1 August 2018, allows foreign investors to take up 35 per cent in local companies and investment with capital not exceeding 5 million U.S. dollars can be permitted by the regional or state authorities of the DICA.
Lately, Myanmar introduces draft Industrial Zone Law to govern the development of the industrial sector. In 2019, Pyidaungsu Hluttaw issued the draft Industrial Zone Law to provide much needed legislation to govern the sector and help to draw in much needed foreign investments into the country.
Recently, Pyidaungsu Hluttaw, Myanmar’s highest legislature has approved the highly anticipated comprehensive Industrial Zone Law on 26 May 2020.
Myanmar Company Law and Industrial Zone Law are the valuable instruments that could attract foreign investment in the country.
Around 70 per cent of the Myanmar CMP (cut-make-package) sector is exporting to the EU and this sector creates hundred thousand of job opportunities for women around the country, imparting them with skills in the industry.
Myanmar is exporting basic produce such as natural gas, wood products, pulses, beans, fish, rice, clothing, jade and gems and that the items are not fetching fair prices and good return. Time is ripe to produce value-added items through the modernization of manufacturing industrial sphere.
Value-added products are defined as having the change in the physical state or form of the product such as milling wheat into flour or making strawberries into jam. It is the making of a produce in a manner that enhances its value. Such transformation creates more job opportunities.
Fixing the drawbacks
Out of the blue, the COVID -19 can bring out the worst as well as the best to our country.
Obviously, we have learned the lessons in connection with the forced closure of the businesses not because of the pandemic, but due to the protests of the garment workers at the factories that led to the dead end.
At this juncture, the government has taken up necessary measures to avoid untoward protest and demand through the issuance of rules and regulations, and also set up a mechanism of “One Stop Service” in settling the labour matters.
Coming together in solving the problems
The development of the nation through the manufacturing industry needs a good investment climate such as favourable investment climate which is likely to include low inflation, falling interest rates, growing corporate earnings, political stability, and a high degree of consumer confidence.
People are the key, and that their participation is much needed.
With a view to reducing protests at the factories, the applicants are imparted training courses with ethical behaviours at workplace such as that of obeying the rules, effective communication, taking responsibility, accountability, professionalism, trust and mutual respect among colleagues. Workers are appointed only when they completed the training course.
A good timing
The United Nations World Food Programme (WFP) has requested countries to ensure food security and to expand crops cultivation if possible.
It is indeed a good time for Myanmar in expanding cultivation of crops with added momentum, and also steps towards the labor intensive manufacturing industry for value added items. In the backdrop of COVID – 19, our skill workers that have been working in the foreign countries and neighbouring countries are back in the homeland to fill in the required jobs. The writer is of the view that there would have better working conditions when the “export oriented value added industrial law” is being enacted in Myanmar, where local and foreign business people could prioritize the establishment of labour intensive manufacturing industry in a short time.
Time to work hard
Going by world’s experience, it could take countries on this planet over two to three years after lockdown restrictions are eased to get their economies back on track.
Myanmar needs to work harder individually as well as collectively with patriotism in unity and cohesion in rebuilding the nation.
In conclusion, the writer firmly believes that creating job opportunities in a large scale in conjunction with economic recovery measures is on the right pathway for the fastest lane for development. We are sure to come out of the crisis in the shortest possible time when we are working together in high hope to witnessing the economic development of the nation.
(Translated by UMT (Ahlon))