Acumen Magazine June 2013

Editors NoteIt has been exciting times in Myanmar as of late. Since political and

economic reforms got underway in earnest in 2012, international attention has

been focused on this country to a greater extent than perhaps at any time in its

recent history. There are many reasons to be excited: economic reforms promise

to make doing business easier and more transparent, and new political freedoms

have brought about a spirited debate on Myanmars future. Foreign investors are

keen to get a slice of Myanmars newly available economic pie, and if investment

is managed and regulated in a transparent and constructive manner, it has the

potential to lift millions out of poverty.

But despite a climate of cautious optimism, Myanmars future trajectory

remains difficult to gauge. Corruption and impunity remain serious problems, and

it remains to be seen whether the countrys legal system and skeletal infrastructure

will be able to cope with a flood of foreign capital. Lingering ethnic issues and

bouts of violence in recent months have done little to bolster investor confidence.

Much of the international interest in Myanmars economic resurgence has been

speculative in nature, as foreign investors are wary of making large-scale moves

into a country where misinformation and uncertainty rule the day.

Acumen seeks to be a reliable source of information and in-depth analysis

on business issues in Myanmars rapidly evolving investment climate, and to act

as a bridge between local businesses and their counterparts in other countries.

Long-isolated from the global economy, Myanmars business community has much

to bring to the table of global commerce, and is actively seeking out international

partnerships to that end. Acumen is the only monthly magazine in Myanmar

dedicated to long-form, in-depth reporting on commercial issues, and is particularly

focused on the personalities and ideas that are fuelling Myanmars economic

opening. In this inaugural issue, we touch on a wide range of subjects, including

the future of sanctions, the pitfalls and prospects for tourism development, and

how information technology will shape Myanmars future.

Myanmar faces an uncertain road ahead, but despite the profound issues

facing the country today, its future has arguably not looked as bright in decades.

Acumen looks forward to documenting that journey, and bringing Myanmars

story to the world. A

CEO / Chief EditorDr. Htet Zan Linn

DirectorDr. Hein Thu Aung, Tin Tun Kyaw

Executive EditorPhyo Wai

Editor English EditionAlex Bookbinder

EditorsHein Zaw, Khin Win, Su Le` Nandar

ReportersTha Toe Aung, Nang Aye Chan Moe

DesignersAung Aung (AN Computer), Thaw Tar Oo

Computer OperatorZin Wai Wai Shein

Marketing DepartmentJanuary Khine Mon, Naw Keziah, Yadanar,

Nan Mo

PhotographersBlack Dream, Aung Kyaw Moe (New Image),

Han Saw, Alex Bookbinder, Christopher Symes,Nang Aye Chan Moe

Publisher and CopyrightDr. Htet Zan Linn

Printer

Editorial BoardACUMEN

[email protected]

[email protected], [email protected],

[email protected], [email protected],

AdvisorsAdvisorsAdvisorsAdvisorsAdvisorsProf. Dr. Aung Tun Thet Prof. Dr. Aung Tun Thet Prof. Dr. Aung Tun Thet Prof. Dr. Aung Tun Thet Prof. Dr. Aung Tun Thet (Senior Advisor, UN Resident Coordinator's Office)

Dr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg TheinDr. Maung Mg Thein (Ph.D. (Law), LL.M., LL.B., B.A.(Law), ANZIIF (Australia), Pg. Dip in Applied Psychology)

Prof. Maw ThanProf. Maw ThanProf. Maw ThanProf. Maw ThanProf. Maw Than (Rector (Ret), Yangon Institute of Economics Yangon)

Soe Tint AungSoe Tint AungSoe Tint AungSoe Tint AungSoe Tint Aung (Special Consultant for Advocacy, PSI Myanmar)

Dr. Tun LwinDr. Tun LwinDr. Tun LwinDr. Tun LwinDr. Tun Lwin (Consultant, Myanmar Climate Change Watch,Tun Lwin Foundation)

Than LwinThan LwinThan LwinThan LwinThan Lwin (Deputy Governer (Ret), Central Bank of Myanmar)

Tin Zan Kyaw Tin Zan Kyaw Tin Zan Kyaw Tin Zan Kyaw Tin Zan Kyaw (Principal, Device Business Management Academy)

Grace Swe Zin Htaik Grace Swe Zin Htaik Grace Swe Zin Htaik Grace Swe Zin Htaik Grace Swe Zin Htaik (Media Advocacy Advisor, PSI Myanmar)

OfficeNo. 24/26, 4B-C, Race Course Condo, South Race Course Street, TAMWE TOWNSHIP, YANGON

Tel : (+959) 420033355 ~ 66 ~ 77 (Hot Line), (+959) 73045140, 49317457, 73143313, (+951) 8603886, 8603887

ACUMEN 11

In order to removevested interests thattake advantage of thepolitical system andeconomy, we warn thatthe government willhave to enforce therules according to theconstitution and exist-ing law.

U Thein Sein

President

Republic of the Union of

Myanmar

The Flower News ( VOL-9,

No. 14) (]]EkdifiHom;\ touftkd;tdrfukdxdyg;vmygu tajccH Oya'rS tyfESif;xm;onfhEkdifiHawmforw\ vkyfykdifcGifhukd tokH;jyKum uG,foGm;rnf[k orwajymMum;}})

We dont want to blame anybody, but we are looking foranswers.

Daw Aung San Suu Kyi

Chairperson

National League for Democracy, Member of Parliament

The Flower News ( VOL-9, No. 14) (]]'DDrkdua&pDESpfESpfc&D;ESifh tem*wfvm;&m}})

]]In order to develop SMEs inMyanmar which currently accountfor 90% of industrial production weare now considering the establish-ment of a credit guarantee corpora-tion to give these firms easy access toloans.}}

Dr. Maung Mg Thein

Vice Minister

Ministry of Finance and Revenue

Weekly Eleven News ( VOL-8, No.26) (]]acs;aiGtmrcHtzGJU tpnf;xlaxmif&ef pDpOfaeaMumif;}})

"Teak production in Myanmar has always been an importantsource of revenue. But illegal logging now accounts for almost thesame amount as timber felled legally. We need to enforce the rulesto stamp out corruption."

U Win HtunMinistry of Environmental Conservation and Forestry

Pyidaungsu Daily Newspaper (Vol-1, No.2) (]]uRef;opfrsm;ukd jynfwGif;w&m;0if jyefvnftokH;jyKcGifhay;rnf}})

oicesV

News in Brief

A group of local tourism entrepreneurs

have submitted a proposal to the

government suggesting that licenses for

tour companies be granted to 100%

Myanmar-owned companies only.

According to recently enacted foreign

investment laws, foreign companies are

allowed to enter into joint ventures with

domestic companies in the tourism

industry, and some tour operators want

to see this provision revoked. If a family

owns only a cart, they can do business

with the cart on a manageable scale. If

they own only a car, they can work by

using that car. We are able to keep things

manageable as it is. Why do we want to

allow foreigners in when we can develop

the tourism sector on our own? said U

Aye Kyaw, the managing director of

Ruby Land Travels and Tours, at a

tourism seminar held at the Royal Rose

Hall on March 16. Most tourism

entrepreneurs in attendance were of the

opinion that only local entrepreneurs

The much-vaunted American pivot to Asia

a comprehensive package of diplomatic

and military engagement with the worlds

largest continent, as announced by President

Barack Obama 2011 marks a significant

shift from an American focus on the Middle

East for the past decade and a half. To

discuss the geopolitical and security

implications of this shift, the Asia

Foundation brought noted Indian academic

C. Raja Mohan to Myanmar on a speaking

tour to engage with local opinion leaders,

including an engagement at the headquarters

of the Union of Myanmar Federation of

Chambers of Commerce (UMFCCI) on

March 13. Mohan, the director of Strategic

Studies at the New Delhi-based Observer

Research Foundation, is a well-respected

analyst on Asian security issues. In his talk,

he discussed Myanmars changing strategic

landscape within the context of an

increasingly assertive China and India vying

for power with each other and the United

States, and focused particularly on the role

of India as an ambiguously Asian power

due to its distance from traditional centres

of power in East Asia. A

14 ACUMEN w w w. my a n m a r b 2 b m a g a z i n e. c o m June 2013

should be granted tour operator licences,

fearing that foreign companies would try

to influence the tourism industry in

counterproductive ways. It wont happen

at once, but it is very likely to happen at

some point. Foreigners tend to exert

influence when they come into a country,

and gradually come to hold more sway

over domestic industries than they

should, said Dr. Zaw Moe, the managing

director of Myanmar Orient Pacific

Travel Agency. Of course, I dont mean

all foreigners, only some, he added.

Based on the attendees suggestions, a

proposal to only give licenses to one-

hundred-percent Myanmar-owned

companies wil l be submitted to

Parliament for review. The Department

of Travels and Tours licences more than

one thousand companies owned entirely

by Myanmar citizens, seven joint

ventures, and one entirely foreign-owned

company. A

Tour operators propose protectionismTour operators propose protectionismTour operators propose protectionismTour operators propose protectionismTour operators propose protectionismAsias securityAsias securityAsias securityAsias securityAsias securitybalance is changing:balance is changing:balance is changing:balance is changing:balance is changing:Prominent academicProminent academicProminent academicProminent academicProminent academicC. Raja Mohan visitsC. Raja Mohan visitsC. Raja Mohan visitsC. Raja Mohan visitsC. Raja Mohan visitsMyanmarMyanmarMyanmarMyanmarMyanmar

Under the auspices of Myanmar

Pharmaceutical & Medical Equipment

Entrepreneurs Association (MPMEEA),

the first Myanmar Health Expo was held

On March 1, 2013, a seminar involving

management experts from around the

world was held at the Sedona Hotel in

Yangon. Competence is the key to an

organizations success or failure, claims

Argus Ang, the CEO of the Singapore-

based RVi Institute and a speaker at the

seminar. Successful organizations regard

human resources as the most important

and valuable component of an

organization, he said. Successful

businesspeople know to trust experience

and value employees that have a proven

track record of successes. The seminar

was intended to enable human resource

officers from various backgrounds to

learn international best practices with

regards to HR, and participants thought

that it prepared them well to tackle the

ACUMEN 15

at Yangons Tatmadaw Hall on February

22, 2013. The expos objectives included

improving the governments ability to

provide quality healthcare through

introducing advanced medical equipment

to Myanmar, as well as increasing the

accessibility of pharmaceuticals. The

organizers also sought to provide a forum

for healthcare professionals to network,

and for foreign-backed private hospitals

to advertise their services to Myanmars

healthcare industry.

Western medicines and medical

equipment were on display, as well as

booths from local and foreign health care

providers. There were also a number of

panel discussions and presentations on

healthcare-related issues. The expo

proved extremely popular, as it was the

first such event of its kind in Myanmars

history. A

First health expo held in YangonFirst health expo held in YangonFirst health expo held in YangonFirst health expo held in YangonFirst health expo held in Yangon

Seminar held on organizational successSeminar held on organizational successSeminar held on organizational successSeminar held on organizational successSeminar held on organizational success

problems and challenges associated with

HR management in Myanmars rapidly

evolving business climate.

Among the participants were two

consultants from US-based firm Mercer,

which specializes in human resources

development, as well as management and

training professionals from Singapore.

The seminar was attended by Robert

Chua, the Singaporean ambassador to

Myanmar, Director-General of Myanmars

Ministry of Labour, Employment and

Social Security, as well as many local

entrepreneurs. A


Cover Story


ACUMEN 17ACUMEN 17


American businesses are keen to in-

vest in Myanmars long-moribund econ-

omy, but until domestic regulations are

significantly strengthened, Western sanc-

tions will remain a vital tool to prevent

corruption and human rights abuses in

business transactions.

Conference organisers were unpre-

pared for the turnout when the US Cham-

ber of Commerce (USCC) came to down-

town Yangon on February 25. The head-

quarters of the Union of Myanmar Fed-

eration of Chambers of Commerce and

Industry (UMFCCI) was filled to capaci-

ty with business leaders, journalists and

prospectors of all stripes. We dont have

enough programmes to go around

were down to the last few, said the

clearly exasperated UMFCCI staffer be-

hind the press desk. We just didnt ex-

pect so many people to show up.

The signing of a memorandum of

understanding between American and

Myanmar business leaders would have

been unthinkable only a short while ago,

yet here was UMFCCI president U Win

Aung awkwardly shaking hands with

Jose Fernandez, the US Assistant Secre-

tary of State for Economic and Business

Affairs, amid a hail of camera flashes and

Cover Story

The joint summit between the US Chamber of Commerce and the UMFCCI, entitled US-Myanmar Trade andInvestment Relations: The Path Forward, was held at UMFCCI headquarters in Yangon on February 25.

ACUMEN 19

applause. For all the talk of progress and

cooperation, the carefully scripted rap-

port between the American commercial

establishment and the UMFCCI belies a

more complicated reality.

Although the US suspended most

financial sanctions against Myanmar in

April of last year, the Office of Foreign

Assets Control (OFAC) an agency of the

US Treasury Department maintains a

list of Specially Designated Nationals

(SDNs), individuals with which US citi-

zens and permanent residents are not

allowed to do business. The US has cho-

sen to maintain this blacklist as part of a

careful and calibrated easing, as

Fernandez put it.

The fact that Asian countries never im-

posed trade sanctions on Myanmar has

given Asian companies a huge head start

in taking advantage of its economic op-

portunities, leading American business

leaders to complain they have been cut-

out of the Myanmar gold rush. Despite

these concerns, there is an important eth-

ical and business case to be made for

maintaining targeted sanctions against

the worst cronies of the former military

regime, even if comprehensive financial

sanctions have been suspended. While

foreign investment is necessary for eco-

nomic development to take root, the race

to secure a slice of Myanmars economic

potential risks becoming a race to the

bottom.

Weak regulations and monitoring

standards in Myanmar make it easy for

companies to disregard environmental

and ethical principles. A lack of internal

capacity to deal with these issues rein-

forces the need for external mechanisms

to help promote minimally acceptable

standards. In an interview with the As-

sociated Press, Fernandez said that the

SDN list was valuable due to lingering

concerns about human rights abuses, as

well as continued political prisoners,

continued military ties to North Korea

and corruption.

Fernandez made cautious reference

to these concerns in his address to the

UMFCCI: We want US companies to in-

vest here, but we want them to do so in

a socially and environmentally respon-

sible manner, he said. As a result, weve

Among the names is U Win Aung,

who, aside from his position at the UM-

FCCI, is chairman of the Dagon group, a

sprawling conglomerate with close

t ies to Myanmars former military

government. Other Western countries,

including Australia, Canada, and the Eu-

ropean Union, maintain their own lists

of targeted sanctions that differ slightly

from Washingtons.

The fact that Asiancountries never im-posed trade sanctions

on Myanmar has givenAsian companies ahuge head start in

taking advantage of itseconomic opportunities,leading American busi-ness leaders to com-

plain they have beencut out of the Myanmargold rush.


paired our [easing of] sanctions with

reporting requirements that [have] nev-

er been included in US law for other

sanctions. These reporting requirements

are to encourage responsible investing,

including with regard to promoting trans-

parency.

Western media analysts noted that

the conference itself could be interpret-

ed as being in breach of official sanc-

tions policy, but few in the USCC dele-

gation appeared concerned. While the

Obama administration intends to keep

targeted sanctions for the time being, the

USCC has publically advocated for all

remaining sanctions to be dropped.

Were encouraging reform in the gov-

ernment, we cant encourage reform in

individuals? said Richard Vuylsteke, the

president of the American Chamber of

Commerce in Hong Kong, a USCC affili-

ate, in a December 2012 interview with

AP. Maintaining sanctions while deep-

ening links with the nominally civilian

government is counterproductive, he

claimed, as dropping targeted sanctions

would give these guys [listed business

tycoons] an incentive to integrate into

the system.

Just what kind of system these tar-

geted individuals would be integrated

into, however, is a big question. Despite

reforms, Myanmar remains one of the

most corrupt countries on earth, ranking

fifth from bottom in Transparency Inter-

nationals most recent Corruption Percep-

tions Index. A lack of institutional ca-

pacity will prevent the government from

addressing the problem of unethical and

corrupt business practices, underscoring

the need for external compliance mech-

anisms like the SDN list.

The reporting requirements men-

tioned by Fernandez apply to any com-

pany making new investments of

US$500,000 or more in Myanmar. Inves-

tors will be required to submit annual

reports to the State Department, detail-

ing information regarding policies and

procedures with respect to human rights,

workers rights, environmental steward-

ship, land acquisitions, arrangements with

Cover Story

The Capitol Building in Washington, D.C. - smaedli/Flickr.

ACUMEN 21

security service providers, and, aggre-

gate annual payments exceeding $10,000

to Burmese government entities, includ-

ing state-owned enterprises, according

to a joint State Department-Treasury

statement from July 2012. But the Myan-

mar government is ill-equipped to en-

force such standards, and accurate re-

porting standards are very difficult for

the US government to enforce from afar.

A comprehensive March 2013 report

on the rule of law in Myanmar, by Wash-

ington, DCbased consulting firm Perseus

Strategies, found that President U Thein

sectors. These are precisely the areas in

which state oversight is unlikely to ex-

tend in the short term.

The desire to shed the regulations

that have shackled American business

interests in the past are likely to out-

weigh concerns over human rights is-

sues. Tami Overby, the USCCs vice-pres-

ident for Asia, made no mention of ex-

isting sanctions in her address. I use

the term normalisation very intention-

ally, she said in her opening remarks.

After all, were simply moving to a place

where we will have the same diplomat-

Sein and his allies are interested in mak-

ing genuine reforms; however, many

government institutions are quite fragile

and the role of the military remains

opaque, leading the authors to claim that

in the near term, reforms are likely to

be institutional/legal and, with the ex-

ception of greater civil and political rights

in large cities, not felt by the vast major-

ity of the population of the country.

Myanmars underdeveloped economy is

dominated by extractive industries and

agricultural production, and listed indi-

viduals have significant interests in these

The US Chamber of Commerce building in Washington. The Chamber routinely supports deregulatorypolicies, both at home and abroad. - Elvert Barnes/Flickr.


ic and commercial partnerships as we

do with all our other ASEAN partners

[m]aybe we should call this the New

Normal.

For the USCC, a momentum has

started that they clearly wish to see con-

tinue. Overbys address offered an ebul-

lient assessment of Myanmars reform

process. It is now time for Myanmar and

the United States to take their relation-

ship to the next level. It is important that

our efforts here today begin to yield con-

crete trade and investment achieve-

ments, she said. Were still in the early

stages, and the reform agenda ahead is

massive, but theres a real sense of mo-

mentum, as evidenced by the large turn-

out here today, which we must sustain.

The USCC is the single largest lob-

bying organization in Washington, and

has overwhelmingly supported anti-reg-

ulation politicians affiliated with the far-

right-wing of the Republican party since

1997, when its current president and

CEO, Tom J. Donohue, took office. Ac-

cording to its website, the USCC has

one overarching mission to strength-

en the competitiveness of the U.S. econ-

omy, and spends tens of millions of dol-

lars on campaign donations and adver-

tising each election cycle.

Although it tries to portray itself as

an advocate for small businesses, the

USCC derives the vast majority of its

funding from major corporations. As a

non-profit organization, it is not required

to disclose its donor base under US law,

although a 2010 investigation by the New

York Times found a litany of contribu-

Cover Story

It is now time for Myanmar and the United States to

take their relationship to the next level. It is importantthat our efforts here today begin to yield concretetrade and investment achievements.

ACUMEN 23

tions from financial, chemical and ener-

gy companies pushing for deregulation

in their respective industries.

The USCCs lobbying goals are not

limited to weakening regulations in the

United States alone. On the agenda is

reform of the Foreign Corrupt Practices

Act (FCPA), long the bane of American

multinationals operating abroad. Al-

though it has been part of US law since

1977, the US Department of Justice and

the Securities and Exchange Commission

have pursued FCPA prosecutions with

increased zeal over the past decade. At

its core, the FCPA prohibits American

firms or American-linked entities from

bribing foreign officials abroad. Many

contributors to the USCCs coffers have

fallen afoul of FCPA enforcers in recent

years including Chevron, which has

extensive interests in Myanmar.

Countries with highly transparent

regulatory environments still attract the

most foreign investment, but, perverse-

ly, there are incentives for multination-

als to engage in corrupt practices in coun-

tries that are unable or unwilling to crack

down on them. A recent study by three

US-based academics found that highly

corrupt states are more attractive to for-

eign investors than moderately corrupt

ones. In a New York Times op-ed pub-

lished in late January, Michael S. Paga-

no, a professor at Villanueva University

and one of the studys authors, explained

that potential investors know who is in

charge in highly corrupt states and plan

accordingly. In moderately corrupt coun-

tries, he elaborates, it is unclear who

is in charge and how to play the game.

The cost of doing business increases

when US authorities intrude, so it is lit-

tle wonder that reform of the FCPA is

high on the USCCs agenda. Corrupt prac-

tices make good business sense if com-

panies are not penalized for engaging in

them.

The USCC has criticized the FCPA

for its vagueness, claiming it leaves busi-

nesses unsure as to whether their prac-

tices are in violation of the Act, and gives

regulators carte blanche to assume bad

The United States has shown increased interestin Myanmar since economic and political reformsstarted in 2011 - East Asia and Pacific MediaHub/Flickr


faith in their investigations. In response,

the US government released a 130-page

resource guide to help with compliance

efforts. Despite Washingtons attempt at

improving clarity, the USCC is pushing

for reforms that would substantively

water down the FCPAs deterrent effects.

avoid bribing foreign officials if they can

claim ignorance.

The USCC has also advocated that

companies accused of FCPA violations

get a fresh start if they are bought out,

absolving the companies that buy them

of FCPA-related penalties. This makes a

mockery of the notion that companies

should do due diligence on potential ac-

quisitions, and, with a bit of creative le-

gal sleight-of-hand, could allow for com-

panies to change their ownership struc-

ture in order to pardon themselves.

Despite Fernandez claim that

American businesses act as responsible

partners in the countries that they invest

in, and that this is an integral part of

US corporate culture, the USCCs efforts

to undermine anti-corruption legislation

tell a different story. Corporate dissatis-

faction with the existing rules, coupled

with a Myanmar government that is - at

best - incapable of enforcing ethical busi-

ness standards, highlights why targeted

sanctions will remain important tools to

promote transparency and ethical stan-

dards in the short term.

There is evidence to suggest that

the American carrot-and-stick approach

has prompted some listed companies to

change their behaviour. While listed en-

tities have plenty of Asian partners to

work with, normalized economic rela-

tions with the US serve as an important

seal of international legitimacy. The os-

tensible reform of Max Myanmar Group,

one of the most notorious land-grabbers

under the old government, serves as a

case in point.

Max Myanmar and its CEO, U Zaw-

Zaw, are still listed by OFAC, and the

company has routinely made use of land

confiscated by the military from small-

hold farmers without compensation

across the country. An April 2009 report

from Karen Human Rights Group details

the companys seizure of 120 acres of

land in Thaton district of Mon State, de-

stroying the livelihoods of farmers who,

as the report notes, will potentially have

to apply to work for Max Myanmar in

Cover Story

In a 2010 booklet, the USCC pro-

posed the FCPA be amended by adding

a compliance defence clause, that would

allow American companies to deny lia-

bility for corruption if it is committed by

local employees or foreign subsidiaries

without the companys direct knowledge.

In practice, this would give companies

much more scope to deny responsibility.

The USCC claims that companies

should not be held accountable for indi-

vidual employees or subsidiaries paying

bribes if they can demonstrate to law

enforcement that they have made a good-

faith effort to implement suitable anti-

corruption mechanisms internally. In

practice, however, this will prompt com-

panies to develop impotent and superfi-

cial anti-corruption programs, which will

provide no incentive for companies to

Villagers protest land confiscation at problem across the country. -

Max Myanmar and its CEO, U

ZawZaw, are still listed byOFAC, and the company hasroutinely made use of land con-

fiscated by the military fromsmall-hold farmers withoutcompensation across the country.

ACUMEN 25

over 500 individual complaints about

disputed ownership of some 250,000

acres, according to an Irrawaddy report

from March 2013. And despite the for-

mation of a parliamentary committee to

look into land tenure issues in June 2012,

land grabs remain an ongoing problem.

As if historical claims were not enough,

land disputes are turning violent: a late

February clash over land tenure issues

in Maubin Township, Ayeyarwaddy

Division, left one policeman dead and

40 villagers injured.

But there is evidence to sug-

gest that local companies know this

cannot continue. In a surprise move

last December, Max Myanmar paid

13 farmers in the Ayeyarwaddy Delta

US$838,000 for 106 acrecs it had

seized in 2008 (an incident unrelat-

ed to the recent violence in Maubin),

and pledged to give similar compen-

sation to victims of the Dagon Seik-

kan land grab. While this is only a

token acknowledgement of wrong-

doing, it at least establishes that the

company is aware of the need to

reform its practices. However, until

Max Myanmar proves that it has

made a concerted effort to improve

its old habits - a process that may

take a number of years - it would be

premature to remove targeted sanc-

tions entirely, as the states ability to

act as a watchdog will be weak for the

foreseeable future.

Despite U Win Aungs exhortation

that that total lifting of sanctions can

only enable investors to come and in-

vest without any hesitation in our new

era of new economic development, tar-

geted sanctions can help promote respon-

sible business practices. When foreign

multinationals are all too eager to take

advantage of Myanmars corrupt and

unregulated business environment, the

rationale for preventing them from part-

nering with corrupt business interests

becomes much more important. A

Letpadaung in Upper Myanmar. Land tenure issues remain a contentious Christopher Symes

order to support their families. Another

massive land grab in Yangons Dagon

Seikkan township, involving 16 compa-

nies including Max Myanmar, displaced

thousands of residents who were offered

as little as K 20,000 (US$22.50) per acre

for their land, according to a July 2012

report by Eleven Media.

These incidents represent a minis-

cule proportion of the land seized under

the former government. In the first month

of the committees existence, it received


Feature

When Eric Schmidt

talks, the world

listens. One of the

most prominent

tech executives of the past decade, he

transformed Google from a successful

start-up into one of the worlds most

influential companies during his 10-year

tenure as the companys de-facto CEO.

Having relinquished his day-to-day role

running the company in 2011, Schmidt

has become Googles international

ambassador of sorts, spreading a message

of openness and connectivity to the

frontiers of the global Internet.

Schmidt came to Yangon on March

22 to discuss the challenges and

prospects of information technology

development in Myanmar with young

future leaders activists, entrepreneurs

and engineers before jetting off to

Naypyidaw in the afternoon for talks with

government officials. His appearance in

Myanmar is the latest in a recent run of

visits to emerging markets, including

Afghanistan, Pakistan, India and Sub-

Saharan Africa. Most prominently, he

paid a controversial visit to North Korea

in January in an attempt to convince its

leaders of the benefits of entering the

information age.

In many respects, Myanmars ICT

infrastructure is hardly better than North


ACUMEN 29

Koreas. According to a February 2013

report by the Open Technology Fund,

less than 1% of Myanmars population

has access to the Internet, the second-

lowest penetration level in the world

after East Timor. Only 2% of Myanmars

population owned a cell phone in 2011

according to the International Telecom-

munications Union a lower rate than

even North Korea.

By addressing the challenges facing

the development of the ICT sector in

Myanmar, Schmidt showed his stripes as

a true believer in the power of the

Internet to change societies and lives for

the better. Your government has made

an incredibly important decision to open

up the country to foreign ideas, to the

Internet, to your own newspapers, he

told the crowd. These are exciting

developments. But theres one more thing.

The Internet will make it impossible to

go back.

Schmidt highlighted how the

Internet promotes democratic accoun-

tability, so long as it is unfettered and

easily accessible. Try to keep the

government out of regulating the Internet,

he told the audience to rapturous

applause. Every government I know

only wants nice things on the Internet.

Every politician I know only wants nice

praise [about them] on the Internet. He

underscored the power of the Internet

to promote transparent and accountable

governance, but warned that governments

should resist the temptation to crack

down on free speech. Some things citizens

will say on the Internet will be critical,

and you [politicians] will have to get over

this. The answer to bad speech is more

speech. You get a much better idea of

what all your citizens care about, he said.

Schmidt is expected to have

discussed issues of Internet freedom in

closed-door meetings in Naypyidaw after

his address in Yangon. This kind of

informal diplomacy is a crucial part of

Schmidts forays into unwired societies

like Myanmar and North Korea. Analysts

believe that his dialogue with North

Korean leaders prompted its notoriously

reclusive leaders to allow foreigners to

use mobile Internet earlier this year.

ACUMEN 29


While Myanmars Internet is now

largely uncensored, the countrys skeletal

infrastructure leaves it vulnerable to

blackouts. All Internet traffic in or out of

Myanmar runs through one fibre optic

backbone, making it easy for information

flows in and out of the country to be

stopped either by accident or

deliberately. A study by web security firm

Renesys ranked Myanmars risk of

Internet disconnection as high, as the

countrys entire access must pass through

only one international frontier. Syria,

which received an equally low score

from Renesys, suffered a complete

Internet shutdown in December 2012, as

Some things

citizens will say on

the Internet will be

critical, and you

[politicians] will have

to get over this. The

answer to bad

speech is more

speech. You get a

much better idea of

what all your citizens

care about.

30 ACUMEN w w w. my a n m a r b 2 b m a g a z i n e. c o m

the embattled Assad regime sought to

keep information about the ongoing civil

war from leaking out.

It would be essentially impossible

for governments in countries like

Sweden, the Netherlands or the United

States to shut down the Internet entirely,

according to Renesys, as these countries

have 40 or more international gateways

to handle outbound Internet traffic.

Schmidt stressed that private-sector

investment is the only way to build a

functional and resilient ICT backbone to

help alleviate these concerns.

The government has to make it

possible for the private sector to build

[Myanmars] telecommunications infra-

structure, he said, claiming that state-

run telecommunications monopolies are

inefficient, hinder the adoption of

information technology, and make it too

easy for governments to control infor-

mation. He also noted that language as

well as cost acts as a barrier to Internet

adoption. Today, the internet here is

largely in English, and is used largely

by the elite because prices are too

high, he noted. We have to get prices

down, which occurs via competition, [a]nd

we need to get cheaper phones on the

market.

I predict that if you do that right

[liberalisation] , the most profitable

industries in Myanmar will be in the

telecommunications sector , he

elaborated. The profitability of the ICT

sector will bring with it social benefits,

he claimed, in areas like rural poverty

reduction and education. He cited the

examples of a US NGO distributing

thousands of tablet computers in Ethiopia,

which has shown promise as an efficient

way of educating underserved commu-

nities, and M-Pesa, an SMS-based money-

transfer system originating in Kenya that

has allowed for cashless transfers to

become commonplace across East Africa,

providing people without access to the

Feature

Mobile phone penetration in Myanmar is extremely low by global

standards - but that will change quickly.

ACUMEN 31

formal banking system with a way to

save money.

Extending credit to impoverished

rural communities is a primary focus of

many development agencies that have

returned to Myanmar since President U

Thein Sein took office in 2011. A new

product launched in late 2012 by

Safaricom, the service provider behind

M-Pesa, allows users to earn interest on

virtual deposits in the same manner they

would with a traditional bank account.

By allowing customers to access credit

without ever having to step into a

physical bank, mobile technologies can

ACUMEN 31

help develop the kind of small-scale

enterprise necessary for poverty

alleviation and economic growth.

Optimistic as ever, Schmidt

promised that Myanmar should look

forward to riding the most exciting

rocketship youve ever been on as the

changes brought about by ICT

development come into effect. While

information technology can be a driver

of economic growth in its own right

witness the rise of Google, Silicon Valley

and the information economy in the

United States the benefits of ICT will

bring about net gains for practically every

sector of Myanmars economy, according

to Schmidt, and this development will

allow Myanmars development process

to race ahead at lightning speed. You

will all have an opportunity to skip all

the previous generations of technology,

he prophesised. [Y]ou will literally

leapfrog 20 years of difficult-to-maintain

infrastructure and go straight to the most

modern architecture. For the people of

Myanmar, who remain isolated as the

world becomes ever more intercon-

nected, this change cant come quickly

enough. A

Mobile phone-based money transfer and microfinance services, inlcluding M-Pesa, are popular in East

Africa and other parts of the developing world - Fiona Bradley/Flickr.


Feature

An unprecedented influx of visitors to Myanmar means the tourism industry, like all of Myanmarsindustries, is badly in need of a makeover. 9 million international visitors are expected by the endof the decade, and there have only been 739 hotels built to date to accommodate them. As thecountry emerges from isolation, optimistic planners talk of leapfrogging, and learning from the

mistakes made by other countries in the region. The tourism industrys transformation will have aprofound impact on shaping Myanmars reforming economy. Paul Rogers, team leader of theMyanmar Tourism Master Plan, described the scale of impending change as scary at the Myanmar

Hospitality and Tourism Conference this past February.


ACUMEN 33

At the conference, Minister of Tourism Htay Aung addressed

Myanmars evident unpreparedness for its sudden popularity

as a tourist destination. We are not satisfied, he said. We

want to do better. We want to improve every aspect of tourism,

so we can bring the world to the country, he said.

But how will Myanmar market itself as a travel destination,

and what role are foreign investors playing in shaping that?

Will Myanmar be playing leapfrog, or catch-up? And how to

make the Myanmar travel experience wholly unique in the

region, and not just another Thailand?

Its an enormous challenge for a country blessed with a rich

variety of natural and cultural attractions, and blessed with

people recognized to be among friendliest in region, Rogers

continued. The beeping transformers prompted by occasional

power cuts throughout the conference echoed his words.

He pointed out that the industry is diverse and fragmented.

Its development will cut across all sectors, he said, so tourism

development will have a pervasive impact beyond just

infrastructure development. The opening of land borders,

loosening visa restrictions, the new international airport,

improved internet connectivity, and more reliable electricity

are all tourism-related developments that can push concrete

reforms forward across a number of sectors. Many, however,

want slower, controlled growth to ensure that it is done

responsibly, especially with respect to tourism-related small

infrastructure, such as accommodation, transportation, and

destination planning.

Tourism earnings in Myanmar totaled US$165 million in

2008, rising to US$319 million in by 2011. This is less than 1%

of GDP, compared to 15% in neighboring Thailand. Most profits

go to crony businessmen with close links to the government,

who still control the vast majority of large hotels and domestic

travel outfits.

ACUMEN 33


Arild Molstad, of the Norwegian non-

governmental organization Partnership

for Change, says thats something that will

change, but only gradually. When you

look at the millennium development goals,

there are only one or two [issues] that

are not directly associated with tourism,

he says. But the attitude of the Minister

is not to rush [tourism development]

unnecessarily. Uncontrolled growth for

tourism in Myanmar will kill the goose

that lays the eggs. It means short-term

gain and long-term pain.

Myanmar is the last shining star of

travel in Asia, according to James Reed,

CEO of corporate travel specialists

Destination Asia. Travelers want a sense

of having explored, [and] want to see

something new. The needs of the ultra

luxury market have changed, and

[customers] are looking for new

frontiers. But many fear tourists looking

for something new will destroy the one

advantage Myanmar has over its

neighbors: i ts cachet . Myanmars

unspoiled tourism landscape is likely

to eventually give way to luxury and

convenience, to serve the needs of

visitors who have a limited relationship

with the country.

According to Molstad, the quality of

the tourism experience is already

declining at several destinations,

including Bagan. This has resulted in

tourists returning from Myanmar with

the impression that it is still too early to

go. Thats not a bad thing, says Molstad.

What you need here is to buy time,

which can be more profitable than buying

land.

The Pesky Hotel ShortageThe Pesky Hotel ShortageThe Pesky Hotel ShortageThe Pesky Hotel ShortageThe Pesky Hotel Shortage

One thing is certain: Myanmar lacks

hotel rooms, and travelers are arriving

in droves. 600,000 passengers arrived

at Yangon International Airport last year,

and projections estimate this number will

increase to 5,000,000 by 2015. Myanmars

hoteliers have taken advantage of the

laws of supply and demand, and room

prices have risen by 50% in the last two

years alone. Inflated land prices have

made it diff icult to develop new

properties, as well.

Kyaw Htun of the Myanmar

Tourism Federation recognizes this gap

as a great shortcoming of the industry.

Myanmar is a hatchling, we are just

starting out, and have a lot of growing to

do, he said, adding that the impending

Southeast Asian Games (SEA games)

have put time pressure on building more

Feature

Bagan, Amarapura and Inle Lake (from left, clockwise) are all popular

destinations for foreign tourists visiting Myanmar.

ACUMEN 35

hotels.

The Tourism Federation is in charge

of implementing large development

plans geared toward addressing this

shortage, including the US$56 million

Tada Oo development near Mandalay,

as well as other projects near Inle Lake,

Bagan, and Chaungtha and Ngwesaung

beaches. The Tada Oo project has been

criticized for being yet another ill-advised

hotel zone, such as the ones in

Naypyidaw, but Kyaw Htun insists this

is a misnomer, as it will also have

commercial and entertainment zones. He

does have a point: the scale of the project

is so ambitious that it is more analogous

to a second centre for Mandalay than

merely another hotel zone.

The project would also be built on

hundreds of acres of farmland that

sustains farmers who dont directly own

their land due to problematic land

ownership legislation, a hangover from

the socialist era. As Kyaw Htun presented

plans for the project to a crowd of

developers at Februarys conference, he

began apologetically with the reassurance

that land-grabbing would not occur. We

are not seizing land, only negotiating to

buy land off the farmers, he said, If

there are some farmers who are not

willing to sell, we will just leave that plot

of land out of the plan.

As he presented the plan - which

includes a golf course, a new bus station,

a shopping mall and a handicraft village


- it was difficult to imagine any room for

a small plot of farmland. And Molstads

words about the goose that lays the eggs

were suddenly prescient once again.

Looking Past the SEA Games One way to approach the hotel room

shortage is to entice tourists to come

during the eight-month off season

when there is no hotel room shortage at

popular tourist destinations meaning

people need a reason to come other than

the weather.

Feature

Tourist arrrivals reached record highs in 2013, and this momentum is expected tocarry forward into the future.

Uncontrolled growth for tourism in

Myanmar will kill the goose that

lays the eggs. It means short-term

gain and long-term pain.

ACUMEN 37

In the past, there has been a

reliance on cultural tourism, partially

because domestic tourism consists largely

of pilgrimage to holy Buddhist sites.

International tourists naturally follow suit,

leading towhat Nina Tamaschko,

Myanmars general manager of Orient

Express, described as clients feeling

pagodaed out.

She says the model of religious

tourism is self-defeating, as visitors arrive

and a destination becomes more popular,

it works to the detriment of the industry,

according to Louk Lennaerts of Central

Coast Destination Marketing Organisation.

Nobody thinks of Myanmar as a desti-

nation for beach vacations, he said. But

beach destinations are a major thing, and

beach holidays have to start being

developed now, not later.

Tamaschko, however, believes that

even in the luxury market, people are

coming to Myanmar for a unique travel

experience. Its important we dont focus

on the big 5 destinations - Yangon,

Mandalay, Bagan, Inle, Ngapali - but that

we show them different destinations,

she said. Clients also want to see the

schools weve built and go to the alms

offerings at 5 am. Not just visit pagodas.

After a 44-year hiatus as host for

the SEA Games, Myanmar sees games

as a coming-out party akin to the role

played by the Beijing Olympics for China.

The legacy of infrastructure development

to prepare for tens of thousands of

visitors and athletes will last beyond the

games, but what impression of the

country will the visitors be taking with

them when they leave? And will they

be tantalized enough by Myanmar to

return? A


B2B Interview


ACUMEN 41

Royal Myanmar Tea Mix is one of the most popular beverage brands in Myanmar, and has a strong following in the local

market. MDG (Myanmar Distribution Group), the company behind Royal Myanmar Tea Mix, is a major player in

Myanmars beverage industry. Aside from the Royal Myanmar brand, MDG sells coffee, cereal and beverage products

under nine different trademarks. To understand MDGs success, Dr. Aung Tun Thet, Senior Advisor to the UN Resident

Coordinators Office, sat down with MDGs managing director, U Aung Maw Thein, for an exclusive interview.

Dr. Aung Tun Thet: Very nice to meet you, U Aung MawDr. Aung Tun Thet: Very nice to meet you, U Aung MawDr. Aung Tun Thet: Very nice to meet you, U Aung MawDr. Aung Tun Thet: Very nice to meet you, U Aung MawDr. Aung Tun Thet: Very nice to meet you, U Aung Maw

Thein. Youre rather young to have attained your position asThein. Youre rather young to have attained your position asThein. Youre rather young to have attained your position asThein. Youre rather young to have attained your position asThein. Youre rather young to have attained your position as

the managing director of a major company. How did you getthe managing director of a major company. How did you getthe managing director of a major company. How did you getthe managing director of a major company. How did you getthe managing director of a major company. How did you get

involved in the business world in the first place?involved in the business world in the first place?involved in the business world in the first place?involved in the business world in the first place?involved in the business world in the first place?

U Aung Maw Thein:U Aung Maw Thein:U Aung Maw Thein:U Aung Maw Thein:U Aung Maw Thein: My generation is not particularly interest-

ed in doing business. My parents are both lawyers, and I never

had any particular interest in going into business. I majored in

marine biology in university and moved to Singapore, where

my father wanted me to study computer science. Id never seen

a computer before, when I was in Myanmar, but managed to

complete a one-year diploma course. When I came back to

Myanmar, I started work at a company called Geocomp Myan-

mar - which was just starting up at the time - as a technician. I

stayed with them for six months before landing a job doing IT

work for Unocal.

I lost my job soon after, and went back to Singapore in

search of work. Unocals offices in Singapore had a logistics

department, and based on the strength of a recommendation

from my bosses at Unocal in Myanmar, they gave me a job. I

did exploratory work and computing, such as mapping and

data logging. It made sense for me to work there at the time as

I had my heart set on becoming a computer technician. But my

wife who is a doctor was living and working in Jamaica at

the time, and it was difficult being apart.

My life in Singapore wasnt easy, and it wouldnt have

been fair to insist she move to Singapore with me. We came to

ACUMEN 41


the realization that if we kept up this routine wed end up as

employees, without the freedom to live our lives how we saw

fit. So I quit and came back to Myanmar, with the goal of setting

up a business of some sort. My family loved food, especially a

number of Singaporean brands I introduced them to.

So you started an importing business?So you started an importing business?So you started an importing business?So you started an importing business?So you started an importing business?

Well, I started out with two shipping containers worth of

food, so that hardly counts as importing

When did this start?When did this start?When did this start?When did this start?When did this start?

In 1996 or 1997. I had a friend in Singapore who filled

those two containers for me, and I distributed their contents

myself to local businesses. I then placed an order for ten con-

tainers worth of product, then one hundred. So we needed to

formally register as a company in Myanmar. My father, being a

lawyer, took care of all of the formalities. His students suggest-

ed we name the company Win and Sons after my mother,

whose name is Daw Yi Yi Win. My brother and I drove around

making deliveries with our own car.

I hired a staff of two later on, but I didnt even have an

office at that point I worked from home. At that point, I started

importing other products, such as UHT milk. Eventually, I moved

the office out of my parents house, and converted it into a small

hotel of my own. The tourism industry was on the rise at the

time and there werent many hotels around. I stayed in the

distribution business throughout, though, and some of my big-

gest clients for the UHT milk were hotels. I saw that other

companies were supplying them with meat, fish, and vegeta-

bles. I became curious and decided to diversify the range of

products I offered.

Who were some of your early clients?Who were some of your early clients?Who were some of your early clients?Who were some of your early clients?Who were some of your early clients?

In the early days, I supplied the Nawarat and Summit Park-

view Hotels, and eventually to Traders and Sedona. I eventual-

ly got out of the hotel business entirely to focus on my distribu-

tion business. I expanded my office, grew the range of products

on offer, bought a fleet of company vehicles and hired more

staff. I started importing Gold Roast coffee mix from Singapore

at around the same time.

So Gold Roast is a Singaporean brand?So Gold Roast is a Singaporean brand?So Gold Roast is a Singaporean brand?So Gold Roast is a Singaporean brand?So Gold Roast is a Singaporean brand?

Yes it is. We are just licensees. I saw the brand by chance

when I was shopping in Singapore, tried it, and realised that it

would probably go over well with Myanmar consumers. I took

a chance and imported a shipping containers worth. It didnt go

over as well as Id hoped it would - it took me six months to

get rid of what Id brought in to the country. But I didnt quit.

My colleagues gave me the support I needed, and I kept press-

B2B Interview

U Aung Maw TheinU Aung Maw TheinU Aung Maw TheinU Aung Maw TheinU Aung Maw Thein

ACUMEN 43

and Gold Roast started selling like hotcakes, so to speak. As

sales were strong and we anticipated further growth, I bought a

larger plot of land, built a larger factory, and moved the offices.

You use the same mixing technology as is used in Singapore?You use the same mixing technology as is used in Singapore?You use the same mixing technology as is used in Singapore?You use the same mixing technology as is used in Singapore?You use the same mixing technology as is used in Singapore?

Yes, the parent company in Singapore came and taught us

what to do.

What about packaging? Does local packaging conform to theWhat about packaging? Does local packaging conform to theWhat about packaging? Does local packaging conform to theWhat about packaging? Does local packaging conform to theWhat about packaging? Does local packaging conform to the

same standards as the product produced in Singapore?same standards as the product produced in Singapore?same standards as the product produced in Singapore?same standards as the product produced in Singapore?same standards as the product produced in Singapore?

Our Singaporean partners help us with packaging, as well.

ing forward. But, as often happens, the importation rules changed,

which made it difficult to import coffee mix and other products

after a while.

As we were only allowed to import a small amount of

coffee mix, I came to the conclusion that it would make sense

for us to stop importing altogether. I decided to build a small

factory here, and asked my old university friends to help me

procure and maintain manufacturing equipment. I started out

with three packaging machines in South Okkalapa Township.

Gold Roast sent me one technician from Singapore, but the rest

of the staff were locals. Our advertisements got a lot of airplay,

Dr. Aung Tun ThetDr. Aung Tun ThetDr. Aung Tun ThetDr. Aung Tun ThetDr. Aung Tun Thet


We import special aluminum foil and PVC bags. We learned

how to properly formulate, produce and package the coffee mix

from them.

When did you change the companys name from Win andWhen did you change the companys name from Win andWhen did you change the companys name from Win andWhen did you change the companys name from Win andWhen did you change the companys name from Win and

Sons to MDG?Sons to MDG?Sons to MDG?Sons to MDG?Sons to MDG?

When we started to distribute our products nationwide, I

came to realise that the name Win and Sons was pretty gener-

ic. As our principal business was sales and distribution, I thought

that MDG which stands for Myanmar Distribution Group

was a more suitable name. Our logo has eight arrows, which

represents our philosophy that we will distribute our products

anywhere there is a market for them! The manufacturing side of

our business is run under the brand name Myanmar Lion Com-

pany, Ltd.

I am aware that you have a factory in the Dagon docklands. IsI am aware that you have a factory in the Dagon docklands. IsI am aware that you have a factory in the Dagon docklands. IsI am aware that you have a factory in the Dagon docklands. IsI am aware that you have a factory in the Dagon docklands. Is

this your companys only manufacturing facility?this your companys only manufacturing facility?this your companys only manufacturing facility?this your companys only manufacturing facility?this your companys only manufacturing facility?

I have three factories which produce 3-in-1 coffee and tea

mixes. Our most important tea product is Royal Myanmar Tea

Mix, which we make with local tea powder. We found that

other tea mix products on the market werent particularly good,

and knew we could do better. This is because the tea powder

used in competing brands was imported, and didnt have the

local flavour Myanmars consumers have come to demand. To

be honest, I couldnt afford to source ingredients from abroad,

so I made do with what domestic producers could provide. The

result, interestingly, is a product that is much better than what

our competitors offer.

Another venture I am involved with is a factory that con-

verts green tea leaves to instant tea powder. That factory has

been around for ten years already. As my first factory was lo-

cated in North Okkala at the time, I chose to build the green tea

facility in the nearby Yangon industrial estate. But now that

most operations have moved to the Dagon docklands, its quite

far away. The third factory makes soft drinks, and has only

been around for six months or so. We produce a popular brand

of energy drink called Cobra, and were the national licensees

B2B Interview

of the Sunkist brand in Myanmar. For Sunkist, in particular, I

have high hopes that it will be able to attain a sizeable market

share.

Whats your vision for taking MDG forward?Whats your vision for taking MDG forward?Whats your vision for taking MDG forward?Whats your vision for taking MDG forward?Whats your vision for taking MDG forward?

When doing business in Myanmar, you have to expect the

unexpected. Im not going to deny that we have difficulties some-

times. Sometimes, our luck in business isnt so good and these

are the kinds of practical lessons you cant learn in the class-

room. Ive been doing business for years, Ive been relatively

successful - and I dont even have a business degree.

Ive always wanted to do an MBA (Master of Business

Administration), but when I didnt have a lot of money when I

was younger. At this point, I dont have the time to do one. Im

not a deep strategic thinker, I make my business decisions based

on instinct and experience. The good feeling I got about the

prospects for 3-in-1 coffee mix is a good example of my deci-

sion-making process, and that was why I decided to focus on it

ACUMEN 45

almost exclusively. It was only after that initial success that I

decided to re-diversify under the MDG banner.

All products have distinct life cycles. Unless youre con-

stantly increasing your market share, youre not going to keep

the business sustainable in the long run. It was for this reason

that we made a concerted effort to distribute our products

nationwide. I was able to develop expertise in both distribution

and manufacturing through constantly expanding the business,

building on past successes. Our recent expansion into the soft

drink market is an example of this progression, and shows the

value in having vertically integrated manufacturing and distri-

bution facilities.

By sourcing tea powder locally, youre supporting the localBy sourcing tea powder locally, youre supporting the localBy sourcing tea powder locally, youre supporting the localBy sourcing tea powder locally, youre supporting the localBy sourcing tea powder locally, youre supporting the local

economy, but local tea isnt generally rated as highly as im-economy, but local tea isnt generally rated as highly as im-economy, but local tea isnt generally rated as highly as im-economy, but local tea isnt generally rated as highly as im-economy, but local tea isnt generally rated as highly as im-

ported tea. How do you keep the quality up?ported tea. How do you keep the quality up?ported tea. How do you keep the quality up?ported tea. How do you keep the quality up?ported tea. How do you keep the quality up?

We entered into negotiations with green tea producers who

primarily supplied teashops directly in the past. Many of these

producers produced pickled tea leaves, first and foremost, which

is, of course, different from what we needed. Moisture content

is important to us. We dont dye our products; we only accept

leaves with rich natural colour. Dealing with suppliers wasnt

easy early on; wed specify one thing, and theyd do the oppo-

site. We wasted a lot of tea back then. But over time we were

able to get across what we needed, and eventually we man-

aged to pull it together.

There werent many tea suppliers for me to work with at

the time, and quality has improved greatly since then. We have

our suppliers and we guard them closely. By the time we opened

the factory in Dagon, we had managed to get costs down signif-

icantly. Now, however, sourcing locally can be more expensive

than importing raw materials, its getting more expensive every

year. There are shortages of tea in Myanmar some years, as

much of Myanmars annual crop is exported to China.

I spoke with suppliers and learned that there is also a

labour shortage in the tea industry, so dealing with domestic

MDGs products are well-advertised - and popular - nationwide.


suppliers exclusively doesnt necessarily make doing business

cheaper. The high cost of electricity adds to the cost, as well, so

domestically-produced tea mix tends to be more expensive than

the foreign competition.

Have you considered getting into the pickled tea leaf busi-Have you considered getting into the pickled tea leaf busi-Have you considered getting into the pickled tea leaf busi-Have you considered getting into the pickled tea leaf busi-Have you considered getting into the pickled tea leaf busi-

ness?ness?ness?ness?ness?

Sure, I have. I understand manufacturing, not agriculture,

so Id be open to the idea. But on the other hand, I dont think

getting into that sector is a risk Im willing to take right now. It

doesnt fit into MDGs business plans at the moment, but that

isnt to say that it will not become part of our repertoire of

products at some point.

How do constraints on your distribution network impact yourHow do constraints on your distribution network impact yourHow do constraints on your distribution network impact yourHow do constraints on your distribution network impact yourHow do constraints on your distribution network impact your

marketing strategies?marketing strategies?marketing strategies?marketing strategies?marketing strategies?

There have been difficulties buying delivery trucks in the

past. Also, finding trustworthy salespeople can also be prob-

lematic. Some are alright, some are dishonest. I have to be

vigilant, as distribution is part of the service industry, and our

ability to provide good service will depend on my employees.

From the beginning, I have tried to surround myself with peo-

ple I can trust. They are the anchors of the whole operation, if

you will. I really value my employees.

Distribution is challenging, because aside from taking care

of quality control and financial matters, I need to manage a

large and geographically scattered workforce. Managing distri-

bution networks is different from management in other sectors.

My office staff works from 8:30 in the morning until 5 in the

afternoon every day, so I can watch over them easily, whereas

its more difficult to keep tabs on the distribution team.

Logistics are also problematic. We make use of delivery

trucks for the most part, but also distribute our products via

inland water transport and railway freight. Relying on public

transport is risky, as Im entrusting logistics to someone else,

which means I cant be accountable for losses or delays. The

fact that its difficult to get proper insurance here compounds

the problem.

The 3-in-1 market in Myanmar hasThe 3-in-1 market in Myanmar hasThe 3-in-1 market in Myanmar hasThe 3-in-1 market in Myanmar hasThe 3-in-1 market in Myanmar has

become pretty saturated, and therebecome pretty saturated, and therebecome pretty saturated, and therebecome pretty saturated, and therebecome pretty saturated, and there

are now many companies producingare now many companies producingare now many companies producingare now many companies producingare now many companies producing

similar products. Whats MDGs com-similar products. Whats MDGs com-similar products. Whats MDGs com-similar products. Whats MDGs com-similar products. Whats MDGs com-

petitive advantage? Price? Quality?petitive advantage? Price? Quality?petitive advantage? Price? Quality?petitive advantage? Price? Quality?petitive advantage? Price? Quality?

Ease of use?Ease of use?Ease of use?Ease of use?Ease of use?

To be competitive, of course price

needs to be taken into consideration.

But while price is a factor, quality is

most important, because I am a con-

sumer of my products too! High-qual-

ity products add value in their own

right. Our products are high quality,

reasonably priced, and available ev-

erywhere due to our extensive distri-

bution network. Now, however, the

playing field has changed somewhat.

Advertising and promotion costs are

increasing, as is the cost of raw mate-

rials.

Salaries are also going up, but that

isnt necessarily a bad thing. I want to

encourage effective work habits, and

I always push my employees to strive

to succeed. The success of our busi-

ness is dependent on our distribution

network; most of our success can be

chalked up to our deep market pene-

tration. Our factories need to produce products efficiently, and

our service-based elements need to provide quality customer

service. It is only by synergising these two aspects of the busi-

ness that we can be effective, and this is why I drive my em-

ployees to produce what I like to call intangible value the

effective habits that can help the business thrive.

Foreign companies in foreign markets do extensive marketForeign companies in foreign markets do extensive marketForeign companies in foreign markets do extensive marketForeign companies in foreign markets do extensive marketForeign companies in foreign markets do extensive market

research. Is that common practice in Myanmar?research. Is that common practice in Myanmar?research. Is that common practice in Myanmar?research. Is that common practice in Myanmar?research. Is that common practice in Myanmar?

Sure, we use market research data in Myanmar. But its not

B2B Interview

ACUMEN 47

detailed and can only give us very basic information. Moreover,

the sample sizes of these surveys are too small to extrapolate

patterns that extend to all of Myanmar. But we are able to pick

up on certain signals. For example, Gold Roast is popular in

households but weak in tea shops. When it comes to Calsome

cereal, we have a strong market with household consumers as

well as buyers in the HORECA (Hotel, Restaurant, Caf) sector.

The popularity of these products also varies with geogra-

phy. Calsome, for example, is more popular in Upper Myanmar.

But specifics aside, both Calsome and Gold Roast are market-

leading products in Myanmar, as is Royal Myanmar tea mix

with its unique taste.

Going back to promotion and marketing, how does MDG ad-Going back to promotion and marketing, how does MDG ad-Going back to promotion and marketing, how does MDG ad-Going back to promotion and marketing, how does MDG ad-Going back to promotion and marketing, how does MDG ad-

vertise?vertise?vertise?vertise?vertise?

TV ads and billboards are our main channels for advertis-

ing. Where we choose to focus depends on the product were

trying to promote. Profitable products subsidise advertising cam-

paigns for new, untested products, but this is all part of the

strategy. We plan out our marketing strategies a year in ad-

MDG headquarters in TamweTownship, Yangon.


B2B Interview

vance of any new campaign, and are constantly reassessing our

market position to make changes to our marketing strategies.

Our strategies also depend on who our target audience is,

be it retail consumers or wholesale purchasers. We also run

locally-targeted ad campaigns in specific areas if we feel it makes

sense to do so. Some campaigns are only effective in the short-

term, but some have longevity and we can run with them for a

long time. Its all a question of thinking strategically about what

kinds of campaigns will promote our brands best.

Local entrepreneurs tend to complain about the effectivenessLocal entrepreneurs tend to complain about the effectivenessLocal entrepreneurs tend to complain about the effectivenessLocal entrepreneurs tend to complain about the effectivenessLocal entrepreneurs tend to complain about the effectiveness

of local staff. How large is your workforce?of local staff. How large is your workforce?of local staff. How large is your workforce?of local staff. How large is your workforce?of local staff. How large is your workforce?

At MDG, we have a workforce of 700. When all the facto-

ries under the MDG umbrella nationwide are taken into ac-

count, the company has about 1200 workers.

As youve mentioned, finding qualified people in Myanmar isAs youve mentioned, finding qualified people in Myanmar isAs youve mentioned, finding qualified people in Myanmar isAs youve mentioned, finding qualified people in Myanmar isAs youve mentioned, finding qualified people in Myanmar is

a challenge. How does your company deal with HR issues?a challenge. How does your company deal with HR issues?a challenge. How does your company deal with HR issues?a challenge. How does your company deal with HR issues?a challenge. How does your company deal with HR issues?

My company has a human resource department, and as I

said before, the distribution team is the most problematic. I am

the head of HR for MDG, and each factory has its own respec-

tive administrative and HR departments. I treat my staff well.

Im not a fan of the Im the boss and youre my underlings sort

of dynamic in the workplace, I know that theyre keen to make

it all work as much as I am. Theyre my colleagues, and I see

nothing wrong with saying that were like family. When they

have trouble, I try my best to help them out with the issues

theyre having as a family member might. I try to get my vision

for the company across to them, where I see things going, and

I am always open to their suggestions on how things might be

improved. This is important because I cant do it all myself, so I

try to talk to all employees every six months or yearly, at most,

and I remind regional managers of the importance of taking

care of their employees.

Human resources are very important at MDG. I always try

my best to motivate the staff. In my experience, people want to

work at MDG because of our good reputation, and arent partic-

ularly concerned about the salary theyll receive. At other com-

panies, even if they were to receive double the money theoret-

ically, they might be working for less-than-ideal employers in a

less-than-ideal working environment. This is a primary reason

why I try my best to leave communication channels open at all

times. There are many kinds of jobs in this world some that

pay well and some that only provide experience. But I try to

create a working environment that offers both, and I try to

remind my staff of this.

As you mentioned before, most companies in Myanmar areAs you mentioned before, most companies in Myanmar areAs you mentioned before, most companies in Myanmar areAs you mentioned before, most companies in Myanmar areAs you mentioned before, most companies in Myanmar are

monopolists. Theres a lot of nepotism: businessmen stack theirmonopolists. Theres a lot of nepotism: businessmen stack theirmonopolists. Theres a lot of nepotism: businessmen stack theirmonopolists. Theres a lot of nepotism: businessmen stack theirmonopolists. Theres a lot of nepotism: businessmen stack their

management and boards of directors with their in-laws, kids,management and boards of directors with their in-laws, kids,management and boards of directors with their in-laws, kids,management and boards of directors with their in-laws, kids,management and boards of directors with their in-laws, kids,

nephews, nieces and so on. As youre relatively young for anephews, nieces and so on. As youre relatively young for anephews, nieces and so on. As youre relatively young for anephews, nieces and so on. As youre relatively young for anephews, nieces and so on. As youre relatively young for a

successful entrepreneur in Myanmar, how do you think cor-successful entrepreneur in Myanmar, how do you think cor-successful entrepreneur in Myanmar, how do you think cor-successful entrepreneur in Myanmar, how do you think cor-successful entrepreneur in Myanmar, how do you think cor-

porate governance in Myanmar should change moving for-porate governance in Myanmar should change moving for-porate governance in Myanmar should change moving for-porate governance in Myanmar should change moving for-porate governance in Myanmar should change moving for-

ward?ward?ward?ward?ward?

ACUMEN 49

At MDG, Ive made a conscious effort over the past three

years to change things up. Ive hired highly qualified foreigners

to take charge of engineering and management. Ive also hired

a British gentleman to be our CFO, who has a lot of manage-

ment experience as he worked for KPMG in the past. My direc-

tors are from Singapore, and have been here for two years

already. I am trying to build a sustainable system that will work

well once Im no longer around.

The key to success at MDG is professionalism. To be hon-

est, I had no management training when I started the company

and wasnt really aware of what professionalism standards were.

For that reason, I dont see myself as an ideal managing direc-

tor. I dont think Im well suited to stay in charge of day-to-day

operations, and would be inclined to pass on the reins to some-

one else. That said, over the past two years, I have tried to

teach myself a lot about finance, and have made efforts to build

a true corporate culture and structure at MDG.

For a company to be successful, you need people from

diverse backgrounds to work together towards a common goal.

But sometimes, management strategies from the past need to

change and people whose work isnt living up to expectations

need to be let go. I have made a lot of management and strate-

gic changes over the past few years, which had the effect of

alienating a lot of workers, some of whom ended up resigning.

But I powered through and did what I felt was best for the

company, and I feel as though weve almost realised our goals.

When I first hired foreign managers, I was worried that there

would be a culture clash and language barrier, but that hasnt

been a significant problem. Ive also hired Myanmar staff that

have experience in management overseas, which goes a long

way towards professionalising the entire operation.

HR is as much of an investment as is MDGs tangible infrastruc-

ture, like our factories or trucks. I value having good staff around,

and I value their loyalty. Without loyalty, a company cannot thrive.

MDG places a strong emphasis on its billboards, andtailors its advertising campaigns differently inregional markets across Myanmar.


Myanmars business community is apprehensive of what mightMyanmars business community is apprehensive of what mightMyanmars business community is apprehensive of what mightMyanmars business community is apprehensive of what mightMyanmars business community is apprehensive of what might

happen in 2015, when the ASEAN Free Trade Area (AFTA)happen in 2015, when the ASEAN Free Trade Area (AFTA)happen in 2015, when the ASEAN Free Trade Area (AFTA)happen in 2015, when the ASEAN Free Trade Area (AFTA)happen in 2015, when the ASEAN Free Trade Area (AFTA)

and AEC (ASEAN Economic Community) come into effect.and AEC (ASEAN Economic Community) come into effect.and AEC (ASEAN Economic Community) come into effect.and AEC (ASEAN Economic Community) come into effect.and AEC (ASEAN Economic Community) come into effect.

The UMFCCI has warned local companies to be prepared forThe UMFCCI has warned local companies to be prepared forThe UMFCCI has warned local companies to be prepared forThe UMFCCI has warned local companies to be prepared forThe UMFCCI has warned local companies to be prepared for

a sudden inflow of foreign capital. How is MDG preparing?a sudden inflow of foreign capital. How is MDG preparing?a sudden inflow of foreign capital. How is MDG preparing?a sudden inflow of foreign capital. How is MDG preparing?a sudden inflow of foreign capital. How is MDG preparing?

Theres no way to avoid global brands competing with us

on our home turf. As you can see, my specialty is in the bever-

age industry, and I make efforts to connect my company with

other companies from the region that are operating in the same

sector. MDG isnt alone against the world, so to speak. These

other companies have more experience selling goods in other

regions, and I am a licensee, so MDG does not develop brands

from the ground up. I learn from our partners mistakes in other

markets, and how their operations have grown to succeed in

other markets in the region.

AFTA might be a bit frightening to some, but not as much

as has been claimed. Other multinational brands are already

here, like Coca-Cola and Pepsi. To compete with the big boys,

finance is a major problem for domestic companies. Access to

financial services is poor, which hampers our ability to expand

Myanmar banks simply cant give us enough in the way of

loans.

The second major problem I see is one of human resources, as

I have been stressing. Both operators and managers need to be

competent and qualified, and for this reason its important to

attract qualified staff. A perfect plan isnt worth anything if it

cant be implemented properly, and this implementation largely

comes down to how competent the staff is.

Managers jobs were easier before foreign competition came

Year Established - 1996

Business - Distribution, manufacturing, fast-moving consumer goods

Major Brands - Gold Roast Coffee-mix, Royal Myanmar Tea-mix, Calsome Cereal, Champion Cereal, Cofi-Cofi,

Juice 101, Air Soda, I-Cola, Cobra Energy Drink, Sunkist.

Head Office - 16 (E), East Race Course Road, Tamwe Township, Yangon.

Workforce - 1,200

Phone - (+95) 1 400533, 400544, 401182, 401183, 401184

Fax - (+95) 1 400912

Myanmar Distribution Group of Companies

to Myanmar, as there was no real impetus to be accountable.

Were improving, though. Im constantly working to make sure

that lines of communication are open and well-used. Our projects

will never be completed unless we follow up with each other;

theres no real culture of giving feedback, and managers still

use telephones as their primary means of communicating with

each other.

We need to start using email. Managers must know what

to prioritise, which becomes much easier when you have a full

inbox in front of you! But its true how will managers give

effective feedback otherwise? Can managers handle problems

that arise in a timely manner? Managers need to have hawk

eyes to coordinate workers and be effective. But these skills

arent yet well developed in Myanmar, and Im always left hav-

ing to follow up when my managers dont, which leaves me

exasperated.

What is MDGs stance on CSR (Corporate Social Responsibil-What is MDGs stance on CSR (Corporate Social Responsibil-What is MDGs stance on CSR (Corporate Social Responsibil-What is MDGs stance on CSR (Corporate Social Responsibil-What is MDGs stance on CSR (Corporate Social Responsibil-

ity) policies? Many sophisticated companies have well-estab-ity) policies? Many sophisticated companies have well-estab-ity) policies? Many sophisticated companies have well-estab-ity) policies? Many sophisticated companies have well-estab-ity) policies? Many sophisticated companies have well-estab-

lished CSR strategies. Our comp

Acumen Magazine June 2013

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