Relocating Or Exiting Your Business From Myanmar

 ASEAN Briefing, Feb. 12, 2020

The military coup in Myanmar is being resisted by elements within the country and the threat of some violence occurring has increased. The United States has placed sanctions on some of the Military concerned, and their families and as some of these control specific supply chains such as FDA approvals, the foreign investment operational environment in Myanmar could deteriorate – and fast. Contingency plans therefore are required to work out what to do if an exit is advisable. 

Exit Triggers 

The first elements to ascertain are the triggers for an exit:

1) Local safety; and working conditions;

2) Impact of sanctions (this may only affect certain nationals such as US citizens); 

3) Reliability and sustainability of supplies;

4) Increasing operational costs such as electricity, fuel, energy; 

5) Financing (at present Forex can only be transmitted through the Ayeyarwady (AYA) Bank); 

6) Ability to export 

All of these may be compromised. As business owners on the ground, you will be best able to monitor the risks. Before exiting however, alternative manufacturing domiciles need to be considered. 

Alternative ASEAN  

Hosting a company in ASEAN is useful because of the free trade nature of the bloc, meaning sourcing can be conducted duty free throughout ASEAN and its other member states Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam. All have their specific pros and cons depending upon specific industry sectors, although the majority of smaller foreign investment in Myanmar are in garments, agriculture, real estate and light manufacturing. ASEAN also has free trade agreements with China, and India, with both of these having recently been amended to provide improved market access. 

There is also the recent RCEP agreement which includes Australia, New Zealand, Japan and South Korea. Manufacturers from these countries are specifically looking at investment destinations in the lower cost base nations in ASEAN, with Cambodia, Laos and until two weeks ago, Myanmar. It probably makes sense to look at lower-cost base manufacturing destinations in ASEAN as it can be presumed that this factor has been a driver in establishing a business in Myanmar in the first place. The minimum wage in Myanmar is calculated by the hour and variable, averaging US$3.29 or about US$630 a month, although there have been calls to increase this to over US$1,000 pcm. In which case, three main ASEAN candidates as Myanmar alternatives stand out: 

Cambodia

An ASEAN member with all the trade benefits this brings, with a main port at Sihanoukville, onto the Gulf of Thailand, access to the Indian Ocean and good road and rail connections to China. 

In Cambodia, the minimum wage is mainly guaranteed for workers in the country’s textiles and footwear manufacturing industry. The monthly rate minimum wage is US$190. Cambodia has some competitive advantages within its garment manufacturing industries as the government continues to delay taxing profits in the sector and eliminates export management fees. The European Union (EU) has an ‘Everything but Arms’ (EBA) program with Cambodia. Under the EBA agreement, Cambodia can export most goods to the EU free of duties. Getting equipment from Myanmar to Cambodia requires haulage through Thailand. We covered the options concerning establishing a business in Cambodia in our complimentary download Doing Business In ASEAN 2021. 

In full: https://www.aseanbriefing.com/news/relocating-or-exiting-your-business-from-myanmar/