Monday, September 25, 2017

SME sector faces risks and reward under NLD

Myanmar's small and medium enterprises will face both opportunity and risk under the incoming National League for Democracy government, industry observers say. In particular, an expected increase in foreign direct investment could separate the strong from the weak.

U Myint Zaw, CEO of Ground Solutions, said many SMEs were just not ready for the transition. Companies that had made good preparations to work in a transparent environment would find greater opportunities, but those that clung to old methods would be left behind, he said.

“Too many local companies are not ready to change,” he added. “They don’t know the true value of their company, and they don’t know their market. They are only planning for the short term.”

A strong export strategy was required to level the playing field as more foreign investors arrived, he added. “Tax laws must also be simplified and clarified,” he added.

A proliferation of workshops and seminars on the problems and opportunities for SMEs indicates that the government, investors and the SME sector are all aware of these problems.

“They started talking about SMEs in Myanmar in 2010,” said U Myint Zaw. “They discussed it in ASEAN. But there’s not much to show for all the discussion.”

Parami Energy Group senior adviser U Tin Cho said SMEs have limited access to finance, and limited capabilities for technological development and market exploration. The new government should step forward to offer assistance, primarily by reforming the system of financial inducements and support, he said.

“SMEs have no collateral to get loans,” said U Tin Cho. “A body, financed by service charges, that would guarantee loans to small businesses would be a great help to the sector.”

Both risks and rewards are magnified by the approach of the ASEAN Economic Community, which was officially launched earlier this year and aims to create a single market across the 10-member Association of Southeast Asian Nations.

Myanmar SMEs are now obliged to think not in terms of a market of 50 million but of 622 million customers, said U Tin Cho.

“The likely influx of foreign direct investment makes questions of policy and management more important,” he said, suggesting that the industry ministry should be given primary responsibility for the SME sector.

Reforms that would help SMEs and the business sector in general would include action by the new government to reduce corruption, simplify red tape, and consult business prior to the adoption of laws and regulations, said Vicky Bowman, director of the Myanmar Centre for Responsible Business.

Many businesspeople agree that better access to finance and the simpler procedures would benefit the sector. U Chein Hoke, sales and marketing executive with Capital Development Company, said, “I would like to see the reform of the licensing regulations for SMEs, plus additional training. Loans should be available at suitable rates of interest.”

The new government should write tax laws that would stimulate business, said U Phyo Aung Khaing, a plastics company executive. U Myat Thu Tun, an executive at fisheries exporter GP Trading, called for swifter and simpler bureaucratic procedures.